I've been sweating wether or not to shed Alcoa for the last few days, and I have just this morning come to a definitive resolution, it has to go.
The logic for keeping Alcoa is that it is a potential acquisition target (in such a case the acquiring company would probably value the stock at 12 or 13 and give us a tidy little profit). There's also the chance that with an economic turnaround, particularly with an infrastructure investment by Obama, Alcoa will be fine. There's the chance that it makes its next dividend and is up to 15 or 20 by the end of the first quarter 2009.
While I can definitely see all of this happening, it's just not worth the risk. Alcoa is the only stock in our current portfolio that I can see falling dramatically in the next several months. It is also the only stock that I can see failing to pay its dividend. Why not take advantage of a mini-winning streak and cash out? It won't hurt us to have a little more cash. After the Heinz purchase we are 41% cash, I wouldn't mind being closer to 50%. If the market continues to turn, there are going to be some bargains to be had in the next few weeks and I want to have the cash to buy them. Besides, we have made 8.27% in the last couple weeks on a risky stock. It's time to not be greedy and cash out.
Investing Pittsburgh is a regular part of this blog. It details the ins and outs of a mock portfolio of Pittsburgh Stocks invested and managed by me. For a list of all of the previous "Investing Pittsburgh" posts, click here.
11 months ago