There Goes That Idea

I just saw a commercial on CNBC for a feature they will run later on investing in Latin America. Uh-oh.

CNBC may not be late but they certainly aren't early. I've been writing about Latin America through out the life of this blog. I see big things happening down there, but the stocks have moved a lot already. Latin stocks are capable of big corrections. I recently reduced client exposure by selling a telecom stock. I still have one Brazilian stock that is up a lot that I may keep as a way to maintain exposure. The one name is down some from its high but I still want some exposure in case I miss a turn around.

I don't really like active trading for clients (or myself for that matter) but you have to understand what your holdings are capable of and how they trade. In a properly diversified portfolio you are going to own some hot potatoes. When a hot potato moves up 20%-30% in a month, you should be prepared for that much of a decline. Latin stocks moved up a lot in a very short time so I cut exposure, not complicated stuff.

I would not try to do that type of trade with a core holding that is not a hot potato. I've mentioned that most clients own British Petroleum (BP). I am very unlikely to sell this name because of a market event. At some point in my career something may change at BP to make me want to sell but this is a type of in the long run we are all dead type of analysis.