Wednesday, October 05, 2005


The momentum moose falls off a cliff

Despite a nice 10 percent move in TRT, my portfolio finished down $3,600 for the day. I suppose I ought to be happy that the damage wasn't worse. Today was one of the worst days for the stock market this year. Even the headline numbers disguise the true damage. While the S&P 500 was down 1.5 percent, the small cap Russell 2000, whose stocks often dominate the portfolios of small investors, sank nearly 3 percent. Momentum players fared even worse, with the IDB 100 stocks on average falling nearly 4 percent.

What to do in times like this? I used today's weakness to buy three energy plays: EPL, CHK, and TMR. You may be thinking to yourself why would a value investor like me want to own energy stocks after the massive gains they've seen over the past few years. The truth is that I don't think energy stocks are attractive at these prices. But that's not the reason why I bought them. The reason is because I am concerned that rising oil and gas prices will hurt the other stocks in my portfolio. So energy stocks are a hedge against that risk. It's like buying an insurance policy. You don't expect to use. In fact, you expect to lose the premium that you paid to buy the policy. But you buy the insurance anyway, because if something bad happens, you want to be protected.

In addition to the aforementioned energy stocks, I picked up shares in another company that was pointed out to me by a reader of this blog: PAM. It's a logistics company that caters to the Chinese market. This morning the company announced that it was initiating a small buy back program and more importantly, that insiders will not be selling any more shares this year. I regard that as bullish for the stock. I'm in for 10,000 shares at 74 cents each.

Agreed.. it's been BRUTAL... all the winners I had are now all down. Man.. now I wish I had sold them for a profit instead of waiting longer. ARGH... in a sea of red right now.

Post a Comment

<< Home

This page is powered by Blogger. Isn't yours?