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Time to Pare Some Gains?

Remember how you felt when the stock market plummeted 4500 gut wrenching  Dow points in the three short months September to November last year? This was after a quick 2000 point drop earlier that Spring.

Your heart stopped pounding and you took the tourniquet off your 401K when the Dow rallied back almost 2000 points into the first week of January, 2009. Remember what happened next? (Or did you block it out?) A sickening, bloody, unprecedented, two month plunge down 3500 Dow points to levels not seen since late 1996. 1996? Your 401K was a pup. Yet, in March, 2009 you swore off stocks as you swore at your broker.

Well, apparently you did forget. Or at least your investing brethren forgot. The Dow has rallied back 4,000 points, your 401K is up and walking around and Investor’s Intelligence shows almost 3-1 bulls to bears. Only 17.6% bears.  The lowest number since the highs in 2007.

2007. It’s fun to remember those days. Your retirement account was sprinting from stock to stock and you named your new kid after your broker,”Rison.”

They once asked Baron Rothschild how he made his fortune in the stock market. He said “I always sold too soon.”

Is it too soon to sell some stocks? Take a little off the table? The Dow and NASDAQ are up between 65% and 70%, respectively. Some stocks have doubled, tripled and even quadrupled off their lows.

Perhaps you should look at the stocks in your portfolio that are at 52 week highs. The ones with little or no dividend yield and high P/E ratios. The ones that have 20-30% fewer earnings this year than last yet, and project pallid 2010 earnings. If for some reason (it’s called Momentum) they are sporting the same stock price as last year, it might be time to pare them.

A little pruning might calm you in case next year’s recovery doesn’t pan out as the Government cheerleaders say it will. Besides, in the next drop you will have some cash to deploy.

My mother used to advise me to always leave a party early. The hostess appreciates it, and you will always be invited back. You never want to turn down an invitation to invest when Mr. Market offers you a stock that is on sale after a sell off. Having the cash to deploy then will always be a good memory.

Fred Crossman, J.D., C.P.A.

December 9, 2009

Mr. Crossman is a principal of the Thunderbird-Tahoe Fund, a long/short hedge fund in formation.

The mention of companies in this article should not be considered as an offer to sell or a solicitation to purchase any securities of the companies mentioned.  Please consult an Ancora West Investment Professional on how the purchase or sale of securities can be implemented to meet your particular investment objectives goals.Ancora West Advisors LLC is a registered investment adviser with the Securities and Exchange Commission of the United States.  Ancora West Advisors is an advisor to the Thunderbird-Tahoe.  A more detailed description of the company, its management and practices are contained in its registration document, Form ADV, Part II.  A copy of this form may be received by contacting the company at: 8630 Technology Way, Suite A, Reno, NV 89511, Phone (775) 284-7778


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