Stock Trading - Entry 14

Seed money means stock shopping time, which means I am back to square one with money in the bank. Where to start? With myself, of course. (And bear in mind that this is NOT advice. I am only illustrating what is going through my mind when I look at the stocks I mention.)

So. I have my strategy; I still want to buy-and-hold. I have my sell-out lines; only a few minor changes there. Am I re-inventing my own wheel? Why am I starting here?

Let's say I find a stock with high price volatility being the only thing going against it (from my point-of-view). While that may not matter to some people, I find constant price fluctuations difficult to assess the impact of a company's recent actions in terms of its and my strategy relative to its floor price. Since I want to buy and hold, that is key info and if I can't get that then that is not a roller coaster ride I want to go on.

Always know and understand my indicators.

Take, for example, Imaflex, whose stock price has, over the past decade, really only gone up whenever there were spikes in global shipping demand, only to go back down shortly afterward. That makes investing in them easy for me to determine based on the following three factors that matter to me:

1. knowing when to invest in them
2. working with the floor
3. not being big on plastics

In short, I would consider investing in them before a big upswing in global shipping, where their stock price is closer to 70 cents, and if I was ok investing in a company centered on plastic. Since I am not ok with the plastic bit, so I took a pass. Another situation would be an amalgamation within the global shipping industry and a more lucrative shipping contracting environment like in 2017.

This was an easy decision for me. Whenever I say that in the context of buy/no-buy decisions for a given stock, it means being able to sleep well at night. It means I don't get all anxious about what if this or what about that or why didn't I look at this other thing. It means I have a bucket and it falls in it, I consider buying it. If it falls outside of the bucket, well, I won't cry over it. My strategy and sell-out lines make such decisions ok for me, which is exactly what I need. (Check out my definition of sell-out lines in this earlier entry.)

Speaking of watching things, I have created a watch list. In entry 5, I said I liked Decisive Dividend (DE). Well, the stock price has gone up since then. Good to know and sucks I still can't add it to my portfolio. In contrast, I did not add Imaflex to my watchlist due to their heavy use of plastic.

Another way I keep a watchful eye is creating automatic notices. These are kind of like reminders to myself, but only for stocks I have bought. Let's say there is some kind of option at play, like a warrant where people are guaranteed a minimum stock price by a certain time in the future. In those cases, I have setup a notification below that amount. When it reaches that lower point, I will conduct an in-depth analysis on what the company is doing and what is likely to happen when those warrants are exercised. This hasn't happened yet, but that is called being proactive with my intention (and by extension, my strategy).

Returning to my strategy, there was one thing that became highlighted in this round of analysis and purchases that was different from before. I was seeking to diversify into sectors neither my wife nor I were already invested. Why?

1. I still want to buy and hold; I am not looking for a quick buck
2. I want a diversified portfolio
3. I want to set myself up to assess diversification in a couple years (I will write about this in future articles although at this point it is to better enable my portfolio to have a greater chance at being in the black by then)

For example, one stock I would have otherwise gone for was AirIQ. Looking at recent history in the chart below, I can see their stock price has been doing well over time, moving from a previous floor of 28 cents to around 41 cents now. (Check out entry 4 to read up on the floor of a stock price.) There's nothing funky going with the company from a cursory glance, but my wife is already invested in air transportation. Easy decision.

When looking at stock prices, I am often taken back to something I described in entry 4 regarding Moores a couple decades ago, which was knowing the customers turned out to be an incredibly profound investment insight into that company. Today (in early 2024), even though Eastern Platinum (a mining company with rights in South Africa) seems to meet a lot of what I look for in a company to buy stock in, I cannot contextualize my indicators because I don't have a clue about the market in which they operate and feed. Since I don't know, I did not buy this time around. Given the amount of research required to compensate for that, now or at any point in future, I did not even add it to my watch list. If I somehow reach that point of knowledge, I will likely assess the company again then.

Similarly, Legend Power Systems (LPS) seems like a potentially innovative company to work for, however, a bit of research revealed to me that their more recent customers are governments, specifically for grants (according to their Q4 F2023 results) . Sure there are undoubtedly other applications and while this approach secures funding and big case studies for proof-of-concept and what not, their product line strikes me as requiring a lot of customer education and catering to political green-energy overtones. That is very different from many companies in the market having a glaring problem they can clearly benefit from by fixing it. When LPS is ready and switches gears, then I will give them another shot, but now is far too early for me to get in on this since the runway is way too long and I want my money to move in two years, not ten.

Before I get into the two stocks I bought, I noticed something with some of the stocks I had been investigating - ones that had some things going for it also had money available in two forms. One was just straight up cash in the bank. The other was profit margin. Although I hadn't thought of margins explicitly for quite a while, I have incorporated this into my analysis moving forward as a secondary indicator - meaning not having it won't immediately disqualify them, but if they need it in context and they don't have it, then they are out.

So; margins - the difference between the selling price of a product/service and all the operating costs. If a glass of lemonade costs you 50 cents and you are charging 25 cents per glass, no chance of profit and high likelihood of collapse without a bailout. The only time I will accept a low or slightly negative margin will be the recovery of research and development costs or that an expensive piece of equipment (let's say) was bought that will make a very good, positive impact on the company's performance. If not, nope.

Enter Total Telecom (TTZ). They are not telecom as I would define the word. Their thing is remote asset tracking. RVs, things underwater, you name it. Given the immense popularity and usability of such products combined with their recent military product validation (according to their published results here), this stock may be on the floor now, but it is very well-poised for lift off from what I can see.

An international company I did buy is GiveX Corp. They've been doing a lot in South and North America in various sectors. In a nutshell, they do ordering screens and the platforms behind and surrounding them. Personally, I could see them branching out into many more markets aside from hospitality and others they have done. In Canada, their share price is interesting, but what makes it even more so is the actions the company is taking in response to stellar performance in 2023.

GiveX is buying back their own shares through a regulated process called normal-course issuer bid (NCIB). According to this article, an NCIB involves a company buying a small percentage of its shares back. This means they have the ability to either pay themselves or, more likely, to enable them to dive into something without needing to raise capital (through loans or issuing shares). I am curious where they intend to go and I am going to find out since I am now along for the ride.

One interesting thing to note regarding those stock purchases was me having had to wait a full day of trading (AKA business day - but not always) for a money transfer to land in my account before I could make the purchases. While I was worried about prices going up, they dipped slightly! This meant I paid slightly lower prices and had $95 leftover.

With that, I continued to prowl to see if I could buy at least 600 cheap stocks in a promising company.

If you found this analysis interesting and want to know what I looked at to invest the remainder, subscribe for free below to become notified when those articles are published. Otherwise, you will have to click here to read other entries in my stock trading journey.