Inspired by Bill, Trader X, and Ugly, I have decided to discuss trades I have made. These early trades were made as an educational endeavor to understand buying and selling of stocks using minimal amounts of capital. For the most part I bought and sold these shares as I developed my investing and trading process.
Selection
MSFT was a stock I bought as an idea on a undervalued company. The main reason for purchase was just to get my feet wet and I felt MSFT at that time was undervalued enough to present with a sufficient margin of safety that would preserve my capital. So I bought. And then I sold.
Results
On February 16, 2006, I bought Microsoft (MSFT) at $26.80. As usual I cannot say that there was any particular signal that stood out at that time due to my newness, so again I would describe it as a random entry as discussed in Trade Your Way to Financial Freedom.
On April 24, 2006, I sold MSFT at $27.20. I had a gain of $0.40 a share or just about 1.5% in 67 days. Measured as R, my gain of $0.40 was 0.33 R. Why did I sell? At that time I cannot say I had any real reason to sell. I was not nervous or anything. I simply though I had a better investment I could use the money to buy.
Looking back at the one year chart at Yahoo it is clear, in hindsight, that I was real lucky to sell because MSFT took a nose dive a few days later.
Bottom Line
While at the time of purchase it was fundamentally undervalued it was clearly overvalued from a technical standpoint. But sometimes it is nice to be lucky, I just don't count on it all the time.
Friday, January 12, 2007
Trade Review: MSFT
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3 comments:
You are falling into the trap of the trader. If you truly determined the value of MSFT, why would you sell when it became $0.40 cheaper. Heck, back in May you commented that MSFT could be worth $34.50 if it grew owner's earnings by 6%.
Today MSFT hit a 5-year high I believe and is currently at $31.34. I'm going to reassess my intrinsic value estimate of MSFT this weekend, but I believe that it will come out to at least $30 per share.
Steven, don't be seduced by the Dark Side, err I mean traders. Remember what you have learned from Graham and Buffett. Heed them well.
When I bought MSFT last February I did so as a means to get used to the buying and selling process. Basically I wanted to understand what it would "feel" like to own stocks without the risk of losing too much money. So it may seem that I am buying and selling these intial stocks without regard to fundamentral or technical factors. So my goal was just to buy, own, and sell.
I have a web site where I give advise on penny stocks and stocks under five dollars. I have many many years of experience with these type of stocks. If their is anyone that is interested in these type of stocks you can check out my web site by just clicking penny stocks. I would like to take a moment to talk about low price stocks not classic penny stocks or stocks under one dollar the term most people most often think of when the word penny stock is used. Their are companies of really decent quality trading under five dollars’ but for every one company trading under five dollars that is of decent quality their are maybe ten of poor quality. So the really big difference between those investors that are tremendously successfull when it comes to investing in low price stocks and those investors that lose enormous amounts of money investing in stocks under five dollars’ is having a great deal of knowledge and experience when it comes to low price stocks’ or having a total lack of knowledge and experience when it comes to low price stocks. Finding quality stocks under five dollars requires a lot more research than finding a decent stock above ten dollars.
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