Shaving off some profits at Akamai (AKAM)
Well, I have to say that this wave of selling I've gone through has been exhausting. If you didn't read any of my earlier posts, I've decided to change tacks and reduce my margin exposure significantly in the wake of what have become usurious interest rates, takin profits in some companies, cementing losses in others, and selling both whole and partial positions along the way.
So far, this initiative has led to sales of all or part of my holdings in Formfactor (FORM), Imax (IMAX), Middleby (MIDD), Rofin Sinar (RSTI), and Lionsgate (LGF).
Essentially, what I've philosophically determined is that if I'm going to borrow money to buy shares, it needs to be something I'm absolutely committed to, something that I think has a short term chance of significant returns (less than a year), and something that I'm willing to pay extra attention to.
The flip side of that is that I need to focus a bit more on taking profits on stocks that I hold on margin and that have had significant (100%+ runups). I may prefer to hold many of these companies for the long term, and in non-margin accounts I often will, but in my margin account I need to focus on taking profit when I can do so and pay off the margin loan I've taken out.
Thus, I'm taking some profits in a company that I really like, but that has climbed about 170% for me in a year or so -- Akamai (AKAM).
I'm not willing to sell all of my AKAM shares as I was with Formfactor, another tech company that has had a remarkable run -- I still think there's good visibility for a strong future for Akamai, but there are also certainly some significant risks, largely due to increasing competition in their space (from bitTorrent, Limewire, and possibly, in the future, Google ... among others) but also due to Akamai's stock market run.
While it can be argued that the shares are priced fairly based on very high estimates for next year's earnings, this is a high PE company in a turbulent sector, so since I've borrowed money to buy this one I need to sell a few shares and pay off that loan before I can feel comfortable holding through the next couple years. I think delivering high bandwidth commercial content -- from software to multimedia files to services -- is a growth industry, and one that Akamai is poised to lead. I don't think that their competition will be a significant threat, as I believe the market is growing fast enough to let several growing companies fluorish, and no one has the customer base of Akamai ... but I'm not positive, and it's always possible that a better mousetrap will appear.
And I also fear that any hiccups in their operations -- a missed quarter -- will cause a marked selloff in the shares. I'd rather sell this small portion (about a third of my holdings) on my own terms, at a fair price, than be forced to sell at a discount in the future.
So my Akamai position has been reduced a bit, taking a profit of roughly 170% on the shares I've sold today. I will continue to hold the remainder of my position at an average cost of about $14.26.
So far, this initiative has led to sales of all or part of my holdings in Formfactor (FORM), Imax (IMAX), Middleby (MIDD), Rofin Sinar (RSTI), and Lionsgate (LGF).
Essentially, what I've philosophically determined is that if I'm going to borrow money to buy shares, it needs to be something I'm absolutely committed to, something that I think has a short term chance of significant returns (less than a year), and something that I'm willing to pay extra attention to.
The flip side of that is that I need to focus a bit more on taking profits on stocks that I hold on margin and that have had significant (100%+ runups). I may prefer to hold many of these companies for the long term, and in non-margin accounts I often will, but in my margin account I need to focus on taking profit when I can do so and pay off the margin loan I've taken out.
Thus, I'm taking some profits in a company that I really like, but that has climbed about 170% for me in a year or so -- Akamai (AKAM).
I'm not willing to sell all of my AKAM shares as I was with Formfactor, another tech company that has had a remarkable run -- I still think there's good visibility for a strong future for Akamai, but there are also certainly some significant risks, largely due to increasing competition in their space (from bitTorrent, Limewire, and possibly, in the future, Google ... among others) but also due to Akamai's stock market run.
While it can be argued that the shares are priced fairly based on very high estimates for next year's earnings, this is a high PE company in a turbulent sector, so since I've borrowed money to buy this one I need to sell a few shares and pay off that loan before I can feel comfortable holding through the next couple years. I think delivering high bandwidth commercial content -- from software to multimedia files to services -- is a growth industry, and one that Akamai is poised to lead. I don't think that their competition will be a significant threat, as I believe the market is growing fast enough to let several growing companies fluorish, and no one has the customer base of Akamai ... but I'm not positive, and it's always possible that a better mousetrap will appear.
And I also fear that any hiccups in their operations -- a missed quarter -- will cause a marked selloff in the shares. I'd rather sell this small portion (about a third of my holdings) on my own terms, at a fair price, than be forced to sell at a discount in the future.
So my Akamai position has been reduced a bit, taking a profit of roughly 170% on the shares I've sold today. I will continue to hold the remainder of my position at an average cost of about $14.26.
This article posted by One Guy @ 8/23/2006 03:46:00 PM 2 comments
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