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Learning to cut your losses is one of the most valuable lessons a growth manager on Wall Street must embrace to become successful. Peggy Woodford Forbes, founder and chairwoman of Woodford Capital Management L.L.C., in Los Altos, California, says her firm sold most of her Private Screening picks from a year ago to avoid the poor results she would have gotten had she held on to them. Later, she bought some securities back at lower prices.
She says: “If we feel that the reasons for holding a stock are being violated, such as the fundamentals change or they become overvalued, we will take the profits and cut our losses.”
A year later, Forbes still has favorable opinions of each of the stocks she picked. Although her firm sold it, she says Applied Biosystems Group (NYSE: ABI) was still a good stock at the $33.75 price it traded for in December. Even though that was 63.71% lower than the $93 it sold at a year ago, the company’s work with human genome research makes its prospects for growth strong.
Forbes also sold El Paso Energy (NYSE: EP), because of the California electricity crisis and market pressure on oil and natural gas prices. Trading at $40.23 in December (38.58% off its $65.50 price at recommendation), she says El Paso is a long-term buying opportunity.
Forbes thinks Merrill Lynch (NYSE: MER) and Morgan Stanley Dean Witter (NYSE: MWD) are stocks to watch in 2002. Her firm sold and bought back Morgan Stanley Dean Witter, which lost 23.71%, going from $68.88 to $52.55. And although she sold Merrill Lynch, the stock is on her buyback list. Merrill went from $63.63 to $50.80 since last year, a 20.16% drop.
Forbes sold some of her Oracle (Nasdaq: ORCL) shares, but purchased more when the price dipped. Trading at $14.57 in December, 48.98% off its $28.56 price when recommended, Forbes says the company is set to benefit from a new product launch in 2002, but warns it will be a slower-growing company.
The pharmaceutical giant Pfizer (NYSE: PFE) was caught in a trading range, posting a 13.20% loss from its recommended price of $45.44. Selling at $39.44 in December, Forbes’ firm still owns the stock. “It’s our heaviest holding in healthcare,” she says.