Analysis,  Investing

Portfolio Snapshot: Fear Can Be Your Friend

Ho boy, October was something huh? Trade wars, budgets, declining oil price, scandals, jitters, nerves, Halloween. It’s been an eventful month on the market. Analysts are predicting the end of the bull run and further market correction as investors becoming skittish. Day traders and technical players swoop in, taking advantage of oversold positions to reap some good profits. We continue to see that spill over into November. Let’s take a look at the portfolio.

StockLast Done PriceAverage Price% Holding Unrealised Profit/Loss
INARI1.792.08619.32-14.19
LIIHEN3.203.0018.536.67
MAYBANK9.459.5526.55-1.9
PARAMON2.091.8411.3413.83
UCHITEC3.032.6224.2715.65
Overall % P/L3.57

Change in FBMKLCI since 1 Oct 2018 = -4.80%

Change in Portfolio since 1 Oct 2018 = -4.73%

Trades in November:

  • Bought AIRASIA at RM2.72 on 8 November 2018
  • Sold AIRASIA at RM3.10 on 16 November 2018
  • Realised Gain = 13.97%

As of this snapshot, my portfolio has recovered some of its value. Watching stocks decline over the past weeks, I was itching to make a trade. I contemplated either adding to the long-term portfolio or exploit some market weakness in the short term. I knew I just wanted to buy something. Call it my very own 11.11 fever.

I saw opportunities in three stocks: GENTING, GENM, and AIRASIA. After the budget announcement, GENTING and GENM saw a huge drop due to a higher tax imposed on the gaming sector. AIRASIA has been steadily declining over the past month and the announcement of a higher departure levy didn’t help matters as well. 

While all three are good potential long-term holdings, I wasn’t so keen to buy for that reason. I can’t say I was being very rational at this point but I questioned whether it was necessary to add a gaming or airline stock to my portfolio. Was I comfortable with the exposure to these industries in the long run? Maybe not.

In any case, I decided to take a look at the charts. Immediately, I had to eliminate GENTING because it was well out of my price range.

That leaves me with GENM and AIRASIA.

Now, I’m not much of a technical analyst; my skills in that arena are rudimentary at best so I advise against approaching your trade as I did. At the time, GENM didn’t seem to indicate an uptrend, there wasn’t any heavy volume and the price was trading sideways. It was still too early to tell when a correction would happen. AIRASIA, on the other hand, saw its value come back up from a low of RM2.30 on 29 October to trade around RM2.70 (on 8 November when I got itchy fingers).

I’m not saying my rationale is the most logical or the correct way of guesstimating the market but I went with AIRASIA, 50% percent on gut instinct and 50% on newsflow.

One reason I hesitate to hold AIRASIA for the long term is that the company and its CEO are highly visible in the news. With high visibility, its investors (or traders) become more reactive in each news cycle.

There were contradicting analyst calls over the past weeks. On top of that, further positive news; declining oil prices and a special dividend were offset by notsogood news; USD strengthening against the RM, potentially lackluster quarter being announced soon.

After much contemplation, reading the news, doing a bit of digging, I decided to take the stance of Buy on Rumours, Sell on News. I jumped on the boat plane at RM2.72. About four trading days later, the Dow decides to dip about 600 points. AIRASIA lost a little bit of value, dropping to close at RM2.63 as the KLCI reacted poorly to the Dow’s shakiness.

The next day though, I suspect purely on the back of rumors of a windfall special dividend, there was a spike in volume and the price continued to climb for three days straight closing at RM3.12 on Friday, 16 November.

That Friday, I’m faced with a dilemma; do I hold on or take profit? To make a judgment call like this, I always default to the few key lessons I’ve learned to adopt:

  1. Set a target and stick to it – For quick trades, I set a threshold of 10% profit as a way to benchmark myself. When the counter hits that level, I will need to talk myself out of being greedy by reassessing whether the risk of holding on is worth it.
  2. Anything can happen over the weekend – Actively traded stocks gaining momentum over the week sometimes come with the “Friday caveat”. Shit can happen over the weekend and because of time delay, investors tend to overreact when the market opens on Mondays. Sometimes, it’s better to offload while you’re ahead on a Friday and enjoy your weekend in peace.
  3. Be careful of a pump-and-dump before a quarter result announcement – Sticking with the Buy on Rumours and Sell on New principles, there’s a good chance the stock is being bolstered right before a result announcement in order for some people to exit at a better price.

I know my aversion to risk has hindered some really potentially good trades but I’m not too fussed if I did indeed lose out on higher gains. And so, with all that in mind, I decided to exit at RM3.10 because I was cutting it close. The result announcement is due any time next week. Whether I made the right decision or not remains to be seen.

Did I make the right call? Is there a method to my madness? Or am I just being an irresponsible trader? Share with me your thoughts.

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Image via Unsplash.

2 Comments

  • Lisa

    I wish I had some thoughts to share, but I’m just here to thank you for sharing your thought process. I’m interested in stocks but completely inexperienced. I see things happening, oil prices going down, results coming out, KLCI moving this way or that, but in the grand scheme of things, I can’t make the connections. I don’t know what they mean!

    Insightful post. Took a lot from it, like how highly visible CEOs affect trader behaviour, KLCI’s relationship with Dow, the Friday caveat and the existence of your Buy on Rumours and Sell on News stance – fascinating!

    I also appreciate your honesty in admitting that some choices are made due to gut feeling and you’re not always extremely logical. Makes me feel better about being human.

    Keep writing!

    • Nicole

      Hi Lisa,

      Thanks for stopping by! I’m glad this helps you in some way. I think a lot of thought leaders or investing blogs approach giving investing advice with a lot of confidence and ease. That’s not me. I am just learning and sharing my journey, which hopefully can help others find their way into investing without feeling like they’re the only one that’s not in on some trade secret.

      Nicole

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