What a day!
Linamar released its earnings last night and its shares got crushed today.
14% drop… Wow. I never had this much of single day drop last 3 years.
Although my cost base of Linamar is $44 and $52 so I am still up 50% and 27% each after the crash but still amazed to see a solid stock gets crushed like this.
As I said in my previous portfolio update, I have taken some profit off the table by selling off 25% of my position of Linamar as this is a cyclical company. I also thought that I wanted to sell another 25% off a couple of days ago before the earnings but I did not execute it (I thought I am bad at trading so I decided to leave as is) and it was too late hahaha.
Lesson learned?
Markets always kept me humble but when things like that happen, I get even more humbled. This was about 7-8% of total portfolio so that means today my portfolio shed about 1% of value.
People panicked and sold this off badly. Probably some of stop losses have got executed and that added to further drop or a threat to NAFTA renegotiation did it. Maybe it is the stop loss, little bad but still ok performance, peak-auto psychology, NAFTA threat and Linda’s kinda bad conference call all combined.
Investor psychology kicked Linamar hard today!
Am I going to sell this?
Probably not…
I don’t know whether it will be another bloody day or bounce back when people realize that they over-sold this tomorrow but I will just stick to the fundamentals as that’s all I am good at. The numbers were still pretty good and again, they made tones of $… They are still up by 34% for 1 year so you know… still much better than the markets..
One thing to keep in mind though about cyclical stocks…
When they drop, they drop like there is no tomorrow and will start to lose money very quickly so timing is everything when it comes to investing in cyclical stocks.
Crash of Linamar reminded me of Priceline’s epic 14% drop yesterday. Such a great company can sometimes get hit badly. What an interesting markets! Isn’t it?
I was so surprised so I took the picture during the mid-day. and it ended up dropping by another 3%
Anyway, it was a fun day today! 🙂
What do you think about the CEO that said that there was in fact an INCREASE in net income (9% I think) if we consider non-recurring items and foreign exchange costs. Isn’t this suspicious? I don’t like when a CEO speaks of non-recurring items…
Yeah, I think that was even mentioned in the news release as well. That’s a common practice and to be honest I am not a big fan of it either. That being said, I think her job as a CEO is making sure the share prices do not crash but reasonably stable. Based on my experience working in a publicly traded company, crash or sharp declining share price impact negatively on business itself. Downstream negative psychological impact on their business partners, suppliers and customers, etc…are quite huge and it would translate into further deteriorating business performances.
Anyway it will be interesting tomorrow and next couple of weeks whether the price of share would recover or not. I hope it does so that I can shed off another 25% of my original position. 🙂
Well, that’s just awful news. I was hopeful that the stock price was recovering. I wanted to sell this stock and move on. It’s too cyclical for my temperament. I hope to see it recover and that this decline was an over-reaction.
By the way, what lessons did you learn? It’s not clear.
The lesson I learned is I should have put a trailing stop loss in place. .
The numbers to be honest was not too bad. If the revenue was down as well then I could be more concerned but revenue was up so that indicates that there still is growing business. They will need to work on costs which would not be too bad if focused. It had a huge run this year so it could be just a correction that was waiting to happen.
I learned that when investing in cyclical stocks especially when you can see dark cloud is closing in, I gotta watch out for these kinda huge selloff driven by mass-psychology.