Disciplined investing: Time to pat your back

First, I am not able to track the market as well as I can. I have found a 4 month independent consulting gig. It is a very exciting international customer study for a Heavy Equipment OEM, to develop process and system strategy to meet the requirements of various customer segments.

Anyway, if you have been following this blog, you would have taken advantage of the second opportunity that I recommended. I recommended PEIX (under 18.5) and ADM (under 35) on March 25th for 20-30% increase in the 4-6 months. My recommendation was based on a switch from MTBE to Ethanol. After a faster than expected run, I suggested a pruning on May 5th 2006 about 6-7 weeks after the initial recommendation. If you took the pruning and trailing stop recommendation, you would have gained 80-150 on PEIX and 25-30% on ADM. For about 2 months either return would have been good.

Now is the time to look somewhere else. I will try to be more active in future. Also, I am still awaiting my entry point in MSFT. I will keep you guys posted. I am going to be aggressive in future as the market pulls back. Waiting for your comments.

Alternative Energy pruning: Ethanol

In my March 25th post, I recommended two stocks PEIX (17.5 - 18.5) and ADM (35) primarily because of the the expected ethanol shortage suring MBTE phase out. Now it is time to take some of the profits off the table. Last month and half has seen PEIX almost touch 35 and ADM crossing 40. Both the shares trounced my conservative target for 4-6 months in almost a month and a half. One of the reason, might be the rising oil prices. Rising oil prices carry these alternative energy sources with them too for teh logic mentioned in previous posts.

I would prune the position to sell 1/3 of the PEIX holding. A conservative investor might sell 1/2 of PEIX and some ADM. I still like both these stocks for the long term, but PEIX has grown too fast too quickly. I favor selling PEIX as it is a volatile one product firm and I like cash profits more than paper profits. ADM on the other is a much bigger firm a negative ethanol due to easing of the oil prices will not affect the stock that much.

Here is what I suggest.

ADM put a trailing 8% trigger as it has already fallen 8-9% from the latest peak and at 8% it will breach the latest support. Adjust it to 12% if the stock reached 44.

PEIX put a trailing 8% (Same logic as above) adjust to 15% if stock crosses 37.