The Shock of Loss
I hope when I say this, that you will believe it. But since you don't know me, or know anything about my investing style, I won't be upset if you start to yawn or begin to think about something other than what I am saying. Honestly, it will be all right if you do.
I was looking back through some of my CAPS picks, trying to understand where I went wrong. I mean one of my CAPS picks is down more than 57%, and when you add the changes in the S&P the stock is now down about 72%!
The thing about this stock, Georgia Gulf Corporation (NYSE: GGC) is that I continue to add it to my real world portfolio. At the moment I own 700 shares and have an average cost per share including sales commissions of $20.0996. The stock closed recently at $11.95, and I'm thinking I'm going to buy more shares.
Another stock in my CAPS portfolio is WP Stewart and Company, Ltd. (NYSE: WPL). This company is a publicly traded money management firm that manages the investments of extremely high net worth individuals by investing their clients money in large blue chip stocks.
In my CAPS portfolio I'm down more than 44% with this little gem, and when you add in the S&P changes, I'm down against the index by more than 55%.
This is another one that I own in my real world portfolio and one I continue to buy. I've now managed to accumulate 500 shares with an average cost per share including commissions of $12.1498.
I bought the stock because at the time I came across the company it was my belief that the housing/credit markets were going to implode which would put our economy on its ear.
Looking at WP Stewart I saw that, at the time, they were investing in larger cap consumer companies, companies like Kimberly-Clark Corporation (NYSE: KMB), Wal-Mart Stores, Inc. (NYSE: WMT), and Colgate-Palmolive Company (NYSE: CL).
I guess I zigged when I should have zagged since this one has not worked out like I thought it would.
Another of my picks, and I'm sorry but I really like this company, is Griffon Corporation (NYSE: GFF) maker of garage doors. The company does a few other things and has recently received several contracts from the government for their electronic information and communications systems division.
In my CAPS portfolio the stock is down more than 55%, 40% of which is the decline in the stock price. I own 750 shares of this one in my real world portfolio, with an average cost per share including commissions of $19.0417. The stock closed recently at $14.42.
The other stock that is down pretty good is Accuride Corporation (NYSE: ACW). The company makes truck body and chassis parts as well as seating assemblies, gearboxes, and steerable drive axels for large trucks.
In my CAPS portfolio this one is down against the market a little over 25.5%. In my real world portfolio I own 1000 share of the stock, with an average cost per share including commissions of $13.5108.
The point of all of this, and the thing I started out to tell you, was that being a value investor is really really hard. If you don't believe me, consider what happened on Black Friday (10.19.07) when the markets were slaughtered.
Working people, average Americans, closed investment positions by the millions. They got out of every stock they could, then got down on shaky knees behind the Wall Street Bull and prayed they would wake from a nightmare. To lots and lots of folks, the sky really was falling.
For me the recent market down turn is a buying opportunity, a chance to deploy yet again, my margin of safety. [Collective gasp]
Certainly, with all of the money I have invested in the stocks I mentioned, and with the decline in prices, continuing to add to my positions in these stocks as the prices fall ever further is not easy, nor is it pleasant, and it is certainly not any fun...yet.
But adding to my positions during a market correction fits my investing philosophy, a philosophy that includes:
**My belief that price determines return
**My belief that if you buy great companies at great prices, then what the markets do or don't do really doesn't matter
**My belief that you should sell a bit along the way
**My belief in dollar cost averaging
**My belief in long term buy and hold
**My belief in a margin of safety
For most of us, the markets are a place where our savings ends up, the money is taken out of our paychecks and since we never see it, we never miss it.
We tend to think of it like taxes, and because we do, we seldom get involved with where that money goes. But the simple truth is, for most of us, one day we are going to need that money.
It seems to me that for almost all our working lives, we struggle, seemingly always a few bucks short because the kids needed braces or dance lessons, or because the water heater went out or the air conditioner died, or heaven forbid we needed a new roof.
For those of us that are truly blessed, as I was, we're going to have more than one child in college...at the same time!! No wonder we just never seem to have even the smallest of financial cushions.
What we fail to realize though is that the entire time that money is being removed from our pay and sent to somewhere that never really mattered...we're getting older.