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The Best of Kass

When I mention a buy or a short on my diary, it is almost as important as how I manage the position as the actual performance of the stock.

Below are the two basic tenets that provide the foundation to good investment returns:

  1. Let it ride. If I buy Altisource Portfolio Solutions (ASPS) at $17 a share in late 2009/early 2010 and let it run to over $100 a share, it has an outsized positive impact on my returns. But only if I let it run.
  2. Stop your losses. If I buy Apple (AAPL - Get Report) at $625 a share and stop my loss at $605 and don't let the loss expand on the stock's way to $450 a share, this is also a win. I have exhibited discipline, and I have contained my losses.

Now let's try an exercise.

Go over your profit and loss for your 2012 stock trades and investments. Now figure out an attribution of your returns by gains and losses. If your gains are large (no matter how few there are) and your losses (no matter how many there are) are small, you are successfully controlling your portfolio's risk and likely achieving good investment returns.

Please consider this in the future when I discuss that I am buying a stock that fails to appreciate or short an equity that rises in my face.

Position: None

Henry Schein Looks Tarnished
Originally published on Wednesday, Feb. 13 at 12:29 a.m. EST.
  • I am attempting to add to this short position today.
I would deduce from Henry Schein's (HSIC - Get Report) fourth-quarter earnings conference call that first-quarter 2013 results will be challenging. If my concerns regarding the consumer are valid, electable dental procedures will be postponed, and the company's second half will be difficult both absolutely and relative to consensus expectations.

I am attempting to add to this short position today.

Henry Schein is a serial acquirer (especially over there), and, as such, Europe's economic woes -- Spain and Italy are particularly weak -- will likely continue to weigh on the company's results. Moreover, favorable U.S. tax policy has expired, which has previously pushed forward equipment sales into 2012.

Trading at 20x trailing results, this consumer-based company seems over priced both for the short term and intermediate term.

Let's go to the tape of the call. (Registration required.)

Position: Short HSIC
At the time of publication, Kass and/or his funds were short HSIC, although holdings can change at any time.

Doug Kass is the president of Seabreeze Partners Management Inc. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.

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