OFF THE WALL: In romancing a stock, learn when to break up nicely

By Rene Pastor

I remember the company like a truck that ran over me yesterday: PTA Holdings.

This penny stock from a company involved in transportation was trading then and now below a cent. I had just taken over my IRA and was looking for a quick way to score a winner, very much like a gambler betting that a horse with 100 to 1 odds would pull off the shocker at the Belmont Stakes on Long Island.

I thought it was a winner, especially if it even goes to half a cent, I thought a bit smugly. I put down several thousand dollars from my IRA. A few days later, PTA was heading south fast.

I sold off the position with some difficulty, lowering my sales price and ending up having lost several hundred dollars of my retirement money.

I was trying to figure out a way to tell the wife. Never did. I’m a big chicken. I told her about six months later and breathed a little better when she did not peel my hide off the wall.

Lesson very painfully learned.

There will be times in the stock market when you make a wrong decision and you will lose money. Maybe not with a penny stock, but with a company you thought was on its way up.

Instead, it just sits there, seemingly mocking you like a dog waiting for its next meal. Then it starts falling and you feel it will eventually recover and you decide to wait for the stock to come back.

Only the losses get bigger and the stock looks a lot worse by the day. That’s how it felt like with Caterpillar, maker of construction and mining engines. I thought it would snap out of its swoon. It never did.

See, don’t fall in love with a stock. It is a piece of paper which is supposed to earn you some money. If it doesn’t, you have to learn how to cut and minimize your losses. I eventually let Caterpillar go even though I liked the numbers of the company a lot.

Like any rule on cutting your losses, there are exceptions. That’s how I feel about Apple. I bought some stocks of the fabled tech company led by the late Steve Jobs but it proceeded to get pounded like a piñata in the first half of the year. My Apple shares eventually hit almost 50 percent of my IRA, and then I gradually sold them off when they would recover slightly to break-even levels.

I sold all my Apple shares off when it went on the skids again. But I still liked a tech company that paid over $12 a year per share in dividends when others were paying cents on the dollar and was still growing with a $140 billion cash hoard.

When the stock slipped under $400 a share, I reopened my position and kept it at a modest level. I especially liked the share when Carl Icahn tweeted last week and sparked a rally that sent Apple shares over the psychological $500 mark, a level it had last hit in January.

Now, I am trying to figure out how to take some of the profits off and reinvest the money in another company. That kind of dilemma is a lot better than explaining how I got suckered into a penny stock and was taken to the cleaners.

Some days are better than others on Wall Street.

The FilAm is running a regular column on the stock market by Rene Pastor, a long-time business journalist and commodities analyst. Rene writes analyses for Southeast Asia Commodity Digest, an affiliate of Informa Economics based in Memphis, Tenn. Prior to SACD, he was a financial journalist for Reuters for 23 years. The comments expressed here are the author’s personal views and are not meant to recommend the buying or selling of stocks.

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