“I was expecting Mitcham Industries, Inc. (MIND) would find support soon after its earnings conference call yesterday. Unfortunately, this hasn’t happened as quickly as I had hoped. The situation is that the stock is currently trading around $16.15, after rebounding off of $15.85.
“We’re going to protect our existing 15% gain by setting a stop loss at $16.03. You can do this by entering a limit order with your broker at $16.03. If the stock hits that price your shares will automatically be sold. That said, please keep in mind that MIND is a small company and if a lot of orders are entered at the same price, at the same time, it could impact the share price. So it might be wise to enter a few limit sell orders at different prices, depending on how many shares you own. We’ll keep this stop loss in effect for the foreseeable future so if the stock price hits $16.03 it will automatically be removed from our portfolio.
“I want to be absolutely clear that I believe you could hold Mitcham through this turbulence and ultimately have a bigger gain. But I am not willing to let what was once was a big winner for us turn into a potential loser while hoping for a quick reversal. That would be foolish. ...
“Suffice to say that the company missed analyst expectations. The culprit was lumpy revenues in its own marine seismic equipment sales, and management stated that these revenues will just push back to the next quarters. It reaffirmed full year 2012 guidance.
“But traders are treating this stock as if it actually had a bad quarter and isn’t growing, and we won’t fight them even though it is dirt-cheap on a valuation basis.
“If the stock hits our $16.03 stop loss I’ll be looking to re-enter MIND at a lower price once it settles down. If it reverses course quickly we’ll just have to be ok with the 15% gain and get ready for the next opportunity.
“To repeat, we are only selling this stock if it hits our stop loss to lock in a gain, and not let a winner turn into a loser. It is a technical trade, not a fundamental one.”
- Tyler Laundon, Small Cap Investor PRO, June 7, 2012