Monday, August 30, 2010

One of my top 10 worst trading days

Things are really starting to heat up in the markets. I don't have the screening tools I'd like as I'm in between jobs, but I've begun to start making some serious purchases in names I've been following for a few years.

Damn its stressful. I feel like I'm eating too much and my hair is shedding. I really need to get these habits under control otherwise I'm going to end up looking like jabba the hutt. Even when you have the conviction that you're right, the sheer volatility is nauseating. Welcome to the world of small-cap investing. Welcome to the world of opportunity. Tread carefully.

Today I bought some stock in an education materials company, RLRN. It fits as one of my typical plays (rock solid balance sheet, significant cash flows, strong insider ownership, recurring revenues, understandable business, diversified customer base, buying into extreme selling pressure) but I paid up for it (10x FCF vs. my normal 6x) mostly because of some timing constraints I'm currently facing. In retrospect I shouldn't have rushed it. Really dumb.

In the first hour the stock dropped significantly and by the end of the day it had closed ~13% down on no news. This decline equates to roughly half of one month's salary pre-tax.

While Mike Tyson would say, "everybody's got plans until they get hit," my plan is to triple the bet closer to $5-6 when I'm looking at a 50% drop from my purchase price. I just need the stomach to pull the trigger (and obviously quadruple check my assumptions and any news updates that would bust my thesis).

YTD Return: Flat.
% Invested: 12%
% Short: 4%

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