Wood Group. Should I buy more stocks to even out the falling share price?

#1

Hi FreeTraders!

Ok, so I’m a complete newbie and very much still finding my feet. Before I invested anything I did a little bit of reading and watching YouTube vids on various aspects of trading (paper trading alongside). I decided to use a more technical analysis approach rather than a fundamental. Obviously having massive amounts yet to learn, and having my first small deposit burning a hole in my Freetrade account, I picked a stock that I thought may have a bit of potential.
I set out my support and resistance levels, checked the RSI and the moving averages etc and decided it was a good time to buy. I purchased 66 shares @£4.94 and waited for the roof to be lifted in front of my very eyes. Obviously that hasn’t happened and the price fell through any and all lines I had drawn on my charts, leaving me with my first small taste of the reality of trading. I’ve only been in the position for a few days so I’m not needing new underwear just yet.
Having watched the price fall I wondered if it wood (pardon the pun) be a good idea to buy a few more shares, now @£4.46 to bring my average cost down. I still have faith in my novice lines on the chart, hoping that the price will rise from the basement, which is where it appears to be.
I’ve attempted a bit of fundamental analysis to understand the continued drop (reading broker reports etc) but my novice ££ filled eyes have yet to spot anything to scare me off and run for the hills. My question is, in similar situations what or where would you more experienced traders turn to for a bit of a pointer as what to do next?
Granted it’s a small position and I’ve only been in it for a few days or so, but I’m sure similar situations have been experienced by regular traders. So what wood (can’t resist) you guys do?
Apologies for the essay and thanks in advance!

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(Chris) #2

The only advice I’d give you is to stay away from technical analysis. I see professionals of 10 years get it wrong every day.

On a more positive note though I would simply say that if you think its a good investment then you should buy some more.

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#3

I bought these shares back in 2015 when the company was called Amec Foster Wheeler. In 2017, it was sold to Wood Group, so my shares were converted to Wood Group.

I can’t say that this was one of my more successful individual stock purchases as it’s showing a 62% loss! Why have I kept it? It continues to pay a small but growing dividend (current yield 6%) and I’m a buy and hold investor at heart.

Will it ever turnaround? Perhaps, but it’s only a small holding so the loss hasn’t had a huge impact on my portfolio.

Would I buy more? Perhaps, except that there are other stocks/investments I would rather buy first.

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#4

Thanks Chris!

It is difficult starting out, as you have the two schools of thought on analysis, and each one saying the other is flawed, or should I say more flawed. I understand that both are only guides and should be used as such but its difficult when you see the price nose dive, then try to find a reason amongst the plethora of articles only to find either conflicting info or the same thread with a different headline again and again.
Plenty more learning to do! I’ll just keep turning over media rocks until my Sherlock kicks in :male_detective:‍♂

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(Chris) #5

I know, I’ve been there.

For what its worth I have no issues with technical analysis at all - its all dependent upon the use case. Technical analysis is largely/primarily used for currencies and commodities and on the intraday markets. Here supply and demand are probably the biggest single factors in pricing so technical analysis can help with this. Given you can’t trade on the intraday markets using Freetrade I’d see very little use case for it here.

When it comes to equities supply and demand is still a factor but it is by no means as large - especially when you have so many valuation metrics at your disposal as well.

If it helps, your inner Sherlock Holmes will absolute kick in. You just might have to make a few mistakes before you get there and don’t be afraid of those - I keep my first share purchase in my portfolio to remind me every single day. (RBS, minus 92% as of Monday)

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(Stewart ) #6

I’ve actually read that in an average portfolio you have a few big winners who are responsible for for the majority of any gains while losers can continue to fall or just not perform admirably.

Logic dictates that really you should invest more in those performers than the losers, even though emotionally you may think these have already risen enough. Instead plenty of us average costs down so end up piling money into weaker stocks while (sometimes) big-winners keep rising with nothing more than our first principle invested.

Meanwhile if we could all identify the “winners” early on then the markets wouldn’t work! My view comes down to the fundamentals. Is it more of a bargain if it has gone down?

Sirius Minerals I’m down 35%, but I still believe in the original proposition and there is much upside to counterbalance my risk so I will probably buy more.

Barratt on the other hand I am 35% up - I feel that makes it overvalued but many analysts still see it as undervalued.

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#7

The best traders learn how to mute their emotions and rarely throw good money after bad. They have absolutely zero concern about closing a loss-making trade, which is why the best traders are computers.

They make a prediction within a timeframe then they close it when either their target/stoploss is hit or the timeframe elapses. Get it wrong 49 times out of 100 and they’re a great trader.

When you double up on a losing investment you are making a very human and emotional decision by refusing to accept that you could have been wrong and hoping that by increasing your stakes it can be a great winner instead of a loser.

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#8

If you enjoy charting / technical analysis you’ll see that the share price of Wood Group is highly correlated with the oil price! So it also depends on your macro outlook

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#9

I massively appreciate the pointers and also the support that you guys have offered.

As a newbie wanting to learn, I’ve found it all too easy to fill my head full of information that may not necessarily be useless altogether but more not suited for my particular trading situation. It’s reassuring for me to hear from real traders, as opposed to just watching brokers beginners guides and YouTube channels, who are willing to point me in a more suitable direction regarding analysis etc. All part of the huge learning curve!

Now that I’ve popped my cherry, so to speak, regarding reaching out to my fellow FreeTraders for help and information, I’m sure that you guys will be hearing from me again!

Thanks for taking the time out to respond to my questions guys, it really is appreciated :+1:t3:

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(Dave Smith) #10

True, but that is trading rather than long term investing. If you still believe your reasons for buying were valid it’s OK to hold and wait it out.

Whether to put more money in is a bit less straightforward. if you aren’t careful you could be over exposed to one company that isn’t doing so well, on the other hand it does lower your average price.

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