Thursday, 18 September 2014
Lesson From Speculating In Good Stock
I keep record of my previous share trading transaction since I started trading in stock market in year 2006.
Readers who followed this blog should know that in my "early days", I tried to invest only in "fundamentally strong" companies with my very limited fundamental knowledge.
After a few years, when I have the luxury of working in front of a computer, I witnessed the up & down of share market live on the screen, almost everyday.
So why not buy low and sell high to earn some money for a good dinner?
Inevitably, I started to speculate in stock market.
Nevertheless, to minimize the risk, I only speculated in those stocks that I think were fundamentally sound.
Recently, I plan to write a bit about my stock market investment journey. So I go through my previous transaction records. Guess what I found?
HUAYANG. Yes, it's that property developer.
From my record, I bought Huayang on 14th Oct 2010 at RM0.985 per share, and amazingly sold all at RM0.990 on 12th Nov 2010. It was a small loss after transaction fees are included.
I almost forgot about this transaction.
I bought it just shortly after Huayang's first bonus issues went ex-ed on 24th Sep 2010.
Huayang's share price fell soon after its first bonus issue, which should be the reason that caught my attention. Previously I like to speculate on those stocks which dropped a lot (catch a falling knife), as I thought I will have better chance to gain from them.
As you can see from the chart above, 3 months earlier in July 2010, Huayang is still an unknown stock with minimal volume. If I were a long term investor that time, the timing and share price of my entry would be great!
Unfortunately for me, I think I have lost patience in Huayang only after 1 month, as there was no U-turn in share price! I decided to dispose entirely at minimal loss.
What will happen if I hold its shares until today?
After the first bonus, Huayang has another 3 bonus issues which are:
Oct 2011 - Bonus 1:3
Oct 2012 - Bonus 1:4
Oct 2013 - Bonus 1:3
If I bought 1,000 shares of Huayang at 98.5sen on 14th Oct 2010 and hold until today, I'll have 2,222 shares today. At current share price of RM2.40, it is worth RM5333.
So from RM985 to RM5333 in 4 years, it is a 440% or 5.4 times gain not including the dividends!
For me, it is a 440% loss...
The lesson is, aim to hold good & growing company forever, until its fundamental has changed or profitability has declined.