Last year has been a bloodbath for the stock market. I’m quite sure many investors have experienced the disastrous drop in their portfolio’s value. I was not an exception. As a matter of fact, there were times when all my stock positions are on the red side which means I was having paper losses. Yes, they were only paper losses since I never sold any of them. In my post A Letter to the Newbie Investor I’ve mentioned that one of my stock holdings stumbled by up to 50%. Everytime I remember this, I can’t help but ask myself how did it happen, where did I go wrong. I don’t want this to happen again, and I don’t want this to happen to you either. Let’s try to understand my mistake and hope we can learn from it.
The following summarizes my transactions (i.e. buying and selling) with BLOOM (Bloomberry Resorts Corp) for the year 2015 up to present:
I had a good start. In 3 months, I was able to make 16.37% profit. Not bad at all! I bought shares almost at the bottom on Feb. 9, 2015 then sold them at Php12.00 on Apr 14, 2015. It was the relative peak in that period. I would say I was lucky enough to buy and sell shares of BLOOM at very good timings.
Actually, this was not the first time I’ve done this. In previous occasions, I was able to make significant profit by applying the same strategy on PGOLD (Puregold Price Club Inc) and SCC (Semirara Mining and Power Corporation). On Feb. 9, 2015, BLOOM (Bloomberry Resorts Corp) stock price slumped by about 13% just few minutes after the opening of the trading session. I can’t remember the reason why the sudden fall of share price but upon checking the historical company disclosures, there was no significant news/changes around that date. My instinct must have told me that it was just a panic reaction by traders and investors which caused the drop of the stock price. I took advantage of the opportunity. After a careful monitoring of the price movement on that day, I managed to buy 3,000 shares of BLOOM near the bottom. It proved to be a bargain when the price soared again the following days. After a couple months, I sold my positions and got my profit.
The strategy I used above is just a simple demonstration of what is known by many investors to be the “buy low, sell high” way of trading. Clearly I was able to make money by simply waiting for the days when a certain stock irrationally dives and traders go on panic-selling. I have been trying to follow one of Warren Buffet’s rules: "be greedy when others are fearful". It proves to be profitable, but unsurprisingly, not all the time!
I have become complacent of my own strategy. It seemed to be effective, until one day… On May 14, 2015, BLOOM took a plunge again. It was just a month after I locked-in my profit from the same stock. When I opened the COL Financial platform on that day, BLOOM was one of the highly traded stocks, and it was bloody red. I thought it’s another opportunity to make more money. Without a slight hesitation, I immediately clicked the BUY button and I used all of my buying power to acquire 10,000 shares @ Php10.50 each. Yeah, it could be considered as going “all-in”.
On May 22, 2015, a week after, I have deposited some more funds to my account. This time, BLOOM was still on the downside. In my mind, I was thinking that traders haven’t finished the panic-selling yet, so I bought more shares @ Php9.65 each. I hoped that the same story would happen, i.e. the stock price would rebound the following days. However, contrary to what I expected, it did not happen! I waited and waited but it kept on falling for days, then months, until recently. It was a pain in the eyes to see my portfolio reaching up to more than -50% loss. I realised I just made the biggest mistake ever in my investing life.
So where did I go wrong? Let’s take a look at the company disclosure dated May 13, 2015, the day before I made the suicidal call. There were news everywhere, BLOOM reported a net loss of Php533 million in Q1. The cause of the big loss was the company’s higher expenses than normal due to the completion of the newly built Sky Tower. Of course I read the news! So why did I still put a big bet on BLOOM despite knowing that the company performed poorly? I thought this was just temporary. At the back of my mind I was expecting that their new investment on Sky Tower will bring forth a significant boost on their revenue soon after it starts operating. However, there’s one important factor that I failed to consider. The gaming industry has been hurt badly for the past few years due to China’s crackdown on corruption. So the likelihood of BLOOM recovering quickly is fairly low. It’s something that did not sink into me until later. I was a victim of panic buying.
My BLOOM story did not end there. During the final quarter of 2015, PSEi plunged to near 2-year low. Almost all of the stocks were in bloodbath, BLOOM was still one of the top losers. Out of desperation, I bought more shares with the sole purpose of lowering down my average price. So in November and December 2015, I acquired a total of 11,500 shares @ more or less Php5.25 each. This resulted my average price to go down to about Php8.00. In the past, PSEi usually rallies from late December till early January. This never happened last year. The stock price continued to drop. Did I just catch a falling knife? Some people would recommend doing a “cut-loss”, but isn’t it too late now?
In the recent weeks, I finally saw a little bit of light. BLOOM started to pick up. However, I’m still down by 36.33%, quite significant still. I know it may take some time to recover my capital or at least reach the break-even. I guess BLOOM is testing my patience.