DGI Adventure – 12-01-2015 Limit Order Executed – Cummins Inc. (CMI) – $96.66/share

LOE – Limit Order
Executed

Well that was quite a morning! Apparently I bought 16 shares
of CMI for $96.66/share for a total investment of $1553.51 (including $6.95
trade commission).

Before Thanksgiving, I had decided that I was ready to initiate
a position in CMI
even though there is a long time before the next
dividend. I had messed around with my limit order after writing the thesis, and
decided I wanted to invest closer to $1,600 instead of $1,500, so I upped the
order to 16 shares from 15. I kept that limit order price at $98.00 though because
I still didn’t think there would be a whole lot more downside in the share
price over the next quarter. 

To quote myself:

There are some very old
peaks from 2011 and 2012 in the $96-97 mark and some troughs around $86. I’m
not inclined to wait around to see if it wants to push $86. That’s just too
far. It seems much more likely to start to go up from here. If it does go down to
test those old lows, I will probably be buying more.

Boy was I wrong. CMI’s share price got hammered today. It
seems the primary headline driving the selloff was BofA Merrill Lynch’s
downgrade from “Buy” to “Underperform”. The downgrade skipped the “hold” or “market
perform” or whatever intermediate “neutral” rating they use. Jim Cramer didn’t
help matters
. My favorite quote from that video: “If they’re involved in anything
that’s machinery, they’re just…done.
“ Stick a fork in them. Diesel engines are
obsolete. Machinery is obsolete. We don’t need stuff anymore…just clouds.

The downgrade came out before the market opened, so there
was a big premarket drop. It dropped right past my limit order opening at $96.58,
which meant it was executed as a market order. Unfortunately, the regular
hours robots took up right where the premarket robots left off, and the price
pushed even lower until it stabilized around $92 ish. It closed the day at
$92.43.

So I said if the stock price wants to test those very old
lows, I would probably be buying more. Is it already time to put in another
limit order? While I wouldn’t call this exactly $86 territory, it’s a lot closer
than it was. When the oracles at BofA Merrill Lynch lowered their rating, they
also lowered their target price from $115 to $90. (Seriously? That’s $4.4B of
market capitalization! Overnight? Really?) A week ago I thought it was more
likely to go up from $100 than to go down. Another limit order around $86 would
imply I think it’s more likely to down from here than up. Have I changed my
tune? I have no idea. That’s what I get for trying to make a prediction in the
first place. Thou can’t time the market, so thou shall not try to.

But…I think I’d like to give it a month or so before tying
up more cash in a limit order. The FOMC is supposed to raise rates later this
month, and maybe that’s already priced in, or maybe it isn’t. I felt a $98
price had a decent margin of safety. I got the shares I wanted for even less
than I expected, so now that I own some shares, I’m less concerned with what
direction it goes from here.

The portfolio has been updated accordingly so yesterday’s monthly update is already out of date. Sorry.

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