{"id":434,"date":"2008-01-24T00:32:46","date_gmt":"2008-01-24T04:32:46","guid":{"rendered":"\/blog\/?p=434"},"modified":"2011-10-21T01:50:27","modified_gmt":"2011-10-21T06:50:27","slug":"stock-market-nooblar","status":"publish","type":"post","link":"https:\/\/www.holypotato.net\/?p=434","title":{"rendered":"Stock Market Nooblar"},"content":{"rendered":"

Never try to catch a falling knife.
\nNever shoot a running horse.<\/i><\/p><\/blockquote>\n

These are two simple sayings that investors use to remind them of how to manage getting into and out of a stock. They essentially boil down to one word: patience<\/b>. Fortunately dear readers, you have me here to act as a giant stock market nooblar to reinforce the point for you. I’ve made two recent mis-steps in this volatile market.<\/p>\n

Never try to catch a falling knife.<\/i><\/p>\n

My falling knife was Russel Metals (TSE:RUS<\/a>). As I mentioned earlier<\/a>, I had accumulated a bit of cash over the last two years or so and didn’t put it to very good work. It was at least in a high interest savings account, but I felt that a good portion of that money could serve me better in the stock market. So I spent a weekend with my dad looking for stocks to buy (and then discovered the magic of low-MER index funds<\/a>). There were a few that I liked, but except for TD (which I’ll get to), I thought they were all a little too expensive for me. Russel metals in particular was one that both my dad and I liked. It’s a steel company, and they make a variety of steel parts, particularly tubular steel for oil sands projects. Their expertise in rolled steel and proximity to the oil sands lead me to think that they would have a pretty steady business as long as the oil sands kept pumping. They also paid a decent dividend. However, I just didn’t like them at the price they were at (around $26 at the time), and figured (via a valuation calculation that, given my inexperience, might as well have been composed of a dart and price target) that under $24 seemed right to me, so I put in an order at $23.75 and just kept renewing it every few weeks. <\/p>\n

I got it at that price not too long ago, in the middle of a steep fall to it’s current price around $20. If I had waited for it to settle in to its current price, I probably would have been a lot happier. Of course, I can’t be too upset: as long as they keep up their dividend, I should make 7% on that money. And I think it’s a good long-term hold, and the day before I got it, it looked like it would take quite a downward spike to hit my bid. Though there are all kinds of ways to feel stupid when a stock you just <\/em>bought falls over 16% in just a few days. If I had more money to invest, I probably would have bought it in a few separate lots as it was falling.<\/p>\n

Never shoot a running horse<\/i><\/p>\n

TD Bank<\/a> is perhaps my favourite bank stock. They may not have as much of a dividend as some of the others, but they have such a great retail bank business that always seems to get at least decent word of mouth, combined with the longer hours inherited from Canada Trust. They have a great discount brokerage service, and have been prudent with their US acquisitions; overall it’s a company I feel proud to own a part of (new call centre excepted). Moreover, they managed to sidestep most of the subprime fiasco (I say most <\/em>because while they may have avoided investing in ABCP, the reasoning goes that there’s a good chance a mortgage given by TD to a perfectly low-risk client could be under a sub-prime second mortgage, and if that client goes into arrears, it’ll hurt TD just as much as if TD made the sub-prime loan in the first place). That, in my mind, makes them a shining beacon of conservative, intelligent management in this sea of financial sector disaster. At $65\/share back in November, I thought they were a good bargain and bought some up. It shot up to $75 within two weeks. However, I was in it for the long term, and didn’t end up taking any profit there. I got to watch that high slowly erode as TD was dragged down with the rest of the financial sector, all the way back down to where I bought it. It’s been unusually volatile these last few weeks, and to be honest, I got spooked, particularly when it fell below my supposed more-than-fair buy price. My dad phoned me up and told me to sell it and cut my losses — while TD may be a great bank, possibly the very greatest these days, the market sentiment (or the “macro picture”) just wasn’t behind banks, and TD was going to get killed with the rest. <\/p>\n

So I put in a sell order with an ask price of $67\/share two days ago, hoping to catch another inexplicable spike back up, and get out with a modest profit to watch from the sidelines. That happened today. I can’t really complain: I made 2% after commissions in just over two months. However, if I had the time to watch it today, I might not have sold so soon into its huge rally at the end of the day — it closed up over $68. By selling while it was in the midst of its upswing (shooting the running horse), I gave up a fairly decent amount of potential profits. Who knows what tomorrow might bring?<\/p>\n

Again, it was a bit of a noobish thing to do, but I’m trying not to beat myself up over it too much. While I still like TD for the long-haul, this volatility makes me think I can get it for a better price than I had. So, I take a bit of a profit today, and sit back with my cash and wait for a better buying opportunity.<\/p>\n

Speaking of buying opportunities, I bought some more Priszm income fund (TSE:QSR.UN<\/a>) today. Priszm is an income trust that manages several fast food restaurants, mostly KFC and Pizza Hut locations. They’ve had some financial troubles of late (and I can understand why — when I drive by KFC it’s always empty!), and had to cut their distribution for a few months while they got the company back in order. They had been paying out at about 6% during this time. Now they’ve just announced that the distribution is going back up to $1.20\/year. At the current share price of $6, that’s a 20% return! There are some concerns: the TD analyst who did the report felt that $1.20\/year might be unsustainable for Priszm, and I can totally see where they’re coming from. However, the distribution the analyst suggests, and that my dad also thinks they’ll settle to in a few more months would still represent about a 15% return. It might be a bit of a troubled company, but I’ll take a gamble on getting 20% on my money, with a decent shot at 15%, and what looks to be a fairly solid floor of 6%. Of course, since it does appear to be higher-risk, I only put about half the money I got back from my TD sale into Priszm. The rest will wait for this volatile market to bring me another buying opportunity.<\/p>\n

I don’t know why I’d need a disclaimer about not following my advice in the very post where I talk about the nooblar mistakes I made, but just in case it’s needed: I am not a financial advisor. This is not financial advice. Don’t buy or sell based on my recommendation, and if you do, don’t come whining to me afterward.<\/i><\/p>\n","protected":false},"excerpt":{"rendered":"

Never try to catch a falling knife. Never shoot a running horse. These are two simple sayings that investors use to remind them of how to manage getting into and out of a stock. They essentially boil down to one word: patience. Fortunately dear readers, you have me here to act as a giant stock […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16],"tags":[],"_links":{"self":[{"href":"https:\/\/www.holypotato.net\/index.php?rest_route=\/wp\/v2\/posts\/434"}],"collection":[{"href":"https:\/\/www.holypotato.net\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.holypotato.net\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.holypotato.net\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.holypotato.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=434"}],"version-history":[{"count":0,"href":"https:\/\/www.holypotato.net\/index.php?rest_route=\/wp\/v2\/posts\/434\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.holypotato.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=434"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.holypotato.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=434"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.holypotato.net\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=434"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}