Since HotCopper already has more than enough posters who like to share their brilliance in stock pickings, I will try to provide some balance by sharing my mistakes.
At the Half Year, I declared that I will continue holding BYI as I believed the underlying business had stabilised.
This profit downgrade really took me by surprise and it negated this belief.
When the facts change, there is only one thing to do, which is sell. In the past, I found it hard to make this hard decision of selling at a loss. I would usually hesitate and hoped that the drop would reverse (more often than not, by the time I sell, the price will be even lower). But lately, I've become less emotional and more robotic.
Yesterday, I sold every BYI shares I held immediately. When the share price went back up to close at $1.15, I didn't feel disappointed that my average selling price is less. I felt good because I am getting better at sticking to my investing plan.
Today, looking at the market depth for BYI, I feel that my decision to sell all immediately was a correct one. At the time of writing this post, the buy level is only $0.92, much lower than my average selling price and not only that, even if I want to get out, there is not enough volume available.
Now, to the reasons why I sold yesterday:
- Yesterday, it dawned on me that BHE simply didn't have any kind of pricing power at all. BHE had no choice but to fund any kind of discounting activities initiated by its customers.
- The rate of decline in DVD is faster than I expected.
- The changes in the tax treatment, i.e. uncertainty in BYI's ability to use Australian tax losses in the near term.
- The dividend left unchanged at $0.05. During this difficult times, I don't agree with management's decision to leave the dividend unchanged. I prefer them to be more realistic, cut the dividend and preserve the cash.
- There was no good news from other business units provided to soften the blow from the downgrade. This means they are not really flying at the moment. The Digital business has been a big disappointment.
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Due to its past prudent financial management, BYI's balance sheet is still relatively healthy and therefore BYI is unlikely to go under and will probably rise higher again in the future.
But for me, I will redeploy the capital at other opportunities.
Good luck to holders.
BYI Price at posting:
$1.15 Sentiment: None Disclosure: Not Held
