I purchased Twenty-First Century Fox (FOXA) for $26.77 near the end of September and sold it for just $29.00 yesterday. I could easily be upset about this sell, after all Fox is now trading at $31.15 with the news of Comcast’s supposed interest in purchasing a large stake of the company. Just last week Fox was in talks to sell some of its assets to Disney, so two potential suitors means a better price for Fox.
The reason I had to sell the shares I had for just $29.00 was because I had written a call option when I purchased they shares for exactly $29.00 per share with expiration date of November 17th. I figured an 8% gain within two months was a pretty good rate of return should I be forced to sell. My reason for buying FOX was due to it having a low P/E ratio and dividend, followed by the facts that it had fallen quite a bit from $32 per share in March. Having a profit margin about 10% and a return on average equity of over 20% this was a good candidate amongst other large media companies. Not to mention the “economic moat” that Fox has from its news competitors.
Writing the options yielded 64 cents per share, meaning the shares would have to exceed $29.64 for me to have to sell the stocks. The doubly whammy good news for Fox meant I had to sell the shares at a measly 10.7% profit [($29.00 + $0.64) / $26.77] rather than a 16% profit [$31.15 / $26.77]. My conclusion is that I would have no idea of these pending acquisition talks, as I base my investment decisions usually on book value and economic moat evaluation. The option drove the stock sale, and now my liquidity is up.
It is easy to regret investments which could have made you more money. I regret not buying a whole bunch of bitcoin in 2011. However, instead as a investor you should be confident if your decisions are well informed and logical.