I was asked:
Are you saying you think BEPPA isn't a good investment anymore at this price? or did I read that wrong?
I am most certainly not saying that. It's still less than 20% of redemption value, and it still has legs to run quite a long way yet.
I am saying that for me, my portfolio, my investment strategy and thus my financial goals, it does not make sense for me to continue investing in BEPPA at this time. I will explain this further below.
For anyone ENTERING into BEPPA, I believe it is still a good time. The stock is massively undervalued in my opinion, so buying in now is still not a bad option. Would have been better 2 weeks ago though. It still has the potential to run a long way and make excellent profits.
Why am I ceasing to buy BEPPA? As far as my investment is concerned, the train has left the station. I didn't quite expect it yet, I had figured I had until early June to get my money in. Yesterday's jump was a little unexpected. Investing more in BEPPA now is akin to throwing money at a train leaving the station - you won't get much inside the carriages. It's flown the coop already.
My average buy on these is 8.36c, it's now WELL past 100% over that level, and buy buying in at that price for the value I get from it is about half of previous buys. All it will do is raise my average buy price, and take money away from other investments. It's also over 65% higher than my last buy price (10.5c) and at that level, further buying does not represent value to my portfolio.
Here's my portfolio at market close (post-auction) on the last 2 days:
Thursday 07/05/2009
Friday 08/05/2009
As you can see, I have so many units of BEPPA now that a small increase in SP has a massive effect on my portfolio equity mix. As you can see on the pie charts, BEPPA is massively overweight on the equity mix.
I have had problems where I have purchased more FXJ and then the stock went down, however it impacted on my portfolio in a very negative way because of the percentage that FXJ makes up of my portfolio.
Whereas earlier this week my strategy was to continue accumulating BEPPA, now it's not really in the best interests of my portfolio. I have to buy against it (and FXJ) in order to bring their percentages down. And BEPPA is only going to go higher overall now, so I am going to have a real problem when it hits 25-30c. It will represent about 60% of my portfolio, and I will be at the mercy of it's SP. Mind you, I cannot see it falling into red anytime soon.
Once again, investment strategy has to be fluid and change in order to respond to market conditions, or you will have your heart on buying a stock when you really shouldn't.
Right now, I see myself with 3 main investment choices.
- Continue investing into the market
- Start investing into a different area - managed fund, term deposit, buy into a business or my own home
- Save cash and/or pay down debt
Right now, with sharemarkets still at a point where I call them undervalued and a heap of excellent 'Capital Gain potential' stocks out there, I am going for investing more into the market. Interest rates are low and I can service my debts easily. I also do not have enough cash to dump into a managed fund or term deposit - typically $5K for an opening investment.
So, now I have 4 choices:
- Invest in BEPPA (still a great option) or even FXJ/CBA
- Consolidate position in my smaller holdings (buy more of them, cost average. ORG, MAP & SHL is what I am talking about here)
- Diversify at market sector level and buy other companies in sectors I already own (spread risk within a sector)
- Diversify against companies and sectors I already hold by buying into new market sectors (spread risk within the market)
Option 1 is not really an option, except for maybe CBA. I do not like holding more than 25% of my entire portfolio in one stock. At 6 holdings I should be 30% on one stock at a maximum. Even though I was over 25% on BEPPA and willing to invest more, now the price has gone up a very significant amount it is alot less attractive. Basically, at my buys previously, the SP was way to attractive to NOT buy in.
Option 2 is a good one, except that I will be missing out on a seed buy on a couple of really decent yet underpriced stocks that I can dollar-cost-average later. It also slows exposure to other market sectors.
Option 3 is worthwhile, except that market sectors tend to follow each other. Not such a bad idea in a bigger portfolio in that once you have a number of stocks you can spread the risk within the sector. But with sectors outstanding (property and mining - big ones) and a small holding, it's better to hedge against any one sector. So option 4, at this time, is what I am going to do.