Diary of a DIY Investor 2014

DIY Investor’s Tame Investor Humbug – 2014 Diary Archive

DIY Investor’s tame DIY Investor sets out with £50,000 to invest and a target of 20% returns trading mainly small cap stocks; his diary is frank and brutally honest.

Prices taking a run with me like this must not happen again, I need to look at having live prices with me all the time and check them constantly no matter where I am or what I’m doing, or I need to have a long think over the next few weeks about my modus operandi.

Most of the time I suppress the gambler in me, but hey it’s Christmas! Going for a quick in and out on Game Digital (GAME) – got to be out before they report Christmas trading in January (just in case). One thousand pounds down on the table at 347.75p, looking for a quick run up to 380p, stop 338p. I’ll watch this one like a hawk.

Short term the market looks OK so I revisit Renew Holdings (RNWH) which punished me for £470 last time I tried my luck and buy Tungsten Corporation (TUNG) a B2B payment provider that I believe has great potential. One thousand pounds of each – RNWH at 305p, stop 277p, target 380p. TUNG 241.47p, stop 218p, target also 380p.

Today the markets came off a cliff, the fear that’s been building up over the last couple of weeks burst into the open, the FTSE 100 down 181 points and as I write the Dow in freefall.

As of the close, two of mine Angle and Telit have gone through their stop losses everything else is OK, the question is, do I sell as per normal or do I break the rules and hold because these are market rather than company specific moves.

At times like this panic sets in, the market makers feed on this with the smaller stocks, automatic stop losses get triggered which in turn drives prices lower and anybody trading on margin has to close before they get torn apart. Whilst I’m not happy, I am totally and genuinely calm………………………………….seen it all before (usually when I was on the wrong side of it).

The trick is to forget the money and focus on what you think is going to happen next and act accordingly. Took one small step earlier, going short on De la Rue (DLAR). It issued a profits warning at the end of last month and I wrote then that I would bide my time and short the stock before the next report. I brought the time frame forward, selling a March contract on the spreads (betting the price will fall) at market 500.5. Target 350, stop 551.

Guess what, when almost everything was going down, yeah you got it, they closed up 1%. I wouldn’t go as far as to say I laughed out loud, but I did grin. They don’t call me ‘Humbug’ for nothing.

7.30am, just checked the overnight close on the Dow…………….not ‘off a cliff’ but certainly ‘rolled down a steep gradient’ 223 points (1.35%) down which I think that will set the tone for our early trading. Dangerous for anybody like me who currently doesn’t have any short positions running to hedge their long positions.

8.30am, I’d been sorely tempted to short Mulberry (MUL) but decided not to as it would have purely been a gamble based upon sentiment. Wish I’d backed a hunch MUL is clearly not well, down 25% so far. The market is not big on cuddles when something disappoints it. Other than that so far it’s fairly calm where I am, so nothing to do just yet.

In fact there was nothing to do all day, everything stayed calm with the market closing up for the second day running. It is a challenging time however, everywhere you look in the world there are big problems and above all is the simple truth that the current bull market has run a long time. Trends don’t last forever, shame I’ve got a great leather coat of the sort they used to wear in the Avengers that I fancy getting out of the cupboard sometime.

Market is looking very jittery to my eyes but life goes on and although I’m keeping a very close eye on prices and my various stops I’m also looking for bargains.

Hoping I’ve found one in Optimal Payments (OPAY) an online payment provider that I like. It’s down again today and looks value to me, so I’ve bought £4000 at 429.85p with a stop of 394 and a target of 540. Tristel (TSTL) a little infection control company I also like (you may remember I recently got shaken out of it) reported good figures this morning and the price fell. I was tempted to buy but while I was dithering around thinking, the price suddenly recovered and got away from me. Duh.

Amino (AMO) a company that delivers digital entertainment and is going into home monitoring, a growth area if ever I saw one, fell flat on its face on Friday for no company specific reason I can find. Today it produced a nice positive update about profits, has not far short of half its total value in cash in the bank and pays a chunky dividend. Given Friday’s price fall and all that positive stuff what’s not to like?

A few minutes before the close I bought £4000 of AMO well inside the spread of 79/82 at 79.39p (frankly I don’t know how that happened, but a result is a result) Target of 94, stop at 72.

Well, today turned out better than I first thought it would; none of my stops got hit and the two I bought actually went up, so on balance good.

I’m not good at timing entry and exit points, so often I buy at the high of the day or sell at the low. It really gets on my nerves but evidently that is in common with a large number of retail investors.

So today I spent a long time looking at my level 2 price screen to try and improve my performance. I traded late in the day, buying 5312 shares in Redde (REDD) at 75.0743p taking advantage of some short term weakness. Initial target 90, stop 68 and also bought Renew Holdings (RNWH) 1226 shares at 325.2p – initial target 390, stop 290. Both these shares are making new 52 week highs, have good fundamentals and recent reports/updates have been positive.

The game plan this autumn and winter (traditionally better trading months than the summer) is to focus like never before on risk and reward and really make some money. My intention is to only enter situations where ‘the odds of a trade doing badly are low enough, for the odds of it doing well to prevail more often than not’.

I’m keeping my eye on DLAR – it eventually fell 33% after its profit warning and I’m going to bide my time and plan to go short a couple of weeks before they are next due to update the market. If my strategy works out and that report is the second warning that I expect……..the result should be very good

An exciting start to the day – Robin highlighted that De la Rue (DLAR) had issued a profits warning this morning, so the split second the market opened I tried to open a short trade betting the price would fall off a cliff. It did, falling 25% instantly, sadly without my money being on for the ride – I couldn’t get my short trade on and made £6 instead of £600. There’s always next time, but recounting it brings a tear to my eye.

Given that profit warnings often come in threes, the current plan is wait for the bargain hunters to bid the price up over the next month or so and then go short again waiting for the next report.

A news report at 7am today from AGL covering their application for American approval of their testing process and that they will be listing their shares there too tempted me to buy as the price was once again rising on decent buying volume. Given that this one is all about potential it’s a high risk trade – 2032 shares at 97.8p although I should have bought ten minutes earlier at 96, however there is no point in bleating about what I should have done with hindsight, so let’s just be happy. Stop at 89, target 120.

Back from sailing having had a great time and am now in the mood to make some money this autumn. I only looked at the markets once when I was away which I think has done me good; I did however do a lot of thinking about what I have done both good and bad and how I will improve my trading performance in the coming months.

Clinigen (CLIN) a small pharma company with an interesting and unusual business model reported good results today. I made a lot of money with them this time last year and would like to repeat the performance. I plan to watch them and pounce on any price weakness.

Also very interested in another pharma company, a tiny one called Angle (AGL) that has developed a blood test to see if a cancer has spread and if so, to where. This test can also help doctors evaluate how effective any given treatment is proving. The price shot up yesterday after some publicity, so once again it’s a case of wait for a bad hair day and pounce.

Advanced Oncotherapy PLC (AVO) is a tiny company that is developing and supplying the next generation of machines to treat cancer. It is right at the cutting edge of this potentially huge market. A trading buddy of mine, Robin, highlighted the stock and I did some research.

It’s a great story and I buy into it. It’ll either make me monster money or I’ll lose the lot. For a tiddler the spread was tight and the market size was workable so I bought 50,000 shares at 3.9280p with costs £1975.95.

I’m going away on Sunday armed with my laptop and some good stock market books but think a break from getting up at 6 am each day to look at the market will do me no harm at all. What I will do is look from time to time and if anything too good to miss out on comes up I’ll bag it.

My trading performance in August was a little better, although I found myself trying to predict which way the market would move – normally a mug’s game – and a couple of short positions went against me. The net position on the trades I’ve closed is a profit of £229 which equates to a return of 5.5% on my fifty thousand pound portfolio.

Enquest (ENQ) my recent range trade is just not working out as I planned and as I’m off on holiday sailing for a week or two soon I decided to close it. Sold on the spreads at 118p for a loss of £110; it had been flapping around going nowhere and yesterday suddenly fell away for no reason I could see, in the circumstances the kindest thing was to put it and me out of our misery. All I have in the portfolio right now are AVON, the remaining half of TCM and QFI. Right now I’m happy for these just to sit there till I get back.

In April 2014, Humbug set out with £50,000 to invest and the ambition to grow his capital by 20% p.a. without taking undue risk.

In a recent trading update he described his results to date as ‘dire’ as ‘trade after trade has failed’.

His first three months stats show losses on closed trades of £2050 with profit on closed trade £596; his running profit on open trades stands at £348 showing a net loss on his portfolio of £1106 (2.2%)

Humbug hopes that a couple of weeks R&R on the ocean wave will put some wind in the sails of his lacklustre portfolio.

DTG has just lost a court case about customer compensation and this has brought the shares down to earth with a bump – ‘ I ’m out’, the reason for being in the trade has gone, there will be uncertainty until a Supreme Court appeal, when the price may recover if the court rules in its favour, but this is not a r isk I want to carry.

The price fell through my stop loss unfortunately but it could have been worse, I sold at 248p for a loss of £248.60 or 12.5%.They always say of planes that a good landing is one you can walk away from, I walked away but I do feel a little bit bruised.

Looking at forthcoming IPOs with no great enthusiasm to be honest but something caught my eye. Cenkos (CNK) the broker has been appointed sole co-ordinator and book runner to the upcoming float of the AA.The management said ‘a successful floatation would have a significant impact on the company’s current year revenues’ their recent update prior to that had said ‘revenues to date are materially ahead of the same period in 2013’.

That all sounded good news to me, so I bought £2000 at 201p, initial target 235p, stop 175p.

When the market loves a share it can do no wrong, when sentiment changes the opposite happens. Asos (ASC) was a s tock market darling but the rate of growth has slowed. At one point today they fell 38% after a negative update.

Glad I’m not in that one, the valuation was way too high for me, I follow the lead of Robbie Burns and don’t want to pay a penny more than a valuation of 15 times forecast earnings to market cap, and am much more comfortable with 10 times. In other words if the company is worth say 100 million pounds, I’m keen to buy if forecast profits are 10 million pounds and I wouldn’t touch it with a pole if they were only 1 million pounds.

Topped up another two thousand pounds on last month’s buy of SFE at 205p, they have risen nicely from my entry point of 190p but I wanted to wait until they had crossed the round number of 200p before doing so.

Fed up. This morning I bought my usual £2000 opening tranche of the two I highlighted at the end of last month, DTG, an airline and pharma company CLIN

that I’ve traded in and out of before always doing well. I looked long and hard at my level 2 price data for about an hour but still got my entry price wrong in both cases. I paid 279.65p for DTG and 455.84p forCLINhad I waited I could have paid less.

Both shares have retraced and appear to have bottomed out, if they prove to be as good a call as SCPA(bought a few days ago) the small loss of profit on the poor entry point will be as nothing. SCPA has in fact gone mad and hit my target of 140p in four trading days.

The results were good and why I bought, but the speed of the rise has taken me by surprise to say the least. Although my target has been met I’ll continue to hold and see where we go with this one.

A good month or a bad month? Simply one of those months when there was no money in the market for me with my risk-averse style of trading. At times like

this, when there’s no clear direction the trick is not to force it and throw your money away, simples.

Of the five trades I made, I lost two to stop loss’s losing £309.01, my un banked profits on the other three currently amount to £427.69.

In the next few days I’ll be looking to double up on AVON and SFE if momentum gets back into them, and am thinking about buying Dart Group (DTG) and Clinigen (CLIN) both from my watch list.

…..Onward.

Time for another bite out of Scapa (SCPA). A £165 million cap small company that makes speciality adhesive films and tapes (in my view a good solid company that does something real).

A typical type of trade for me, a good report out at 7am and steady buying coming in reasonable quantities when the market opened. So I joined the party, 1732 shares at 114.92p, target 140p stop 106p.

Pleased I didn’t buy into the IPO of SAGA, they listed at the bottom end of their expected range but even so are flapping around going nowhere fast.

Back from two days with my spin doctor the excellent Robbie Burns, aka the Naked Trader very good indeed, money well spent. Which is more than can be said about two of my recent purchases CSRT andPIC.

They both got burned up in the vicious sell-off of the small caps, shame, when the market takes a run as it did at the end of last week, the good goes the same way as the bad. I got out of CSRT at 860.4p and PIC at 343.21p

I’d now like to see both of them fall further because there will be another good buying opportunity. I decided against the Saga IPO – most of the recent IPOs have fallen in value since launching because the initial valuations have been too chunky.

Just back from the dentist…………..yuk. I was once told always go to a lady dentist because they have smaller hands – its logic I suppose.

Had another affair with an old flame, Consort Medical (CSRT). They have been in a down trend of late that seems to have turned. The MACD indicator has turned positive so I bought 218 shares at 906.3p, stop 875p, target 1050p.

Looked again at CMS but still not sure, same with Cello (CLL) that had a good report out todaybut has been marked up by the market makers.

Yesterday’s purchase of PIC is up 3% which is good and for what it’s worth, in hindsight I should have bought Cohort on Tues 6^th at 174p in spite of the big spread as it’s now up to 210p.

Winston Churchill described doing nothing while waiting for the right moment to strike as ‘Masterly Inactivity’. I’ve spent the last week in masterly inactivity. Thought about buying Cohort at 174p on Tuesday 6^th, but the spread at 4.6% was too wide for my taste; shame the timing was good as the price is up to 199.5p today.

I’ve also spent the week doing a bit of stalking. I’ve watched as Pace has come down from a high of 483p in mid March to a low of 337p at the beginning of this month. It seems to have bottomed out and started going back up this week – I’m interested.

Avon up nicely, in fact rather too nicely, finishing the day at 659p. So how can a profit be anything but good?

Well, when a trade starts to move in my direction, as I’ve said, I like to add to it. I’d set in my mind that I’d take out a spread bet at 650p to double my position, but the share just raced past that and I missed my chance.

Chasing after just about anything in life usually ends in tears, so best not to do it. One of the really great things about the stock market is that there will always be another share and another day.

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