Friday, 13 March 2020

To Sell or Not To Sell

Today is the worst day of Bursa Malaysia since the 2008 crisis. KLCI surrendered 74.68 points or 5.26% to close at 1320.96 points.

At this moment, some investors might have already sold ALL of their shares.

Some might still hold a few stocks, either already kept for months or years, or just bought recently during the drastic drop but only to see them drop deeper.

If you still hold shares now, you might have a doubt:
- Should I sell now to minimize loss since it's likely to drop further?
- Should I just hold since it has dropped so much and unlikely to drop further?

These are very difficult questions to answer, as I think the answer should be individualized.

We have different stocks, different cost price, different risk appetite, different mind strength, different cash level & cash flow etc. So it's good to work out a plan that suit you the most.

I can't remember very well exactly when I started my stock market investment. I started working in 2004, and bought my first unit trust fund in the same year.

If not mistaken, I should have bought my first stock around 2006 and I can remember the first 2 stocks I bought were WCT & Mahsing.

Even though I started to join the stock market before the 2008 financial crisis, frankly speaking I don't have a clear memory what happened to me during the market crash.

I don't have any painful memory, nor any exciting memory. In the other words, I seem to learn nothing from that bear market in 2008.

Perhaps I was not that active in stock market or did not hold lots of stocks at that time.

Now it's definitely different, I have so many stocks in hands going into year 2020. I must have a plan when bear strikes.

If you read my blog recently, you should have known that I have a plan to sell stocks to trim my portfolio, and also in anticipation of potential bear market.

Even after clearing 5 stocks, now I still have 11 stocks with me which I decided earlier not to sell first. Holding so many at this point of time, too bad isn't it?

Out of those 11 stocks, I think Matrix & BAuto are well-managed companies supported by fantastic dividend yield. Both are not that overvalued as well that's why I decided not to sell.

Anyway, share price of both stocks still fell significantly but I'm not too worry about them. Financial crisis will affect their sales but low interest environment should benefit them.

Scientex is also a magnificent company which is traded rather cheaply while it's still growing its business. After it announced its latest financial result few days ago, I had a dilemma whether I should sell it first to lock in the gain, and buy back later as almost certainly the share price will drop.

At this moment I haven't sell Scientex's shares as I just feel not right to sell. Will its business affected by Covid-19? I don't think it has direct long term negative effect but I know that low crude oil price should benefit it.

DKSH is a company which is also not traded at high PE ratio and has decent dividend yield. I think it is undervalued and plan to add. How can I sell if I have plan to add more shares?

My cost for Notion is quite low at 40sen. I can sell all at above 80sen and take home a handsome 100% profit. However, I decided against selling them because I have plan to "average up" if the price fall to lower level.

Notion's share may fall to 60sen and even 40sen or lower, then surely I will regret my decision not to sell early but what to do? No one can predict the market precisely.

These 5 stocks above are my "winning stocks" that I decided earlier against selling. Now of course share prices of all of them have dropped and BAuto and DKSH suffer paper loss.

The rest are deep in trouble.

Before that I have 3 high PE tech related stocks. These type of stocks have been pushed up high and are risky to fall harder.

I have cleared Inari & Frontken, but left Krono behind.

If I can foresee that Krono can drop to 40sen, I will definitely cut loss at above 60sen and buy back at 40sen. However, even Feng Shui Master Joey Yap also can't foresee this to happen.

After Krono's FY19Q4 result, I have a bit of doubt whether its business and profit can grow as expected. I'm also not sure how Covid-19 can affect it in short term.

This makes me a bit hesitant to average down Krono. I think I might need to wait for another quarter.

When I bought Geshen last month at 43sen, I thought I got a good price as its shares are really hard to buy due to low liquidity.

Because of this, one sell transaction can see the share price drop by more than 10%, another buy transaction can raise the price 10%.

Geshen might be at higher risk of being affected by Covid-19 and all these supply-demand disruption issues. Though it seems like the company has invested a lot on new machinery and capabilities in its Malaysia & Vietnam operations, I might have bought it too early.

Hibiscus should be able to make profit even if the crude oil price is at USD40. I think crude oil price will not stay at low level for a long long time. Once it rebounds, so will Hibiscus's share price.

Perhaps I should have sold all Prolexus & LeonFB shares just like Latitude. All these feel like "dead wood" because it seems not easy for them to grow well from here. Everything seems tough for them.

Both are deep in paper loss. They have dropped so much but still can drop further. Since they are still doing business as usual, it looks weird if I sell now at big loss.

Lastly I would like to announce the winner of "The best performing stock" in my current portfolio in 2020 - Daya. It doesn't drop!

Those 6 stocks (Krono, Geshen, Hibiscus, Prolexus, LeonFB & Daya) are losing stocks. After giving so much explanation and excuses of why I didn't sell yet, the main reason is "unwillingness to realize loss", haha.

Some of you might think that I should sell all those hopeless losing stocks in my portfolio, get the cash and put them in better quality stocks which can rebound faster than others.

Ya, I agree and this sounds very logical. However, I don't do it due to various reasons, at least for now. May be I will change my mind in the near future, I don't know.

With ample cash in hand, next question will be: When and what should I buy?

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