New Investing Strategy and Jan 2008 Stock Performance

One of the things I chose to do this year is to try and stop using just my “head” and begin to use the ‘pen”. This made me write down increased activity on the stock market as one of my objective for this year. I don’t intend to be sentimentally attached to any stock this year (I actually wrote it down…and also I need a wallet too…). Well, not to say I have been docile before now, but I was rather conservative in my approach. I always picked good stock, carefully analysing the value (seen and unseen) of a stock before making my choices. The choices always turn out right. But this year I chose to do something different, and my interim plan is to have it this way for another 3-5 years before revisiting my strategy again.

On many occasions in the past, I was never disturbed by volatility in the market (even though in most cases, it has been upward volatility for me). I buy a stock for medium to long term reasons. Whatever happens to the price of a stock, I just won’t sell a stock because I try to come in when the price is relatively low. However, upon review of last year’s performance, I didn’t do too badly (an average of 50% over my entire portfolio), but also found out missed opportunities. With the same money, I could have gotten far more returns if only I had adjusted my strategy a bit. I needed to make my “blood” flow faster than it does currently. I needed to hound my broker a lot more to buy and sell like a “proper” trader would.

So I commenced active trading in January this year, and the results have been quite impressive. I made a choice between income stocks and growth stocks. Some of the stocks I held were in the long term growth stocks but in the short to medium term were income stocks. Some other stocks I figured out were growth stocks both in the short to long term, but there is a caveat, they could be quite risky. I will be targeting only growth stocks for this year. I acted immediately on this strategy commencing in the 2nd week of January.

First thing I did was to sell my Nigerian Breweries and Union Bank shares. I had the Union Bank for over twelve months, while the Nigerian Breweries, I guess for over a year and a half, maybe even 2 years. Don’t get me wrong, I got decent returns on these stocks, but I considered I could do much more. So what did I buy? I went for Livestock Feeds and UTC. I considered these stocks to be appropriately priced and believed they could appreciate by at least 30-40% in a month’s time. Do you want to know the results? Two weeks after, Livestock had returned 43% while UTC clocked 40% returns by the last day of January (UTC initially returned -5% after 3 days before picking again). Confessions: I am yet to offload these stocks as I planned, but will definitely do so shortly (one thing I have prayed for is to have the discipline to sell when my set objective is met and take the next “big” decision.

A week after I sold the Nigerian Breweries and Union Bank, I took another bold step. I sold some units of UBA, GTB, Unilever, and my beloved Presco shares (and all my Crusader Shares). I instructed my broker to use the entire proceeds to buy…guess? Equity Assurance! It was such a divine choice. I had no access to any fundamental analysis to make this decision, but comparing the price of the stock vis-à-vis other stocks at that time, I told myself, this will definitely be a slam dunk! In less than a week, I was over 35% in value. As at yesterday (3 weeks after), it was over 60% in value. During the same time period, I also made a purchase of First Aluminium in the 3rd week of January, and by 1st week in February, it was 36% up in value. If you think I am excited, you are damn right!

I need to point out the basis of my excitement, its not the returns per se, it is the fact that I took a decision and immediately acted upon it, and the results are showing. I believe this will be the hallmark of my life this year and beyond: to make a decision, act on it and stand by it!

If you noticed from above, the stocks I picked in the last one month were quite peculiar. Well, the common parlance is to call them Penny Stocks, I won’t challenge that nomenclature, but I’m not popular with that usage. I’ll rather say my plan is to go after appropriately priced stocks that I believe have 20-40% growth potential in a 20-30 day period. I have asked God for wisdom to do this with excellent results this year; I believe he will help me.

Do you want to come on this journey with me? Some choices I make this year could scare you but something tells me we will have so much fun while doing this.

Enjoy…

NB: if you are interested in seeing the list of my Buy and Sold activity in January, leave a comment behind and include your email address. I am yet to figure out to load a table on this blog, and the picture quality when converted to Jpeg just didn't cut it.