As promised, I am going to write on the inspiration to start the Tumble Mumble series. I am going to be honest and say I am still exploring what is best for me. Presently, I would say both.

I have tried to invest for good. Putting money into various REITs and stocks. They proved to be good, however, I always took profits at the wrong time, or sell at the wrong time. Intention was always to hold till it gives a good capital gain. Yet, while holding, profits turn to losses and vice versa. News and events occur and I lack cash to capitalize on such opportunities.

Well, I would define trading as making a trade with the intention of taking profits be it a week, or a month.

Any trades that lasts for 3 months or more is considered investing to me.

1. Are you an opportunist?

I am an opportunist. I find it difficult to stay out of opportunities. Be it headlines of US tariffs against China, or Oil prices slumping to never-seen before lows.

Or Hong Kong protests affecting growth.. all these inspires me to make a trade in the direction of shirt-term momemtum.

This is also the fundamentals of my Unit Trust 'Trades'.

If you are an opportunist, you are better off to stick to trading and minimal investing.

2. Do you have Cash?

Cash is king. Period.

As mentioned in my profile, I have graduated with around $1500 left in my bank as a young fresh graduate. Whatever that I put into the markets is my hard-earned cash.

Yes you are right to say I almost cannot afford to fail.

With the limited amount of cash I have, I can only look to either trade effectively, or to invest.

If you have more, you could do both. When i accumulate more cash, I would do both too :)

Rationale being that, to trade, trades have to be in the range of 4000-5000 for brokerage fees to be put to the best use. Anything less, you are paying more than 0.20% per trade.

Any averaging down will require another 4000-5000$. Converting SGD to USD, it takes up a good amount of cash to trade.

3. Timeframe risk

Some people may find trading risky. Well, I would say it depends. Holding to a stock for long-term exposes you to its quarterly financial performance, and any other risk events.

For instance, Llama Portfolio was badly hit by investing in HPH Trust. I had invested in it at prices lower than what Temasek holdings had bought into. I first bought it at 0.320 sgd, and averaged down at 0.275.

Finally I sold it off at 0.210. Yes, you are right. Loss was insane in the range of -26%.

Trading wise, the intention would have been to escape once things smell amiss. And once again, one can argue that Llama portfolio was not too well diversified.

Agree, but the portfolio was not all losses though. Oh wells.

4. Do you have time?

You will probably need an hour everyday to trade. Oh wells, you will have to read up and keep yourself updated while investing too.



Why Tumble Mumble?


I am a strong believer of this. Sometimes, it is no point holding to a stock because of its good business. Without trade volume, attention and news, it is just going to be stuck.

Recently, I sold off Sciplay (SCPL) at a -17% loss to only see it rise back to a potential 4-5% gain. Did I regret? No.

Sciplay had a great balance sheet, great earnings growth, good industry outlook in mobile gaming sector, but no trading volume and kept falling for past few months.

It was to free up cash for other opportunistic trades. It was a painful lesson, but trading does not just stop here, so I will persevere on and keep learning.

The idea of Tumble Mumble is to buy stocks on the cheap after a great fall. More than often, after dropping sharply, there will be a knee jerk rebound.

Of course, one have to judge accordingly. I would read up on why the particular stock dropped in value. Not just any drops, but substantial drops - 10-30%.

It could be due to Chapter 11 Bankruptcy filings, Class action lawsuits, earnings missing expectations, or poorer guidance.

For instance, let's take a look at Z Scaler (ZS) , a stock I entered at $74. It has dropped to $61 because of some comments in the internet that tech stocks are overvalued.

It then reported EPS of $0.07, way above expected EPS of $0.01.
Revenue for the most recent quarter was 86.11m, exceededing analyst expectations of $82.83m too.
Its stock price fell another 17% to 49$ range.

Why?

Growth forecast missed analyst estimates.

For full-year, fiscal 2020, Zscaler forecast EPS in a range of 12 cents to 15 cents, with revenue of $400 million at the midpoint of its guidance. That missed estimates of adjusted profit of 19 cents per share on revenue of $402.9 million.

Will I average down? Answer is Yes. At a price range of $45-48, I would average down. As clearly, this company has just turned profitable and has room for growth.

I believe this has potential for rebound, but we have to watch the case closely.

After all, internet security is still considered a booming industry. Risky? Yes.


Technicalities of Tumble "Mumble

Using the example above, I was trying to capitalize on market fears. I would buy into oversold stocks and sell on rebounds.

I have done so in Micro Focus International (MFGP) that is now trading at $13.90 range, and Paysign (PAYS) that recently tumbled and rebounded back to $10 range.

The reason for the fall has to be something that does not cause the fall of a company. Missing estimates by a little, and lowering performance guidance are a few good examples of negative news that does not justify a stock falling by as much as 30%.

I would not say that this strategy is a sure-win. But i do hope it gives more profitable trades than loss-making ones.

Sometimes, stocks fall for no reason too. If you browse through Yahoo! Finance, and search through Google and there is no reason for a stock to fall, it is a good chance to load them up on the 'discount' too.

And hope I get to blog more successful cases in my Tumble Mumble series :)

Cheers!

Mr Llama

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