Monday, November 8, 2010

Thoughts about earlier thoughts

In an earlier post, I expressed my regrets about not buying Best World:

"I have another reason for selling Best World -- Q1 results are below my expectations. I did somewhat regret refusing to buy Best World back at higher price (compared to my selling price), as Best World seems fundamentally more solid relative to my other positions."

My regrets arose because I felt that Best World's problems will be resolved quickly. Probably by 3Q 2010, Best World will have shown substantial recovery in profits. Given Best World's historical profit records and the probable recovery in profits, I concluded that Best Word seemed fundamentally better relative to my other positions.

Now, after Best World reported losses for its 3Q 2010 results, my earlier thoughts look incorrect. Best World may not be recovering as fast as I have thought. Rather, Best World's problems may turn out to be less temporary than I thought. Its Indonesia sales may not recover as fast as I anticipated. In addition, Best World may have lost some momentum in revenue and profit growth. I guess that I will not venture into Best World until its P&L shows more definite signs of recovery.

In conclusion, I am lucky in this episode. And, this episode shows that my thinking may turn out to be too optimistic sometimes. Lastly, it also shows that buying recovery stocks is not a simple matter.