Like many of my generational colleagues, the baby boomers, I've found that my best intentions about saving for retirement aren't always meeting the mark. In 2011, I took some old 401(k) accounts and combined them into a self-directed IRA with Scottrade, and established a strategy of using covered calls to stabilize and enhance my returns. Rescue My IRA chronicles the progress of my IRA rescue using this approach.
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
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.
1) Stock loss: -$5,233.34
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!