Selling GME

 

Lessons from selling GME

 

Game Stop (symbol GME) has been up 16 times from the low and still is climbing up. There are several lessons to learn and review.

 

·         Super stocks. Based on your time available for monitoring stocks, you should have a handful of stocks comprised the majority of your portfolio; I have about 10. GME and GILD were my super stocks at the time. Both were more than 3 times my average position.

 

·         Stops. Both GME and GILD were in the downward trend when they were acquired. I was glad I did not use stops on them to give the market more time to recognize their real values. I sold GILD before the surge. Lesson: Do not put stops on value stocks, but it is fine on momentum and/or on short selling. With manual stops, you may lose up to 100% at most, but not 1,600% in the worst case for GME.

 

·         Shorting. Do not short stocks when the short percent (from Finviz or other sources) is over 20%; usually I use 10%.

 

·         Short squeeze. GME had experienced serious short squeeze. The trade volume for one day was 140M, while the number of floating shares was only 50M. Lesson: Watch for the short percent. I recommended in this book the stocks with short 25% (from Finviz) are buy candidates.

 

·         I do not understand why the short shares can be more than the floating shares (114%). Some shares could be shorted more than one time. 

 

·         I sold 1/3 at about $26 and the majority at about $40 just a few days later. I should follow my article on selling winners.

 

·         Usually I keep good record of the stocks I bought. I did not this time. Hence, I cannot tell you my real returns and my annualized returns and the comparisons to S&P500. Most stock brokers do not give you the buy date. You need to include the metrics such as P/E and Debt/Equity for future evaluation of other stocks. A simple spreadsheet will do the housekeeping.  From my estimate, I made about 300% in trading GME.

 

·         I will not buy it back for several reasons: (1) It has more than its fair value (still losing money), (2) The short squeeze will be over if not already, (3) Most malls have few visitors as this writing, (4) The future of buying software is via downloading, (5) They do not have moats and advantage over their competitors such as Amazon and Target, and (6) The management is good in selling pet food, which is quite different from selling video games and consoles. Do not look back. As of 2/4/2021, it went up to more than 400 and today’s price is 92.

 

·         From Finviz, I read 2 good articles on GME.

 

·         Luck has a lot to do with this trade. If I waited for a week, I could have made many times. Usually I sold my stocks after making 100%, not I made 300%. A broker offered cash for moving to their account. I did not look at this account where I have my GME more often than my primary account.

 

It is a crazy situation that retail investors giving the hedge funds and their investors a tough time; some may go bankrupt and their investors would lose a lot. Invest in hedge funds carefully. Hedge funds used to take advantage of retail investors. They lead us to trade what they want us to trade and determine the trends of many stocks. With the social media, the retail buyers strike back.