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Wednesday, June 13, 2007

KME and WAL lead portfolio in poor day on market

I bought KME today.

While this has been a selection of mine for a while (bought in at 81c) I think now is a good time to top up the account. The PE is currently sitting at 16 which is high for stocks that I purchase. But the federal budget incentive plus the long term uptrend say this is a raging buy.

I bought in today at $1.395.

Another share which I am still raving about is WAL. I initally bought in at 22c and bought more at 20c and then 17c. It has returned to 20c and I am showing a small profit. When this company decides to do something with the cash it could be a big mover.

Good luck.

4 comments:

Colin said...

Isn't adding to losers a huge investor no no?

Paul Smith said...

Colin,

For most people yes adding to losers is a huge mistake. But you have to look at why it is a huge mistake for most people. Firstly most people are either buying on a hot tip, financial planners advice, or based on technical analysis.

When basing your decisions on fundamental analysis you are not trying to pick the bottom price and then hoping it turns around. You are buying a solid company for sound business reasons. If your reason for buying the share at 22c is still the same and it drops to 17c then you should buy some more.

But if for example you use technical analysis you have no idea of the underlying value of the company. Buying a good solid company cheap is good but buying a good solid company even cheaper is outstanding.

If you read Warren Buffetts work (best investor ever) you will find he advocates the same thing I have just said.

Good Luck.

Colin said...

Yes, but Warren Buffets investing style probably didn't include very many small caps.

I've always believed its about spreading risk. Occasionally, you get it wrong, and miss an important key point in what you're investing in.

Hedging your risk also involves hedging your ideas, and not putting more into one. Although there's no doubt you're probably right, its still adding risk to something that has yet to prove the idea is true.

Its an interesting discussion though.

StockDoc said...

Warren Buffett is on the record as saying he could do 50% returns p.a. if he was investing small (probably <$50m) amounts of money. I reckon this would involve focusing on small caps. Buffett also said, in a talk to MBA graduates available on Youtube, that he'd only hold six stocks and have 50% of his portfolio in his best idea. His rational was that he didn't know many people who got rich on their 7th best idea. So, to Colin, I'd say 1) of course Warren Buffett's ideas apply to small caps and 2) if you know what you are doing you should concentrate your portfolio to maximise returns.