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This is where I began and how I found my feet in the trading world. Read on to find out what made me the trader I am!
Hi everyone,
Today I decided to look over my very first investment, partly to remind me of of my introduction to the market almost 5 years ago with very little funds to my name but mostly to see what has happened to the company I first believed in.
I started out in the stock-market at the young age of 19 years old fresh from doing my AAT level 4 exams and knew relatively nothing about market mechanics. I kind of stumbled into investing in one sense as I had heard someone bragging at work about making 12% in a year which he (while grinning like an idiot) declared proudly that he would have no chance of getting as much in a savings account.
Now I must point out at this point that I am and always will be very competitive which of course meant I had no choice (in my head that is) but to try and do better than 12% in a year.
Obviously, being fresh out of an accounting course I decided that looking over accounts of companies and marking particular growth and risk areas would be a good start. I then started shortlisting companies which looked interesting from a financial prospective.
Armed with a shortlist of financially strong companies I decided to start watching the price movement, watching to see which ones started rising and which seemed to struggle.
After watching in frustration as each fell by 2-10% over a month I realised I must be doing something wrong…. but what? they were growing in profit year on year so why did the share price not reflect that?
I decided to read up about charting.
Soon I started to see patterns emerging in the charts of some blue chip companies but the gains didn’t meet my needs.
As I tried to find patterns in smaller companies I found that the price would jump or fall 30% or more on good/bad news which obviously meant that charting for such companies relied on lack of news.
I decided that instead of using just charts or just accounting I needed a better model. At this point I hadn’t invested a single pound.
I began designing a system, it involved using charts and plotting RNS indicators onto the chart to see what impact (negative or positive) the historic RNS releases had on the share price. It also involved looking deep into the company (financially and fundamentally) to find out where its future growth would come from and whether it could survive one or more of its projects falling short of expectations. p.s I used volume and price movement to show what impact an RNS had and what level of rise/fall occurred before and after the RNS.
By working out what impact different RNS releases had and influencing market situations had on a stock I could provide a rough worst case/best case price forecast for a company.
Armed with my newly designed method of picking shares I picked my first investment. Avon Rubber (LSE:AVON)
I called the company and asked anything I couldn’t find out online and discovered that they were a company that at the time supplied rubber parts for the milk and defense industries. They had a steady income coming in from the milk side of things and had great growth opportunities in the defense sector. They ticked every box and I decided to invest my full budget into them.
My notes show I invested in at 121pps September 2010. I missed selling on a spike a later but held knowing (mostly hoping) I had done enough research.
I sold AVON in March 2011 at 206pps. I should have held onto them in hind sight as they ended up much higher but I was pleased with my first big win.
With my new much larger investment pot I was pretty smug with myself, I was bragging to everyone who would listen and it felt good.
The lad at work congratulated me, he also gave me a tip. Avocet Mining was about to do 300%!!!!!!
Full of gusto and idiotically convinced I could become rich over night I decided to take his tip.
9th of May 2011 I bought into AVM at 198pps 20th of June I sold at 183pps at a loss.
Now I will admit that I could have made a fair amount (almost 50%) if I had held but I had got spooked by the sudden drop and my lack of research made me second guess. I looked into the company before selling and seen holes in its plans and I seen sloppy work and a BOD that didn’t seem bothered about investors at all.
It turned out that I was right about AVM as they are now worth between 3 and 4pps.
After that mistake I never took tips again. I invested based on my research only.
I gained more success at companies like IMG TCG(when it was being speculated that they would go bust) LGO HUR IQE HNT to name just a few.
Something that never changed was the fact I never invested in more than four companies at once.
Below is a chart of Avon Rubber going back five years. Even today it is moving north and if I had held I would now be looking at 2000% profit from 4 years.
I am still learning and every time I buy or sell I learn something new. The fact is I have a system that works and yes it might scare people when a stock I say is good falls a few percent and yes I might look daft holding when a share falls 30% but they recover and they make me profit overall and so far I haven’t been let down by my research and system so I wont be changing it any time soon.
If you have followed my April 2015- today portfolio and watched me produce 300%+ profit in that time you will know my calls come good.
For anyone holding UKOG PHE and LGO I will tell you this, I am bullish on all three and feel they will make a huge difference to my portfolio growth this year. For those who doubt my ability then feel free to watch from the sidelines and don’t forget to keep a wipe handy to clean the egg off your face when my investments come good.
For anyone interested I am starting a newsletter on here soon which costs £8 per month. I will be starting a new portfolio especially for the Newsletter.
A great tool to accompany my newsletter would be to subscribe to ADVFN. Its reasonably priced and is a great tool for investors experienced and beginners alike.
I hope you enjoyed this article and as always.
All in my opinion and not to be taken as fact nor advice.
Always seek profesional advice before investing in any company
