Friday, March 19, 2010

An Investing Mistake

The portfolio edged closer to the 10% mark despite the addition of 6,000 shares of Elite KSB, thanks mainly to the rise in Etika International Holdings. With $73 of free cash left for CY10, I would like to focus on an investing mistake.

Stratech was bought because it was on the CNA forum one weekend that it would be in The Edge as a story. Thinking that the publicity would give me some way of making a quick buck, I got some people along as well to buy into the company.

After touching 6 cents for that week, it subsequently stayed at 4-4.5 cents for the longest time ever. The mistake I made was buying it when the PE was 60 times. even if it managed to double its earnings, that would just make it 30 times.

Is 30-60 times high? It really depends what industry it is in. Stratech's motion sensing technology while cutting edge, is not that crucial like Biosensor's heart stents. With the lack of a competitive advantage - be it switching costs, brand name - the theories of economics suggest that profits will wither.

Nonetheless, I am not selling Stratech for the moment because I think we should see some good results for the coming FY in end May. If there is that potential to make above average earnings for say 1-2 more financial year, considering that I only put $1,000, it would be worth buying and forgetting.

No comments:

Post a Comment