I have closed all my NN positions. Sold my long stock at 16 for a significant loss, and sold my Nov 20 puts for a significant gain. In total, the stock was loser for me. Fortunately, I bought some of the cheap puts a few weeks back. My gut feel at the time (as most of you have gathered from my posts) was that something was seriously wrong with the price action in the action. Good luck to all longs.
Also, here's an interesting article from TSC.
Avoiding a Big Loss
By James J. Cramer
11/4/99 11:47 AM ET
Why ever sell a stock? If you are an individual, you are under huge
pressure never to do it. You don't have to report your holdings.
You don't have to worry about someone taking your money
away. It's your money! You spent a lot of time analyzing the
investment, it is not worth it to bolt.
But I think those pressures
are too great. I think that
there are times when you have
to sell. Let me tell you about
one that happened to me:
This past May, I was long Newbridge Networks (NN:NYSE).
They were telling a pretty good story about how strong business
was. The stock was in the 30s. Then, one day, even as I was
under the impression that business was good, the company
preannounced bad earnings. Alan Lutz, the president, called the
quarter "a significant disappointment."
That said, he went out of his way to say that this was strictly a
one-quarter problem. In fact, he blamed the poor performance
on a host of one-time factors that would clear up in a short
time. He said: "To add credence to this conclusion [that it was a
one-quarter problem] is the fact that one minute after the
quarter closed last Sunday night, we still had orders, required by
customers, amounting to $115 million. But we had run out of
time."
My partner and I didn't believe Lutz. His firm had been telling
every sellside analyst that things were great. There was no way
that this could be just a one-time problem, because the credibility
of the company was being called into question. We thought Lutz
was bagging the street.
We sold the stock.
A few months later, and the stock was down 50% from where
we sold it. (We just bought and sold some for a trade. We leave a
little on but we want to go soon.) Lutz is gone. The one-quarter
stuff turned out to be a year-long problem, one that couldn't be
fixed by management. The stock was mangled, just crushed, right
to the teenager level.
We missed this disaster. I have often stated that if a shortfall is
from accounting problems: Sell, sell, sell! But I would also like to
interject that if a management's credibility has been compromised
-- as was the case with Newbridge -- you should also sell.
We don't want to be a nation of traders. But we don't want to
take a beating. Avoiding a beating is all that matters sometimes.
We avoided this beating because we knew that management had
been compromised. Let's add that to the list of things that make
us take the money out of a stock. It will save us lots of money.
"Ah hah," you say, "hold it, you are long Newbridge. You could
have just held on to it."
No, wrong lesson. You must consciously avoid losing big at all
times, whether you are a trader or an investor. Newbridge would
wreak too much damage to your portfolio or my portfolio. Big
loss avoidance must always be your No. 1 goal when you buy a
stock. Always. |
