Monday, August 25, 2008

Investment Lessons from the Blackjack Table

Sometimes, I play blackjack. It's the only type of gambling that I've ever really been interested in, due to the surprisingly small house advantage - I don't have the skill to count cards, yet the odds are still not stacked too high against me. It occurs to me that there are a lot of similarities between blackjack and stock trading.

The main thing, I think, is that odds are in blackjack that at some point in the evening, you'll have more money than you started with. If you walk away from the table at that point, you've won - just not much. On the other hand, if you stick around waiting for the big payout, odds are good that you'll wind up behind, but there's that tantalizing chance that you'll walk away rich.

I sold my Timminco stock for a $400 profit, 9%. This is not the most I could have sold it for, and if TIM can deliver on their promise to make UMG-Si at $10-$15/kg, it could easily turn out that I missed out on $10 000. But, like blackjack, it's probably best with a wild swinging stock like this to walk away while I'm up. There's every possibility that they will be unable to deliver on their promises, in which case the company will only be worth a fraction of its current value.

I've found this to be true in my other speculative holdings. I have a great deal more confidence in the ability of FR and WEE to deliver on their promises...yet in both cases I've let slip chances to make a 10% profit and walk away, and in return, I'm currently sitting down 22% on the two.

So, maybe I'm a wimp...maybe I really don't have the balls of steel that it takes to make the big returns. On the other hand, maybe I'm that smart player who can consistently take small profits and run with them. After all, if I could consistently turn 10% on a trade in about a week, I could generate massive annual gains.

Anyway, for better or worse, TIM is closed, and I'm looking for the next one.

In the time it took me to write this post, TIM dropped from $16.30, where I sold it, to $15.00...within pennies of my buy point. Am I feeling happy right now? I think so.

Tuesday, August 12, 2008

Stress Much?

So my resource intensive portfolio has been melting down of late. FR is now down 23%, WEE down 34%. It's been a pretty nasty couple of weeks.

I keep toying with the idea of selling, but I just feel like these prices are insanely low for these companies, so I'm not prepared to do so. Maybe I'm crazy, but I still think that despite falloff in resource prices, they're still companies with a lot of growth potential. I'm particularly annoyed because these are companies which didn't benefit all that much from price runup, but seem to be taking the full brunt of the downturn in resources.

Anyway, still in them. Don't really want to sell when they're down...not while I'm still confident in their futures.

On another note, I opened a position in Timminco (TSX:TIM) today. TIM makes solar grade silicon, and was a star performer on the TSX last year. This year it had been performing well, but its second quarter earnings missed expectations, and led to a 25% drop in value. While that's cause for worry, I read the earnings information, and it seems like it it's not all that bad. I don't think it fundamentally changes the bright future for the company, which is what its stock price is largely based on. Pretty much the whole drop was in overnight trading, and today it held steady with high volume, so I don't think I'm the only one who smells a deal.