Wednesday, September 24, 2008

Would You Sell In This Market?

On 9/11/08, I wrote about how my ESOP account was down 20% for this year. What a difference a week and a half makes - - my ESOP account is now up 25%. Last Friday, the stock closed at $260/share. On Monday, it rocketed to $326/share (an increase of $60/share or 25%!).

As I watched the stock price go up and up and up, I discovered that I absolutely have no exit plan with respect to these stocks. At what price am I willing to sell? Do I hold on to them for the long run? If I do sell, and should I reinvest the proceeds? Or do I pay off debts with this money? Put the money into my emergency fund? If I’m going to reinvest, what should I reinvest in?

There’s no explanation for why the company stock price went from a slow downward spiral to a sudden, upward trajectory. My hypotheses include:
  • my company is one of the few companies that made tons of money by betting against the subprime mortgage and is thus considered a “safe” stock by investors,
  • short-traders are covering their bets,
  • the company has been grossly under valued and the stock price corrected itself, and/or
  • the increase is just part of the wild market fluctuation right now.
  • I doubt individual investors caused this stock to pop. What do institutional investors know that I don’t know? Is this a short-term pop or is this a sustained correction?

    Anyhow, my cost basis (including my company match) for 14 shares of my company stock is $2,986.03 (or, $213.29/share). Yesterday’s range for this stock was $300-$329.74 and closed at $322.05.

    If you were me, would you sell this stock now? If "yes", what do you think I should do with the proceeds?