Profit Taking on IBM

IBM (IBM) has hit another 52 week high (and an all-time high) today and closed at US$177.71.

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I like the company but the stock price is a little high for me. Here is a snapshot of my analysis of the stock. My investment policy is to sell where the return on investment is below 10% with a 10% margin of safety (using an IRR calculation). The return on investment falls below my minimum criteria when the price hits $186.44.

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I would like to trim my holdings and take a little profit if the price moves up. I will sell half of my shares using a 30 day limit order at US$180. If it climbs to US$186.44 I’ll sell the rest.

Update: The stock hit US$180 on 19th July and half of the shares were sold.

  • SELL IBM (IBM) @ US$180

Update: I developed a new and more accurate analysis spreadsheet. This showed that the sell price for IBM was actually US$181.98 so I adjusted the limit price and the second sale was executed on 28th July.

  • SELL IBM (IBM) @ US$182.37

POSTMORTEM

One month after making the decision to trade, on 6th August 2011, these trades look like a good call. IBM rose above US$180, where the trades were executed, and then fell back as low as US$172.

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