Aug 29, 2015

Cory Diary : Traps to Avoid

Portfolio Management

Land Mine  ( 地雷 )

As the name feared, the misfortune of stepping on one is terrible. Will likely to have a limp blown off. A dent that is not easy to recover from. In stock context probably -50% to complete loss in a counter and depending on it's size in the portfolio it can be quite damaging to my overall returns.

The fewer stocks I have in my portfolio, the higher my concentration. Too many stocks and i will exceed my bandwidth to monitor them.

Growth Stocks  ( 成长股 )

High PE typically. To maintain this story the growth needs to be there to sustain. Below expectation news or even loss may have double blows to the stock price. When I foresee possible slower growth in the future is it time to take something off the table.

This can also be terminated early due to pump and dump situation enacted by syndicate. A syndicate can comprise of business news editor, analyst, broker, banker, insider, forum/blog manipulator and speculators. They will use means to push up stock with convincing storyline after securing sizeable position.

Doubling Down  ( 双倍下注 )

Can also include averaging down or similar methods. Some people has the concoction that stock price fluctuates within a fixed band. That stock works like newton theory. While so far it works for DJIA / STI Indexes over medium-long period and higher, company stock can go to zero value or stay low for life.

If the mindset is like gambling, this can be dangerous. Stock market is a place where price can be manipulated or influenced. The future of the company lies with the touch of people that manages it. Therefore bias. Thus, the outcome can be worst than going to casino to gamble.

Few of the traits i seen on successful turnaround is change of management (competent), was hit by black swan event, due to bad market sentiment, have management integrity and having strong moat.

Dividends  ( 分红 )

Ability to generate cash flow to reward shareholder is a good indication on the health of the company to most layman. Be careful if company issues rights, borrow more or cash calls that exceed returns. At the same time keep watch on potential capital loss if any that may negates many years of dividend.

Market Trend  ( 市场走势 )

Going against market trend can be mind blowing to my portfolio negatively. When a particular industry is in possible down trend for a long period, will it better to re-balance my portfolio ? Some people can spot the gem against the tide. Good for them. That's my bonus.

I can do the maths on it. Some stock gives good cash flow and i maybe ok to hold if is medium term. However if the business change is more fundamental maybe I need to change.

Cory 20150829

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