Recently, two of my positions, Mechel (MTL) and Petrobras (PBR) started to sell off very fast. A few months ago, I had adopted a long term investment strategy. In a rising market this approach worked well, but the last few weeks commodities stopped working.
My conviction about my approach was being tested. I thought about the long term thesis for these two companies. Mechel, a Russian integrated steel maker has a great outlook because of global expansion and they recently purchased a company that produces coal, a major component in making steel. This acquisition will help to reduce raw material cost because they would not have to purchased coal from another company. Petrobras, a Brazilian oil company recently made a major oil reserve discovery. This in addition to the increased global demand for oil and the Brazilian economic growth, I concluded my long term outlook was correct.
Last week, I was on vacation and I checked on Mechel and read an article about the Russian Prime Minister making negative comments about Mechel and the stock was down 18%. I sold it. Also, the last few weeks, oil has dropped from a high of $147 per barrel and now was $125. As a result, Petrobras was down 25% from its high. I sold this stock as well. Both of these stocks started decreasing a week or two earlier, but I held them. I did have a warning.
What investment lesson did I learn from this? Don't try to fight the market. If the market is telling you something, listen. Take it from me, don't be slow to rotate.
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