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Be careful not to anchor a position to your starting price

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March 29, 2012 – Comments (4) | RELATED TICKERS: BIP

 

Here's a link to a very interesting new article from Motley Fool's very own Jim Royal.  I always find what Jim has to say interesting because we seem to have similar investing styles, plus he's a good writer as well.

The main stock that caught my eye in this piece is one of my current holdings Brookfield Infrastructure Partners (BIP).  Interestingly, given the fact that my BIP position has nearly doubled since I bought it in real-life and added it as a "Top Pick" in my CAPS portfolio...paying a massive dividend along the way...I haven't been thinking of it as a cheap stock that I would buy right now.  That goes to show that one has to be careful not to anchor to one particular price on a stock, both when trying to decide whether to buy more or sell.

We've probably all said to ourselves at one time or another, "If this dog gets back to break-even I'm selling it."  While in theory not losing money on a stock is a good thing, if the thesis of why you initially bought it is broken then you should probably sell.  Conversely, just because a stock's price has risen significantly it doesn't mean that you should automatically sell it or refrain from adding to your position.

Here's what Jim has to say about BIP:

"3. Brookfield Infrastructure Partners (BIP)

Brookfield Infrastructure has what I like in a stock: a cheap valuation with a mission that most people find more boring than chopping wood (one of the things that Brookfield actually does). It trades at just eight times earnings and offers a 5% yield. While it's bigger than ROIC and Regis, its $4 billion market cap still falls below the radar of many big investors.

Brookfield offers a great play on diverse infrastructure assets across the world. It owns stakes in timberland, railroads, ports, power transmission assets, and coal terminals -- all the necessities to keep a modern global economy running. And that's the appeal. Brookfield invests in high-quality assets that have high barriers to entry. These assets offer annuity-like income streams with the chance for capital appreciation, too.

The company is on the hunt for value-priced assets. Last year it snapped up two Chilean toll roads. In 2010 it acquired Australia's Prime Infrastructure, which many investors saw as a very smart buy. That's the type of value-creating purchase that will allow the company to achieve its total return goal of 12% to 15% annually and meet its payout growth target of 3% to 7% per year. That means more money in your pocket along with the safety of Brookfield's hard assets."

3 Unappreciated Stocks to Buy Hand Over Fist in 2012

http://www.fool.com/investing/general/2012/03/28/3-unappreciated-stocks-to-buy-hand-over-fist-in-2.aspx

Thanks for reading everyone.  Have a fantastic day!

Deej

4 Comments – Post Your Own

#1) On March 30, 2012 at 9:19 AM, portefeuille (99.66) wrote:

Some appear to always consider stocks like ORCL, MSTR and VMW expensive. I think they are not and if they are they always remain at around the same "valuation level". At least very broadly ...

Give the following pages a few seconds to display the long term charts.

http://www.wolframalpha.com/input/?i=vmw(market+capitalization)/vmw(revenue).

http://www.wolframalpha.com/input/?i=mstr(market+capitalization)/mstr(revenue)/(orcl(market+capitalization)/orcl(revenue)).

http://www.wolframalpha.com/input/?i=rht(market+capitalization)/rht(revenue)/(orcl(market+capitalization)/orcl(revenue)).

 

Also see comment #122 here.

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#2) On March 30, 2012 at 10:59 AM, portefeuille (99.66) wrote:

#1 There are currently 7400/110/800/300 EMC/MSTR/ORCL/RHT shares in my fund with break-even ("average buying price") of around -25.35/70.12/6.44/-43.09 USD. EMC holds around 80% of the VMW shares. I think all mentioned shares are "pretty cheap" currently ...

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#3) On March 30, 2012 at 11:01 AM, portefeuille (99.66) wrote:

#1,2 You should increase your IT/biopharma exposure a little. Those are still my favourite sectors.

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#4) On March 30, 2012 at 8:13 PM, HarryCaraysGhost (99.60) wrote:

Porte that was some sound advice you just gave yourself...Ha ;)

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