Steel and Tube. That was the company my great-grandfather worked for, although it wasn't called that when he started there. It's the company that started all this, as I have said previously. If it weren't for those 319 shares I inherited, who knows at what point I would have started investing, if at all.
A few months after I first got the shares, I received my first ever dividend. It was $20, which wasn't bad considering the value of the shares at the time were around $400. As you can imagine, to a poor student, this seemed like a big deal- free money every 6 months, yes, please. And the investment seems so much better than my savings account or even my term deposit was returning. The decision to invest more when the rights offer came round was easy to make. Too easy.
The rights offer was a 1:1.9 pro-rata rights offer at a discounted rate- even now I'm not 100% sure what that is. It barely took me any time at all to make the decision to take up the full rights offer, to the value of approximately $175. Having the experience I have now, I almost certainly would not have made the investment. If I had done it, I would have spent more time researching the company and finding out what would be the best option. Even more stupidly than accepting the rights offer without researching, was my decision to invest an extra $825 in an oversubscription without any research. It was only through sheer luck that the offer was completely oversubscribed, so I only ended up with an extra $360 worth of shares. Had I of invested the rest of the $825, I would be down about $170 more, at the time of writing. As it is, I am down over $200 before dividends (which only add about $80) and not including the initial 319 shares I inherited. To add to the long lists of things I did wrong here, STU was the only shares I owned and the first thing I did was to buy more. This breaks the age-old rule of investing- DIVERSIFICATION. Rather than accepting the rights offer, I should have looked to invest in some more defensive assets, property and high growth stocks and funds.
Right after the offer, Fletcher Building (FBU) made an initial indication to buy STU. The shares jumped from around $1.20 to $1.70. With hindsight, I should have sold out there and then, taken the gains and run. But of course, hindsight is 20/20 and if everyone could go back and change poor investing decisions then the global financial crisis would never have happened. Additionally, I was still new to sharemarkets, I had no idea where to go to sell my shares even if I wanted to. Then FBU removed its offer to buy STU and the share price plummeted and has remained low and going down ever since.
It hasn't been all bad news. This was truly a wonderful learning experience and sparked the journey that has led me here, where my investments are in positive territory despite the Covid-19 outbreak and all the other negative influences affecting markets currently.
I still hold all my STU shares, although I might end up selling them one day soon at a small loss, or in a while at either a huge loss or small gain.
Key takeaways from my mistakes here-
- DIVERSIFICATION- If I had never bought any shares other than STU, I would be down hundreds of dollars.
- Always do your research into a company.
- Do not let emotions rule your better judgement. I got overzealous because it was my first time investing and it has led me to lose money.
- Make sure you understand what investments are and how to get out if you need to.
Daniel
