Lessons From My Historical Trades – Keep Calm And Keep Holding On To Get >100% Returns

One of the recent discussions I had with Mrs Budget was that, I should have held on to some of the stocks I bought when I started investing back in mid 2017. 

Back then, Mr Budget started off by looking at US equities.

Some of the popular counters which I was looking at include NVIDIA, AMD, Micron, PayPal, Amazon, Adobe and more. These are counters that I am familiar with as I see them everywhere.

Obviously, these are all high growth stocks and their price were increasing every single day. When I first started to invest, I was a trader and just bought them based on price action and what other financial analysts were saying. 

There were no research done whatsoever on my part, and because my position was very low, to me then, it made sense for me to trade in and out. 

Here are some of the historical trades which I have made.

StocksOpen PriceClose Price% P&LEntry DateExit DateHolding period (months)Current PriceCurrent % P&L
AMD$16.76$24.2444.63%16/7/201829/8/20181$52.26211.81%
Facebook$171.96$175.001.77%23/3/201826/7/20184$213.0623.90%
Huya$36.46$45.0023.42%12/6/201819/6/20181$20.31-44.30%
Micron$50.63$58.9116.35%9/4/201831/5/20182$57.3313.23%
Netflix$320.00$353.5410.48%9/3/201831/5/20183$371.0715.96%
NVIDIA$192.89$204.055.79%01/12/20179/3/20183$262.9736.33%
Adobe$173.69$185.426.75%01/12/20179/3/20183$370.00113.02%
Alibaba$180.27$174.50-3.20%01/12/20179/3/20183$215.7719.69%
Micron$44.05$55.7626.58%01/12/20179/3/20183$57.3330.15%
Alibaba Group Holding Ltd$144.34$177.9923.31%04/08/201729/11/20174$215.7749.49%
Facebook Inc.$126.57$175.1738.40%04/08/201729/11/20174$213.0668.33%
PayPal$78.25$73.12-6.56%04/08/201729/11/20174$120.0653.43%
The Walt Disney Company$110.92$105.02-5.32%04/08/201729/11/20174$142.5928.55%
Activision Inc$62.34$63.201.38%04/08/201729/11/20174$61.63-1.14%
JD.com Inc$41.52$38.57-7.11%04/08/201729/11/20174$40.10-3.42%
Amazon.com Inc.$979.85$1,152.0717.58%04/08/201729/11/20174$2,133.91117.78%
Micron Technology Inc.$34.51$44.6829.47%04/08/201729/11/20174$57.3366.13%
Nvidia$179.86$197.779.96%04/08/201729/11/20174$262.9746.21%
Mr Budget’s US Equities Trade History
Trade history in image

From the table, you can see that my average holdings were only a few months. The profits from each trade were subsequently poured into the market. 

Looking at the table, if I held on to all the stocks I bought until today, I would have made a lot more! Some of the big multi bagger which I’ve missed out is definitely AMD, Adobe, and Amazon!

For AMD, while I took a 44% profit in just 1 month, if I held on to now (19 months), the profit would have been 211.81%!
For Adobe, while I took a 6.75% profit in 3 months, if I held on to now (36 months), the profit would have been 113.02%!
For Amazon, while I took a 17.58% profit in 4 months, if I held on to now (26 months), the profit would have been 117.78%!

Other positions would also see a profit of between 15% – 70%. 

If history is any lesson, I should definitely hold on to any good US stocks for at least 12 – 24 months, and let the multi baggers continue to go up and just ride along with the bull wave.

Of course, this is easy for me to say now because in 2019, US equities generally had a good run and any US technology equity would have grown up by a fair bit if you went into the US market early last year.

Epilogue – while the tables looked great, in the end of 2018, there was a mini correction and I made a lot of bad calls and sold a lot of my active holdings back then at a loss, hence wiping out all of my profits throughout the first few years of investing. I also conveniently left out these trades towards the end of 2018, all of which are money losing trades haha.

So moral of the story – for strong US equities which are category leaders, be strong and keep holding on as long as business fundamentals remains intact, and the price are continued to be supported by growing EPS.

Don’t be afraid even if the prices are hitting new ATH (all time high) every other month.

Also, trading is mostly bad if you do not have time to actively monitor the counters.

Do you have any counters that you regret selling?

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New Investing Rule – Only Invest In Dividend Paying Companies

Mr Budget recently came across a thread on Quora which is quite interesting – What is the wisest financial advise you have heard from a rich person. 

According to Mr Wonderful, one of the sharks of Shark Tank, he follows a few investing rules:

  1. If a company has no cash-flow, don’t invest! A company without cash-flow is valueless and nothing more than a speculation.
  2. Never buy a stock that doesn’t pay a dividend

He adds on further by explaining his investing rule with proper stats: “Over the last 40 years, 71% of the stock market’s return came from dividends, not capital appreciation”

“Don’t wait for the stock price to go up, get a check every other month and take your share of profits. I’ll never own a stock that doesn’t pay a dividend,” ~ Mr. Wonderful.

I think this is a very good yard stick that I will be using to guide my purchase decisions in the future. I also read somewhere that companies who have a dividend policy are more savvy in terms of capital allocation and capital utilisation, as compared to companies without a dividend policy. 

Strong companies will always give a share of the profits back to the shareholders. Companies that produce dividends on the other hand, have to ensure that their cash flow is strong enough on a regular basis to make the dividend payout and thus are managed differently.

This is also reflected in REITs – all of which have dividend policies and their prices have been increasing over the past decades. 

Another reason why this is a good investment barometer is that, when the cash of the company starts running short, dividends are among the first expenditures to get cut. That will serve as a good indicator of how the company is performing in terms of capital utilisation.

What this means is that, for growth stocks without dividend policies, Mr Budget will have to be more mindful about deploying our investment capital into them. 

Some of Mr Wonderful’s other rules for investing:

  • no more than 5% in any one name
  • no more than 20% in any sector
  • volatility is the enemy, so stick with less volatile large caps and dividend payers
  • Take your age, and put that percent of your wealth into bonds

This is a good reminder as Mr Budget just liquidated Beyond Meats, a counter which I bought few months back and suffered a 60% capital lost.

The counter was bought without proper analysis at the fear of missing out, and subsequently caused a 60% capital lost.

The Mrs asked me why did i not hold onto it – but what i didnt tell her is that, for me to recover my position and break even, the counter would have to go up by 120%, a highly unlikely case given the increased competition and the wearing off of the novelty.

Hence, it’s better for me to just cut loss (one of my biggest lost position) and to see if I can deploy the cash into something else.

And this time, into a dividend paying counter.

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