Plum Creek Timber (PCL) is a name I have disclosed many times before as a long time holding.The past three months have been an good microcosm for a couple of points I have tried to make before.
One is that stop orders can be tricky. PCL appears to have bottomed out down 8% which is a magic number for a lot of people. Obviously people have success putting a stop in 8% below where they bought the stock but I think it probably leads to a lot more trading than is necessary for most folks.
The other point is that in a diversified portfolio you never know where leadership might come from. Most of the time PCL doesn't seem to do a whole lot. Occasionally it struggles and occasionally it has a good run and I would say adding 10 or 11% versus the benchmark in a quarter is a good run. And I'm sure that when this run ends the stock will do nothing for a while.
Really I am not sure why the stock has done well. None of the recent news strikes me as market moving. The Timber ETF (CUT) listed during the quarter. It is not clear to me that the listing of the fund or the subsequent volume after listing created too much demand but maybe so.
To say something very obvious; sometimes stocks go up for no real reason just as they go down for no real reason. This creates visibility for trading for no real reason.
Clearly long term success in the stock market requires some degree of patience. The stock named in this post is irrelevant. Obviously I believe in it but there literally thousands of other stocks that could have been substituted in. If you believe in a company, think its prospects going forward are good and it has done a good job of rewarding shareholders in the past you probably just need to be patient when it goes through a stretch where it lags.
3 comments:
SNC Lavlin is an CDN engineering company. They had a huge chunk of the 407 toll road in Ontario and sold off chunks of it over the years. They get tons of contracts world wide (including building a toll road in Israel I believe) but they also do power plants, oil related stuff, anything. They have been on a tear as of late. The 407 toll road is a license to print money. Not sure why they sold most of it off cause the thing is busy 24/7. I trade it on the TSX and it usually runs a couple of hundred thousand shares per day plus has a dividend.
cheers
thanks for the extra info DNF. I glanced at their website over the weekend when the other reader left the link. The appear to be involved with a lot. So then is the question are they as good at managing different things as Macquarie? Are they better managers than Macquarie?
The 8% rule often refers to the tactics used by O'neil in his books. It is part of an overall strategy for risk management and cannot be applied nor argued for/against separate from the rest of the strategy.
In my view it is no more or less arbitrary than putting no more than 2-3% in 40-50 positions as part of a diversified top-down strategy.
O'neil's strategy is based on extensive botom-up analysis of the stock, consideration for the overall market and an entry based on specific chart patterns. The idea is to capture a break-out trend. The reason for the 8% is to exit positions where the break-out failed to materialize. Not just to reduce the losses of the particular position but also to be able to deploy cash into other positions. i.e. opportunity cost.
From what i can tell both systems work well in Bull markets :)
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