Despite having written just a few days ago that I was going to simply 'hold' my current portfolio of stocks, I bought another 17,500 Elders shares at $0.14 yesterday. The shares appear to have 'bottomed' around 11c during December, and in the past few days have started to rise. Given that their 'book value' is allegedly around $1 or more per share, there is always the chance of a significant turn-around in the fortunes of this historic Australian company. With many parts of the country having now been out of drought for a couple of seasons, it seems logical that a rural services company could benefit from increased sales and profitability over the coming years.
However, I bought my first tranche of ELD shares based on this same logic, only to see them decline further in value after a brief 'bounce'. Time will tell whether buying more Elders shares to 'average down' was an astute buy (aka 'lucky guess'), or simply throwing good money after bad.
From what I've read, it seems that the statistics indicate that buying such 'turnaround opportunity' stocks is usually a bad idea, akin to buying an IPO. Picking individual stocks (rather than investing via an index fund) is breaking one of my current investment 'rules', as is investing in a stock that isn't in the ASX200! This just goes to show that investors do not always act rationally, contrary to what economists generally assume.
I could kid myself that this buy is an example of following Warren Buffet's strategy of buying a good company at a low price, but, having not done any research (I lack Buffet's research ability and resources anyhow) or any sort of financial analysis, it is really just a wild punt.
Perhaps I should stop fiddling around with my stock portfolio and get back to studying my astrophysics texts...
Subscribe to Enough Wealth. Copyright 2006-2013
No comments:
Post a Comment