The Day I lost $2,700 on the stock market
6 October 2017 was one of the saddest days of my investment history. It was the day I realised the loss of a laggard stock that I’ve held on to, since three years ago. I had lost 30% of the investment value, because I had foolishly ‘caught a falling knife’ (ie, bought in when the stock’s price was relentless falling).
The stock in question was SIA Engineering. Back in 2014, it was one of the hottest stocks around. At its peak, it was priced at over $5 per share. I sold it off on Friday for $3.20. SIA Engineering was largely impacted by the business of its parent company SIA. In face of increasing competition from airlines around the world, especially the Middle Eastern airlines, SIA had to cut cost, investing in planes which were more fuel-efficient, requiring less maintenance work. This meant less contracts for its engineering arm, SIA Engineering. I used to think that even if SIA wasn’t doing well, SIA Engineering could still service other airlines such as Scoot and Tiger. But to be honest, there’s not much of an impact there because the fundamentals of the airline industry has changed. Because of technology, planes are now better equipped to travel longer distances without the need for maintenance. It was a fundamental fact of the industry which I had missed out during my early days of investing.
To be fair, I had a chance to cut my losses this year, but I didn’t. I was naïvely optimistic. SIA Engineering reached a high of $4 per share mid this year. I bought the shares for an average of $4.53 per share, and was still hopeful that I could break-even. Little did I know that it was far from reality. SIA Engineering fell a further $3.70 per share, and then suddenly, on Wednesday morning 4 Oct 2017, I came across a report which said that a major institutional investor JP Morgan had gotten rid of its entire 38.9 million shares. The share price fell to a low of $3.15.
On Friday, SIA Engineering’s share price hovered at around $3.20. I had a bad feeling about this and decided to cut my loss. After all, I had this stock for three years and there were no signs of recovery. The outlook was bleak. By then, 30% of my investment was gone.
The Investing Squid’s Take
Well, of course I feel deeply sadden by the monetary loss. It is also a reflection of my lack in investment acumen, and I suppose the folly of my younger days. But I think there are certain life lessons to be taken away from this episode.
- First, if there’s a chance to cut one’s losses. Do so. Don’t wait. I was holding on to two lots of SIA Engineering shares. I do regret not selling at least one lot mid this year, when the share price hit $4.
- Second, there’s a difference between getting good value and catching a falling knife. In this case, there was no price rebound. My loss had not happened over night. I had many opportunities to sell out and use the money to invest in better stocks. But I didn’t. I stubbornly held on to the notion that the airline industry would turn around. And after three years of sitting on this bad stock, I had finally let go, at a loss of 30%.
- Third, there’s a strange sense of relief, even as I have lost $2,700; the cost of airplane ticket to Brazil, a new solid wood bed and mattress or 270 bottles of good single malt whisky. Urggh. The loss is painful, but I can now sleep with the peace of mind that this SIA Engineering stock is not going to fall further, to $2 or below.
I’ve got other laggard stocks in the oil and gas industry, which I was hoping for a revival but I don’t expect one in the near term. Should I just go ahead and bravely accept my loss? Before the ink gets redder and there is an irreversible fall in share prices? I’ll take that one step at a time.
Well, I’ve got to accept it. It’s part of life. We win some, we lose some. When we finally come to terms with our loss, it hurts, but there’s a certain sense of relief and liberation. That weight on my shoulders has somehow lightened.