Stocks Of The Month: LULU, GERN

Time for the monthly (or so) stock housecleaning...

Bought lululemon athletica (LULU) at $46, watched it fall to $41, then pop 36% since to its current price of $55. Which is a nice case study in that its better to be early than late. I find LULU compelling in the same way as Under Armour (UA), in that it has built-in marginalization in its perceived markets. For Under Armour, it was "it's just a specialty football equipment maker" when it's really a broad-market athletic brand like Nike. For lululemon, it is "it's just a specialty yoga clothing maker" - when I think it could be the dominant brand of women's casual clothing for the next decade.

Also bought Geron (GERN) at $8, and it has since fallen to $7.33. This is a flier stock pick on two sure-fire growth segments in the 21st century: 1) stem cell therapy, and 2) intellectual property litigation. I hope that Geron doesn't evolve into just a patent-holding company, and can monetize its R&D findings on its own - but I recognize that in a business area so immature, finding the future game-winner is highly unlikely. Still, investing with the company with the most patents in its industry seems like a decent risk-reward proposition.

On the sell side, Rite Aid (RAD) was let go because it fell to near $4 from its high of $6.74 on June 5th (see, I told you I was going to start following my own rules). I think it still may be a long-term turnaround story, but short-term, there are better places to invest.

Here's my current portfolio. As always, I believe in all of these stocks - until I sell them.

Southern Copper (PCU) 10.16%
Aluminum Corp. of China (ACH) 8.02%
Fording Canadian Coal (FDG) 7.85%
Intuitive Surgical (ISRG) 7.59%
PetroChina (PTR) 6.56%
Lululemon (LULU) 6.22%
Baidu (BIDU) 5.57%
Annaly Capital Management (NLY) 5.18%
RMK Advantage Income Fund (RMA) 4.68%
Google (GOOG) 4.54%
Geron (GERN) 4.23%
Apache (APA) 3.94%
Frontline (FRO) 3.90%
Apple (AAPL) 3.60%
Terra Nitrogen (TNH) 3.48%
Capstone Turbine (CPST) 3.38%
Ace Limited (ACE) 2.90%
Alliance Resource Partners (ARLP) 2.78%
Nokia (NOK) 2.72%
Under Armour (UA) 2.66%

Dear Delphi: It's Sooooooooo Over

I sold my Delphi stock this past Thursday.

All of it.

To which the proper response should be, "What-what-what?!???!?!", since I've been writing compulsively about how great the stock is for the past 3 months.

What was the turning point, you ask? What was the straw that broke the camel's back?

It was after purchasing more stock just two days earlier, and noticing that over the past year, I had bought the stock at the following prices: $1.73, $2.10, $1.88, $1.05, $0.92, $0.68, and $0.44.

And then I had to ask myself: "what the #&*% am I doing??" Even though I already knew.

I was catching the falling knife. Hoping instead of investing. Bottom-feeding. Trying to be a hero. Fighting the market. Pretending I knew something that the market didn't. Pretending that the market was dead wrong.

And I arrogantly kept betting on a losing stock, only to watch it lose further.

DCA'ing did help me to lose "only" 51%. However, I did watch the stock plummet 90% from its high earlier this year.

Absolutely inexcusable. And it had to come to an end, while I still had some of my money left to save.

It was a painful experience, but that makes it that much easier to remember, so that it won't be repeated. Ever. Again.

Lessons:

• Don't buy stocks that trade on the pink sheets.
• Don't buy stocks of companies that are exiting bankruptcy, by issuing new common stock (most likely resulting in the screwing of owners of the old common; in this particular case, that would entail having the old shares convert into warrants and option-like stock rights).
• Don't let stocks fall by more than a third from their highs.
  

As for Delphi the company, I look forward to it's successful exit from bankruptcy, and may choose to own the new common when it is issued. I still believe it is a company with valuable assets, superior technology, and improving prospects, and will execute its turnaround plan with great success.

As for DPHIQ.PK the stock, you're dead to me.