December 28, 2007

And I am out !

For sake of disclosure, let me say that I have started exiting my position in MRO-TEK. The stock is almost at 95 and has shown an 80% rise in the last one month. It is now above my calculation of intrinsic value for the stock.

I can see the thrill of momentum investing – instant gratification. In spite of the thrill, I am not planning on changing my approach which I understand well, and have become comfortable with, over the years. In general I have seen my picks rise and approach intrinsic value in 1-2 years. That allows me to analyse the company in detail and build a decent position. Sometime I have been able to even average down on the stock as the price went lower and I developed a better understanding of the company.

A case like MRO-TEK is not really suited to my style of investing. Too soon, too fast. If the stock moves up very fast, I lose interest if it crosses my buy levels as I cannot complete the analysis and would hate to create a big position without understanding the company in depth. This approach is ofcourse contrary to most investors. However I do not have such an approach for the sake of being contrary or just because it is a smarter approach. It is just that with my time constraints and risk aversion, I prefer to analyse a company in detail before I invest in it.

Will the stock go higher …? I have no clue and am not planning to play the stock on that.

As always, please read my disclaimer

5 comments:

Anonymous said...

Warren Buffet once said "We enjoy the process far more than the proceeds". It is commendable that you continue to stick to the process !

Rohit Chauhan said...

hi anonymous
i prefer to stick to a process which i am able to understand. i sometimes get lucky like in the above case , but as nicholas taleb says in his book - fooled by randomness, try not mistake luck for skill.
however unlike buffett, i definitely enjoy and need the proceeds too :)

regards
rohit

Vishal Mittal said...

Hi,

I am also facing similar situation...the stocks i analyze are running too fast, and am not able to complete my analysis...signs of bull run...

cheers

vishal

Rohit Chauhan said...

vishal
it looks like panic buying. looks like it started around november. now some or other midcap / small cap stock manages to hit circuit breaker every other day.so for value investors the environment keeps getting tougher
i guess if you own the stock, enjoy the ride.

Shankar said...

MROTek ... the 2nd stock I bought at rupees 14 .. brings back some good memories :-)

And some lame ones aswell, as I sold it at 28 rupees, whilst it had passed the then instrinsic value. I wont call that naive, because Grahamian principles donot factor in growth as they do the margin of safety.

But now that I think of it, growth is also another 'margin of safety'. (Much like a flowing river is appreciated more to a placid lake .. being poetic)

Rgds
Shankar