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My Simulated Stock Investments

My Simulated Stock Investments

            Building a portfolio at a time when the stock markets around the world are still reeling from the effects of the economic disasters that occurred in the year 2008 would seem to be a risky thing to do.   A look at the prices of the specific stocks that used to be considered by financial analysts as safe and conservative picks – General Electric, Microsoft, Citigroup, to name a few – would serve to dissuade anybody who half-heartedly decides to invest in stocks these days.

            However, there is no mistake-proof way for determining whether or not it is the right time to buy stocks.  The investor’s purpose for investing as well as the time frame and return targets that he has in mind will, therefore, have to be considered to try to buy the appropriate shares at the appropriate time most fitted for him.

Investment Philosophy

            In my case, I believe in buying shares of companies that I personally know about.  I believe in investing in companies that are engaged in making available products and services that are highly marketable and are very likely to tap even bigger new markets in the coming months.  There is no sense

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in buying shares simply because the “Buy” recommendations of analysts have been attached to them.  It is wiser to invest in companies that one is familiar with.  This, then, sheds light to the importance of doing due diligence and getting all the relevant information about listed companies before deciding to buy their shares.  With sufficient knowledge regarding the company that one invests in, there will be no inclination to panic whenever the company’s share prices goes down a bit in the course of everyday trading at the bourse.

Trading Strategies

            I designed an investment policy that involves choosing companies of varying volatility levels during trading.  Thus, my portfolio included selected banks and an airline company of low volatility and then players in the technology and services sectors that I am particularly interested in, despite the fact that their stocks are mostly known for their high volatility.  The following are the eight stocks that I have invested in:

Symbol
Company
Sector
Industry

PNC
PNC Financial Services Group Inc.
Financial
Money Center Banks

BK
The Bank of New York Mellon Corp.
Financial
Money Center Banks

CVG
Convergys Corp.
Technology
Business Software & Services

NFLX
Netflix, Inc.
Services
Music & Video Stores

CVTX
CV Therapeutics, Inc.
Healthcare
Biotechnology

DAL
Delta Air Lines Inc.
Services
Major Airlines

VRSN
VeriSign, Inc.
Technology
Internet Software & Services

CSCO
Cisco Systems, Inc.
Technology
Networking & Communication Devices
(Source:  Yahoo! Finance)

            My portfolio was a combination of “safe or low-risk” and “high-risk” stocks.  I picked

stocks whose market prices have fallen from the ceiling prices that they have enjoyed during

the rallying days of the stock market.  Back during the days when I decided to buy them, I reckoned that they could not possibly go even lower from their levels.  Thus, I purchased

CVG, VRSN and CSCO at the prices that I rather considered good and cheap.  At the same time, I attempted to make the most of sudden swings in prices of stocks that were in my watch. Last January 20, PNC dove to $21.31 in the middle of the trading day.  With such 43%-drop from the previous close price $37.54, I decided to short-sell 100 shares at $26.36 and to later buy them back at a much lower price.  I waited for the PNC price to again go as low as $21.00, but it never happened.  I ended up buying back the shares at a loss last January 27.  The same story applies to my purchase of 80 shares of BK.  Last January 20, it went as low as $15.44 or 33% lower than its previous closing price, $22.96.  I bought BK shares at $17.41 and I was days later constrained to buy back the shares at $26.20 at such a loss.  Even the dividends earned at $0.24 per share could not make up for the loss incurred.

            But I was not always a loser at short-selling.  I made some money from short-selling DAL at $8.50 last January 28 and then buying them back last March 3 at $3.99.  I maintained an active portfolio.  I bought and sold shares at prices that I thought were so good.  I have lost almost $1,200 from trading and I have VRSN and CSCO shares still.  As of March 16, VRSN’s market price was lower than my buying price for it last March 3, while CSCO’s was higher than its $14.45-purchase price on the same date of purchase.

Trading Summary

            I may have incurred a loss of over $1,100; but in the end, I am glad to have secured the more important thing, the original investment amount.  After all, the amount lost is but a tiny portion of my total $1 million-fund.  More importantly, the transactions have served to teach me valuable lessons.  I, then, know better next time I decide to buy stocks.  The following tabulation summarizes my buy and sell transactions during the first three months of 2009:

Symbol
Transaction Dates
Quantity
Trading Prices ($)
Trading Net

Buy
Sell

Buy
Sell
Gains (Losses)

PNC
1/27/2009
1/20/2009
100.00
30.53
26.36
(467.00)

BK
1/28/2009
1/20/2009
80.00
26.20
17.41
(753.20) **

CVG
1/27/2009
3/3/2009
100.00
8.80
5.89
(341.00)

NFLX
1/27/2009
3/3/2009
150.00
34.39
34.34
(57.50)

CVTX
1/27/2009
3/3/2009
200.00
16.12
15.47
(180.00)

DAL
3/3/2009
1/28/2009
150.00
3.99
8.50
626.50

Total Trading Gains (Losses)

(1,172.20)
(Source:  Yahoo! Finance)

** Dividends amounting to $19.20 were received for the 80 shares purchased at $0.24 per share.

            As of now, these are the shares in my portfolio that remain unsold:

Date

Total
Subsequent Trades
Symbol
Purchased
Quantity
Price
Purchase
Date
Price

VRSN
3/3/2009
200
20.76
4,177.00
3/16/2009
19.24

CSCO
3/3/2009
500
14.45
7,250.00
3/16/2009
15.45
Total Stocks in the Portfolio
11,427.00

(Source:  Yahoo! Finance)

Strategies and Market Lessons Learned

            The simulation exercise has taught me to do more thorough analyses before enlisting stocks for my portfolio.  While I have found time to read about the companies whose shares I was intent on buying, I realize that I did not exert enough efforts to generate more helpful information about the listed stocks I was eyeing.

            The following tabulation includes details about the companies I have selected for my portfolio for reasons that I have previously discussed.  I see now that some of them have not been religiously issuing dividends to their shareholders (e.g. CVG, NFLX, CVTX, DAL, VRSN and CSCO).  Dividends are not that significant in terms of their amounts; they, however, denote profitability and stability of companies.

            Having focused on the fact that they belonged to industries or sectors that I believed in (technology, IT-related products and services), I also have failed to see that NFLX and CVTX are rather close to the “high” prices that they have reached during the last 52 weeks.

            But these lessons and more can be learned only by getting into buying and selling of shares, simulated or for real.  I must remember to apply them the next time I pick stocks for my portfolio, and the next time I decide to buy shares at their current doing prices.

Closing,
52-Week

Dividend
Symbol
3/16/2009
High
Low
Beta
P/E
EPS
Yield(%)

PNC
27.32
87.99
16.20
1.00
11.10
2.46
9.40

BK
22.66
47.38
15.44
0.68
18.85
1.20
4.10

CVG
6.55
16.99
4.02
1.54
n.a.
(0.75)
n.a.

NFLX
38.66
40.90
17.90
0.73
29.27
1.32
n.a.

CVTX
19.64
21.15
5.67
0.32
n.a.
(1.61)
n.a.

DAL
5.54
12.65
3.51
(0.08)
n.a.
(19.06)
n.a.

VRSN
19.24
42.50
16.23
0.84
n.a.
(1.87)
n.a.

CSCO
15.45
27.72
13.61
1.19
12.33
1.25
n.a.
(Source:  Yahoo! Finance)

Work Cited

Yahoo! Finance.  (2009).  Company Profile and Key Statistics.  <http://finance.yahoo.com/ q/hp?s=BK&a=00&b=14&c=2009&d=01&e=5&f=2009&g=d>

 

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