Courage In The Face Of Dropping Share Prices

by Mr. Cheap

On June 6th I lost most of the gains on BMO and ROC that I’d previously made (about $400). The market seemed to turn against them (no specific bad news), and both stocks dipped back to where they were when I bought them.

Its a little bit nerve wracking, but I just doubled my position in both. I bought $5K of each originally because that’s how much I had to spend. I now had some more free cash, so its seems like if they were worth buying at that price before, they should still be and the rational thing is to grab another helping.

Ideally I would have preferred to buy similar companies in different sectors (expand beyond banking and tobacco), but of the stocks I’m currently looking at, these two still stand out (National Bank is closing in though). I’m comfortable focusing so intently on such a small position because I’m still in the early days of building my portfolio, I’m young enough to be a bit more aggressive, and I really see bank stocks as forming the core of my portfolio anyway (and I don’t have a problem with having a tobacco position if the price is right).

I’m glad the drop has happened to test my nerves a little bit. I’m looking forward to a huge drop (25% after I’ve bought something perhaps) and am hoping that I’ll have the courage buy when that happens.

For anyone who regularly buys stock on a value basis, how do you decide how much more to buy when it drops below a previous purchase price?

EDIT: I got “lucky” and had a big drop after writing this (but before it went live on the site). Currently (June 7th), my portfolio was down $400 at one point in the day. Considering that I was up $400 at one point, that’s a lose of $800 (8% of my portfolio).

Of course, there is no way, except in hindsight, that I could have known what the high and low points would be (I still don’t). I continue to be happy to own these companies, and look forward to future dividend payments!

(now I just need to figure out a better way to decide when to buy more of a stock I own after a drop).

EDIT 2: There seemed to be a bit of a rally (as of mid-afternoon on June 8th), I’m currently down $200.

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