Tuesday, June 28, 2011

Playing the Waiting Game

Some stock purchases can be real exercises in frustration.
You buy. You wait. You don't make any money. You don't lose any money. The stock's price fluctuates 5 or 8 or 10 % north, they returns south, leaving you in the red.
These are tough stocks to own, because it's hard to ever decide what you want to do with them.
This was my experience with Activision-Blizzard (ATVI). It was one of my first stock purchases, back in 2009.
At the time, it looked like a smart bet. The market was starting to recover, and ATVI looked attractively priced. It had good growth, was fast becoming the leader in the gaming industry. It had the Call of Duty and Transformer and Guitar Hero games in its library.
It had great games in its pipeline. 
The company had solid financials. It had the recommendation of a Motley Fool investing service team, and the Fool's massive community of investors had the stock ranked at the highest possible 5 stars.
But there was more than that. What first attracted me to the video-gaming stock were my personal experiences. I'm not a gamer myself. In fact, I think I've played a video game once since I was in college the mid-90s.
But I'd been amazed to listen to men and women in their late 20s and 30s discuss video games with great enthusiasm.
All that had me sold on Activision. All signs said go, and I was excited.

Going nowhere, fast
I bought.
And it promptly did nothing. And it still hasn't. Take a look at the view of ATVI's performance vs. the S&P 500 since then.
After more than a year of owning the stock, I sold out of frustration. My money was better spent on other investments.
Was buying ATVI a mistake? I don't think so. Sometimes, the preponderance of the evidence says "buy," but things just don't happen they way they should.
In ATVI's case, the company may have put itself in a great situation as a market leader with a huge stable of popular games. But it had little room left to advance.
To its credit, the company instituted a dividend. But it was a small one (1.4% yield) and not enough to keep me interested.

Is it 'game over?'
My mistake here, if there was one, was not looking back at where ATVI had been. The stock was a 10-bagger from 2003 to 2008. It's peak over $18 a share was 10 times what it was selling for just five years earlier.
Although all that adult enthusiasm over video games seemed new to me, it wasn't new to all those people playing. Neither was it new to a lot of investors who already cashed in on ATVI.
The great video-game rush might have had already plateaued.
If it was any indicator, ATVI announced soon after I sold that it would stop making its once-super-popular Guitar Hero game.
By the time I started playing ATVI, the music was already over.

Is the gaming a good investment, or is money there dead as the victim of a shoot 'em up? Should I have held on to ATVI? How would you play it?

My portfolio down 1.98% on year. Have a look here.

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