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Wednesday, September 21, 2011

Range Resources -- what to do now

Since last November, I have been recommending purchase of Range Resource (symbol RRC) one of the biggest producers of natural gas from the Marcellus shale. The stoc was $37.34 when I began my recommendation. Today, it is up over $9.00 and has hit a high of more than $76. For those of you who have ridden the stock up as it doubled in price, here is my suggestion as to what to do now. I think that it is time to take some of the profits you have in the stock. RRC has gone up strongly now for two days in a row based upon takeover rumors. But these are only rumors. Nothing has been confirmed. The stock could just as easily go down ten points if the rumors prove unfounded. Of course, if there is a takeover bid, the stock could soar further. My suggestion is to take profits on half of your position. If the stock goes up further, you will lose the increase on the half you sell. Of course, you will still have doubled your money in less than a year on the stock which you sell, and you can make the gain on the other half of your current holdings. On the other hand, if the stock falls from here, you will have taken the profits for half of your holdings at an elevated price. This will mean that you have take our all of your original investment and still have half of the position.

One last note: I realize that if you bought last November, you are getting close to a one year holding period needed to get a long term capital gains tax rate. I would ignore the tax issue in deciding what to do. Shoot for profits not tax benefits.

Disclosure: I remain long RRC with major holdings.

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