Index at all time high again and trading at high multiples.
When should one be worried? You should be worried if the company that you are investing does not have any promise of future earnings growth.
Is it time to buy?
I’m patiently waiting.
Stocks and Family
Last December 2011, Me and my client allocated plenty AAI. As some of you might have remembered it was very volatile at 25~35 range. During Christmas and New Year, we find our portfolio at negative 50%. I feel bad about it and have that unusual feeling in my stomach. I enjoyed the moment with my family but my mind just reverts back to my stock.
January 2012, I sold all my AAI stock for a 100% profit.
From that date on, I limit my speculative holdings to just 20% of my portfolio and I learned to disconnect my ego from my bank account. Never again an activity I passionately do distract me in my time for my family!
Speculative vs. Invesmtment
What exactly is a speculative and what is an investment?
A stock purchased for speculative and for investment purpose does not differ on the time frame but on the amount of information available prior to the purchase that can promise us safety and returns for our capital.
Stocks I consider an Investment
FGEN, AGI, PCOR, CHIB, and EDC are companies that allow us to project their earnings based on the readily available information that only requires number crunching.
Let’s have FGEN, FGEN derives 90% of their earnings from sale of electricity to MER. Electricity demand is almost certain not to decline dramatically so we can easily project FGEN’s earnings in the coming years.
Stocks I consider Speculative
LPZ, APX, GREEN are speculative.
APX is speculative since the mineral reserve estimates are not yet disclosed and that we are not sure if the increase in APX’s capacity can be met by APX’s reserve. Current APX reserve can only last for 5 years should the capacity be tripled.
LPZ is speculative since GLO buying LPZ’s BTI is in the mind of GLO’s decision maker.
GREEN is speculative since we have no comparable operating years to project earnings.
Why did I buy these shares?
Because, IMHO, the odds are very much skewed to the speculator’s favor. 🙂
APX to announce a substantial mineral resource is very likely.
LPZ’s BTI to be eventually purchased by GLO is very likely.
GREEN’s management declaring property dividends to increase shareholder value is very likely.