Pulling the Ripcord on Softbank (SFTBY)
The day I bought my second lot of shares in the internet giant on December 12 was the exact point where a year of upward momentum in this stock came to a juddering halt.
The shares have since been like an errant teenaged child who you keep giving the benefit of a doubt until he goes out and steals a car. That is show business.
The immediate cause for the selloff was a downgrade of Alibaba by an unnamed Chinese internet analyst, in which Softbank is a major shareholder. The imminent IPO of Alibaba was the whole reason for owning Softbank.
It doesn?t help that the global emerging market rout has sent traders into ?RISK OFF? mode, especially in China. The doubling of Turkish interest rates overnight focused a great giant spotlight on the problem.
When in doubt, sell, especially stocks with funny sounding foreign names. ?Brave new world? technology stocks, like Alibaba, have been put on hold. A full handle move up in the yen against the US dollar to a new high for the year was further fat on the fire.
But what really tipped me over to the sell side was to see the Nikkei Average up a robust 2.70% last night, but Softbank shares drop by -1.30%. If it can?t catch a bid with this tailwind, it?s time to get out of dodge, or in this case, Kabutocho.
You knew this eventually had to happen. Since June, my Trade Alerts have enjoyed an almost unbelievable success rate of 90%. My followers have earned a +41.15% return on their capital, a multiple of what the market did. It was just a matter of time before I got slapped across the face with a fresh piece of sushi. But the entire world had to conspire against me to do it.
If you do have to lose money, this is the way to do it. By owning shares instead of options I was able to limit my loss to 2.86% off the back of a 14.3% fall in the shares. The trade was part of the general deleveraging that I have been implementing with my trading book since the end of 2013. It?s far better to have leveraged gains and unleveraged losses than the reverse.
No doubt, everything I predicted about Alibaba and Softbank will come true, and vast fortunes will be made by shareholders. But for the time being, we will have to restrict ourselves to reading about it in the newspapers from the sidelines.
