Ed Vail: “You’re holding your PCL? I thought you told us you sold, persuaded by the Schafer analysis?”
☞ Well, this is embarrassing – and a good reason the subscription fee for this site is set where it is. But also an excuse to tell my “Sid” story.
Are you ready?
A long time ago, when telephones had dials and stocks traded in eighths of a dollar (or “teenies” – sixteenths – if they were low-priced and “two-nies” – thirty-seconds – if they were outright skeevy), I had occasion to call my broker and ask him to sell “my 250 shares” of Something Or Other – “or do I have 275?”
I apologized for not being certain how many shares I had … this was before personal computers, let alone real-time on-line access to your portfolio … and he said, “Oh, listen, that’s nothing. Did I ever tell you about [one of his big clients]?”
One of his big clients, it seemed, was even older than I am now, and far richer than I will ever be, and spoke frequently with my broker. One day, as they were talking, something came over the ticker – my broker always talked with one eye on the ticker – about a big blue chip, American Cyanamid, let’s say (don’t hold me to the specifics), and it was pretty significant news, so my broker read the item to his client and asked, “Do you have any?”
“Cyanamid?” asked his client. “I don’t think so.” But then, turning from the phone he shouted, “Sid – get the book.”
Sid gets the book … my broker waits while his client leafs through the book … and then, after a little while, his client says, “Cyanamid. Yeah. Ten thousand shares.”
My broker, in telling me this, could hardly spit out the punch line, he was laughing so hard. Can you imagine forgetting that you own 10,000 shares of what was then maybe a $60 stock? Can you imagine? For years – indeed, for decades – my broker and I have amused ourselves finding excuses to say, in the midst of some other conversation, “Sid – get the book.”
But PCL has so long been etched in my brain as a very-long-term holding that … well, PCL stands for Plum Creek Lumber, and I just plum forgot.
I’m embarrassed. Could I be getting as old as that client? I know I’m not as rich.
If I get lucky, Schafer will be right and I’ll have a chance to buy it back cheaper. So far, though, it’s up 10% from where I sold it.
Mark S.: “May I invoke your considered opinion regarding the condition of Cornerstone (CRTX). This company has weathered the economic storm and up until recently I have been reluctant to question my purchase of 1000 shares at $5.75. Could there be a reason for concern at this time? I was thinking of selling for a small loss (it’s $5 and change now) and buying more PCL.”
☞ Well, I’d have preferred you had paid $3.80 or so, which is where it was in April when Aristides’s Chris Brown told us it was “the best value he had ever seen in his life.”
Yes, he did say he thought it was fairly valued and could be worth $16 in a couple of years … but at that point, having sold, he stopped following it.
Indeed, he hadn’t looked at CRTX again until I passed on your query last week. To which he replied, candidly but I think instructively:
I’m sorry to hear about Mark’s expensive lesson in CRTX. I don’t follow the company any longer, and can’t render specific advice to him as he is not my client, but I am happy to offer these two nuggets, which hopefully will provide him with comfort and maybe even profits in the long run:
1. If you own individual small cap stocks, you MUST (must!) look at the news flow on them every day. At a minimum, make a ticker list on Yahoo Finance and bookmark it.
2. Unless you feel that you understand a small cap company better than almost anyone else, the instant that you become aware that forward earnings have been revised downward, or that some dilutive corporate action is happening that will lower forward earnings, you generally are better off selling right there, even if the position has gone badly against you. You can follow earnings estimates each day or week on Yahoo Finance. Even better, you can both look at Yahoo Finance every day and also subscribe to Zacks investment research. They’ll e-mail you every day with earnings estimate changes on the companies you own (but only the ones they are aware of or are allowed to share, which is why you still need Yahoo, because sometimes the Yahoo data, from FirstCall, has estimates that Zacks doesn’t, and vice versa). CRTX’s estimates have been sliding for a long while.
Remember, if you aren’t watching, professionals are. And they have more money, more research, and better trading platforms. The biggest advantage you have as an individual investor is that your positions are small enough that you can get in and out quickly on news, and if you aren’t watching like a hawk, you’ve given that advantage away.
☞ As for replacing CRTX with PCL, they are very different kinds of stocks. As you know from the previous item, PCL should be bought here only with a very long time horizon.