Sold Chicago Bridge and Iron

posted Aug 23, 2016, 3:54 PM by Intelligent Investor   [ updated Aug 25, 2016, 9:50 AM ]
Chicago Bridge and Iron (CBI) comprise 2.5% of my overall portfolio. I first bought this stock at around $46/share. I sold it at $34. So, I basically took a 30% loss on this investment. My portfolio took a hit of a 0.75% loss from this investment.

Chicago Bridge and Iron (CBI):
Portfolio Allocation: 2.5% = 0.025
Loss: 30% = 0.30
Total Loss = 0.025 x 0.30 = 0.0075
0.0075 x 100% = 0.75%

I sold it because I saw better values and less risk with other stocks such as AT&T (T), Goldman and Sachs (GS), Phillips 66 (PSX), and Qualcomm (QCOM). And I just got tired of waiting for the price to rebound to $46/share. In addition, Warren Buffett exited his position in CBI. The problem with CBI is that the price of oil is directly correlated with the company's ability to make money. Oil prices are still falling at this time which means there is a lot of risk here.

As a note to others:

When investing in a risky stock DO NOT invest no more than 5% of your portfolio in that stock. The riskier the investments, the less weight or allocation you should have of that investment in your portfolio.

For example:

Wabco (WBC) is a risky investment, so it only comprises 5% of my portfolio.

Chicago Bridge and Iron (CBI) is a riskier investment than WBC, so it only comprises 2.5% of my portfolio.

Viacom (VIAB), another very risky investment, only comprises 2% of my portfolio.