I have discovered that I have made a blunder in my valuation of Hongwei and Contel. That is, I did not take into account of their newly issued shares. Newly issued shares would lower eps and lead to lower valuation. The blunder is due to not reading or taking into account of every announcement carefully.
Given that I prefer less uncertainty, I may feel that the growth achieved from the equity raised by issuing of shares may not make up for the eps fall.
I have sold off all my Contel and one-third of my position in Hongwei. This may be regardless of valuation. It may be more to smooth my nerves and reduce possible negative consequences later. I do not really understand Contel's rationale in doling out convertible bonds continuously. Do they need the money for expansion or is it because it is due to cashflow problems? I can't tell, so I have to sell.
The Contel and Hongwei mistake seems rather severe as it has at least contributed to half of the losses (-17.35% from the highest point). A costly lesson.
Meanwhile, I have added on to my position in China Printing & Dye. I have also bought back or re-initiate positions in C&G Industrial, China Precision, Star Pharm and one more stock.
If you are a reader of my blog or my post in other forums, please note that my post is only indicative of my thoughts at that moment. My thinking may change or reverse (as in the case of Contel from bullish to bearish) anytime after my post. And I may not post any reversal of my earlier decisions. Therefore, do your own research and do not follow me.
4 comments:
Hi there,
I always tell myself it's ok to make mistakes as long we learn from it and not repeat it!
I think making mistakes and learning from it is better than not doing and hence never learning!
I'm curious do you make investment decisions solely nased on valuations analysis or do you conduct other form of analysis as well? So far I do not sense you do other form of analysis through your blog!
Hi,
Valuation analysis or fundamental analysis would form the bulk of my investment decisions. However, I do sell if the position gets large or if I feel that there is an incoming correction.
Hi thinknotleft,
thanks for your sharing!
Is it ok for to ask, how you know your feeling is right about incoming correction? And how does it fall into fundamental analysis?
Hi,
I think I mis-communicate in my last post. It's just that I try to sell some when the market starts correcting. There's more times when I sell and it's a recovery the next day.
Due to my poor forecasting record, I tend to sell the less undervalued shares first and the selling tends to start drip by drip.
It doesn't fall into FA, but just an action to smoothe my nerves in case the market really falls too badly.
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