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Thursday, March 19, 2015

Addition of a New Position

Another update.

I added another position into my portfolio.

Las Vegas Sands, or LVS. This is a chart of its performance for the past year.




I'm really hoping it will bounce back after it hit multiple bottoms at around the 52.5 level. However, even if it still manages to slump a bit deeper I am pretty sure that the "dividend net" will end up catching the falling knife at one point or another. I mean, it is already at above 4% as I'm speaking already. (The dividend net is when the price of the security gets so low that the dividend yield percentage gets "raised" to the point where the yield is too desirable for the price to go down any further.)

Also, in terms of just making a contrarian trade, I am also liking it in terms of that aspect as well. I think that the price has been pretty significantly battered for the past year, and I am hoping that the dividend net as well as the multiple bottom technical setup will cause the share price to get back to positive results.

However, one of the underlying reasons behind its price decrease is pretty poor gaming revenue performance in Asian markets and subsidiaries. But I think the strong management and the fact that it is one of the best of breed stocks will keep it afloat.

But to make sure that this trade does not go completely haywire for me, I put down a trailing stop sell order at 48 just in case it breaks through the 50 support level. That would be a pretty bad loss, but in all honesty my supposed win/loss ratio is looking pretty fine. I'm expecting this to be a pretty long term holding period, maybe 6 months for it to get back to solid levels.

So that's what I did. I'm also thinking about getting some BABA stock as well, if it holds above the 80 level. I think it is a really strong company representing a huge market. Pretty good looking growth stock.

Kevin

Tuesday, March 10, 2015

Lessons Learned from Frustrating Outcomes

I think I have somewhat put off the vital act of looking at my past trades, decisions and mistakes and looking at how they have panned out for me. Being able to do this well gives anyone detailed insight into their approach and strategy, and I have not really done it well.

So I did. I looked at my past decisions, and the trades that I made that were especially accompanied by research and contemplation. 

I found one stock in particular, WETF. I entered a pretty substantial position in this security six to seven months back. 

My reasons for entering the position were in my post on September 6th. I said that "Wisdomtree is showing a beautiful chart pattern right now, and the fundamentals of the company are quite nice, with an exceptional return on equity and other general statistics."

But at the time I also remember looking at their financials, and their fundamental ratios.

And they were, and still are, pretty solid. They have pretty impressive revenue growth, substantial increase in their net income, huge increases in their total stockholder equity, and solid growth prospects in the funds that they were and still are consistently churning out.

So what happened since then? The stock has risen up to 20.61. I purchased the stock for around the 12.00 range, give or take .5.

That is around a 70% return.





















Everything is looking good for it in terms of its fundamentals as well. Above 30% ROI, ROA, ROE, a healthy, strong valuation with good projected EPS growth, and a 1.55% dividend as of today. It also pretty much looked that way before, minus the dividend.

So you're, or more likely, I, am reading this right now questioning the title of this article. It says, "Frustrating Outcomes". How could this be frustrating? This is definitely positive, considering that this all happened within a six to seven month period.

Well, I sold it back then. I thought that it was fluctuating too long in the 10-12 range. I then purchased shares of Potbelly and Noodles and Co. (PBPB and NDLS, respectively).

They weren't necessarily bad trades in themselves, either. I got a thirty to forty percent return on those in 4 months. That is, however, until NDLS missed on its earnings reports and got slashed by 30%. But that's a different story. I covered that already.

So let's focus on WETF. I could have very easily kept a position in it, instead of completely closing it off to purchase shares of  NDLS and PBPB.

I sold it all off way too early, if you have not figured it out already. I spent so much time researching and making the decision to plunge in this stock, and I got out of it for pretty much no reason, just that it wasn't really doing anything.

I ended up missing out on a solid return on the investment. I took a 4% loss, instead.

Pretty stupid. Anyway, I should have probably had more conviction to hold on to it. But how? How does one get the conviction to hold through the investment to get the return that he or she should have gotten? I've come up with a few possibilities and reasons.

  1. Establish price targets for buying and selling the stock. This way, the stock would be held until it dips below a certain price level, so that the position can be secured and hopefully, the price movement will be as planned.
  2. Invest for a much longer period of time than the typical swing trade that I am looking to make. With a longer holding period, maybe even indefinitely, I can not worry about these fluctuations in the price movement and focus on the big picture.
  3. Establish a catalyst, or an event that must happen that can propel the stock up or down, depending on what I want to happen.
  4. Hold out until the possibility of positive momentum in price movements seems to be at a point where the probability of it happening becomes unlikely to the point that holding it does not seem viable.
Well, I think I can and should do all of these, except maybe the price targets. I think doing that would require an amount of technical analysis and probability calculation that I would not be able to sustain. However, there are definitely still some core elements of it that I can take away, such as establishing gain/loss probability and ratios before I even invest in the stock itself. This way, I would be able to look beforehand at the trade's supposed chances of succeeding before it even happens.

For number two, I definitely have not been holding my stocks at the time period that they should be held for the trade to mature. I need to establish longer holding periods, which is what I am trying to do with HPQ and FAF, both strong, somewhat undervalued stocks with a solid bottom-line and a decent dividend. They both have over 2% yearly dividend payouts as of right now.

For number three, I could have thought up a decent amount of catalysts that could happen with WETF that would have made it surge. For starters, earnings beats and good results, maybe news of a certain ETF that it is selling that is doing particularly well, but I also could have thought about other macroeconomic factors that would have positively affected its stock price, such as Japan's recent uptrend in economic health and continuation of a solid amount of lending towards its financial institutions? Those were all factors that I could have thought about. I really need to work on this.

And number 4! It's not like an upsurge in price movements was completely implausible during the time at which I sold it. It was just moving from the 10-12 range; no negative downtrend had been established just quite yet. I did my research and already thought about it, however I still ended up selling it during a point at which it was a pathetic little loss.

I'm still pretty salty about this. I made this mistake before with KKD; I completely underestimated its global growth potential before I sold it off around 2 years ago, I believe. Stupid mistakes.

I'll get better. I better get better at this. It's super annoying seeing the possible gains I could have had with my trades if only I had not been so quick to exit the position.

Till next time.

Kevin 



 

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