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14 Jun | When Not to Sell

Despite investing at the more volatile end of the market I like to think I remove many of the elements of chance by doing my homework and remaining informed about any holdings in my portfolio. Information is a little like insurance, not home insurance or buildings insurance, rather portfolio insurance.

When the markets are in turmoil it’s even more important to stay informed. However it’s easy to get sucked in by plunging prices. Potential entry points appear when prices are in flux and sometimes we go chasing the quick quid rather than staying to true to our long term investment goals.

On the chart for Range Resources below, take note of the price movements on 17th May. Range’s price ranged between 5.8 and 9 pence on the back of a Puntland Drilling Uupdate. After bottoming out at 5.8 pence we waited for the turn then took a little chunk at 7.17 pence. Considering less than a month later they’re now trading at 8.24 pence – and have traded as high as 9 pence in the interim – the purchase at this stage at least, seems to be a reasonable one. But there’s a twist in the tale.

In order to buy our bargain-basement priced Range, we sold our entire holding of PV Crystalox Solar. Now it’s not that we didn’t have a good degree of faith in where we thought PVCS was heading long term, rather because we’re dealing with limited resources and something had to go to fund our Range purchase.

PV Crytsalox Solar had been doing little on the price front for a few weeks prior, bouncing about in a range between 4 and 4.5 pence, so of all the shares currently in our portfolio, it was PV Crystalox Solar we opted to sell with the view to coming back to it a week or two down the track.

By this stage Range had well and truly bounced so we were keen to get on with things and get our purchase in and hopefully ride the bounce in Range’s price a little ourselves.

And here’s where it got ugly. 7am the following morning PV Crytsalox Solar released an Interim Management Statement in which it informed investors of a “cash settlement of approximately €90m before tax” for “the termination of a long term wafer supply contract”. For a company going through some pretty tough times an injection like that resulted in the price more than doubling. Ouch!

If you’ve traded long enough I’m sure you have a story or two like this yourself. The moral? Well I’m not sure there is one. I guess if you trade with an eye to the long term, stay true to your investment decisions when they’re based on quality research and that basis remains unchanged.

Thanks again for dropping by.

Paul
rsvp@investorsoiree.co.uk