My venture buying and selling GE – And why I won’t buy it again

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I decided to start my own venture into buying and selling GE.  I had never owned a share of General Electric (GE) stock until after the bad news had been announced in October 2018. The stock had already fallen over the previous two years from a 5-year high of $32 and in 2018 it was floating around $14 a share and following the bad news it dropped to mid-single digits.

Buying Opportunity or More Bad News

Why would I be buying up a stock that just announced bad new and had fallen? It’s because there was so much uncertainty of how bad it was and if the worst was over or if it was going to be worse. And here 6 months later no one knows for sure what the future of GE holds. But I figured I would try some strategies to see if I could grab a bargain.

This is following some of our short-term strategies to maximize returns by capturing gains see also Why I capture Short term gains. I will go through and explain the timeline of when I bought and sold and why I decided on that, the primary goal was to hold until GE stabilized less than a year and then sell.

I always liked GE, they have a big name been fairly stable and they are diversified across other large businesses.

Oct 23 was the last time GE was at its recent high of $12.69.

The week following the stock continued to drop. My first purchase was a handful of shares for $11.55. I figured it may go back up to $12 and I’d be done holding it and make a few bucks quickly. But the stock continued to fall. So what did I do? I continued to buy more shares. I bought a few more a $9.30 on November 2nd and a few more still November 16th when it fell down to $7.82 a share.

By now the drop has started to cool down, having been about a month. Things were looking stable until December 12th when it dropped again this time to a low $6.85. At this point, I saw this to be the point where basically the stock could continue to basically zero or somewhat recover. I bought more than double the amount of shares I currently had to help lower my cost average of all of them.

Turnaround – When to Sell

By this time I felt like I had seen the bottom. It floated around mid $7 range and by mid-January, I sold my first batch at $8.89. I only sold about a quarter of what I held and figured I would see how it behaved and would sell again around $9 or $10. A week later I sold another set for $9.18 and a week after that I sold the rest for $10.31 on January 31.

Was it the best time to sell? From what I could see that gain from around $7 to $10 was enough that the market would need to see if they could handle such a jump. And seeing it still hadn’t reached $11 and is back down to $9 looking back it made $10 seem like an ideal time to sell.

Results – Decent profit for about 3 months

As of February 1st, I had all the shares sold and I reflected back to my experience. Based on my overall cost average I earned about 7% over 3 months. Granted 7% wasn’t great, it could have been more if I bought more while it was at it’s lowest. At first, I was getting a heart attack each time the stock to fall to new lows, and some people may not be ready to tackle those kinds of drops.

But I figured patience would win in the long run. If you take 7% a quarter you would have a yearly return of 28% or 31% if I could compound and repeat the process every quarter. If you take a look at that a 30% return in a year is an amazing return.

True there were thoughts that perhaps GE was going to continue to crash and I’d never see any return except a big ZERO, but with the assets and other companies that it had, I figured if there were more question marks than answers currently.

 

The first of many short-term gains

While I was holding on to GE I also make some other short term trades. It got me thinking that if I could trade quicker and earn micro gains (1-2%) in a matter of a few days that it would be better than holding onto a stable stock and hopefully have it gain between 6-12% a year. Plus I start thinking of it as a game and it makes everything go so much smoother as I say in my short-term gains post: If you can remove the emotion you can start to see gains more clearly and make decisions based on logic and not on emotional.

I didn’t mention how many shares I placed because ultimately with zero commissions, it doesn’t matter. Well if you want to get technical it does to compile my overall cost average, but anyone could plug in 1, 10, 100, 500 shares and see the difference. It’s scalable from someone who had less than $100 to someone using $10,000, the strategy is the same, the percentage return is the same, the only difference is the overall amount.

Here is a summary of my trades

Buy/Sell Date Price

Bought 10/29/2018 11.55

Bought 11/2/2018 9.3

Bought 11/16/2018 7.82

Bought 12/12/2018 6.85

Bought 1/16/2019 8.84

Sold 1/24/2019 8.89

Sold 1/25/2019 9.18

Conclusions

It’s funny growing up I always thought of making these sorts of trades and picking up small earnings here and there, but buying $100 worth of stock and you need to pay $10 to buy it and $10 to sell it. I need the $100 to turn into $120 before I break even. That’s why the zero commission trading platform such as Robinhood or Sofi is what makes these trade profitable.

Make sure you have the patience to keep buying if things get low (I bought 5 times before I felt ready to sell), and that it’s a stock you’d be fine holding onto for months to a year based on the volatility. You could put limits to sell and cut the loses after 10% if I had done that I would have lost more money than just buying more while it was low.

Have you made any recent trades where you kept holding on waiting for it to rebound? Or have there been times when you have wanted to make a similar trade but felt you couldn’t due to the commissions?

Leave a post and we’ll talk about them and look forward to other trades, one where I bought on Friday and sold on Monday just to see what my return would be for those few days.

 

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4 Comments

  1. I must commend you for taking your time to share this article as it has really help me have an insight of what to expect if I’m to go into GE trading, because I’m also thinking of buying shares but the question of knowing when to sell and when to buy has just been answered by the experience you shared. Thanks for sharing your experience.

    • Glad I can help.  Most likely there will be more opportunities in buying and selling GE but the range will be much more limited (between $9 and $10) until there is a more clear plan of how GE will overcome its current challenges.

  2. Awesome article, well written. I am going to go into stocks later on. This will help me a lot. I will be sure to follow your article. I am new to robinhood app and about to buy shares. I think GE will be a good one to buy one next time. Thank you for sharing.

    • Go for it.  Especially those with large uncertainty.  A recent one was Sprint, because of the potential merger with T-Mobile the stock has been up and down by as much as 18% in 1 day because of the uncertainty if the merger will go through.  When good news comes, cash out, and be patient for the next drop.

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