Thursday, July 5, 2007

Doubling Down & Then Selling Half

With all the mergers and acquisitions taking place recently, it might be intimidating to sell a potential takeover candidate while it's flying high.

At this point in time, I really don't see any of my holdings being in this situation (unfortunately) but as I scope the market looking for my next investment, I'm thinking that I should revisit a strategy I utilized to some extent last year. It involved establishing a position in a stock over one or two entry points, and then once it hit a point, at which I considered it reaching a short-term high, selling half of my shares to lock in my 'profits' while giving me the opportunity to earn more if it continued upward. This strategy would also protect me if the stock dropped as my break-even point would be that much lower while also providing me the possibility of investing the second half again at a lower price.

I can't recall why I deviated from this strategy this year... perhaps it had to do with not having the confidence I once had in investing so much (potentially double my normal weighting) in one company but if the opportunity presents itself, I'm definitely going to have to remember to give this a shot once again.

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