Skip Navigation Links
Reacting to a sharp market correction
06 Mar 2021 (417 views)

Many of the growth stocks that I monitored already suffered a drop of over 50% from the peak prices that they reached during the past few months.

On 5 March 2021, many of these stocks dropped more than 10%. In the case of Senseonics, it dropped 25% due to the negative reaction to its recent results.

The main catalyst for the drop was the strong employment numbers and the accompany increase in 10 year bond yields from 1.5% to 1.6%.

The increase is modest. The higher yield of 1.6% is still very low. If the yield had increased to 3%, it would justify the panic in the market. But at 1.6%, the sharp drop was excessive.

I decided to hold my positions in the growth stocks, amounting to $875,000 USD. I had invested in these stocks with cash, so there is no need for me to liquidate the holdings. Although these stocks had dropped by $195,000, they were more than covered by the realized gains on the same stocks that were sold during the past year.

Instead of taking losses, I realized cash from other stocks and invested $156,000 USD on the stocks that were grossly undervalued. Apart from Tesla, I cleared the positions on these stocks at prices of about 10% higher than cost. I realized a gain of $3,448 USD.

In taking investing decisions, I had to rely on understanding the market and also on luck. Luck was on my side. The bond yield dropped back to 1.5% and the growth stocks recoved most of their losses. The selling was clearly overdone.

Tan Kin Lian

 

 

 

 

 



Reacting to a sharp market correction
[Back] [Print]


Many of the growth stocks that I monitored already suffered a drop of over 50% from the peak prices that they reached during the past few months.

On 5 March 2021, many of these stocks dropped more than 10%. In the case of Senseonics, it dropped 25% due to the negative reaction to its recent results.

The main catalyst for the drop was the strong employment numbers and the accompany increase in 10 year bond yields from 1.5% to 1.6%.

The increase is modest. The higher yield of 1.6% is still very low. If the yield had increased to 3%, it would justify the panic in the market. But at 1.6%, the sharp drop was excessive.

I decided to hold my positions in the growth stocks, amounting to $875,000 USD. I had invested in these stocks with cash, so there is no need for me to liquidate the holdings. Although these stocks had dropped by $195,000, they were more than covered by the realized gains on the same stocks that were sold during the past year.

Instead of taking losses, I realized cash from other stocks and invested $156,000 USD on the stocks that were grossly undervalued. Apart from Tesla, I cleared the positions on these stocks at prices of about 10% higher than cost. I realized a gain of $3,448 USD.

In taking investing decisions, I had to rely on understanding the market and also on luck. Luck was on my side. The bond yield dropped back to 1.5% and the growth stocks recoved most of their losses. The selling was clearly overdone.

Tan Kin Lian