Comments on: Telstra – Stock Market Returns Inverted

By: Dean Morel

Dean Morel — Mon, 14 Jun 2010 09:20:31 +0000

Hey Sean, I view position sizing as critical, but many other investor like Mohnish Pabrai have argued intelligently that static sizing is the way to go. Their basic argument is that while they are happy selecting the best X stocks for their portfolio, as they can’t be sure which one will deliver the biggest gains then having equal sizing is the best way to go.
Like most things I see value in fusing philosophies and try to apply static sizing within categories, but allowing outsized position when I’m extra confident. Perhaps one day I’ll gain the patience to only invest when I’m extra confident.

By: Sean

Sean — Mon, 14 Jun 2010 04:27:21 +0000

Hi Dean, it was a small % loss but a large position, 10x my normal position in individual stocks, so it blew out the loss to the equivalent of 50% on a usual position, which is much larger than what my stoploss would be (15-20%). Just goes to show that position sizing has a big effect on loss size. A basic lesson of risk management, but one I seem to need to learn many times to really get it.

I wasn’t able to trade around the loss either, because time and again I overestimated the volitality and failed to sell out on the bounces as I thought they were too small. They were pretty small (10% over 1-4 weeks) and I kept getting the directional moves wrong on % swing, averaged down and increased the position without taking some off at a profit. Based on my record in the last 6 months on it I had no confidence I would be able to do better in the next 6 months.

Good luck in your position. Watch the risk management if it is an overweight position. You may need to be able to stomach being able to tolerate sub 2.75 prices in a gradually downtrending stock if the dividend is cut or no NBN deal is reached by late June.

By: Dean Morel

Dean Morel — Sat, 12 Jun 2010 06:50:08 +0000

Hi Sean, if that small loss is the worst you’ve done this year then well done as I know you’ve booked some good gains. I agree Sensis has short lived value, comparable to the decline in the fixed line business.

By: Sean

Sean — Fri, 11 Jun 2010 10:53:41 +0000

Hi Dean, unfortunately I couldn’t stand holding telstra anymore. I bought in average price 3.14 and sold out at 3.00 after a 9 month holding period. It was the biggest loss for me this year.

I like to have a timeframe for a turnaround. I bought it on the premise that it was underpriced due to regulatory uncertainty and that this would resolve itself within 6 months and it didn’t.

In the long term I have doubts about sensis being worth much with google. Telstra have not elaborated a management plan that I found a compelling turnaround story so I sold. Perhaps it will turn around some time but it isn’t my sort of investment. I hate losing on capital and paying a high tax rate on the dividend despite the franking.