Monday, March 29, 2010

Sold Two Positions

Last Friday RHI Entertainment (RHIEfiled their 8-K, and things are not looking particularly well.  It appears they are still struggling with their debt load and revenues are not coming in quickly enough to meet those obligations.  I've decided to jump ship on this one, with a good sized percentage loss.  I didn't lose much as it was a very small position, and I knew going in that it was speculative.  I was able to cash my shares out after hours on Friday for around 0.26.  I'm not sure what will happen from here, but I'm going to focus on other things.

A couple of lessons to learn here:

1) Excessive amounts of leverage can be troublesome, especially for a small company.  The small cap names I've been buying lately are in much better financial shape, which gives them a nice margin of safety in case their revenue stream slows up.
2) Don't buy a stock strictly because someone else owns it.  What drew me to this stock was the fact that Seth Klarman owned it.  He is an outstanding fund manager, but everybody makes mistakes from time to time, and I should have seen it as a clear warning sign when the bailed late last year.

I also sold out of Carefusion (CFN).  Its still a solid company trading cheaper than its peers, but I have better things to put my money in.  I don't like the uncertainty occurring for them with new health care legislation, and rather than find out, I decided to split.  This is probably still a good stock, but it goes against my rules for holding stocks.  Its time to sell when either: A) The company becomes fully valued or overvalued; B) The situation changes and more uncertainty arises.  This is in the B category.  And there are cheaper stocks out there that I can buy with that money.


So, we'll move on from these.  There are lots of exciting things happening both with stocks I currently own, and ones I'm looking to buy.

Disclosure: None

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