Sold ACAS This Morning
Usually, I do not post portfolio adjustments but once a month as I update the holdings spreadsheet but with all my commentary on ACAS in recent months, I felt an obligation to readers to disclose I’ve sold out of ACAS @ $6.20 for a 70% loss.
I’ve been thinking about this damn stock for a few nights running now. As I said on Monday, my first instinct was to sell but I felt it was too late after a 30% drop. Once again, my sell discipline let me down. Once my reasons for owning the stock (management + valuation based on sustainable dividend) were invalidated, I should have sold immediately. Instead, I morphed into a trader waiting for a bounce to get out and turned a 50% loss into 70%.
I am disappointed that I could not help readers (and especially myself) avoid this blow-up. There were warning signs and when I spent the better part of a week data-entering ACAS’ complete portfolio into a spreadsheet in July, that should have told me that I just needed to put the stock in the “too hard” pile.
This should also reiterate that readers take my disclaimer seriously. While I take my research seriously, I would only advise readers to use my reports as a small component of their own research. As always, YMMV; my mileage on this one was piss-poor.
November 15th, 2008 at 1:13 am
Have you read David Einhorn’s Fooling Some of the People All of the Time? His was a battle with Allied Capital, but the whole thing just felt a little too close to home.
I bought ACAS originally in 2002 after the internet bubble had burst at around 19. I figured that with all the accounting fraud going on, faking earnings has to be easier than faking dividends, so I bought some. I felt pretty damn smart for many years, collecting my fat dividend and seeing the share price rise. I bought again when it dipped to the mid 30s, but sold in the mid 20s after reading Einhorn’s book and realizing I really hadn’t done and wasn’t prepared to do the massive holding by holdeing level of analysis that Einhorn did and that you tried to do here.
November 16th, 2008 at 1:48 pm
Jason,
I think you’ve mentioned the Einhorn book previously and I should have paid more attention. I was aware of it but I’m sure like many investors, I’ve got a bookcase full of books to read. Expensive mistake.
I remember my fiance just shaking her head as I was trying to dig into their portfolio, which took me literally days even on that superficial basis. I didn’t even get pricing on bank debt, etc. I should have sold right there based on Warren Buffett’s “too hard” rule.
November 24th, 2008 at 1:36 pm
My research shows me that dividend cutters and eliminators should be sold as soon as you hear that the dividends are cut/suspended. I sold ACAS on the day it suspended 4Q for a large loss as well.
The stock has fallen a lot since I sold..