Sunday, July 14, 2013

The Pain of Loss

Recently i had to exit two stocks since the markets had punished them hardly, of course with valid reason that both of them had governance issues. The mentioned stocks have left pain for me due to the losses i had incurred,however the teaching from them is very much valuable. The stocks mentioned are my personal view and nothing to do with the working of the company. Here is the brief view

Zylog Systems: The company ran into problems due to cash flow crisis. I had taken a position on the stock at Rs 72. After i bought at 72 the share price went to 55 and fluctuated at the price for a couple of days. I felt i had made a strong bet at 72 and the share price might come up in the next two to three quarters after the results. However the price came down crashing to 30. I didn't try to dig much into why the stock price fell but i just waited for price to recover to some level and made an exit at 40% loss[around 40]. After i made an exit i see the price came crashing down to 13. I did make a huge loss but learnt a lesson that when i put my money into a stock [however cheap i might be] i need to look at management aspect also.This i had ignored when i invested in zylog since i was in a hurry to make a position at 73[obviously expecting a good profit in a few months]. I need to carry forward this lesson.

CEBBCO: This was a company with good track record on management. But something amiss went with the company resulting in share price dropping to 45 levels. I waited for share price to come down further. So i took a position at 30. However it continued its slide till 14. I had booked losses at 18 levels. Though the position i had taken was small it still helped in learning a lesson. May be the bad sentiment continued. The way share transfer took place raised some concerns and reflected some bad sentiments which triggered the slide. I had to book a loss since i was able to find some other promising stocks[of course promising word is an assumption].

The main lesson learned here is bottom fishing can be dangerous sometimes.

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