Given that global stocks had taken a breather this week, some investors started to think that bear is coming, and correction or crash is imminent in the coming December when Fed increases the rates.
Personally, I don't think a crash or crisis is coming as global economy is recovering well and there is known structural weakness (yet) in any place that is so bad that could trigger a large scale massacre like the one in 2007. However, 10% to 20% correction is possible since prices has run up a lot and correction could be triggered by anything, or could even be orchestrated on purpose.
So with this in mind, I start to think how could I position myself against the possible correction. As when correction comes, it doesn't matter good or bad companies, most will take some damage; though prices of good companies will recover in the long run. Would I be better if I strategize my moves to prepare for correction, or would I be better just doing nothing and hold them for long term? It's a very tough question since no one can predict the future. No matter what, I think going through such mind exercises would definitely be helpful.
Since I am pretty loaded now, the first thing that comes to my mind is that my war chest is limited, and the second thing is that I am holding too many number of stocks. How will each stock that I current owns fare in the correction, and which one should I divest to increase my war chest? This is purely my own thoughts based on my sizing and entry price.
AEM: If correction happens, it seem 10% is quite likely, while 20% will be a bargain price to enter given that several long only institutions got it at $2.70. Should I lock in my 20% gain, and hope to load even more in correction? Will there be any positive catalyst near term given that company has just buy back some shares at $3.3? I guess most likely I will keep it and load more should correction comes.
YZJ shipbuilding: 10% seems likely but this stock has not shown bearish sign yet. I hope it can ran to $1.80 then I can lock in my profits first, though news update on M&A activities will be a catalyst. But I really like the company as an alpha in the industry though. If my war chest could be increased when I sold few of others, I think I will keep this.
Geo Energy Resource: drop to 10% level is quite possible even without correction, given the bearish momentum, maybe after interim dividend XD? Don't think will sell but may consider to add more if price drops further.
Delong: Another greatly undervalued stock, but it is not popular among local investors' eyes. When negative sentiments kick in, maybe more than 20% drop is possible. Hope it can goes up above my EP for me to take profit, and increase my war chest.
Trendlines: 10% drop will be below its recent placement prices to various famous asset management funds. As I am sitting on a paper loss, this is not a viable stock for me to increase my war chest, I guess I just have to hold long term for it to realize its potential.
Capital World: 10% drop is possible but it might be attractive to mysterious buyers or investors who bought large quantity from 0.08 to 0.09 to load more shares at cheap price. Don't want to waste my precious bottom fishing and cash out for thin profits when the share price could increase few ten % next year when project Capital 21 finishes smoothly. Might only consider TP if it soars like some of the pennies.
SATS: 10% is not so likely unless BBs want to dump out fast and hard during correction. Possible near term catalyst to push the share price higher also. May TP when it happens.
Pan Hong: Even if Sino Harbour drops 20% from current level, it is still a no-brainer bargain for Pan Hong. But, Pan Hong please drop now so that I can add.
Alliance Mineral: 10% drop is possible, but it also represents a good opportunity to load even more. How could I increase my war chest if I am not willing to let go of most of them? Argh.
Food Empire: Got in recently when it dropped on the second day of results announcement due to overall weak market sentiment. Hope it can projects further up next 2 weeks so that I can take quick profits for few %. 10% drop is quite likely if correction comes.
GSS Energy: 10% is also quite possible, it's time racing between their first oil and correction. Small holding with no intention to load more, let's see what will be the market reaction when first oil is finally out.
Frencken: A regrettable impulse buy on drop. Hope to cash out soon without incurring loss. A 10% drop scenario is highly likely.
China Sunsine: Fundamentally solid, and expecting to have better results next year; but don't think will do well in correction as S-chip bias is obvious during its recent massive sell down after results. Undervalued and yet under-appreciated. Tough choice for me.
Sarine Tech: Already down from $2 to now $0.94, I don't think there's much more room to drop even in correction. Just hold it for its good dividend gain, and I believe the business can turnaround in 1 or 2 years. Even if its price return to only $1.20 in 2019, pocketing 10% dividend (sum of 2-year dividends) + 20% capital gain in 2-year time is not a bad investment.
Centurion: Quick punt following heavy purchase of insiders. Hanging for some surprise, will only sell if prices go up to certain % of profit.
China Star Food: Oh, I should have sold this when it hits 0.13. Of course the price level will goes much higher when the company resumes its businesses and profitability, but in these few months of waiting, price will be purely driven by traders of all types.
| Sell to increase war chest
(those with high chances
to hit TP near term) | Load more
during correction |
|---|
| AEM | | Yes |
| YZJ | Likely | Likely |
| Geo Energy Res | | Yes |
| Delong | Quite Likely | |
| Trendlines | | |
| Capital World | | |
| SATS | Likely | |
| Pan Hong | | Yes |
| Alliance Mineral | | Yes |
| Food Empire | Quite Likely | |
| GSS Energy | | |
| Frencken | Very Likely | |
| China Sunsine | Neutral | |
| Sarine Tech | | |
| Centurion | Likely | |
| China Starfood | Likely | |
That's the dilemma of getting into too many stocks without planning properly. As I only just began my journey to gain exposures, I have not much confidence in my picks and only entered small quantity for each stocks. So after prices ran up for some stocks, it becomes a mental barrier to add more for those stocks. And hence I keep searching for different stock ideas and end up having a thin slice for each of them. I guess with almost 30 transactions on my belt, I am more comfortable to load more when time is right. Ultimately, I think is best for me to keep my number of stocks within 15; but this also requires me to think hard on evaluating and comparing business prospects of different stocks and make selection.
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