People often talk about over-trading. Affected by the fluctuations of share prices, you can end up trading in and out of a company several times. Each time you rack up a fee, and at the end of the day your net profit is less.
But, believe it or not, you can also under-trade. This is what I think I did with my investment in telecoms and broadcasting company Vodafone (LSE: VOD) (NASDAQ: VOD.US).
Let me explain. I have long advocated buying into Vodafone, particularly since the demerger with Verizon was announced. I really felt that the demerger created incredible prospects for this company.
Incredible prospects
I bought into Vodafone during the Eurozone crisis in 2011, at a price of 170p.
At the time much of Vodafone’s business was in a Europe that seemed mired in recession, where revenues and profits were falling. The share price was range-bound, and I began to have doubts about my investment; was the company much more than a slow-growth utility?
But last year Vodafone announced the demerger of its stake in US telecoms company Verizon. It was a move that completely changed the way I viewed this company.
The share price shot upwards. About the time the demerger took place I could have sold Vodafone at 250p, for a tidy 50% profit.
A slow-burn investment
Could have sold? With hindsight, I should have sold. But I hesitated. Could the share price increase even more? Why not wait and see how things progress?
I am rapidly learning that you need to be on your toes in investing, and take opportunities when they appear.
As it happened, I decided not to sell. And, of course, the share price promptly came falling down.
But, if you bide your time, keep your eyes open and your emotions reined in, you shouldn’t worry about one missed trade. Future opportunities will come along.
I still have great confidence in Vodafone’s prospects, and the Project Spring strategy. But I now see this as a slow-burn investment. It will take time for Vittorio Colao to assemble a portfolio of global broadcasting and telecoms assets, and for the profits to come through to the bottom line.
Meanwhile, we have a little fog, and during this time sometimes Vodafone will trade higher, and sometimes lower. As long as I sell during the former, and not the latter, I believe I will do okay.
