Curious Case of Wheelock

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Curious Case of Wheelock

20180727 Wheelock Case Study

Chart taken from Chartnexus at end July 2018.

No it is not the Curious Case of Benjamin Button. Any semblance whatsoever is purely incidental. But this counter sure piqued my curiosity on some issues and I believe we can extract learning points from this case. Let us dissect it chronologically.

  1. Prices have been sliding before the 5th July 2018 changes in Additional buyer stamp duty (ABSD) and Loan-to-value (LTV) announced after market close. P/NAV <1 back then and as of time of writing, still is. ($2.67 NAV per share taken from Shareinvestor)
  2. Before the announcement, there was a buying momentum intra-day price climb, probably profit taking set in after too; because the price climb started days before the announcement observably. You really think insider trading does not exist?
  3. 6th July 2018 gap down understandably as the changes cooled private property market. The expectation moving forward that private property developers will face tighter operating conditions is justified. But if you think can continue to SHORT this counter, think again. You really think insider trading does not exist?
  4. The sweetest spot with the biggest gain comes from buying on 6th July 2018 as the counter rebounds with notable surge just before trading halt was called. You really think insider trading does not exist?
  5. Announcement $2.10 general offer for privatisation. Huge gap up.

My heart goes out to the honest investor/trader who lost money big time on this, totally played out psychologically if the exact actions taken were to long the counter before the ABSD announcement on basis of momentum buy cum value buy, carry overnight and suffer the gap down, swing cut NETT SHORT the position thereafter, tolerate the rebound and get nailed into the coffin by the gap up privatisation general offer.

Here are the learning points:

Momentum buying basis without knowing material information is valid and does not constitute insider trading. Value investing is valid but tolerance required to wait patiently even when price falls plus news to drive price lower. Psychology can impact investment outcomes.

Markets are efficient, not always correct. And the market can stay irrational longer than you can stay solvent. You can form an investment view most rationally and with facts/logic to back its validity, but it may not be in sync with the market. Going against the crowd in the face of fresh announcements that support the crowded view, can have a huge payoff. (Especially if you bought on 6th July 2018 and hold till this time of writing. Hindsight speaking, it takes real guts even for a regular contrarian trader.) So its not what you think that is important, what the market thinks is more important. Stay humble.

  • The market can punish you for doing the right thing.
  • The market can reward you for doing the wrong thing.
  • Respect the market. It can psychologically mess you up.

* Writer has no positions in this counter whatsoever.

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6 Comments

  1. […] it is fair to assume those correlations remain static over time? For more, you can check out the Curious Case of Wheelock Properties too, to understand that every approach to the markets has its nuanced risk return […]

  2. […] can the investment market screw your thinking? It does this by rewarding you for doing the wrong thing, (you got it wrong but you made money) and […]

  3. […] Let me start off by saying that I am a proponent of this approach. It explains why I do not care much about having any particular style or approach to the market. It explains also why I embrace the full spectrum of approaches from scalping to long term income investing. It explains the extent of my open mindedness to the variety of valid approaches there is to the market (ie DCA) as well as to the extent I will not champion any strategy in particular. (Remember Wheelock) […]

  4. […] Therefore, different pockets of time favour different approaches to the market.¬†Check out the curious case of Wheelock to understand more about this statement. Alternatively, you can check out Adaptive Market […]

  5. […] for consideration is wildly dynamic. Not all things in future can be anticipated accurately (Read: Wheelock and Right side of Charts). Perhaps an engineering analogy is fitting, everything is a fluid. Given […]

  6. […] The future is not cast in stone but it is dynamic, and it should not prevent us from formulating plans. If an investment view is wrong (nothing wrong with that), cut, take the necessary measures and formulate another view. Repeat the framework, the framework does not guarantee positive outcomes by the way. This whole post shows the number of blind spots there are. Other real life stories recorded can be found in (1) Reading to the right side of charts and (2) Wheelock Case. […]

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