The habit of keeping a Watch List of interesting stocks is one habit of highly successful investors. Personally, I also like to keep track of what’s going on with stocks that I have sold in the past.
When I sold Longtop Financial (LFT) from the Cabot China & Emerging Markets Report portfolio in July 2009, it couldn’t have been called a mistake. The stock was nearing the bottom of a decline that took it from a high of 30 in mid-June to a low of 22 in early July. Again, a reminder to always Cut Your Losses Short.
And I didn’t mind much that the stock got going again after a few months of consolidation.
The Story, Numbers and Chart (SNaC) approach to picking stocks requires that all three factors be strong. LFT is a good illustration of a stock that has a good story (the company sells software for financial ATMs, call centers and online banking) and good numbers (Q4 earnings were up 44% on a 66% gain in revenues, and after-tax profit margins were a whipping 46.3%). But its chart is only mediocre.
LFT peaked at 42 in January and built a nice base in February, but has shown only flashes of the kind of volume support that would indicate a strong change in investor sentiment toward it. Thus I’m happy to have my subscribers in other stocks … that are going up!
Presumably, fundamentals like Longtop’s will eventually begin to attract some serious money. When that happens, I’ll be ready to move it from my Watch List to my portfolio.