Wednesday, 8 January 2014

The Fat Finger of Fate (Portfolio Sale)

point finger
Don't let it be you...
Source
Investing is not without its moments of pleasure and excitement - but also sometimes moments that you would like to forget.

Normally my Internet share-dealing goes fairly smoothly - so smoothly, in fact, that I can do most of it in bed in the morning with a slice of toast and a cup of tea. (It's tough - but someone's got to do it.)

But there are times when the computer does not do exactly what you want it to.

A couple of days ago I decided to sell my holding in Centaur Media (LSE:CAU), the FTSE 250 publisher and event organiser. This was bought back in 2007 and was one of my 'legacy' holdings - inadvisedly bought on the basis of a 'recommendation' of the Investor's Chronicle - back in the days when I was a wet-behind-the-ears investor (I no longer subscribe).

Centaur proved to be a continual disappointment over the years. To cut a long story short, I snapped up some more shares in May 2013 when the price had dropped to around one-third of what I originally paid for it and CAU had entered the yield territory that is the DIY Income Investor portfolio. With a poorly performing share like this (thankfully, they are getting fewer), I do sometimes double up (and 'cost average') in the hope of getting out without making too much of a capital loss. (I know, loss aversion - tell me about it!)

So fast-forward to early 2014 and I've forgotten all about CAU, except that after a sustained climb in the share price it sets off my patented 'sell' signal (with the overall capital gain hitting five times the annual dividend income). 'Great' I say to myself. Checking the yield, it was down to 4%, although the dividend cover was good at nearly 2, the price trend was good and the p/e was in single digits - all-in-all not a bad dividend share. But this wasn't really a share that I believed in - it felt like old baggage to be cleared out. So 'sell' it was.

Try as I might, my Internet broker website would not accept the sale. I tried three or four times but the same error message appeared - something about the market maker not being able to accept the trade. But at the next try it went through and the acknowledgement appeared.

Good. Err...not good. 'Purchase' instead of 'Sell'? What???

So, instead of selling this albatross of a holding, I had doubled up the number of shares I owned. A 'fat finger' moment of my very own making!

What to do? If I reversed the trade now, not only would I have two lots of trading costs but I would lose on the bid/offer spread. I decided to trust to fate (and the share price trend) and did nothing hasty. Sure enough, a couple of days later the share price had risen enough to cover the costs of the abortive sell/buy fiasco. And the trade for the full double helping went through straight away.

Altogether this sad story yielded a 30% capital gain over all the various transactions since 2007. All well and good. But there is probably a lesson or two in this somewhere?

[Sale price: £0.612]


I am not a financial adviser and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.

5 comments:

  1. I occasionally get a problem with being unable to trade. This is normally on the smaller companies with large spreads between bid and offer. I, luckily, have not bought instead of sold, but you were lucky enough that the price moved in your direction.

    Hope this is a one off for you.

    ReplyDelete
  2. Hi S,

    Is there some merit in you letting the trend ride for as long as it is holding up, rather than using a fixed "Sell" indicator ?

    Let us say you have 1000 shares bought at 1 GBP for a share. Now assuming that the yield is 6%, your indicator will flash sell, when the stock goes to 1.3

    Now, instead of selling out of it, let us say you sell 800 shares and let the remaining 200 ride the trend.

    In a way this is no longer your money at risk, it is other people's money (OPM), as you have recovered your capital.

    You can always liquidate this OPM without remorse at a later date when you feel like it.

    Yes, it does add to trading costs.

    Yes, it does change a winning formula.

    However, the benefit is that it helps you capture some upside which you would have forsaken otherwise.

    Hope this helps

    ReplyDelete
    Replies
    1. Hi Vatsa

      Sound comments. Being honest with myself, I do like 'clearing out' a share - and then not looking at the price for a while. If the price goes up, I regret selling; if the price goes down I regret not selling.

      There's also a 'decluttering' aspect...

      Keeping emotions under control is the hard part of investing!

      Delete
    2. I'm generaly of the same mind too. Once I deem a share worth selling, I rarely see the point of a partial sale.

      Having said that, I've recently taken part profits in two small growth stocks, which I think have further to run. There's always an exception to the rule and I think it pays to remain flexible.

      Delete
  3. I'm torn with my Centaur. I bought just over £1,000 worth 6 months ago for a punt with some spare cash and it's currently up 71% (£756!) which is amazing. But I'm greedy and wonder if it'll go much higher.
    I wish I was as structured as you and sold when my signs said sell! Not hold on like my RSA which is 21% down :o(

    ReplyDelete