SembCorp Industries: Partial divestment.

Yesterday, a reader asked me if I would be selling my investment in SembCorp Industries. 

I replied that if I thought SembCorp Industries was fairly valued at $5.00 when I made my first purchase a few months ago, would I sell at a lower price?






Honestly, the investor in me said to stay invested while the trader in me said to look at possibly selling at least part of my investment. 

Let me talk to myself and throw some light on the matter.

As SembCorp Industries' stock price fell in recent months, I added to my position at various price levels: $4.80+, $4.50+, $4.20+, $4.10+. 

My memory is a bit patchy but something like this. 

I believe that SembCorp Industries is a good company and that Mr. Market was overly pessimistic as the stock kept falling in price.

Then, whether I would sell or not would depend on whether the investor or the trader in me wins. 






Finally, the trader won but only after giving a concession to the investor. 

What do I mean?

I initiated a position in SembCorp Industries at what I thought was a fair price and I said so in a blog post soon after the purchase. 

I went in with my eyes open and knew what I was getting for the price I paid. 

However, given a choice, the investor in me would prefer to purchase an undervalued stock.






So, having added at lower prices as well, recovering the capital utilised for purchases made at higher prices which fairly valued SembCorp Industries, retaining the purchases made at lower prices which undervalued the conglomerate somewhat is a palatable proposition.

After looking at the charts this morning, I determined that there should be stronger resistance at $4.84 if the stock price continued its ascent today.

So, I put in sell orders at $4.82 and $4.83.







I still like SembCorp Industries and if its stock price were to weaken to retest its lows in the last few months, I would probably be adding to my position again. 

If its stock price should rally after taking a breather, I would stand to gain with my remaining investment in the conglomerate.

Related posts:
1. SembCorp Industries: A safe price.
2. AK went shopping in the stock market.
3. Investing for income and position sizing.

ST Engineering: A letter from a reader.

We are supposed to be emotionless as investors. This is not easy to achieve. Well, at least I am still working on it. I am a poor candidate for a ninja, er, I mean, investor.


Dear AK,

I went to your last seminar because of a friend. I have been investing for a year but I never make money. After your seminar and reading your blog, I understand why my friend said you are good.

At the seminar, you and the audience discussed ST engineering. I was inspired by your own story about your first lot at $1.55 almost 20 years ago and holding till now. I was excited that the stock pays you every year.

Some people said they know the business and also bought the stock. I remember one guy said he keeps buying every year. You gave me confidence when you said you bought again at around $3.30 and $3.40. You said it was not expensive. So, I bought that week.

Today, it is $3.77. I am very happy. Don't worry. I know you will say bu yao hai wo. You said to understand price and value. I have been reading your old blog posts. I know price can go lower in crisis. But I just feel happy. So, many thanks. You are a good person.

Yours sincerely,
W

I think we discussed STE at the 3rd "Evening with AK and friends"

Hi W,

Your last paragraph saved me from having to write you an email on the difference between price and value. Sounds like you have emerged from a fog and are beginning to plot your route in the stock market as an income investor.

It is, of course, normal to feel happy that our investments are doing well. However, please be mentally prepared that we might see prices sink one day. Knowing something could happen and being prepared for it are two different things. Apart from being mentally prepared, we should be financially prepared as well. So, have a war chest ready too.

I am glad that you have found my blog useful and that one of my chit chat sessions (not seminars) started you on your journey as an investor for income. Stay the course and, I believe, you will do well enough over time. Gambatte!

Best wishes,
AK

Related posts:
1. Seven steps to creating passive income.
2. 2014 full year income from non-REITs.
3. The mystical art of wealth accumulation.