More Record Highs - What to Do?

12/04/2013 12:01 am EST


Jim Jubak

Founder and Editor,

MoneyShow's Jim Jubak assesses the current market environment and explains how he is handling one of his recommendations that has exceeded his initial upside target.

The stock market is at record highs. We've had 16,000 on the Dow, we've got 4000 on the NASDAQ, we've got 1600 and something on the S&P; all of these are records or approaching records. The NASDAQ is getting back to where it was before it collapsed in the dotcom bubble. The question is, what do you do? Do you buy into this rally? Do you not? I think if you're taking kind of a big picture look and trying to guess where the indexes are going to go, I think you're really talking about guessing. I would much prefer to try to do it on a stock-by-stock basis. For example, there is a stock that I own in the Jubak's Picks portfolio called Chicago Bridge and Iron (CBI). It's a construction company. It builds things like power plants, natural gas facilities, and infrastructure, and all that stuff. I liked it because it's exposed to the US energy sector, which is showing a pretty good boom. My target price on this has been $74 a share and recently the stock hit it. The question is, because it's hit that target price, do you sell it?

What I usually do with the target price is go back and look at my notes for the last time I set it and go okay, how aggressive was I being about my assumptions about the company's earnings growth, etc. If I was being really aggressive; that's one more reason to say sell on the target price. If I was being kind of loose and gaining, and giving the company not a whole lot of credit for stuff, I would be more inclined to keep it. Right now, the story is pretty much the same. I like the stock because of the energy boom in the US, and therefore, building out of infrastructure. I was fairly aggressive when I set this target price, so that would be a reason against holding onto this. Looking at it, there are a couple of big deals, big potential deals. If they come through—they have a deal to build some infrastructure for the chemical industry, etc., that might come through. If they do, that would be another couple dollars to the target price.

The market, as a whole, looks like it's headed up, so it might be worth waiting to see what this news would be. What you have here is a stock that, given the general background, is probably worth holding onto. It's in a good sector, which has good growth going on, that might be relatively insensitive to general US economic slow down. I would say, “Well, yeah, okay so, 74, I'll raise it to 77, hold on for a little bit, and see whether these big deals they've got going on come through.” If they do, that might then be the time to sell on the news, but right now, it looks like this is worth holding for a little longer. That's the way a lot of stocks look as we finish out November and head into December.

This is Jim Jubak for the video network.

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