Tuesday, May 20, 2008

CSC review

Today I trimmed off CSC from my portfolio, cutting out all my stake in it. It was a love-hate relationship.

I bought it entirely on technicals, held it with speculative hope, thought I'm holding it for investment but sold it on a rational and businesslike manner. I believe CSC will have a splendid FY08, but I couldn't care less anymore. This is simply a business that holds no place in my revamped portfolio.

I went in 5 lots at 0.305 on 16th April, 2007. Went in another 20 lots at 0.385 on 22nd May, 2007 after csc announced that it won a contract worth 200 million (something like that, can't remember the exact details). I made 2 mistakes:

1. Bad entry point on 16th April. I don't know what I'm thinking about.

2. Even worser entry on 22nd May. I bought on news that they won a contract, whereas I should have sold. This gap up is soon covered and the stock price went up after that. But by buying 20 lots at a high of 0.385, I basically sealed my returns for csc, no matter how great it looks. This lesson is already well learnt by me. It's my first exposure to being a contrarian instead of following the herd instinct.

At a price of 0.305, I bought it at a PE of 35 times (FY07 earnings). At a price of 0.385, I bought it as a price of 44 times. Considering the low margins (though it's better than most construction firms, I must admit), erratic earnings subjected to economic cycles and low ROE, is it a good buy? Furthermore, at a PE of 35 times, do I really expect the earnings of CSC to grow at 35% or 44% pa?

Subsequent mistakes come from not knowing when to sell off a cyclical stock. At the peak of the bull run, csc was trading at 0.495, PE of 57 times. I didn't sell it. My rationale then was that since the price kept creeping up, it will continue to creep up too. Even when the price first broke past ema20d, then ema50d, then ema100d I was still holding it. I thought it is just a correction and things will improve.

So what's my total losses?

Total capital input: $9,282.92
Total losses without dividends: $2,290.02
Total losses including dividends: $2,232.21

% losses inclusive of dividends : 24.0%


Anonymous said...

Thanks for putting personal trading experience on the web, learned a lot from ur blog, pls keep update on it. :)

My experience is try to simplify ur trading strategy(Technical Analysis) with good discipline and psychology.

Enjoy life is most important!

la papillion said...

Hi Avatar,

Glad that my experiences helped someone :)

Keep coming back for more updates. I do blog every 1-2 days, so it's very often. There's also an active chatbox with lots of interesting pple to talk to :)


Financial Journalist said...

Any thoughts on Taisin?

la papillion said...

Hi Brendan,

I know nothing about Taisin. But I went to find out a little more. Seems like they do electric cables and wirings (55% of fy07 revenue).

Not a good business for long term, in my opinion. But for you, your advantageous position as a commodity trader might mean that you know more about their raw materials than I do :)

You interested in it? :)

Anonymous said...

thanks. seldom do i read about someone's self-confessed failure in stock trading with such honesty.

appreciated your blog thoughts...

la papillion said...

Hi des,

It's only when I'm honest with myself that I can view my mistakes objectively so as to learn from it. If investing is a long term goal, then learning from mistakes, which are bound to occupy many times in the future again, is critical skill to learn too:)

Thks for your comments des, I appreciate it :)