Monday, June 30, 2014

My salted fish had turned over

First of all, sorry for the long hiatus. This had been a crazy June holiday, so all my free time is sucked up into never ending work. I'm very glad that June holidays is over, to the dismay of all school teachers in Singapore, lol!


Recently, I noticed that one of my salted fish had turned over (咸鱼翻身). Yup, you heard me right - that's when a stock that you had bought long long ago, and had dismissed it and wrote it off because of some mistakes in judgement but nevertheless held on to it, and is now suddenly revived. This particular salted fish is very fragrant because it had been salted since April 2010. I had bought it at an all time high of 0.270 and subsequently averaged in at 0.240, giving me an average buy in price of 0.255.


Wow...why did I buy it then? It's based on some rumors that I had long forgotten. It didn't materialise, and thereafter the stock crashed and burned but I still had on to it after all these years. Reason? It's a good reminder for myself not to buy stocks with rumors. I'm glad I've not made the mistake then, so in a strange fashion, it's quite a good tuition fee paid.




The company had been paying dividends, so it helped to reduce the cost of bearing the stock. After collecting dividends every year, it amounted to around 11% of the capital sunk in, so it's not that bad. I initially thought of cutting losses, but since I do not require the capital locked up (it was a rather small amount), I just held on to it. More like a reminder to myself rather than an aversion to realise paper losses. I must say I'm quite relentless in cutting stocks.


So, what's the rumor that's propelling this unloved penny to a parabolic capitulation now? It had recently announced that it had made placements shares arrangement (at around 0.160+) with two big investors to dilute the total holdings to around 20%. If you ask me, that's a pretty huge investment in a 'okay' company. One of the two investor is none other than Sam Goi, better known as popiah king, who is quite an astute investor and businessman. I wonder why he got into this, and with such huge stakes in the company as well. Usually share placements are frowned upon since it leads to dilution of everything, including dividends. But the market had absorbed this seemingly bad news quite unexpectedly by capitulating upwards.


Yeah, but who cares...I get to exit and pass the buck to another better player lol

11 comments :

Richard Ng said...

Good to hear that. Another testament of value investing, as long as you hold long enough, it is like weighing machine? ;-)

Createwealth8888 said...

My late FIL held some stocks till his death at 90+ with paper losses.

Super Value Investor?

LOL!

la papillion said...

Hi Richard,

Though I would like to say that I'm smart and I had the foresight to hold the stock until now, it's not really like that in reality. This is NOT a value buy, it's based on rumors. I held on to it NOT because I knew the value of the company and know that the market mispriced it, but because I do not need the money and if I did, I would have cut loss much earlier.

So, nope, this is not a good illustration of value investing at all LOL

la papillion said...

Hi bro8888,

Haha, exactly what I had said earlier.. Holding long term doesn't mean you're a value investor. It's the approach towards buying and selling that determines what kind of investor you are :)

Anonymous said...

Same here, bought a stock on rumours that it was going to be acquired by a P.E. fund.

Deal didn't go through and it sink spectacularly.

But this stock help me think twice about the Blumonts and the Asiasons of the SGX.


Regards,
JW

la papillion said...

Hi JW,

Haha, I think I'm not the only one making investment mistakes based on rumors. Oh well, we learn our lessons (hopefully) and move on. I think all things happen for the best..we might not know it yet though ;)

Lee Chin Wai said...

Hi La Papillion,

I plan to write a post on my investment mistakes too. Do you mind if I borrow the term "salted fish" from you? I got 11 of them! LOL!

la papillion said...

Hi LCW,

No problem! It's certainly not coined by me first...go ahead, would love to read about your article :)

Createwealth8888 said...

Younger generation folks still eat salted fish?

la papillion said...

Hi bro8888,

Literally, yes. Salted fish with bean sprouts, quite nice :)

Metaphorically, definitely yes. Mistakes will continuously be made in the markets.

Lee Chin Wai said...

Hi La Papillion,

Thks for agreeing to the use of the term.

Hi Uncle CW8888,

A small portion of salted fish now and then will prevent an bigger portion of salted fish in future!