I’ve decided to have a more detailed look at my use of stop losses. By using a stop loss I mean selling a share if its price falls to a predefined level. Stop losses fit naturally within a momentum based strategy, as they discipline you to sell shares that lose momentum.
My current use of stop losses is a bit ad hoc and I’ve been wondering whether and how to be more systematic. In particular, I’m concerned that I might be applying them a bit too vigorously. There have been a few occasions recently when I’ve sold a share on price weakness only to buy back again a couple of weeks later when the price has bounced.
Some volatility for share prices again this week, particularly on Friday following a further North Korean missile test and some hints from the Bank of England that interest rate rises may be coming sooner rather than later. Higher interest rates would be bad news for my portfolio both because equities become less attractive relative to bonds and because of the impact on the exchange rate. A higher pound means my investments, which mostly earn in dollars, are worth less in pounds. Accordingly, my portfolio has taken a bit of a hit today. Continue reading
I bought an an initial holding in Churchill China. This brought my total number of holdings to fifteen, my self-imposed limit, and meant I have little spare cash in the portfolio. I subsequently decided to sell AB Dynamics for a 9% loss. The price had faltered after my purchase. Continue reading
I’ve been away for a week and so haven’t yet had a chance to update on a number of trades I have made. I have taken profits on two large holdings, Burford Capital and On The Beach as they fell through stop losses. I have bought three new positions, buying back NMC Health, Burford and buying Microgen for the first time. Continue reading
One of the first things I learnt when investing was to ignore news issued by the businesses I invested in. News would be taken account of immediately by the market. Bad news often meant an opportunity to buy a business at a cheaper price as it would already be baked and into the price and, provided the business was good, the bad news was likely to be temporary. This seemed to make sense at the time and appealed to my desire to be smart and ‘contrarian’, but like pretty much everything I learnt from reading beginner value investing articles at the time, it was terrible advice.
I’ve found overwhelmingly from my experience since then that buying shares soon after they issue positive news leads to outperformance (and vice versa). As I have later found, there is a huge wealth of academic research supporting this too. Continue reading
It’s time for another quarterly portfolio review. Overall, volatility seems to have picked up a little bit recently but the portfolio continues to progress onwards and upwards. Continue reading
The prospect of nuclear war between the US and North Korea put a bit of a dampener on things this week. I made a few trades on Friday, rotating out of some weaker positions and into some stronger ones. Continue reading