Being an avid stock market enthusiast, I knew that stock trading can be cherishingly profitable and can also be painfully unprofitable. Therefore, being a short-term trader, I was aware about the risk-return pool I am going to swim in. However, I ensured that none of my trades should be influenced by mere market rumors, and any long-short trade should be backed by a valid market information.
As for the reasons of selection of the stocks in my portfolio, as I disclosed in the preceding section, each of the stock in my portfolio was backed by either strong fundamentals or a recent news in the market where it was expected for the stock price to surge and provide short-term profits to the investors. For Instance, Apple (Ticker: AAPL) and Starbucks (Ticker: SBUX) were the indisputably the market movers, and while the former surprised the corporate world with blockbuster profit of $18 billion in third quarter (Ciaccia), the latter company’s profit figures were well exceeding the market expectations quarter-by-quarter. (Johnston) Therefore, these stocks were rather fundamentally enticing for me to be included in the portfolio. On the other hand, chip manufacturing companies such as Arm Holdings (Ticker: ARMH), InvenSense (Ticker: INVN) and Synaptics Incorporated (Ticker: SYNA), are the suppliers to Samsung, and their latest produce was being used in Samsung 6. Therefore, with tech-savvy customers eagerly waiting for the new smartphone by the Korean giant and with wide success expected by the market pundits, the stocks of the above three companies were forecasted to witness a surge, and it happened accordingly once Samsung S6 was launched in the market and was declared a success.
We also took a calculated risk by buying Mc Donald Stock (Ticker: MCD). The company was going through a bearish phase since a long time as the fast food chain came off with sluggish fourth-quarter results, which was fifth consecutive quarter of U.S. sales declines and most of all company had witnessed the worst every same store sales growth. Therefore, a bold move was expected from the board to rejuvenate the investor’s confidence in the company, and this came up with a management shuffle with CEO, David Thompson asked to step down and Steve Easterbook, who had led the fast-food giant’s UK and European unit for more than two decades was named the new CEO of the company. (Walsh)The market responded positively to this managerial action and stock surged by 5%, and yet again we were successful on reaping profits from our trading strategy where we benefited from positive market hypes.
Similarly, stocks of companies such as Hershey(Ticker: HSY) and 1-800-Flowers.com(Ticker: FLWS) that are retail food gourmet distributors and whose sales are significantly dependent on festive sales, were bought around Valentine Day as were expecting to capitalize our gain with stock price expected to be fueled because of the festive sales. Once again, my strategy turned profitable, and I was able to earn the stocks at higher price soon after the valentine day.
Considering all the discussion relating to my trading and stock selection strategy above, I do not believe that it was pure luck as many of my stocks reaped profitable figures. Having experienced the carnage brought by the financial crisis of 2007-08, where many of my friends and family members lost their investments by about 60% and were trapped into the burst of housing bubble, I had decided not to believe in any market rumor and fall the victim of herd behavior. Each of my stock selection was either a tried and tested stock with consistent performance over the years, or was selected based on recent market news that could provide us with short-term profits. Although I carried all the trades on short-term basis, but I had still ensured that my portfolio is a well-diversified one and non-correlated stocks from different industries are included in it. So, technically, I was trying to follow the pursuits of investor’s God, Mr. Warren Buffet and his notion of ” Do not put all the eggs in one basket”. Therefore, it was the mix of experience and stock selection formula that showed me profitable phase of the stock trading.
At the end, the only limitation which I experienced while doing the trades was the time period for which I held the stock. As you may witness that I was aggressively buying and selling the stocks in the matter of few days only, the strategy did not turned well for stock such as Apple (Ticker: AAPL) which I sold at a loss of -$0.51/ share+ commission expense loss, and had I held the stock till today (AAPL: $130.10), I would have made a hefty profit of $10.28/share. Therefore, if given a chance to redo, I would re-consider my trading strategy for the stocks that need trust in a long-term horizon.
Ciaccia, Chris. Apple Surges Following $74B Revenue Quarter, 74M iPhones Shipped. 27 January 2015. 5 March 2015. http://www.thestreet.com/story/13025026/1/apple-surges-following-74b-revenue-quarter-74m-iphones-shipped.html.
Johnston, Chirs. Starbucks’ profits soar 82% in final three months of 2014. 22 January 2015. http://www.theguardian.com/business/2015/jan/22/starbucks-fiscal-first-quarter-profits-up-82-percent. 29 February 2015.
Little, Katie. McDonald’s CEO Don Thompson steps aside, stock jumps. 28 January 2015. http://www.cnbc.com/id/102376552. 29 February 2015.
Walsh, Tamara. What McDonald’s Management Shuffle Means for Investors. 1 February 2015. http://www.fool.com/investing/general/2015/02/01/what-mcdonalds-management-shuffle-means-for-invest.aspx. 29 April 2015.