1035 Days Ago

January 18, 2008.  Three things happened that day;

1. I broke my long standing rule to never sell anything at a loss and bailed on HudBay (HBM) as documented in my post HudBay Minerals - My BIG Mistake.  
2. I promised myself that I'd learn as much as possible about the markets and get the loss back...and not just get it back but get it back into my trading account which is a small portion of my overall portfolio.
3. I made up my mind to never again recommend a stock to family or friends as I had with HudBay.  Fortunately none of them followed up on my recommendation, because, as a group, they are very passive investors who don't have trading accounts.

I bought HudBay on July 11, 2007 at $27.35 and sold on January 18, 2008 at $15.69.  A huge loss at the time.  Not chicken feed today.  Since then, HudBay has been down as low as $2.90. Had I held, this would have wiped out my trading account.

Fast forward to yesterday, 1035 days later.  It's all back!  Yup, as of yesterday's close, my entire HudBay loss has been recovered.

So, how did it happen?  Since selling HudBay I've bought and sold 43 times in my trading account.  Not all different stocks as I've been in and out of a few more than once.  For example, I bought and sold the Gold ETF (XGD) and the Energy ETF (XED) several times. Buying on dips and selling on gains of the underlying commodities.

I got real lucky a couple of times with takeovers.  I bought Fording Coal Trust (FDG.UN) just days before a hostile takeover offer from Teck Cominco (TCK-A).  Same thing with Canadian Hydro Developers (KHD).  Bought them a week or so before the TransAlta (TA) offer. In both cases I sold as the stock ran up rather than wait for the final takeover in order to take the profit and move on.

Very recently I lucked out again with Western Coal (WTN). Bought it on November 9 at $8.05 and along came Walter Energy (WLT:NY) with an offer of $11.50. Not too shabby for nine days.

Of course, my biggest single gain was my recent double with Scorpio Mining (SPM) as reported in my post Thank You Mr. Brieger!!!

All-in-all, I've beat the TSX by a wide margin over the past 34 months and most of my picks began with BNN and then followed up with research which been mentioned on these pages.  It's been a ride.  Along the way I learned a lot, practiced more patience than I'm used to and had fun doing it.

Good Luck & Happy Investing!

So, you're selling, what are you buying?

That's what friends have been asking since my recent posts about selling Encana (ECA) on September 30 and Research In Motion (RIM) on October 13.

Well, the little birdies have been predicting an upturn for Canadian banks for the past couple of months.  There is a near unanimous consensus that the banks have their troubles behind them and will report strong results for the next several quarters.  Most analysts predict that the banks will begin raising dividends as early as year end.

So, decision made…going to buy the banks.  Which one(s) to buy?  That’s the question.  For the answer I turned to the Interactive Charts of Yahoo! Finance.  I had a look at one year charts for BMO, BNS, CIBC, National and RBC.  Why not TD?  Because I already hold TD and have for some time as mentioned in my post Canadian Banks - Buy 'em and Hold 'em. Why National when it’s not one of the big five? Because it’s often a top pick by BNN analysts and many expect it to outperform the others and be the first to increase dividends.

To the charts I added Technical Indicators for 50, 100 and 200 day simple moving averages. By doing this I discovered that that BMO and RBC were trading at or below their moving averages. On the other hand, BNS, CIBC and National were trading well above which possibly indicates they have already begun the assent to new levels so there may be less upside over the next few months.

Based on this simplistic research, I divided my Encana and RIM money in two and placed buy orders for both BMO and RBC.  On October 13 I bought these two banks.

This week I sold Scorpio Mining (SPM) on Monday and Lundin Mining (LUN) on Tuesday.  As mentioned, Scorpio was my first ever double and I picked up a very nice 37% gain on Lundin. Anxious to keep the money in play I quickly bought Grande Cache Coal (GCE) and Western Coal (WTN).  Why the coal miners?  Again, the little birdies are predicting that the demand for coal will outstrip supply in the next 12 to 18 months as China builds another coal fired something or other every couple of weeks.

I have great hopes for my four new stocks over the next six to twelve months.

IMPORTANT REMINDER
Nothing on this site should ever be considered to be advice, research or a suggestion or invitation to buy or sell any securities. Every investor should do their own research and consult their own finance guy. See full DISCLAIMER.

Thank You Mr. Brieger!!!

THE STORY OF MY FIRST DOUBLE
One day in August of 2009 I was watching BNN.  The analyst du jour was Peter Brieger of GlobeInvest Capital Management.  A guy called in and asked Brieger if he still liked Scorpio Mining (SPM).  It must be his brother who calls every time he's on to ask the question to give him the lead into talking about his favorite stock.

Brieger gave a number of reasons for his belief that the .55 stock would rise to $1.50 to $2.00 over the next eighteen to twenty-four months.  I'd seen Brieger a number of times and believe that he's a fairly conservative guy so it was a bit of a surprise to hear him talking up a small cap miner.  He stated that Scorpio is his largest single holding and he's still adding it to client's accounts.  I figured if it's good enough for him, it's good enough for me.  The price that day was .55.

I had some cash in my trading account having recently been taken out of Royal Bank (RY), so I put in a buy order at .50 good through the end of August and went on vacation.  A couple of weeks later, while snorkeling in Maui, my order was filled and I became the proud owner of Scorpio shares.  Within weeks the price bounced to .75.  Normally I would bail and brag about a 50% gain in less than a month, but I held off.  Brieger's forecast of a share price in the $1.50 to $2.00 range intrigued me.  I've never had a three or four bagger.  Forget three or four, I'd never had a double.

Months passed, the shares traded in a range between .55 & .70, seldom touching .75 again.  With my usual impeccable sense of timing I put in a sell order at .75 in March.  Yup, here I was, seven months later, trying to get the same .75 that I could have had months ago.  I renewed my sell order each week for a number of weeks.

On Monday, April 5 I changed the strategy and revised my ask to .90 figuring it was just plain dumb to settle now for what I could have had last September.  Brieger's predictions haunted me. I realized that I had already held for nearly half of his earliest prediction of $1.50 to $2.00 in eighteen months. The following day, the price popped to a high of .85 and closed at .83. At last, I had avoided being taken out on the way up. 

One day later, on Wednesday, greed set in.  Before the markets opened I revised my order to an ask of $1.04 for half my position, calculating that I'd get all my original investment back (including fees) and still hold half the shares for the ride to Brieger's $1.50 to $2.00.  The Wednesday high was .94 and it closed at .88.  Once again, I'd dodged the take out bullet.  Was I finally getting the hang of this?

Well, you gotta know, on Thursday it dropped to .80...but everything else dropped so I wasn't worrying.  I decided to stand fast with the $1.04 ask figuring if it hit .94 on one good day, it would get there again in the near future.  If .94 is possible how far away is $1.04?

On Monday, April 19 the share price jumped over .90.  By 11:00 AM 'Peg time the volume was twice the average daily.  The price was in the .93 to .97 range with a brief pop to .99.  I resisted the temptation to reduce my ask to 1.00 and grab the double.  I stood my ground only to watch it fall off and wander in the .60 to .75 range for the entire summer.

Things heated up in September and Scorpio's share price bounced to the .80 to .90 range. Brieger was on BNN on September 21.  As usual, the very first caller asked if he still loves Scorpio.  As usual his answer was yes.  In fact, he now has a price target of $2.50 to $3.50.  This he calculates as a simple multiple of anticipated earnings.  Once again I placed a sell order at $1.04.

In mid October I revised my sell order and offered all of my Scorpio shares.  Figuring that I'd held for fourteen months I may as well take the double and move on rather than sell half and wait it out any longer.  Last week my sell order expired on Friday and I was busy with other things and did not renew it.  I was heading out early this afternoon and thought I'd check my trading account.  Scorpio had briefly touched .99 this morning.  I placed my usual sell order at $1.04 just before leaving the house.

While I was out my Scorpio shares sold for $1.04 giving me my first ever double.  Yup, fourteen months and three weeks and I doubled my money with Scorpio Mining.  Thank you Mr. Brieger!

ROCKTOBER!

Wow!  Here we are, one month past the historic weakest month of the year, September. October isn't usually a whole lot better as it's the final month of the summer doldrums as described by the Halloween indicator, a term used by some for the theory that the markets generally do better in the months from November to April than in the May to October period. The Sell In May And Go Away crowd supports this theory.

So what happened this past summer?  At the end of April my stuff was up 5.42% for the year. By the end of August it was all gone.  My year to date gain had disappeared.  I sure was feeling like I should have joined the Sell In May And Go Away gang.  Needless to say, I wasn't looking forward to September, the weakest month of the year.

September!  The TSX gained 3.82% while in the US the DOW shot up 7.77%.  And then, along came October.  Pumpkin month saw the TSX gain another 2.49% while the DOW bounced another 3.06%.  While the markets did very well in September and October, I did better.  My stuff shot up 9.19%.  A fantastic two month gain!

On October 8, I triggered my exit strategy by unloading my long held Canadian Resource Fund. That day I simply parked the proceeds in an Interest Fund with the same fund company.  A few days later I transferred it to a Canadian Bond Fund, again, with the same company.  I don't have a crystal ball and I'm not suggesting that resources and commodities are going to fall off the cliff.  What I do know, is that if they do, my Canadian Bond Fund units will be worth the same amount, or more, the day after the meltdown.

Exit Strategy?  Who said anything about an exit strategy?  Well, I think I did...at least I've been gradually introducing  the idea throughout the year.  On May 5 I wrote Who Should(n't) Be In Funds?  This one triggered some interesting response from readers who told stories about finance guys who no longer return calls.  After hearing some of these stories I was compelled to write my July 9 post Why we fell in love with funds.  Do we still love finance guy today?  Finally, my July 16 post A Little More About The Last (Next) Ten Years revealed that in the past ten years the markets were pretty crappy and I suggested that we all need a plan.