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My investing journey III: 2004 to 2005

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After I got some moderate success on OPSW and GE in early 2004. I got a bit excited.

If I could use one word to summerize what I did my acitivies on stocks in those two years, it’s speculation. I did all kinds of speculations, luckily I did not get into really dangerous zone: margin, short and options. So my loss is still limited (a few thousand dollars each year). I did the following speculations:

1) Bet on earning: from PALM, Redhat (RHT), NetEase (NTES) to more speculative plays such as Look Smart (LOOK), the9 (NCTY), I never made a dime on betting ERs. The common scenario is I bought them right before the earning. The stock price already reflected best case scenario. Even if the company came out with a blow out (good) earning, there wouldn’t be much upside. But in reality 100% of time they did not beat the estimate by wide margin. So…I had to sell the stocks after earning to limit my loss.

2) Secondly, I bet on IPOs. I bought the following new IPO stocks: 51job, shopping.com, Jamdat, Ninetowns (NINE) and Shanda (SNDA). I had oppertunity to make money on the first three because they all went up after I buy. But I did not hold the 51job and Jamdat long enough (see my stock lesson iv post), held shopping.com too long. As to NINE and SNDA, I did not have any chance, but they were in downward trend ever since I bought them.

3) Pure speculation: IPIX. Does anyone still remember this one? It was a hot stock in a short time in 2004/5. Just like the EFUT we had last year (2006).

4) Another thing I did is “sympathy move”. For example, I saw this Netscreen got bought by Jupiter Networks, so I looked for its competitor Rainbow. Unfortunately, this never worked.

5) Get the money back. So I lost money in NTES (bet on earning), I tried to get it back by betting on NCTY’s earning. That did not work out either. Because at that quarter online game companies all missed the earning estimates (industry cycle).

These are my speculation stories. I don’t think speculation is a sin for investor, but in order to make money, we need to speculate intelligently. Not blindly, or emtionly.

Last but not least, let me quote a word from a Chinese fund manager:

Engage or make friends using your feelings (and emtions); don’t invest in stocks purely out of emotion.

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