Thursday, 9 February 2012

Can YOU afford to be a stock picker?

Should really have lead with the line, Can I afford to be a stock picker?

Recently, I got dealt a huge blow with the takeover of GTL, the Aim listed bio-ethanol producer. GTL was a stock market piece of excitement about 10 years ago, however it soon lost favour with investors as it continually went to market for more cash, and protracted deadlines for completing its plant in Illinois. However, things turned around in 2007-8 and it got the plant operational. It was an instant success. So much so that GTL expanded and doubled production capacity. Profits started coming in. Debt was getting paid down. New technologies were being implemented to make use of the residue from the corn. The share price solidified and then started ticking up.

Seeing all this good news, some bunch of chancers offered the board a purchase 20% over the share price at the time. The board, instead of telling them to take a running jump into the nearest vat of boiling oil, accepted this offer. And every single share holder in GTL was shafted overnight. This left me with a big loss. Almost half of my money invested in this share gone in one foul shot.

Was this my fault? Should I have been averaging down with the price to ensure that if a takeover did happen I would benefit? Or should I feel anger at the board for accepting a derisory offer that let everyone down?

Regardless of who is at fault, it begs the question can I afford to be a stock picker? If the shares I pick are then sold out under me for less than I ever paid for them, that's money down the drain. I may as well have burnt the money than 'invest' it. Some would say, foolish you for buying into GTL. And that is something I accept.

So I think I'm going to move my investing process.

I think it may be time to start trusting someone else to do the picking for me. 

More on this later in the week, first I'm going to do a bit of research into some stock pickers. Who is good? Do stock pickers out perform the market consistently?