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Trading Through A Perfect Storm

By Robert Freedland

In 1997 Sebastian Junger wrote about the Andrea Gail, a 72-foot fishing boat that sank off the coast of Nova Scotia in October 1991. The vessel was a victim of a "perfect storm."

Three storm systems came together and produced 80 mile per hour winds and 100 foot waves that tore the boat apart. In 2000 a movie of the same name was released and became a box office hit.

As an investor it is difficult to observe the Congressional antics in relation to the operation of the Federal Government, the raising of the Debt Limit Ceiling, and the underlying weak economic recovery still suffering from austerity and sequestration without considering the possible implications to the stock market.

Luckily, on October 16, a last-minuted bipartisan deal to reopen the government and avoid a debt default was reached. Even so, days before that breakthrough I slowly raised some cash within the accounts that I manage on Covestor.

In addition, I reduced the number of holdings in my Sustained Momentum portfolio to 10. I am not a believer of ‘timing the market’ but it is hard to ignore the big Nor’easter heading our way!

Since September of 2013, I have sold my position in Apple (AAPL) on weakness and volatility, added back a new position in Cardtronics (CATM), peeled off a few shares of Fleetcor (FLT) at a large gain just to reduce the size of the position.

I sold my position in Gorman-Rupp (GRC) as it developed a small loss and sold off my recently acquired position in CarMax (KMX) also on weakness.

Early in September I initiated a position in LKQ Corp. (LKQ), an auto parts distributor showing strength. Thus far, I have been able to hang on to that holding.

Lumber Liquidators (LL) was sold initially just to reduce the size of this stock position, then the rest was sold after the stock sold off on word of a Federal investigation involving agents raiding its headquarters on questions apparently of importation of hardwood from endangered forests in Asia.

Simply put, I have been anxious to move holdings into cash on weakness and this presented an opportunity that I took. The stock has rebounded and remains unaffected by this news for the most part.

Other sales included closing out my position in Lowe’s (LOW), and peeling off shares of Packaging Corporation of America (PKG), and Starbucks (SBUX). aFinally, I sold off my position in SS&C Technology (SSNC), a holding acquired mid-September and then sold in early October.

The net effect of these transactions has been to move about a third of my portfolio in the Growth and Momentum model into cash.

The investments discussed are held in client accounts as of September 30, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.

Robert Freedland

Robert Freedland

Robert has over 40 years of investment experience and is a full-time optical surgeon. He uses his expertise in the

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