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Tea with Matthew Seah: Same stock, different results!

Saturday, March 8, 2014


Recently I met up with a friend. Naturally being me, as we conversed, we veered more toward talking about investing. As we talk, I found out that this friend of mine had invested in the same US company as I did back in August 2011.

Back then, he had asked me what company I was investing in. At that time Gap Inc (GPS) was falling some 32% from its high of US$23, to below US16. Of course after doing much due diligence, I deemed that GPS was undervalued (I shall spare the fundamental analysis portion), and I told him I just bought GPS and told him the reasons why I think this is a good company to invest in. And without doing due diligence, he bought…

Coincidentally he had bought at the same price as me – US$16.16, although the exchange rate and broker fees might be slightly different. After 2 and a half years, how does each of us fare?

Friend: loss of S$65
Me: sitting with a 100% return of investment, with some 54% of my original shareholdings earning residual dividends + capital gains!
Apparently, right after he invested, the price of GPS went up and down several times. So much so that he could not take the emotional strain and he sold his entire stake in early October, 2013. He didn’t even manage to receive a single dividend during the time he was invested and made a small loss. The chart below shows what happened.
As for me, I have been holding since I bought it till June 2012, when I sold 46% of my shares for a total return of my original investment capital, plus a bit more. My remaining stake has gained some 163% In value and I have also received some dividends every now and then from the company. The chart below gives a pictorial view of what I have described.

Why such a big discrepancy?
I’m sure readers of financial blogs would know that emotions affect one’s decision in investing and trading. Emotions and personality can often get in the way of successful investing. As a result, many people have tendencies to:
1. Buy on tips from other people
2. Buy on a whim
3. Buy the hype
4. Ride a winner till it goes bust
5. Fail to exit a loser

As an investor, we should recognize our own emotional strengths and weakness, and approach investing in a way that is more suitable to our investing style. It is paramount that you know what type of investor you are and not follow other investors blindly. Their investing style might be very different from yours!

Read other guest blogs by Matthew Seah: here.


9 comments:

Little Boy said...

Hi AK,

Great sharing once again.

Four greatest emotional occurrence during investing.

1.Greed
2.Fear
3.Hope
4.Regret

Thus, people say that the best victory is to conquer yourself.

Matthew Seah said...

aiya got mistake... he sold in oct 2011, not 2013 haha

Capricon said...

AK
I read that you sold 46% when the price went up to recover the capital and leaving the rest = gains, to continue. Is this what you practice ? I do have some counters that went up 100 %, the company still doing well, regularly giving dividends, profit marginally increasing. I was contemplating should I sell the 50% to recover the capital, put the sum to increase my war chest.

Cheers

AK71 said...

Hi Little Boy,

Indeed. :)

We might have all the knowledge in FA and TA, if we do not have self knowledge, it is harder not to succumb to emotions.

AK71 said...

Hi Matthew,

Thanks for the erratum. :)

AK71 said...

Hi Capricon,

This was a guest blog by Matthew. So, this was what he did.

I did this in the past with some of my investments too. Example: Old Chang Kee.

As long as we are comfortable with the possibility that price could go higher, why not? :)

Matthew Seah said...

Hi Capricon,

There are many reasons to sell. It should be part of your investing plan.

The reason for me selling GPS can be found here

Singapore Man of Leisure said...

Matthew and AK,

Now this kind of sharing makes the reader think and reflect ;)

Same stock, similar entry price - same same but different results!

Must find their own answers than simply waiting for handouts.


A special shout-out to Matthew - big heart and small ego. Thumbs up!

AK71 said...

Hi SMOL,

You are very perceptive. Matthew is often misunderstood but from my interaction with him, I can tell that he is a big hearted person and does what has to be done selflessly. We need more people like him in the world. :)

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