DaVita Inc

No, I'm not going to ignore it. DaVita Inc's (DVA) third quarter earnings missed estimates but even more concerning is that the company stated that they were uncertain about 4th quarter performance. They were so concerned about it, the company did not give specific guidance for the coming quarter.

Accordingly, the market sold off the stock. It sank 9% Friday. I have been doing this blog for a little over 3 months now and this is the largest one day drop for any of the stocks I have held. Not only that, this drop wasn't in reaction to other factors, such as RIG reacting to oil or ABX reacting to gold. This is a company specific issue.

So, what am I to do with the stock? Since I added the stock in mid September, it now has shown a loss of just over 1% with Friday's drubbing. I'm holding on to the stock for the time being but I am going to watch it's performance over the next few days closely. If it continues to fall (beyond what the overall market does), I am going to ditch the stock if it falls another 4%. I'll cap my loss at 5%.

You get many divergent advice on what to do with your stock holdings. Some say, buy and hold and only check your stocks once a year so you can re-balance your holdings. Others say you need to sell out of a losing stock to put your money to better use...which means you need to keep closer tabs on your portfolio.

What you need to do is somewhere in between. You purchase a stock as an investment, something you are going to hold, presumably forever. Think Berkshire Hathaway. But you have to have a game plan. For example, my plan with DVA is to limit my overall loss to the stock at 5%. If the stock had sold off and the company was more certain of their performance going forward, I may have given it more room to the downside.

But the same applies to the other direction. I held Las Vegas Sands for over a 50% gain. But I knew that the company was headed towards a fall. It was just too hot. It posted lower guidance for the third quarter and lost 15% over 2 days. I was out long before the fall. I sold out on September 24th, LVS has lost 11% since that time.

You need to keep the pulse of the companies you hold. I suggest if you own individual stocks...you need to check them at least once a week or so. Know when their quarterly earnings reports are coming out. Read a little bit about the company again before they report. And know what gain or loss you are comfortable with. Knowing what you are going to do and what risk level you are willing to take....that is more important than any advice that is given.

Quick Update & Adding a Stock Pick

So I didn't write a weekly recap last week. Sorry, busy with a trip to Indianapolis, playing Madden on the Wii and drinking. And I'm not going look back either. I'm not going to take the time to crunch the numbers. It isn't worth it. Why?

Well, because I am running away and hiding from the S&P this week. Las Vegas Sands (LVS) has broken out of it's trading range and made a significant move higher. Since the start of the week the stock is up over 16%. The move is based on an upgrade by JP Morgan analyst calling for the stock to hit $120 and giving it an "overweight" value. The stock closed today at $117.

I have also had Barrick Gold (ABX) on a nice little run. The stock has gained over 14% percent since we returned from the Labor Day Holiday. Gold has been the talk lately with so much talk of the Fed cutting rates. If rates are indeed cut, gold does move separately from the dollar. Not a bad place to be.

JP Morgan also issued an upgrade to "neutral" from "underweight" for both Transocean (RIG) and GlobalSantaFe (the company RIG is acquiring). Let's see what that does for the stock over the next couple of days.

At this time, I am going to add another stock to my portfolio. I am going to add DaVita (DVA) based on Jim Jubak recommendation here. Diabetes is something that is immune to stock price ups and downs and DaVita provides the services necessary (such as dialysis).

I think this is a great idea and I am not afraid to ride on someone else's research and know-how. I think Jim Jubak is someone you should read every Tuesday and Friday. He covers a lot of ground in his writing. Is not afraid to admit when he is wrong. And explains the most difficult ideas in easy to understand terms.