Paper Trumps Gold – Tembec TMB.TO

by Olivier on February 10, 2011

Now that’s a headline I like ;-). Kidding aside, TMB.TO – Tembec the paper, pulp and forestry stock in my portfolio is quietly developing into a monster stock. It is now obvious the stock was way undervalued when I initiated my position. Along the way I stated quite a few times it was one of my best performing portfolio positions. The thing to do in this case is to stick to your winner and hold on to your position as long as you possibly can. As Jesse Livermore used to say:

“Men who can both be right and sit tight are uncommon.” – Jesse Livermore

This ultimately proved to be much harder to do than I had anticipated. I ended up selling 1/3 of each of my portfolio positions because I feared that no matter how great individual portfolio positions looked, the overall market might undergo a correction. Still, I went for a conservative approach. I didn’t sell everything, I kept my core position, thus enabling me to ride the bull market but at the same time reduce my stress level and manage risk.

TMB.TO Tembec Canada TSX Paper Pulp Forestry Technical Analysis Price Chart Pattern

Up-to-date TMB.TO – Tembec chart on my public list.

My job as a trader is to objectively analyze a stock’s price action at all times. The market and individual stocks do not care about me. They keep moving up or down no matter if I am in or out. With the benefit of hindsight, the recent pullback has to be considered a world class shakeout of weak hands. Today the stock closed at the high of the day and eclipsed its pre-shakeout high around the 5$ level. When it comes to demonstrating technical strength it doesn’t get much better than this. TMB.TO’s technical strength combined with the fact I still think the stock is fundamentally undervalued makes me think the stock is headed much higher. The next obvious round number is 10. It will be a challenging task, but as long as the stock doesn’t make it too difficult to hold on to it I’ll do my very best to ride it all the way up to that potential 10$ price target. It really all comes down to expectations. Constantly monitor a stock’s behaviour. You will soon find out if the stock in question doesn’t meet or exceeds your expectations. Strong stocks move higher and faster than you would expect. Those are typical character traits of winning stocks. Look at the chart above. Tembec is displaying those exact characteristics.

Lesson learned: TMB.TO – Tembec was completely under the radar when I first bought it. Still, irregardless of the compelling fundamentals, I mainly bought it due to its technical set-up. In other words, it was a technical buy into a sector that was clearly not a ‘crowded trade’. Avoiding the crowd when it is getting late in the game is something that tends to pay off nicely more often than not. TMB.TO is a great example how to make big bucks trading stuff you find on your own. Then be confident enough to go for it. Time to act accordingly. You probably guessed it, my public list will undergo major changes. I will soon get rid of quite a few names and replenish my watch list with fresh and new trading ideas. Stay tuned.

A loser doesn’t know what he’ll do if he loses, but talks about what he’ll do if he wins, and a winner doesn’t talk about what he’ll do if he wins, but knows what he’ll do if he loses. – Eric Berne

My public list with all my charts can be viewed here:

Buenas noches!

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