I decided to end the agony last week. I sold my holdings in AHM, American Home Mortgage, from my IRA accounts. On Thursday, July 19th, the stock took a beating as there were rumours that a bank was pulling it’s warehouse line of credit. The stock dropped like a rock, losing close to 18% of it’s value. It’s been steadily heading south for the greater part of the month, going from 22 to 12. I finally decided I had a enough. I sold, locking in a loss of 60% in one holding, and 40% in another. The next day AHM came out and denied the rumours, and stock proceeded to recoup everything it had lost the previous day. My timing was not the best, but I’m glad I sold.

As I stated earlier, my biggest problem as an investor is selling losers in my IRA accounts.  AHM was such a holding, I even added when I shouldn’t have. The other issue with AHM was that the holding itself wasn’t consistent with my overall view of the economy, especially the housing sector. I’m very bearish on housing for at least the next year to two years. Tightening lending requirements will both drive lower sales and lower sales prices. In my opinion the worst has yet to come. While I think fundamentally the economy will come out of this OK, in the near term the prospects for builders, and mortgage companies are not good. The warning by Countrywide is just another in what I believe will be continuing stream of bearish statements.

While it’s possible that I might even buy back into AHM, I’ve decided that it’s probably best for me to wait for the housing market to shake out a bit before I decide what I want to own. For example I’ve been interested in adding the builder, D.R. Horton (DHI), to my portfolio because I believe the company is well run and has solid future . However, I’m not interested in adding it to my portfolio right now. I rather wait till I’m confident that the turn around in housing has either started or is just around the corner. That is far from now. I will take the same approach to AHM, and sit out the potential volatility in my IRA accounts.