June 21st, 2007

Life Cycle Investing: Life Partners Inc. (LPHI)

I just couldn’t help but pass this on (and bask in the glow of one of the best spec buys I’ve ever made). At the end of April, I posted on stocks breaking to new all-time high territory with an emphasis on the Insurance Industry Group; one of the stocks in the list was Life Partners Inc (LPHI).

The stock didn’t actually stick out of the group until I was doing research on IPO’s, their characteristics and the criteria for finding entry points and good buys for my upcoming book on “Life Cycle Investing” (what a coincidence, Life Partners and Life Cycle Investing) . It was at that point that LPHI took on some additional interest.

I began gathering the info on IPO’s around the beginning of May (first wrote about them on May 28 in Life Cycle Investing: Winning Class IPOs Class of 2006) and LPHI was among the group (its IPO was in 2000). LPHI’s chart appeared to fit the profile of prospective winners that I was looking for (LPHI chart as of May 03) :

While my data seems to indicate that the began trading at January 31, 2000, only 76,800 shares were traded during all of the next six months. It wasn’t until a year later, on January 25, 2001, that 100,000 shares traded. Trading volume over the past 5 years was:

Although the its trading volume was below the average I usually felt comfortable with, I decided to take a small position any way …. just as a test of the IPO concepts I was developing. And I’m glad I did because my timing really couldn’t have been better. Volume started to pick up as the volume began climbing sharply to new levels:

As of 2:45 today, the has run straight up 104% from the May 3 price of 16.81 to 32.30! I’ve been adding to my position in small increments as the price went up.

You know the old saying “Bulls make money, bears make money but pigs get slaughtered”. Am I being a greedy old pig by not selling as the stock has gone up (“schnitzeling a little” as Cramer says) or have I been a keen Life Cycle Investor. But why sell a true winner only to try finding another one? What about the other Wall Street saying, “Cut your losses but let your winners run”? I’m going to stick with this one, if my nerves and stomach can handle it, until I see a consolidation forming and then I’ll take some money off the table. (By the way, there are no options available for use in hedging my position.)

What would you do? I’m open to suggestions and advice.

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