Tuesday, May 8, 2012

Biting the Bullet on Legacy Holding ACM

At last, I decided to end the roller coaster ride I was on with my legacy ACM position.  This is the stock of a company I used to work for, and my view as an employee had been that the company was slow to react to changing market conditions – certainly worse at it than competitors JEC and URS are, and I had also been an employee at JEC before (and done very well with the stock through the employee stock purchase plan, I might add!).

So when earnings came out last week and the stock took a haircut, back to test the lows that we had seen with the shares last year just after I was put on furlough, I decided it really was time to see if there was a better use of the money.  After all, this is a legacy position that was not established under the Rescue My IRA trading plan – it wouldn’t make the cut to begin with as a non-dividend stock, and since it is a company I am not in love with, well, it was time for ACM to hit the road, Jack.

My basis in the shares was around $25, and I don’t see getting back to that this year and maybe not next.  So I cut my losses this week and sold at $18.50.  That capital gain hit is going to set the account back a few months, but I immediately established a position in URS, which I will post about tomorrow, and the recovery has already begun.

Here’s the position analysis:


November 2012:  Transferred 880 shares in from my 401(k) during the rollover.  I sold 80 shares immediately so I would have 8 round lots.  My basis was about $25.00 per share.
5/8/2012 Sold 800 shares at $14,784.66, average share price $18.49
Total stock LOSS:  -$5,233.34

Over the course of this holding, I have had covered calls with March, June and September expirations at strike prices between 22.50 and 25.00; total options income:  $204.91

ACM is not a dividend payer.  It is a legacy holding that was not selected based on the trading plan, and has always been a candidate for divestment because of this.

Net Profit:
1) Stock loss:  -$5,233.34
2) Options income:  $201.91
3) Dividend Income: $0

Total Net loss upon divestment:  -$5,233.34 + $201.91 + $0.00 = -$5,028.43
Estimated Absolute Return on Investment: -25.14%
Annualized Return:  Not calculated

All I can say here is good riddance.  I have my work cut out for me to recover this loss over the course of the rest of the year.

And we'll call it a lesson learned - the trading plan for this account is working; the investments I make here need to follow that trading plan!

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