A move made a month ago...part 2

Now that we have discussed the selection criteria which I was employing last month...let's look at what happened.

Free up some cash: Get $27K to start.

• I sold $22K of INTC at $19.28. As I mentioned before, Intel does in fact meet my criteria as an investment. The issue is that I am extremely overweighted in Intel due to the fact that I work there. As such, I really want to diversify away from this position...aka, Enron-syndrome.
  
• I sold $5K of IBM at $94.20. IBM does NOT meet all my criteria (Market cap of $143B, been in business >5 years, current earnings $6.72, +9% earnings growth next year, 1.2% yield, +5% price target and a good balance sheet).
  

What I bought with the $27K:

• $12K was put into a 5% online savings account. Since some of the $27K was earmarked for "savings" I decided that it would be best to pay ourselves first.
  
• $5K was put into British Petroleum at $59.49 (price target of $73).
• $5K was put into Global SanteFe at $58.41 (price target of $72).
• $5K was put into Tele Norte Leste Participacoes at $13.19 (price target of $19.50)

Relative Success criteria over the past month: Beat the investments I sold as well as the indexes!

• Intel has moved up to $20.47 (+6%) and IBM has moved up to $95.16 (+1%). As such, the weighted average I need to beat is : +5.1%
• Dow is up +1.4%
• S&P is up +2.8%
  

Results:

• The $12K in savings only returned 0.4% for the month.
• BP is up +12.4%
• GSF is up +9%
• TNE is up +27.8%
• Weigted results: +9.3% ---> even with 44% "under the mattress".

Obviously this was a pretty good month...I do not expect things to go this well in the future.... but it does show how you can go with good companies and still make some money. Now the hard part comes...when to sell. My original thinking for when to sell was based on two things:

1. News which significantly alters the fundamental assumptions wrt EPS or EPS growth or
   
2. The stock has risen to within 5% of the 1 year price target.
   

On the news front: there was only one game-changing announcement and that was for TNE.

Moving higher on the ADR index were shares of Brazil's Tele Norte Leste Participacoes and Brasil Telecom Participacoes (BRP) . Stock in each company gained more than 5% following a local report that the government has given clearance for the two telecom services providers to merge.

I will poke deeper into the news on these three over the next week. I am not sure if news of a merger is enough to change my hold position on TNE. People do say "buy on the rumor and sell on the news"...but since TNE had so much headroom to begin and still has so much headroom to go, I am not sure that applies. I will have to think about this one over the weekend...any thoughts from the critics out there?

As for the second sell criteria: Getting within 5% of the target price...nothing is close yet. In fact, TNE still has the most room to target of the three despite a big run. For now I think I will wait out earnings season. I do not expect any huge negative news out of these three since they are consistent performers.