I have made a fairly hefty loss on my investment in this company, but sadly they can't all be winners and you have to take the rough with the smooth. The key thing is to ensure the winners outweigh the losers and stick to a strategy.
I sold my investment in Densitron for two reasons. Firstly, the trading statement stated that :-
"The difficulties in closing business that were encountered during the second half of 2012 have continued into the first half of 2013. At present the level of sales are in line with those achieved in 2012. A number of projects have moved forward and, while noting the on going protractions in closing business, we expect to see revenues from them during the second half of the year and into 2014."
Not great, but not disastrous either. More worrying is the protracted legal action against the company:-
"As also explained in the 22 May 2013 Preliminary Results announcement we are working to find a solution on the writ that the Company
received in relation to the property occupied by a former Group company. The situation remains largely unchanged and we continue to work to bring this matter to a resolution as soon as possible."This is dragging on too long for my liking, and I think Densitron could eventually take a considerable hit.
As I mentioned in my last blog about Densitron, much of the bad news might already be priced in and
I'll keep them on the monitor, but another good reason for selling was to free up cash to invest in other opportunities.
It's never nice selling at a loss, but it's your overall portfolio that counts. The multi-baggers more than compensate for the losers.
In fact show me an investor that always picks winners and I'll show you a liar.
Looking back my biggest investment mistake by far was investing in a company called DCD Media. A real jam tomorrow outfit that I have mentioned on my blog a few times. I sold out a little over a year ago, and if you're interested you can read my comments in post 72 on the advfn thread below:-
http://uk.advfn.com/cmn/fbb/thread.php3?id=27683272&from=58
I notice that DCD's recent results were released around a couple of weeks ago. Same old story, the usual loss making dross with another share consolidation thrown in for good measure. If the share consolidation was 1 to one trillion, I'm pretty sure that in a few years they would still manage to bring the price back down to a penny again.
The only positive from owning shares in DCD Media was the invaluable lesson it taught me in what to look out for in the future and avoid at all costs.
As mentioned above, it's never nice when an investment goes against you, but if you have a reasonable ability to pick out the hidden gems amongst the micro-caps (mostly AIM listed) then the rewards from the winners more than negate any losses incurred elsewhere.
As a scenario, let's say that you buy a portfolio of ten micro-caps at £1000 each. Two five bag, six lose half their value and two go bust. Not particularly good stock picking, but your original £10000 investment is now worth £13000 and you've made a 30% profit.
Unless you've proven to yourself that you can pick potential multi-baggers then of course the strategy above isn't going to work for you, but if you've got a proven track record in stock picking and are confident in your own ability then you're likely to do far better than the scenario detailed above. With an added bit of luck you've also got the chance of picking an ASOS or LO-Q for instance that will multiply your original investment manifold times.
As ever, no advice is intended or given, these are just my musings based on personal experiences.
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