Investing in ComfortDelgro and locking in gains.

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.

Averaging down and don't invest in this stock!

Reader says...
... Singtel, average down from entry at $3.62 till $3.33, average cost is about 3.44.

I only started buying stock about 6 months ago, and having using this approach.






I decided an entry price, normally at 52 weeks low so I got a margin of safety, then average down if the stock keep dropping and stop when the stock moving up.

What is your opinion of this average down approach?






One down side I learnt so far is if the stock run up after my entry price, then I will not be able to accumulate much as only nibble small amount (3k-4k) at the start.

It happened with my ST Engineering, Sheng Siong and First Reit.

The stock took off after my entry and have no chance to buy since then as I tried to chase.






Also, what do you think about stock with low transaction volume?

Should we avoid those as it might not be easy to sell with low daily volume ?

AK says...

If the price on a good investment goes lower, it is better value. ;)

As for less liquid counters, I don't see a problem if we are investing for income. :)






See what a CFA and investment guru told me about Old Chang Kee when I blogged about investing in it in 2011?

"I love eating Old Chang Kee. However, the stock is quite illiquid and has very little volume. One look at the bid ask spread tells me a lot about the counter.

"So as much as I love Old Chang Kee, it is somewhat considered close to a penny stock to me. Therefore I can't invest in it."

See full comment and also my reply in the comments section of:
http://singaporeanstocksinvestor.blogspot.sg/2011/10/old-chang-kee-initiated-long-position.html






Have a plan.

Everything remaining equal, stick to the plan.

Ignore the noise. :)