In this post, I will be sharing how I accidentally traded a stock within 24 hours on 20/5/2020. I am sharing this in the name of transparency, as I used the money I reserved for Div2030 portfolio to carry out the trade.
I hope there will be some lessons to be learned here.
Why did I mention it was “accidental” ? It’s because my original aim was to “invest” in this counter and hold it for at least 2 years and to collect the dividend.
As mentioned in my earlier post, my targeted conservative dividend yield per year is 5%.
I am going to share my entire experience from how I found the share (company) and why I chose it, all the way to how I closed my position and my plans with the gains.
Pharmaniaga Berhad (PHARMA)
On 19th May 2020, at night, while browsing the news on my phone, I came across this article in Star online with the following title:
Pharmaniaga (Syariah compliant) was never in my watch list that I built few months ago.
So I immediately started my research.
The share price of the company closed at RM 1.88 on 19th May, and I quickly calculated the dividend yield based on 6 cents. Based on my calculation, the dividend yield was 3.19% (0.06/1.88)*100.
This got me interested…
So, I proceeded further with my research. Pharmaniaga is an investment holding company. The company through its subsidiaries is engaged in manufacturing, marketing and distribution of pharmaceutical and medical products.
I also came to know that it had just released its quarterly report for the 3 months ended 31/3/2020.
This was an information I got from my KLSE SCREENER app. (This app can be download for free from google play store).
I am not going to bore you with the figures, but from reading their quarterly reports. I got to know that their performance for quarter 1 2020 did improve greatly compared to quarter 1 2019, due to strong demand for its products from Malaysian and Indonesian government for the fight against Covid 19.
I then proceeded to analyse it’s quarter 4 2019 report and got to know that it incurred a significant loss as follows:
This type of news is a no-no in my investment selection. However, the revenue was high and the company seem to have an important role to play in combating Covid-19.
So I did perform further reading on the losses and got to know that the losses no longer existed in the Quarter 1 report of 2020, which effectively means the write off and loss was one-off.
Furthermore, I came to know that it incurred the loss for the first time in 21 years since it became listed.
I then proceeded to confirm the above by reading their past annual reports (which can be downloaded from it’s website) and started studying their financial performance in the past, and they were satisfactory.
Pharmaniaga has been paying dividend consistently since 2001. Even in 2019 when it made a one-off loss, the company still paid a dividend.
Next, It has the habit of paying dividends 4 times a year, although, It only paid dividend 3 times in 2019. As such I can anticipate more dividend payment in 2020 since it’s outlook for 2020 & 2021 looks good,
So more dividends can be expected later this year and it means there is a very high chance of me achieving my dividend yield of 5% this year. (Ignoring capital gains).
The process of buying and selling
Since the trading session for 19th May was closed. I waited to buy the share on 20th May. I queued to buy the shares at RM 1.90 cents per share. But, to my surprise, the price shot up to RM 2.02 (from RM 1.88) at opening.
So I hesitated.
But, I tried to recalculate my dividend yield based on a price of 2.02 and I still managed a yield of 2.9%. I was still confident, so I tried queuing again, this time at RM 2.05. This is the price that was trading at that time.
I managed to secure 5000 units of shares at 2.05, which came to a total of RM 10,250 (excluding charges).
So based on my calculation, I was hoping to get at least RM 512.50 in dividend this year (and hopefully the same or more next year). This is based on assumption of 5% dividend yield per annum.
It became a hot stock for the day….
Very unexpectedly, this stock became a hot seller for the day. It was an active counter, which I did not expect at all. The prices started increasing at a much faster pace after I bought the shares.
Since I finished pre-recording my classes for the day earlier, I was a bit free and decided to monitor the share price from time to time, while resting at home.( I am a lecturer and due to Movement Control Order , I now have the freedom to pre-record my classes anytime)
To my surprise, I noticed that by around 3.00 pm, the prices started fluctuating at 2.24 or 2.25 per unit, and I quickly decided to calculate my gain, just for fun.
This is what I got:
“If I sold 5000 shares at 2.25, my total value of disposal would be RM 11,250, which gives me a gain of RM 1,000. This is almost 9.75% gain on a capital of RM 10,250.”
So I decided it would be good to sell and secure my profits since Pharmaniaga was never in my shortlist anyway.
I managed to secure a higher price of RM 2.27 for the sale and managed to sell my shares at RM 11,100 for a gain of 10.7%. I was satisfied.
My take on this experience
As mentioned in my earlier post, I am not interested to trade. I am interested to invest for the long term. My original intention for buying this share was to hold it for 1 or 2 years.
I sold the stock because of the following reasons:-
- I got my 2 years “dividends” through my capital gain, in one day.
- Pharma was never part of my dividend watch list in the first place.
- I still have some companies in my watch list in which I wish to invest for the long term.
- So after selling the stock, I can still allocate the capital to other companies.
At the moment, I am still waiting to reinvest all dividends and gains.
Currently, my realised gain from the sale of Pharmaniaga shares + dividends from Maybank stands at around RM 1,600++, for this portfolio.
I will collect more dividends in the next few months before reinvesting them.
I aim to reinvest all my gains and dividends by getting my first “free” investment before year end.
Actually, I would not have monitored this stock if I was busy with my classes.
I recorded them early morning so I had the time to monitor the prices
In fact, I would have preferred not to monitor this stock because the price has then surged to 2.30++, after I sold my shares.
Furthermore, as the prices were increasing, the mind voice in me became greedy and started regretting why I didn’t invest a larger amount of capital to lock in more gains.
This is a dangerous emotional aspect of investing.
Moving forward, I don’t think I will be able to monitor stocks like this, but we never know, due to the Movement Control Order and the new normal.
I still prefer to hold my shares for the long term, while collecting and reinvesting my dividends.
I am doing o.k as a lecturer and consultant and so I don’t think trading is something I wish to pursue for the short term.
Investing for the long term is still my aim at the moment.
My reaction if the share price had started dropping….
I will still be emotionally stable and would have held on to the share.
I invested the extra cash I had and not with the ones I need in the short term. (I would only consider cutting my losses if the price drop is to significant)
Anyway, my initial plan with this stock was for the long term to collect dividends, so I would have held it for the long term and monitor it on quarterly basis to see if fundamentals still exist, while collecting and monitoring the dividend.
In fact, I may have bought more stocks if the price continued to slide down to averaged down my costs.
As at the time of writing on 22nd May 2020, the prices have surged to RM 2.34. If I had held on to the shares an extra 1 day. I would have made more gains, but I have no regrets.
In investment, we have to learn how to live with lost opportunities, and we need to learn how to be disciplined and stick to the plan.
I did it, and I hope this discipline will save me from huge losses in the future.
Thank you so much for reading.
” If you are a full-time employee working in a company, monitoring share prices during your working hours is strongly discouraged, you will be unproductive (thus affecting your performance and ability to EARN well), and you will be doing a disservice to your employer.
“I am a freelancer and I finished my work, so I had the freedom to do so on a Wednesday during normal working hours”
God bless you !!!!