I wasn't really planning to make too many moves in December but the market thanks to Donald Trump's animal spirits was in a rather euphoric mood. I suddenly found some of the stocks and ETF's I owned were generating very solid returns and I had to make a decision to keep riding the wave (is the wave sustainable?) or bank some profits. It turns out I did a little of both.
Opened position in Twitter (Ticker: TWTR)
This is my second foray into Twitter this year. The first tour was pretty successful as I obtained a 36 percent return. The stock popped because of hot rumours that the company was going to get taken out by Salesforce.com or another technology company. After I sold, the rumours were systematically dashed and the stock fell back. I said at the time that I would buy back in if the price came back to where I originally entered which was at about $16.60. Sure enough, the stock was trading at $16.40 so I decided to buy back in. Fundamentally nothing much has changed with the business then from when I analyzed it back in July by answering my 8 questions. It is still pivoting heavily toward live streaming. It has rolled out the Twitter Live functionality to the masses which is essentially integrating the Periscope platform into the Twitter app. We’ve seen several more senior executives leave the company, so the potential is there with the right management to ramp up the company. It’s also gota little bit of bad goodwill as Donald Trump, ironically it’s most pronounced endorser of the platform, dissed the company by not inviting the CEO to the tech summit/kiss up audience in December. You’d think he’d pay Twitter more respect as it pretty much facilitated his election. Make no mistake, this is still a very speculative investment and so I have a very , very small position opened up. It can easily fall well below $16.
Sold position in Vanguard Canadian All-Cap Equity ETF (Ticker: VCN) for 20.8% gain
I sold my Canadian equity component mainly because it had crossed my 20 percent threshold. I also sold it because I think Canadian stocks have had a really good year. Almost too good a year. When we started 2016, the Canadian equity market was in tatters thanks to plummeting commodity prices. The banks, which make up another significant chunk of the Canadian equity market was down. The analysts and Smart Money people were steering their portfolios away from Canadian equities and that was enough to make me want to start building long term positions. Sure enough, oil popped. Commodities popped. Banks popped. The next thing you know, the TSX/S&P Composite was up almost 17 percent. I suspect many retail investors may have missed this ride.
SOLD POSITION in Neulion (ticker: NLN) for 23.1% Gain
I really didn't see this stock popping up so fast. I just bought the stock on November 7th at $0.95/share and it did get over $1.20 at one brief point, before coming back under a buck again. I didn't do anything. Fundamentally not much changed with the business. This time though when it did revisit the $1.17 level, I realized the return was above my 20 percent threshold. Ultimately I decided that I'd rather bank the profit and play another day of the stock comes back in under $1. Am I leaving money on the table? I could be and I've in the past had that issue. Part of the reason could be my past experience with the stock where I was up almost 90 percent only to see it plummet. At the end of the day, a 23 percent return on investment is nothing to feel sad about. I feel comfortable with this level of return. It works for me and I feel more comfortable churning returns in medium sizes chunks rather than trying to hit a home run.
sold position in Cal-maine foods (ticker: CALM) for 19.6% gain
Here's another example. I only bought the stock in October after the stock got taken down 15 percent on a weak earnings report, even though the company was still generating strong returns on capital. It's still a best of breed egg producer. As usual the analysts and market over-react and the baby gets thrown out with the bathwater and eventually returns back. Quality companies do this. So the stock popped back up to near $45/share and again I decided to bank a nice profit. Situations like this are low-hanging fruit for investors. Again, if the stock comes back down into the $30's again, I'm happy to buy back in as I feel this is a quality business.
You might be saying, and you are rightly so that I'm trading more than investing. with these investment decisions. As it pertains to these investment decisions, it is more trading because the price moves have been so rapid. It's a bit worrisome as the last time I remember making investment decisions like this was in 2008 before the market really collapsed. Prices were zig-zagging at a ridiculous rate. Sometimes this happens in investing. Every stock I buy, I purchase with a premise that I am comfortable to hold that stock for many years, however there are times where the return I seek just happens right away. Is it luck and good fortune? Maybe. I think though it is has a lot to do with understanding the behaviour and psychology of the market and identifying moments where stock get miss priced and trying to exploit them. Sometimes it clicks right away but a lot of times it takes a lot of patience and waiting.