Gamestop (GME) was my first enthusiastic attempt at value investing. "Buy cheap company" (Low PE, not just price). When I bought it in January ( 27 Jan 2017), it was $24.32. Trading at a PE of 5x with dividend yield of 6%. I mean it's almost half of the high of $57 in Nov 2017. How much more can it fall?
I had betted that this would be a new year of new gaming consoles. With Nintendo Switch and new Microsoft Xbox coming out.
After buying the stock, it actually went up to $26 before crashing down to $20 and recovering to $25 again. I thought I was abiding by value-investing rule to not be affected by the daily market fluctuations. Aka, ignore Mr Market.
The interesting thing is the stock price crashes at every earning call even if GME beats the earning estimates?! Also they were doing well with their diversification to Tech Toys and ATT reseller stores.
When prices hit $18 in August. I am banking on the hope that the iPhone sales may turn things around. It recovered to $20. I was supposed to sell. But I did not. I was an ass. I am in denial.
Not it's broken the $18 line and the pain is almost too much to bear.
Reviewing it, these were my mistakes:
1. FA: This is not a value stock. It's fundamental business is being eroded. It's biggest business segment, pre-own games (moat) is being eroded as people increasing move to downloading their video games instead of buying disc. I stubbornly think their tech toys and att store diversification would help. But I am losing conviction there. Although I still have a little belief that the Big Boys are deliberately driving down the prices so they can load up themselves. More on that later.
2. TA: The stock is still in a downtrend. I was catching a falling knife. No one know how far it can drop. I made the same mistake with Indofood and I repeated it again. I ought to be shot! Real recovery need to be accompanied by FA business improvement and stronger volume.
3. TA: Decreasing volume at each price increase shows that the recovery does not have strength. I should not have turned a blind eye to it.
4. I had gotten in when it bounced off the lower envelop. I should have sold once it hit the upper envelop. My trading strategies were confused. This should have been a momentum play (in view of the larger downtrend). But I could not pull the trigger to sell whenever it hits the upper channel and chose to just hope.
5. Strong sector headwinds: GME is considered a retail stock. Not a tech stock even though it sells digital games. 2017 is a bad year for retail stocks. Very bad.
Now:
1. I feel like I should cut loss. -25% loss. But it keeps feeling like the bottom is near. Keep feeling like it's just the BB manipulating the market. But is that true?
Price - Volume Analysis: Is the price stable with increasing volume? No. Then turning point is not likely to be here yet.
2. I hate to sell now cos it's near the lower end of the channel and 2004-2012 low of $16. I am debating whether to average down and sell on the next momentum to the higher end of the channel. But if I miss the timing, I could end up with an even bigger loss. Because, what if it gaps down again at the next earning release and hits $16?
3. Or should I load up as a dividend play? It's almost 8% dividend at $18. As long as they can continue to pay the dividend, I ought to be safe? But am I throwing good money at bad stocks.
Bottom line: I should have let go at $20. So if it hits $16, I can load up. As it is. I should let go at $18. if it hits $16, I can load up for the dividend and consider that a fresh start. But I need to overcome the resistance of selling at the low of the channel.
Based on the TA, the down trend line is likely to be the support for the stock to do a little bounce back to $19. If not, I might see it at $15.
Actually my stop-loss will be $17.50. My sell-off is $18.50. Really I should just sell it off and save myself the sleeplessness.
It's a mistake. I made a mistake. Learn from it. Move on.
But if things stabilizes at $17 or $15, I might get back in, to enjoy the good dividend yields.
I had betted that this would be a new year of new gaming consoles. With Nintendo Switch and new Microsoft Xbox coming out.
After buying the stock, it actually went up to $26 before crashing down to $20 and recovering to $25 again. I thought I was abiding by value-investing rule to not be affected by the daily market fluctuations. Aka, ignore Mr Market.
The interesting thing is the stock price crashes at every earning call even if GME beats the earning estimates?! Also they were doing well with their diversification to Tech Toys and ATT reseller stores.
When prices hit $18 in August. I am banking on the hope that the iPhone sales may turn things around. It recovered to $20. I was supposed to sell. But I did not. I was an ass. I am in denial.
Not it's broken the $18 line and the pain is almost too much to bear.
Reviewing it, these were my mistakes:
1. FA: This is not a value stock. It's fundamental business is being eroded. It's biggest business segment, pre-own games (moat) is being eroded as people increasing move to downloading their video games instead of buying disc. I stubbornly think their tech toys and att store diversification would help. But I am losing conviction there. Although I still have a little belief that the Big Boys are deliberately driving down the prices so they can load up themselves. More on that later.
2. TA: The stock is still in a downtrend. I was catching a falling knife. No one know how far it can drop. I made the same mistake with Indofood and I repeated it again. I ought to be shot! Real recovery need to be accompanied by FA business improvement and stronger volume.
3. TA: Decreasing volume at each price increase shows that the recovery does not have strength. I should not have turned a blind eye to it.
4. I had gotten in when it bounced off the lower envelop. I should have sold once it hit the upper envelop. My trading strategies were confused. This should have been a momentum play (in view of the larger downtrend). But I could not pull the trigger to sell whenever it hits the upper channel and chose to just hope.
5. Strong sector headwinds: GME is considered a retail stock. Not a tech stock even though it sells digital games. 2017 is a bad year for retail stocks. Very bad.
Now:
1. I feel like I should cut loss. -25% loss. But it keeps feeling like the bottom is near. Keep feeling like it's just the BB manipulating the market. But is that true?
Price - Volume Analysis: Is the price stable with increasing volume? No. Then turning point is not likely to be here yet.
2. I hate to sell now cos it's near the lower end of the channel and 2004-2012 low of $16. I am debating whether to average down and sell on the next momentum to the higher end of the channel. But if I miss the timing, I could end up with an even bigger loss. Because, what if it gaps down again at the next earning release and hits $16?
3. Or should I load up as a dividend play? It's almost 8% dividend at $18. As long as they can continue to pay the dividend, I ought to be safe? But am I throwing good money at bad stocks.
Bottom line: I should have let go at $20. So if it hits $16, I can load up. As it is. I should let go at $18. if it hits $16, I can load up for the dividend and consider that a fresh start. But I need to overcome the resistance of selling at the low of the channel.
Based on the TA, the down trend line is likely to be the support for the stock to do a little bounce back to $19. If not, I might see it at $15.
Actually my stop-loss will be $17.50. My sell-off is $18.50. Really I should just sell it off and save myself the sleeplessness.
It's a mistake. I made a mistake. Learn from it. Move on.
But if things stabilizes at $17 or $15, I might get back in, to enjoy the good dividend yields.
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