What I quickly learnt about investing in stocks was that there are three areas that you need to master.
Know The Market
Know The Stock
The real challenge is that very few people teach you how to do the first two right and the third point generally goes untouched.
And when I say know the stock what I mean is knowing the business. Like really getting into knowing the business.
This is exactly how I got a 400% return on my Billabong investment in 2015.
The company was getting hammered due to a decrease in sales and a CEO leaving after an unsuccessful sale of the business.
They were getting hammered in the media and looked like they were in the brink of bankruptcy.
Seeing as the stock had plummeted, I wanted to undertake further research to see if this was a buying opportunity.
I found that the Billabong brand was still number 1 in surfing with 90% brand recognition.
Rarely do number one businesses in an industry go under.
The second part was looking at their new CEO. His proposed strategy made a lot of sense.
They would close unprofitable stores, sell their stake in unprofitable online businesses and focus on their 3 core brands.
He didn’t deny they were in a bad situation and acknowledge that it would take time for the company to turn things around.
The final confirmation for me was when the CEO and a few key executives dipped into their own pockets to purchase stocks in the company. A powerful sign of confidence!
They bought in at 32c a share. There is often a lag between when execs buy in and the stock turning around.
Based on the information above, I bought into Billabong at 16c per share.
Not long after, the stock went to 10c a share.
I have a rule, if the stock drops significantly after buying, wait two years before doing anything.
I’d done my due diligence and ignored what the stock was doing by paying it little attention.
It wasn’t until around 12 months later that I’d seen a news article come out about Billabong’s turnaround and the stock has risen over 60c a share.
I logged onto my trading account at it was listed at 64c per share. I sold immediately cashing in on my profits.
It’s been four years since that investment and the stock now trades for $1.60 a share! What a turnaround!
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