IMH was liquidated from the portfolios this week in the 20-21 range for what was a roughly 14 point profit since inception in Q4 2014.
This leaves us with the most significant cash position we have had in years, which opens the doors to pursuing new opportunities as 2015 progresses.
While discovery, research and initiation of long positions should normally be systematic, repeatable process. The decision to sell is much more dynamic in nature.
It is rare that I will sell a position because of concerns regarding changing fundamentals. It is true that by the time concern rolls across my consciousness, it will also be persuading others who hold the position to reduce exposure. Fundamental data then is a lagging indicator, not being necessarily useful to sell decisions. Or at least sell decisions at an advantageous price.
Impac certainly hasn't experienced any fundamental changes worthy of notice. If anything, the stock remains dramatically undervalued. Not to mention it being a great way of participating in nonqm loans, which is the future of alternative mortgage financing.
What the decision to sell IMH comes down to is an issue of comfort and the fact that once comfort in a position becomes compromised even slightly, an investor becomes vulnerable to decisions that carry a negative expected value. I can't be uncomfortable in a company like Impac and efficiently sit through the volatility. Inevitably, I will become vulnerable to that volatility, being forced into a poor decision with a large position that will be difficult to liquidate.
Rather than having the market force my hand at an inopportune time, I would much rather be proactive in recognizing points in the life cycle of price when I don't properly grasp risk vs reward. Or you could also say, points in time when an investor embraces their confusion through defensive measures.
And that"s all I've done here. It's an issue of self dynamics as opposed to market dynamics. At a certain point, knowledge of self while investing becomes equally if not more important than any knowledge of the markets that can be gained.
