I've mentioned more than once that I wish I had some cash sitting in my IRA so I could pick up something the market has thrown a sale on. Basically I've seen an opportunity to make a quick trade but am already fully invested in stocks and don't have anything I want to sell right at the moment.
Here's a case in point. Last Friday a jury found Sherwin-Williams (SHW) liable in a lead paint class-action suit and the stock simply fell off a cliff: from above $52 to under $38 in a single day. This is almost certainly an overreaction.
I hate to keep talking about Jim Cramer, since I believe that blindly following him or any other "guru" is a good way to lose money. You really have to read between the lines a lot with Cramer since he's always saying things like "you need to own FOO" and he assumes you know not to buy it just because he said so but to check it out for yourself. Anyway, he pointed out this past Monday out that it's extremely unlikely SHW will actually have to pay out, and if they do, it'll cost 'em more like fifty cents a share, not $14 a share. And sure enough, on Tuesday the judge in the case basically threw out the fine. The stock has recovered some since last Wednesday (it closed at $45.50 today) but it looks like there's about $7 worth of recovery still to come, which would represent a respectable 15% gain. Let's see if Cramer's right.
Last year I missed out on an opportunity to make a quick 15% on Merck (MRK) under much the same circumstances: a lawsuit, an overreaction by the market, followed by a recovery in just a couple of weeks. I had some money, but was new to investing then and didn't really have the confidence to jump in. But if I had, I'd have made that 15%.
Next time I sell something, or perhaps I'll wait until 2007 when I make my next contribution to the Roth, I'm seriously considering keeping a "chunk" aside just for quick trades like this. I still want to hold most of my stocks for a year or more, but it's just too painful watching obvious trading opportunities like MRK and SHW float by.
Posted by kindall at March 1, 2006 03:32 PM