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Varchild2008 (84.50)

Pairing your losses is NOT the same as Trading

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December 19, 2008 – Comments (14) | RELATED TICKERS: DPS , MNST

Demondoug got upset with me for revealing that I sold off my entire stake of DPS to buy it all back a couple days later.  Personally, I did that with a lot of my long term investments...

It's call PAIRING your losses.....

For example... Had you bought into (HANS)....A stock DemonDoug prefers over (DPS) and is a great stock with a 1-hit wonder in MONSTER Energy Drink + It's Coffee derivative.... back when it was trading over $40 a share and sat there doing nothing but watching it freefall to as low as $20 (give or take).

Then in my opinion that is irresponsible.

Granted... Motely Fool doesn't believe you should care about freefalling stock prices because in the long term the stock prices will bounce back whenever you have a great company in your portfolio.

However, even MOTELY FOOL still believes that if you have reason good enough to think your stock is getting absolutely hammered and will continue getting hammered in the next few months like both (HANS) and (DPS) have had to deal with.... Then they do state that it is ok to SELL off your stake and buy back in lower...

They also say it's ok to sell off an investment just because the share price was driven so far unrealistically high that it would be foolish not to sell it off. 

If you are a subscriber to Stock Advisor....  Sell off my DPS Stake around $16.75 to buy back $1+ less may or may not have been a good move on my part.  But I personally prefer to get a better price for my shares.

Getting a better price for your shares by PAIRING your losses can also free up additional cash.

With (AMAT) I was able to have an extra 50 shares of that company in my stake my selling off my entire stake to buy back in at a cheaper price.  This method works more than it fails for me and is something I plan on continuing to do.

So if (DPS) or (HANS) runs smack into an unrealistic Hedge Fund Short Selling Assault.... Why as a long term investor sit there and take it when you can Pair your Losses and come out of the assault with perhaps a larger stake of shares and more money on the sidelines?

14 Comments – Post Your Own

#1) On December 19, 2008 at 10:55 AM, Varchild2008 (84.50) wrote:

Addendum:

Demon Doug accuses me of not being a long term investor of (DPS).  My Stake of 290 is more than 500% from where my stake started.

I bought in around 30 shares in the beginning and have only grown my stake since then.

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#2) On December 19, 2008 at 11:21 AM, Varchild2008 (84.50) wrote:

HANS used to be a $60 stock.. I mean.. Good grief.... Whining about whether or not someone is a long term investor when that someone still holds the same or larger stake than they ever sold but backed out at a good time to buy in on the massive dip....

????  Had I sold HANS at $60 and bought HANS at $20 I'd be rolling around drunk on the floor with pleasure...and with a ridiculously larger stake of HANS to enjoy the ride back up.

That's what I am doing with DPS.  I am enjoying this ride back up to where it takes me.   Should it hit another bump.... I'll dump and buy again.

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#3) On December 19, 2008 at 11:41 AM, Schmacko (44.40) wrote:

I'm confused are you saying you bought DPS close to the IPO price of $23ish, rode it down to $16.75, sold at the loss and then rebought back in about a dollat later at $15.5-$16.75?

Cause if that's the case it seem like all you did was lock in losses and then bought back into the stock at a marginally lower price.  Would think just dollar averaging down might have served you better if you believe in the stock long term.

Using your HANs example numbers though, if you had bought hans at $40,  sold it at $60, and the rebought it at $20... that's trading.  There's nothing wrong with that, I do it, but it's trading.   

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#4) On December 19, 2008 at 12:11 PM, rookie02 (63.63) wrote:

i completely agree. if i own any stock no matter how strong the company is and see the market sailing downward the correct move to make would be to jump off and wat till the free fall is at least near over. feeling the bottom can be tricky and you may take additional losses but you are still saving free cash. if i own 100 HANS at 60$ (6000$) and the market falls and i ride it all the way down to 20$ and back up to 60$ again i still have my original 6k. however, even if i jump out at 25$ and buy back at 20, i would own an additional 25 shares and therefore when i ride back to 60 my new value is now at 8100$ that can stay long term or sell at the next fall. it is simply common sense.

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#5) On December 19, 2008 at 12:19 PM, BradAllenton (31.82) wrote:

First: Why explain? If it works for you and it's your money who else should have a say?

Second: There is nothing wrong with trading. Standing still in the market would have killed you this year. I traded in and out and am up about 5% in real money. If I was "long term buy and hold " or as I call it stupid, I would be down 30-50%.5% isn't much but it is out playing the Stupid & Poor index by a chunk.

Third: Read the blog about the statistics of stocks that over the life of them are negative.(can't remember who posted it, sorry) That may help you understand why trading isn't taboo. The idea is to make $, not to be loyal to the concept of fantasy stakes in fantasy companies with fantasy earnings based on a fantasy monetary policy. 

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#6) On December 19, 2008 at 12:21 PM, pantera100 (< 20) wrote:

 if it makes life less frustrating so be it however you still left a chunk a money behind potentially, the climb back up will replace some of if not all of that ,its the waiting thats hard. sub conciously you know money was left, but the current numbers look better and you move on i just keep wondering like others where the bottom really lies. i have done the same a few times but not sure its right. i think the dollar cost avg. , or schmacko,s reply makes alot more sense but like i said its the waiting thats hard

 

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#7) On December 19, 2008 at 12:22 PM, Gemini846 (46.06) wrote:

The only problem I see is getting caught by the wash rule and not being able to take the loss.

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#8) On December 19, 2008 at 12:25 PM, pantera100 (< 20) wrote:

 if it makes life less frustrating so be it however you still left a chunk a money behind potentially, the climb back up will replace some of if not all of that ,its the waiting thats hard. sub conciously you know money was left, but the current numbers look better and you move on i just keep wondering like others where the bottom really lies. i have done the same a few times but not sure its right. i think the dollar cost avg. , or schmacko,s reply makes alot more sense but like i said its the waiting thats hard

 

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#9) On December 19, 2008 at 12:39 PM, Schmacko (44.40) wrote:

"if i own 100 HANS at 60$ (6000$) and the market falls and i ride it all the way down to 20$ and back up to 60$ again i still have my original 6k. however, even if i jump out at 25$ and buy back at 20, i would own an additional 25 shares and therefore when i ride back to 60 my new value is now at 8100$ that can stay long term or sell at the next fall. it is simply common sense."

This is why I buy in scales.  Using your numbers- buying at $60, selling at $25, and buying back in at $20.  You've locked in a $3500 loss.  You now need your 125 newly bought shares to grow 140% to $48 to break even overall. 

On the other hand if you had only bought $3000 worth at $60 and then another $3000 at $20.  You'd have the same total overall investment in the stock ($6000) but you would have 200 shares with an average cost basis of $30.  That means to break even you only need the stock to appreciate 50% off it's low and you haven't locked in a loss.

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#10) On December 19, 2008 at 12:45 PM, Rhyssan (< 20) wrote:

I wouldn't call it paring your losses.  I'd call it gambling.  Sure, it'll work sometimes.  But I'd be concerned about cashing out of a good stock at the start of what looks like free fall but turns out to be just a momentary blip down.

But if it works for you, more power to you.  You'll be rich a lot sooner than I will.

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#11) On December 19, 2008 at 12:59 PM, Varchild2008 (84.50) wrote:

Schmacko

"Cause if that's the case it seem like all you did was lock in losses and then bought back into the stock at a marginally lower price.  Would think just dollar averaging down might have served you better if you believe in the stock long term."

I agree.  Like I said.. Some of my moves have failed on me.  I was hoping for a 3$ plunge in the stock and got basically a $1 drop.

Now.. in all honesty... I don't see how you "locking in losses" can be used as a reason not to sell.  Losses in my opinion are never locked in if your total reason for selling is to simply buy back in at a lower price.

Assuming you successfully get in at a really good 5 pts or more lower price... You end up with More Cash...AND...more Shares.

So.. What losses were locked in if that's the case?

Take AMAT.... I sold off around $15 and bought back at $10.
That gave me more shares... and more money.

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#12) On December 19, 2008 at 1:22 PM, DemonDoug (32.31) wrote:

Demondoug got upset with me for revealing that I sold off my entire stake of DPS to buy it all back a couple days later.  Personally, I did that with a lot of my long term investments...

It's call PAIRING your losses.....

For example... Had you bought into (HANS)....A stock DemonDoug prefers over (DPS) and is a great stock with a 1-hit wonder in MONSTER Energy Drink + It's Coffee derivative.... back when it was trading over $40 a share and sat there doing nothing but watching it freefall to as low as $20 (give or take).

Then in my opinion that is irresponsible.

This would all be a really good point - if it's true.

My point is that you are advocating DPS as this unholy "go long forever" type thing, and have been on it's jock since it IPO'ed.

My view on HANS, as with the entire market right now is that you should be trading.  Short-term trading is the only way you are going to make money right now, and maybe for a while.

Also, it is 100% a lie to say I preferred it over 40/share.  I've picked HANS twice, once at 29.90, once at 24.46.  HANS currently trades above 32/share.  I would recommend selling HANS right now.

My argument is that you are advocating long term fundamentals when you are basically trading.

Pairing losses?  #1 google hit is this blog, my friend - in other words you just basically made that up.

Now I will admit that I have been wrong, very wrong on certain stocks, especially in the past 6 months.  But the other component of my criticism is that I feel you are just dead wrong on the fundamentals of DPS.  And my point was that because I feel you are wrong, your blogs come off as your basic yahoo board pumping.

Hansen has a lot less debt (673k - thats thousands, not millions).  Hansen has been growing revenues.   Hansen has been successfully expanding very carefully outside of the US.  They have better margins too, as well as much better ROI.  Neither stock pays a dividend.

I have no problem with you criticizing my views, by the way.  What I do have a problem with is lying to support your own thesis and to knock me down.  I would suggest not making up investing strategies.

Schmako, I recently did what you stated with HP.  Bought at 25, it went down to 17, I bought more around 18, then when it went up over 26 I sold for a cool profit (overall made 18%+ on the trade).  Sure, selling low, and then buying lower might be a strategy, but boy is it risky.  You have to wait 30 days to be able to deduct it from your taxes as an investment loss, and just ask Kirk Kerkorian, who did just that with a little stock known as GM.  I wonder how that one is working out for him?

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#13) On December 19, 2008 at 2:57 PM, DarkToast (39.71) wrote:

I am pretty sure he means paring his losses, not pairing.

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#14) On December 19, 2008 at 10:14 PM, Varchild2008 (84.50) wrote:

I should spell check more often but I get busy and sidetracked whenever I log onto fool.com.. ya know....panic and fear sets in when I get a press release from TRINA trying to tell DPS what to do with their bottler...

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