Let go of Southern Copper today.  A tough decision as it had not yet reached it’s Intrinsic Value as I had calculated it back in March.  This past week I went back and reviewed my future growth assumptions.  Southern has grown its free cash flow by 29% in the last decade, a truly remarkable feat.  But perhaps a bit too optimistic to start the next decade.  A slight downward revision resulted in a new, lower intrinsic value target of $35 per share.  And if I’d sold just a few weeks ago I would have caught 35 instead of the $31.53 I did today.  Normally I would wait ’til Southern reached my target, however a few things motivated me to sell early.

1) We are in an ‘all cash’ safety environment with the momentum portfolio.
2) Just released 3rd Quarter profits are down 25%, though I hesitate to give much weight to one quarter.  Indeed there was some good news – sales up and costs down.  Southern blamed the poor showing on a terrible pricing environment.
3)  Short-term technicals turned lower from an overbought position.  (I was a few days late catching this)
4)  Copper has reached some overhead resistance at current levels ($300 per lb.)  In this economic environment I think it reacts lower before inflation pressures catch on and carry it away.

I was also practicing one of Warren Buffet’s rules of knowing when to sell:

“Look at each stock you own and ask yourself if you’d rather see it rise in price so you can sell… or fall in price so you can buy more. If you’d rather see it rise in price, you should consider trimming the position or selling it out entirely.”

I was hoping PCU would rise back to $35 for a quick sale.  Hope is not a good investment strategy.  So I decided to lock in the profits now.  I’m quite pleased with the 105% gain since purchase 7 months ago, and may buy in again for another ride if things truly “go south” for Southern.

You can follow my real-time stock trades on the Portfolio page.