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Model Portfolio Update: Sell BAC

Very rarely do you see me sell a position before it hits its trailing stop. Today’s sell order for BAC (Bank of America) is one such occasion.

I’ve written before about my rules for selling. Simplified they are, sell if a stock stops paying a dividend and sell if a stock has negative earnings.

bac

Today’s news was not good for BAC. It was revealed that they made a mistake with their accounting, which has led to the dividend payment being suspended as well as the share repurchase plans.

As you can imagine, the stock has plummeted since the news. I’m calling for an immediate stop now. The stock is trading at $14.95. It no doubt has further to fall. 

All in all, the trade works out to a 6% gain. Not too bad, considering we ran into some bad luck here near the end of the trade.

However, the fact that they couldn’t avoid such a simple accounting error shows you where the morality of management is at. It seemed for a while that they had really learned from their bailout, and that things were going to recover. Now, I’m questioning ever thinking that.

The stock was originally bought as a play into the financial sector, but it’s no longer as attractive as it used to be. There are cheaper and safer plays out there that can be exploited in the future.

My model portfolio posts are usually monthly, but obviously this one is an exception. I had to get this post out to my readers, to stop the bleeding for anyone following the recommendation.

Again, the recommendation for my model portfolio is Sell BAC.

**Model Portfolio Update: Sell BAC**
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