Tuesday, 2 April 2013

Lessons from Breadtalk

Breadtalk has risen to a new historical high today (2 April 2013), at around $1.06.

I have purchased the stock back in July 2012 at a price of $0.53. It has since been a spectacular rise of 100% to today's closing price.

However, I have liquidated my position at a price of $0.765 just one and a half months ago (although its due to my uncle's request for cashing out), thus missing out on the substantial gain that followed, and also missing out on my first 2 bagger stock.

As much as I try to keep my emotions in check, I still inevitably feel a sense of 'wasted chance' and a tinge of 'I should have...'. Of course, this is 20/20 vision with hindsight and does not bring about any tangible benefits.

But it is important to study the episode and distill key learning points hone my investment strategy, framework and emotional stability. Here are a few points:

  • Always maintain confidence in my stock selection and develope conviction to my stock pick. Believe in one self analysis, and always remind myself that one has no control over the duration it takes for a good stock to be appreciated by the market and rise, which could be due to various reasons such as capital injection from strategic investor (breadtalk) etc. So I just have to be patient and remain convicted.
  • Recognise overall market trend. It is important because it will affect the margin of trailing stop loss to be set. In Breadtalk's case, I set a trailing stop loss of 8%. However, it could have been better to double the margin to, say 15%, in view of the market macro trend that is rising. This will ensure I do not miss out on the ensuing rally.
  • Be sharp and observant towards corporate development news, such as major stakeholders increasing holdings that could act as catalyst that boost the stock price. For Breadtalk, Mint Holdings increase stake signifies the merit of the stock. Subsequent swing (eg. there was a day with $0.10 fluctuation) in price should provide a good entry point.
  • Keep emotions in check. Do not be overly affected by the rally after sale, as opportunities are abound in the market and one can always look for the next value play.
Well, whats done cannot be undone, and what matters is to learn from the mistakes and do not repeat them in future.

Hope to find my first 2 bagger counter soon!

4 comments:

  1. Hi there,

    I was reading your intro about this being a value investing blog. It is rare to find bloggers these days who advocate value investing.

    For Bread Talk, I think your post-mortem should focus on the business aspects, numbers, margins, ROE/ROIC and expansion plans of the company. I do not think market trends and insider holdings are very important determinants of value.

    Hope to see more discussion on the financial and qualitative aspects of companies which you own!

    Regards,
    Musicwhiz

    ReplyDelete
    Replies
    1. Hi MW,

      Thanks for comment.

      This post is meant to be a post mortem from psychology and market trend perspective as the stock was sold due to unforeseen cash call, and some rash decision making, although it was bought on the basis of its fundamentals. Hence did not share that part.

      Will fine tune my value evaluation process and am working on sharing them soon!

      Well I do take insider holdings into consideration as that forms part of my management evaluation process, which I feel is an important determinant to the margin of safety of the entire investment decision :)

      Delete
  2. Hi CSCCC,

    I know what you mean. I bought into Old Chang Kee at 26c. Sold half at 57c. It went to hit 80c (or a few cents higher). LOL.

    I also think that how big a stake insiders have in a company is an important consideration as we can say whether their interests are aligned with those of minority shareholders.

    I am glad I discovered your blog. :)

    ReplyDelete
    Replies
    1. Hi AK71,
      thanks for the comment.

      Yup its always quite 'xim tia' to see counter jumped after you get off. But the market is full of opportunities! Look somewhere else then haha.

      I am one of those silent readers of your blog and had benefited much from your sharing. Glad that you dropped by!

      Delete

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