Graham (GHM) "Trading Transparency"

Hello Friends!  Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice!  As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

The market had another dismal performance today with the Dow closing at 11,326.32, down (51.70), and the Nasdaq down (14.59) at 2,310.96.  The S&P index dipped (7.07) to 1,260.31.  Oil rebounded from the recent correction and climbed $1.02 on the day to $125.10/barrel.

In spite of this miserable trading environment, my shares in Graham (GHM) enjoyed a nice move higher, closing at $101.97, up $12.97/share or 14.57% on the day.

I acquired my original 105 shares of Graham (GHM) 5/30/08 (just two months ago) at a cost basis of $64.48/share.  Two weeks ago, I sold 15 shares of Graham (1/7th of my holding) at $85.46, representing a gain of $20.98/share or 32.5% since purchase.

The 30% appreciation level is, as you may know, my first 'targeted' appreciation level at which time I sell 1/7th of my holding and use this as a "signal" to be buying a new position.  The next appreciation target is at a 60% appreciation level.

Today, after announcing 1st quarter 2009 results with sales climbing 38.3% to $27.6 million from $20.0 million in the year-earlier same period, and net income up over 100% to $5.7 million or $1.11/diluted share compared to earnings of $2.7 million or $.53/diluted share the year earlier, the stock literally exploded on the upside.  And that in the midst of a nasty market environment.

With the stock climbing to the 60% appreciation level, I sold 1/7th of my now 90 share position, which when 'rounded down' worked out to just 12 shares, at $104.45.  With my cost basis of $64.48, this represented a gain of $39.97/share or 62.0% since purchase.  Even though I personally have sold shares today on what I call 'good news', I am still bullish on this company and

GRAHAM (GHM) IS RATED A BUY

When would I sell shares next?

Going along with my system of selling small portions at targeted appreciation levels, my next sale point would be at a 90% appreciation level from my original purchase price which would work out to 1.90 x $64.48 = $122.51.  On the downside, having sold a portion of Graham (GHM) twice, both at the 30 and 60% appreciation levels, my sale would be at 1/2 of the highest appreciation percentage or at a 30% gain.  (NOT at 1/2 of the highest appreciation PRICE...you can see the difference).  This would work out to 1.3 x $64.48 = $83.82.

One other thing.

My 'portfolio management system' generates buy and hold signals upon the sale of my own holdings.  In other words, when I generate a sale on 'good news' like this Graham transaction, I generate a 'permission slip' to be adding a new position.  When I generate sales on declines, I simply am required to 'sit on my hands' unless I am at the minimum, which for me is 5 positions.

Since I was at 6 positions, not at the maximum (20), this sale on good news generated a 'buy signal' and that nickel started burning a hole in my pocket immediately.  I did find a stock to buy.....but THAT is a discussion for another blog entry entirely!

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Have a great weekend everyone!

Yours in investing,

 

Bob