NEW YORK (TheStreet) -- Eating a bowl of humble pie is not my favorite assignment. Remembering the lessons learned from both my profitable trades and my losing ones is an instructive exercise that's worth the time.
When TheStreet's Jim Cramer wrote to Real Money subscribers about an important goal of virtually all traders and investors, he didn't mince words: "Remember, the real goal for all people in this market is to make this business less of a guessing game about what the Fed will do and more of an investment business where we judge stocks by what companies say."
That was foremost in my mind when I went long shares of Lockheed Martin (LMT) at the end of February when shares fell below $86 each.
The financial markets were riled by the possibility that the so-called budgetary "sequester" that the federal government was embroiled in would hurt defense companies. I noticed that at $86-a-share Lockheed was trading for around 9 times both current and forward (1-year) earnings.Lockheed's leadership held to its guidance for the company's sales for the year. What really caught my eye was its dividend. With an annual payout of $4.60 and the share price at $86 the yield-to-price was a very rewarding 5.35%. I rubbed my eyes with disbelief, checked the numbers again and went long. In less than 3 months I was sitting on close to a 22% gain as Lockheed shares moved above $105. Knowing that bulls make money and bears makes money but pigs get slaughtered I decided to sell. The annualized rate of return for this trade was nearly 88% and that pleased me greatly. This one-year chart illustrates how Lockheed shares behaved. LMT data by YCharts
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV