Changing Course

As new information comes to light, I am forced to make adjustments to my portfolio. As much as I hate admitting being wrong, to do so is to learn and to grow. I was wrong on a few assumptions.

1. Merrill Lynch. Despite the fact that I think the subprime mortgage market is in huge trouble, I can't overlook this:

"Despite problems brokerage firms reported last month with the subprime mortgage business, analysts are more sanguine about results for Merrill Lynch, and they expect the firm to post a more than 20% rise from year-ago earnings per share."

You cannot ignore news items such as these. If you'll recall, Merrill took a very activist approach when it came to getting rid of subprime securities. While JP Morgan Chase was canceling auctions over fears that the entire subprime CDO market would be recognized for its true value, Merrill persisted. They rid themselves of highly risky debt obligations and by using an auction format, they were committed to doing so no matter the losses they'd incur. That, coupled with the news release, is my reason for changing course. If you shorted the company, buy enough stock to cover the short. If you sold your original stocks, too bad. I won't issue a buy for Merrill at this point because I think the banking industry is still due to take a large subprime hit.

2. Apple. The iPhone figures have yet to be released, yet the stock pushes upward. I'm not going to wait for it to hit $200 before I change course; I'm changing course now. Buy enough to cover any shorts and wait to see if the price comes down.

3. Google. This stock is the only one I'm reversing course on. From Marketwatch:

"Analysts polled by Thomson Financial expect Mountain View, Calif.-based Google to post a 44% gain in earnings from the period a year earlier, to $3.59 a share, while revenue is expected to grow 60% to $2.68 billion."

"Meanwhile, Cowen & Co. analyst Jim Friedland said in a note released Wednesday that he expects Google's share of its traditional search market only to grow ever-higher.

"'We believe Google will achieve a share of at least 90% of the search market over the next decade,' Friedland said."

If you shorted Google, cover your short. In addition, I recommend buying more shares. Google closed trading at the end of Friday at $552.16.

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Investing is about constantly re-examining your positions. Sometimes investment decisions are the wrong ones, while other times you'll be right on the money. For these three stock picks, I believe I made choices that were reckless, choices that were based on cursory research. I failed to use a proper amount of prudence. I shall try harder.