How I Made 50% in 6 Months with Care.com
28 April 2020
Today I want to share with you my thought processes when I first initiated a position in Care.com (NYSE: CRCM) on 28 May 2019 – and less than 6 months later on 20 December 2019 – overall at an average cost of $10.07, I sold off all of it at $15.05.
My valuation for care was higher than $15.05; it was about $19 conservatively. But the fact is that care agreed to be bought over by IAC at $15, and the deal is to be closed by the first quarter of 2020.
So I decided to sell off all my stake – which ultimately to be about 27%-30% of my portfolio when I sold it off.
Here’s the flow of events that made me a 50% gain in less than 6 months:
On 28 May 2019, I initiated a small position for care at $14.42.
On 29 May 2015, I made some money by selling care put options to expire 21 June 2019 at a strike price of $12.50 (which did not get exercised).
On 26 June 2019, I bought more of care at $11.39 and sold more care put options to expire on 19 July 2019 (which did not get exercised).
On 25 July 2019, I bought more of care at $10.75 and sold more put options expiring 16 August 2019 (which did not get exercised).
6 August 2019 was the turning moment when care stock price crashed, and I more than doubled my stake at $7.95. At this point, my average cost for care, excluding premiums I got from selling put options becomes $10.07.
On 20 December 2019, when the acquisition was announced, I sold off all my care stake for about 50% return in less than 6 months.
The key lesson to learn here is that:
Learn from your mistakes: I made some mistake some time back with GameStop in trying to buy a so-so company at an extremely cheap price.
They, too was a candidate for sale, but the sale did not go through, and the share price tanked from about $14 to $10.
I sold off almost all of my stake at about $10.
Now with care, I knew when I bought it at $7.95, it was a solid business at a reasonable price – instead of a so-so business at a cheap price – it paid off.
Intrinsic value is vague, buy in batches: I would not have made a good gain on care, if I bought most of my stake initially at $14.42 on 28 May 2019, I have had an average cost for care at $10.07 because I bought in batches.
The more fearful the market, the more I buy.
In fact, I sold off some of my Facebook stock to fund the care stake on 20 December 2019.
In hindsight, it was a great decision – but again, the framework is clear – when the price to value diverged more, buy more of that stock instead of others.
Re-ThinkWealth is a personal value investing & options selling blog. By using this Site, you specifically agree that all the information provided is for general information purposes only and is not intended to be a personalized investment or financial advice.
Important: Please read our full disclaimer.
Further Learning or Doing
- Our Telegram Channel – You can get daily updates on stocks, business, economy, and value investing knowledge from us here.
- Our Value Investing Mentorship Program – Individuals looking to learn skills to become better investors can join our effective and exclusive course, taught via one-on-one mentorship, here.
Some of our most popular articles:
What is Value Investing? – An article I wrote for Value Walk describing in summary what exactly is value investing.
The 100+ Most Intelligent Investing Quotes of All Time – I love quotes. Especially quotes by value investors who had been wildly successful at managing their funds. The list is consistently updated.
The Intelligent Investor Summary (Ultimate Guide) – A very popular article from my site that summarizes concepts of value investing from the father of value investing, Benjamin Graham.
Chris’s latest articles:
Being a successful investor requires us to have equanimity in everything we do. There are many benefits to keeping a gratitude journal, firstly, the balance of emotion. Would you rather make $100,000 a year but all your friends and neighbors make $200,000 a year or […]
There is a lot of patience in investing quotes. Patience when investing is underrated in today’s fast-paced environment. Many people forget to put the word patience and investing together because information moves so fast today. This article will serve as a reminder for us to […]
Sun Tzu Art of War Quotes “He will win who knows when to fight and when not to fight” – We should only invest when there is clear benefit to do so, do not do something just for the sake of doing something. “If you know the enemy and know yourself, you need not fear […]
In this thinking fast and slow book summary, I will explain to you the various human biases that we have and why it is important for us as investors to understand it. It all begins with a simple premise that we all have two systems in our brain, system 1 and system 2 […]
I chanced upon an edited transcripts from Guru Focus of an interview of Munger and Li Lu in one of China’s top finance magazines. Here are the 7 investing lessons I learned from Charlie Munger and Li Lu’s interview: 1. In investing, patience is very […]
As value investors, a lot of us talk about investing for the long run. But what does investing in the long run really mean? As a value investor, I have had companies that I made over 50% in less than 6 months because that company I owned got acquired. I have also had companies […]
Just finished rewatching all 95 episodes of The Romance of The Three Kingdoms – Although this is a classic Chinese historical war movie that is likely dramatized, there are a lot of lessons to be learned from it – for value investing purposes.  No matter how good we are or how much […]
Compound interest is very powerful. It is the interest you get on top of the previous principal + interest you already got. Here are 3 actions you can take to make the best use of compound interest: Invest early – the earlier we invest, the more powerful the compounding effect […]
Peter Lynch’s one up on wall street book was one of the first investing books that I read. I probably first read the book when I was about the age of 20 or 21, and now, after about five years in the market, I can tell you that the lessons hold. Who is Peter Lynch? Peter Lynch is a legendary […]
This is a guide to help stock investing beginners to start their journey investing in stocks in Singapore or anywhere around the world. The purpose of this guide is to share with you some of the general mindsets, philosophies, guides – information that I […]
You might know Warren Buffett from Berkshire Hathaway as a stock picker. But not many people know he has made a lot of money by selling put options. In this article, you will learn […]
As of today, the Nasdaq & the S&P 500 has hit a new high. Recently, the US economy showed that GDP grew 2.1% annually in the second quarter of this year. It means that consumer is still […]