Patient Experience

Last year I invested in Corus Entertainment, a Canadian company I stumbled upon when I first began investing in the stock market. I could sense that they were about to make some serious changes to the company; based upon that and a gambler’s hunch I bought in.

Sure enough, just as I expected, the company slashed their dividend. However, I hadn’t anticipated just how that would affect the stock price.

It tanked.

I decided to ride it out. It hurt, watching one of my very first investments, one of the very first companies I’d invested in using my limited experience to drop so sharply. I counted it as the cost of experience. I would learn something from this; even if I lost every penny of my investment it would be worth the price of admission.

It would also test a theory of mine. Based on my studies, I believed that in a quarter or two that the stock price would rise again as the company used the money previously allotted to a dividend to improve itself.

I was right.

Over the past few weeks I’ve watched the price of that stock slowly tick upwards. Yesterday, in the excitement of a new earnings announcement I watched the company’s price briefly hit $5.41/share.

I only paid $4.94/share when I bought in.

So what have I learned? I’ve learned that dividend cuts can be a very good thing for shoestring investors. Wait until the cut is announced. Watch as the price of the company’s stock tanks, and then buy as much as you can afford. In a few quarters as the company uses the extra funds to grow stronger, the stock price will advance again.

I am currently using that method on another company I’ve discovered. I intend to buy until the stock reaches a certain price and then move on to my next target.

Patience is key. Just as a successful business isn’t built in a day, a profitable portfolio isn’t built overnight.

I have now discovered that I learn best through practical experience. I’ve learned to pay the price of admission, even if I don’t fully understand the game. I’ve learned that experts can be wrong, and the only way to discover that is to do your research and make your own decisions.

What have you learned lately? Please share your stories in the comments below.