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Investing in ComfortDelgro and locking in gains.

Friday, June 1, 2018

I was accumulating at close to and under $2.00 a share amidst very bearish sentiments, having decided that ComfortDelgro's balance sheet was robust and that its dividend was sustainable even if the entire taxi business was shut down.

The last time I bought more at under $2.00 a share was in 1Q 2018.

It should be quite clear that my decision to invest in ComfortDelgro was mainly for income but, of course, I am not averse to doing a bit of trading either.

So, if I were to sell some of my investment in ComfortDelgro, what prices would I sell at?

Ideally, we want to sell at prices we would not buy at and not at any price Mr. Market threw at us because we did not have a choice.

When I shared my incomplete analysis of ComfortDelgro many months ago (see related post at the end of this blog), I said that a 13x PE ratio would bring us close to crisis valuation and that when Mr. Market was feeling more optimistic, the company was valued at about a PE ratio of 20x.

So, we would not be wrong to think that somewhere in the middle we would find ComfortDelgro's approximate fair value.

Off the top of my head, using EPS of 15c, we get the prices of $1.95 (13x PE) and $3.00 (20x PE) a share.

Therefore, down the middle, at around $2.47 is what should be a pretty fair price, using these assumptions.

Remember that I also used an EPS of 14c which I estimated in a scenario in which the taxi business remained challenged.

With this, we get the prices of $1.82 and $2.80 a share which gives us a middle or fair price of $2.31.

So, depending on what we believe to be the case, selling ComfortDelgro at between $2.31 to $2.47 a share looks to be a reasonable decision.

Of course, then, selling any higher than $2.47 a share would be sweet.

As the share price rose, the MACD, a momentum oscillator in charting (i.e. TA) struggled and churned but did not form a higher high.

Another momentum oscillator, the RSI, tangoed with the overbought line.

So, although the share price rose, the momentum oscillators suggested that Mr. Market was hesitant to buy at higher prices.

This contributed to my decision to take some money off the table.

I reduced my exposure to ComfortDelgro by almost half at $2.47 a share and locked in approximately a 25% gain.

It has been a while since the last time I traded in stocks.

Yes, I have been pretty lazy as a trader in my retirement.

I will most likely hold on to my remaining investment in ComfortDelgro for income unless Mr. Market becomes even more bullish.

If Mr. Market should go into a depression again, reducing my investment in ComfortDelgro, I will have more funds to take advantage of such a situation.

ComfortDelgro is no longer the undervalued proposition that it was when I was accumulating.

Related posts:
1. Analysis of ComfortDelgro.
2. Massive shorting of ComfortDelgro.


csky said...

Hi AK,

Thank you for your sharing. Haha, better than Warren Buffet, cos with Warren Buffet still need to wait at least 1-2 months before we know what he buy or sell, but you are sharing with us in almost real time and for free. Some other people probably sell it as opportunity to be in "inner circle" for a couple of thousands!

I wasn't on this boat for CDG, maybe that's why it went up... what I buy goes down, what I don't buy go up :( But I definitely learned some from your approach to investing. :)

Brina said...

Nice one, AK! (Y) Missed the boat on this one, but hopefully the market will be many more opportunities :D


foolish chameleon said...

oh no... after this post, everyone knows what will happen.. haha
the oracle has spoken..

AK71 said...

Hi csky,

I am sure I was just plain lucky here. ;)

I rather be lucky than smart. :p

Credit goes to my fairy godmother (or godfather). ;p

AK71 said...

Hi Brina,

If weakness sets in and the momentum oscillators seem to suggest a high probability, I think that ComfortDelgro could see its share price retracing to around $2.20 where there could be some support.

Not I say one hor. My bowling ball which thinks it is a crystal ball says one. ;p

AK71 said...

Hi fc,

Aiyoh. Cannot like that say lah.

I hope I don't get invited to a kopi session by the regulatory bodies.



AK71 said...

Reader says...
I want to learn exit strategy
We exit when the ptb is no longer cheap/ overpriced?
I also understand sometime we pay more than ptb for good governance companies eg AA REIT

AK says...
I hardly trade these days.
As an investor for income, most of my investments are long term holdings.
However, you might be interested in this blog.

AK71 said...

Reader says...
Write blog

AK says...
no enuff time

Reader says...
Its been very profitable. About 6 mths salary. I told wife. I m gonna quit
Tk to u

AK says...
aiyoh... dun liddat say... paiseh

Reader says...
Its like batman came n help the victim of crime but donno who to thank

AK says...
u so funny... i fell off my seat.. ty 😀

(So, is AK buying more CDG now that Mr. Market is pessimistic? You say leh?)

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