As we approached the end of 2007, I spent some time reviewing my stock portfolio.  It’s part of my holiday tradition.  Over the years, I have made a habit of doing this to see if there are any tax losses that I can take to minimize that year’s tax bill.  One stock in particular was giving me a bit of heartburn.  I had bought U.S. Steel (NYSE: X) in early November of this year after doing some research on steel stocks.  U.S. Steel seemed like a good bet because, unlike foreign competitors, it was relatively insulated from recent increases in raw material prices due to the fact that it has its own iron-ore and coke supplies for its U.S. plants.  U.S. inventory levels were at historic lows and U.S. steel prices were lower than comparable products in Europe and China. There was also talk of consolidation in the U.S. steel industry, which might make U.S. Steel a takeover target, and it was trading at a discount compared to steel companies in China. 

 I purchased the stock at $102.00 a share, only to watch it plummet to $87.00 a share in the next couple of weeks.  Needless to say, the drop was severely distressing, and I began second-guessing myself about the reasons why I purchased the stock in the first place.  I started mentally beating myself up for not doing more research, and thought, this $1500.00 loss is going to hurt.  My anxiety levels rising, I seriously contemplated dumping the stock and cutting my losses.  But I ultimately held off, deciding that I hadn’t actually lost the money yet and wouldn’t do so until I sold the stock.  Thankfully, in the last month, the stock has rallied, climbing back to $119.00, as of last Friday.  I am breathing a sigh of relief, not only for the fact that the stock has come back, but also that I didn’t succumb to my emotions.  Ironically, giving in to worry and anxiety would have caused me more worry and anxiety if I had seen the stock recover, after having sold it at $87.00.  Of course, sometimes your instincts are right, as in the case of another stock that I purchased but promptly sold at a small profit because I ultimately didn’t feel good about the long term fundamentals.  However, in this case, I had done the research, and nothing had changed with respect to those facts.  Rather, it was just the market moving up and down as it does from day to day, many times without any particular reason specific to your stocks.  I was just in a tizzy because I thought I had lost $1500.00, something like what a gambler feels after a bad night at the blackjack table.  Warren Buffet’s brilliant success in the stock market is largely due to the fact that he doesn’t watch stocks go up and down on a daily basis; he buys based on good fundamentals in the stock and the industry.  This episode taught me to work on my stock-picking and stock holding skills.  Both really go hand in hand for successful stock investing.