Convictions

(Posted on behalf of TL)

Sorry for the long hiatus. Previously, I was busy with exams and after exams my schedule had been pretty tight – rushing back to Singapore, packing for my internship in Shanghai and all. That said, over the past month or so, I have been meaning to blog about convictions.

Believe many of us have bought a stock and had our convictions tested when faced with some adverse news. Even I, despite all the research I have done in a stock, my convictions would be tested from time to time. Looking at King Wan Corporation, after the stock had rallied to 34c in May 2013 and started dropping till 25c in March this year, my average buy price excluding dividends collected. I started having thoughts about selling the stock in fear of it dropping further given that the Thailand economic conditions did not seem to be getting better.

For the case of King Wan, it was much easier to remain calm as it was just a case of economic climate in Thailand, and not some news regarding the fundamentals of the company shifting. In another scenario, I was invested in Quindell (QPP.L), a stock listed in the London Stock Exchange. Basically, the huge drop in the price was due to a research report done by an independent blogger – Gotham City Research (GCR) claiming that Quindell has conducted fraud. Looking at all the evidence in front of me – GCR’s past track record in profiting from such scenarios (see BLINX) etc., I decided to do some ‘smart speculation’ and buy into the company at 26 GBp. Being my first time entering the London market, the whole experience was very new to me. I was flooded with news from FT, Motley Fools and a whole range of other news agencies, something we don’t see in Singapore where counters do not get such huge coverage especially those in the catalyst market. Secondly, people are able to short the stocks in London, hence, we see QPP under huge shorting pressures, which actually brought the price down to approximately 18 GBp. To be honest, my conviction this time was really tested especially with all the negative news, some of which I could not ascertain if it were true. Furthermore, despite the huge director buybacks, this did little to help push up the price.

To cut to the chase, I would like to just say that when faced with such scenarios, I always go back to the basics. I start from ground zero again, looking at all the information I have for my initial purchase of the company. Only in the event that something has changed for the worse, where the company’s fundamentals has changed would I decide it is time to cut losses. Hence, the reason for my second buy-in for QPP, averaging my buy price down. While it is still too early to start celebrating, however, I remain quite optimistic and we slowly start seeing the share price climbing back up after the dust has settled.

“Be Fearful When Others Are Greedy, Greedy When Others Are Fearful”

 Disclosure: The author is long QPP.L and 554.SI