Year in Review: 2014 Trades
Notes:
Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.
Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.
The purpose of this discussion and review is to analyze the trades I made in 2014 - what went bad, what went well, and what's still undecided. Hopefully we'll be able to glean some lessons from the experiences I've had and use those to become better in 2015 - so let's dig in. Below are all of the trades I made this year. I'm going to try to break things down stock by stock, not trade by trade, but I'll do my best to keep all of this straight.
 |
| Trades Made in 2014 |
The most obvious place to focus consists with the 4 trades of Broadwind Energy (BWEN) that I made in the year. Simply put, there isn't a single thing I ever did right with this stock - this year or the entire 4 years of ownership. I'm going to only focus on this year though. First comes lines 1 and 2, which were purchases made at really poor times. First, is line 1. This trade was made at a 52 week high. It's almost never wise to make a purchase of any stock while it's at a 52-week high, but it gets worse than that. Not only was at its annual high, but the stock had already run up over 400% since the start of 2013! Hind sight is 20/20. Hell, looking at all of these details at a more sane time probably would've yielded better results, but I panicked. I felt I was missing the move (truth is I already missed it) and I was trying to recover losses from holding this stock for so long when I was wrong the whole time. So I jumped in (I chased). Watched the stock as it climbed to 12.33, and then watch it's drop ever since. I could go into a lot of details as to what other things I did wrong, but this might turn into a novel. Bottom line is I didn't do the right research, didn't look at the right facts, and let emotions control me instead of rationale. The next purchase (Line 2) came at $9 - with the stock down almost a third from its highs, in a short three month's time. While I can at least commend myself for having patience to wait for a pullback, the stock was still up 250% from where it was only 19 months previous. Additionally, any stock down 30% in 3 months has a serious underlying problem and you need to find/understand what that problem is as well as have conviction and confirmation that the move has stopped. Usually after such a fast drop, it will take a little time for a stock to build a base. It's also been very common, since the start of the great recession, that stocks that drop this far, this fast, will likely get cut in half, at least, before it starts to find a base. Finally, we get to the 2 trades I made in December (Lines 7 and 8). In all actuality, these trades happened in reverse. I accidentally purchased 107 shares when I meant to sell, then worked to sell all 214 shares. Human error, sure, but one that shouldn't have happened if I was paying attention. It didn't help that I also made that trade a little too early. I couldn't take the pain anymore. The stock just kept dropping, the little bit of research I had been doing indicated that the PTC bill the company wanted to pass to help continue the purchase of windmills looked dead, and oil had been getting destroyed for 2 months - indicating that their gearing business would also likely go down. Add to that a previous quarter which was rather disappointing and took away the whole idea that the company would actually come out in the green this year and to me, it was a lost cause. I cut out. Had I waited just a little longer, I could've made a little more on my sale at least. Congress passed a budget bill over that following weekend. Included in it were incentives for the wind industry. That caused the stock to go up over 10% from where I sold it. The stock has since pulled back within my selling price and there's a chance my expectation of the stock dropping further could still come true, but let's face it. I had way too much damage here to begin with to call anything successful.
Line 3 is where I sold my holding of John Deere. Again I also made the sale near the bottom this year, though I was at least able to sell for a profit. I knew how corn prices, which the stock typically aligns its movements with, was hammered. The company announced layoffs and I could tell farmers weren't buying as much. So I sold, expecting the stock to go below $80. That never happened and was over $91 in the last month. I had commented in weekly summaries as well as stock analysis how this stock struggled to get above $95 and should sell. The price approached and sat between $90 and $95 for 3 months this summer, but I sold nothing. Selling at least some would've been wiser and a lot easier to deal with, but I had such a small position that I worried trading fees wouldn't be worth it if I was to buy it back down $10. It's hard to say which was right, but the least I could've done is sold at 89-90 when the price action clearly was not favorable. I was right, just didn't follow my own advice and ended up making myself wrong.
Next comes Encana (Line 4). This is the one trade I actually feel decent about this year. I had watched as the stock climbed from just over $18 at the start of the year to almost $25 by the middle of June - a 30% increase in 6 months. My gut told me this couldn't last and as the price started to decline, I actually acted on my own instructions - selling a portion of my position as I didn't feel this stock, despite the positive improvements from within the company, was going to hold its valuation. Only spot I didn't do well in is selling the rest, which I still hold to this day at much lower prices. I got some of this "right," even though I did take a loss in the sale. I at least made the most out of it and had cash to invest into areas I thought I could do better in. My mistake was in holding the rest even though my belief that prices rose too much to fast was proving true. I was afraid I'd miss more upside, despite the purpose of selling to raise money to buy something that I had more conviction in. Emotions took over and I didn't want to "miss out" on something. You can't do this. Think of a plan, stick to it. Maybe you're wrong - and you're likely to be a lot - however in the grand scheme of your portfolio, you could be right anyway.
This takes me to my next 2 trades, lines 5 and 6. This was the replacement I felt I could do better than in Encana with. In hindsight, these trades also were made too early. However, I don't feel as bad about them right now. Unlike Broadwind, this stock was down on the year as well as the year previous to it. Oil prices seemed to have stabilized at the time, the company had a strong balance sheet as well as the newest fleet with best technological advances. The yield appeared the safest and was recently reaffirmed as well. So I bought in. This was the time oil prices then started their crashing descent. No one really seemed to see this coming, though there were signs if you'd look at what had happened with all other commodities like gas, silver, gold, coal, copper, and grains. The US also had a surge of production while the rest of the globe appears to be slowing down and reducing demand. So there were signs, but I don't think I would've known. The second purchase is a little more suspect. I should've noticed how quickly and how much the stock price dropped and been a little alarmed. 5% in the course of a week is a little steep, though not completely uncommon in markets where panic sets in. After this, though, I stopped. The stock price has plummeted and I still don't have my fully planned position in place. Yes, I have a high cost average. I might've also been able to get out and come back later. It's hard to time markets though and I am accepting the risk that this stock might not move a lot for a while - similar to what I went through as I held Citigroup, but with a significant yield. Citigroup sat flat for awhile, suffered a crash, recovered a little, when it pulled back I bought in a bunch more to improve my cost average and had a long-term outlook on the stock. It hasn't been ideal, however, it hasn't served me poorly either. I believe I have the potential for something similar with the added benefit of a strong dividend that is still being supported by the company. Change tune if there's negative changes to the dividend, though. The end results are left to be discovered. I expect I'll hold this for over a year and see potential for higher prices - even if oil doesn't increase much - in the future.
Finally we have my last purchase (Line 9). I made this purchase explicitly as a trade. It has appeared to be well timed, as the stock fell about ten cents more before it took on its next ascension. The theory is that the stock is on a short-term launch higher based on technical trends I've seen recurring in the stock on an annual basis for a period of 10 years (minus 2008 where the market was crashing and 2009 where the value increase started with the "generational bottom" in March and finished at the first of 2010). As a trade, I should be holding it no longer than the term I anticipated - regardless of what happens. At this point, things are looking, generally, as expected. However, it will need to be watched closely and we'll see how this trade works out in 2015.
That's the summary of my 2014 trades. I feel these trades, at least partially, represent the reason for my portfolio's performance on the year (see my next post). I need to do what is necessary to make sure I'm researching my stocks deep enough, make a plan, stick to it, and keep emotions out of the picture. Not an easy set of tasks for me as I'm sure I'll make some of these mistakes again. Let's just hope this sinks in so I can be a better investor.
Line 3 is where I sold my holding of John Deere. Again I also made the sale near the bottom this year, though I was at least able to sell for a profit. I knew how corn prices, which the stock typically aligns its movements with, was hammered. The company announced layoffs and I could tell farmers weren't buying as much. So I sold, expecting the stock to go below $80. That never happened and was over $91 in the last month. I had commented in weekly summaries as well as stock analysis how this stock struggled to get above $95 and should sell. The price approached and sat between $90 and $95 for 3 months this summer, but I sold nothing. Selling at least some would've been wiser and a lot easier to deal with, but I had such a small position that I worried trading fees wouldn't be worth it if I was to buy it back down $10. It's hard to say which was right, but the least I could've done is sold at 89-90 when the price action clearly was not favorable. I was right, just didn't follow my own advice and ended up making myself wrong.
Next comes Encana (Line 4). This is the one trade I actually feel decent about this year. I had watched as the stock climbed from just over $18 at the start of the year to almost $25 by the middle of June - a 30% increase in 6 months. My gut told me this couldn't last and as the price started to decline, I actually acted on my own instructions - selling a portion of my position as I didn't feel this stock, despite the positive improvements from within the company, was going to hold its valuation. Only spot I didn't do well in is selling the rest, which I still hold to this day at much lower prices. I got some of this "right," even though I did take a loss in the sale. I at least made the most out of it and had cash to invest into areas I thought I could do better in. My mistake was in holding the rest even though my belief that prices rose too much to fast was proving true. I was afraid I'd miss more upside, despite the purpose of selling to raise money to buy something that I had more conviction in. Emotions took over and I didn't want to "miss out" on something. You can't do this. Think of a plan, stick to it. Maybe you're wrong - and you're likely to be a lot - however in the grand scheme of your portfolio, you could be right anyway.
This takes me to my next 2 trades, lines 5 and 6. This was the replacement I felt I could do better than in Encana with. In hindsight, these trades also were made too early. However, I don't feel as bad about them right now. Unlike Broadwind, this stock was down on the year as well as the year previous to it. Oil prices seemed to have stabilized at the time, the company had a strong balance sheet as well as the newest fleet with best technological advances. The yield appeared the safest and was recently reaffirmed as well. So I bought in. This was the time oil prices then started their crashing descent. No one really seemed to see this coming, though there were signs if you'd look at what had happened with all other commodities like gas, silver, gold, coal, copper, and grains. The US also had a surge of production while the rest of the globe appears to be slowing down and reducing demand. So there were signs, but I don't think I would've known. The second purchase is a little more suspect. I should've noticed how quickly and how much the stock price dropped and been a little alarmed. 5% in the course of a week is a little steep, though not completely uncommon in markets where panic sets in. After this, though, I stopped. The stock price has plummeted and I still don't have my fully planned position in place. Yes, I have a high cost average. I might've also been able to get out and come back later. It's hard to time markets though and I am accepting the risk that this stock might not move a lot for a while - similar to what I went through as I held Citigroup, but with a significant yield. Citigroup sat flat for awhile, suffered a crash, recovered a little, when it pulled back I bought in a bunch more to improve my cost average and had a long-term outlook on the stock. It hasn't been ideal, however, it hasn't served me poorly either. I believe I have the potential for something similar with the added benefit of a strong dividend that is still being supported by the company. Change tune if there's negative changes to the dividend, though. The end results are left to be discovered. I expect I'll hold this for over a year and see potential for higher prices - even if oil doesn't increase much - in the future.
Finally we have my last purchase (Line 9). I made this purchase explicitly as a trade. It has appeared to be well timed, as the stock fell about ten cents more before it took on its next ascension. The theory is that the stock is on a short-term launch higher based on technical trends I've seen recurring in the stock on an annual basis for a period of 10 years (minus 2008 where the market was crashing and 2009 where the value increase started with the "generational bottom" in March and finished at the first of 2010). As a trade, I should be holding it no longer than the term I anticipated - regardless of what happens. At this point, things are looking, generally, as expected. However, it will need to be watched closely and we'll see how this trade works out in 2015.
That's the summary of my 2014 trades. I feel these trades, at least partially, represent the reason for my portfolio's performance on the year (see my next post). I need to do what is necessary to make sure I'm researching my stocks deep enough, make a plan, stick to it, and keep emotions out of the picture. Not an easy set of tasks for me as I'm sure I'll make some of these mistakes again. Let's just hope this sinks in so I can be a better investor.
Comments
Post a Comment