# Medium Term Contrarian Investment Strategy - Thinking aloud



## xxjohnboy (26 June 2012)

Hi all,

I have a pretty loose investment plan that I want to tighten up.  I felt this was a good place to lay down my thoughts in a concise manner and get some feedback at the same time.  Hopefully it can give food for thought for green and experienced investors alike.    

*Starting Position*
So briefly to give you my starting position.  I am actually pretty skint.  I was a full time IT uni student (though just changed to part time for next semester to give more time to work on business). My realistic earnings right now are about $750 a week before tax.  I am a solo musician so income varies depending on the number and type of gigs I do.  I am looking to increase this by the end of the year to a comfortable $1000/week and hopefully higher.

I currently have $2000 invested in GWA which I bought on 13th April for $1.94.  Right now they are $2.02 a share so I am happy that they are bucking the trend.

I am not paying rent right as I have been house sitting.  This is about to end though and the thought of going back to live with the folks isn't hugely appealing so that free ride is likely to finish pretty soon.  

*Buying Strategy*
Firstly, I will invest as much of my income as possible in the share market, and as soon as I have another $2000 saved up I will buy another lot of different shares.  I came to the conclusion that anything less than $2000 meant that the $39.90 (2 x $19.95 for buy and sell) transaction fee with CommSec was too big a loss to start with.

This means I am not diversified right now, but that is just too bad.  My plan is to continue buying in $2000 lots until I have at least 10 different shares in my portfolio without any of them making up an inappropriately large portion of my entire portfolio due to crazy gains.  I need to clarify how many eggs I am going to allow in one basket, though I am so far from this stage that right now it isn't all that important.  I know I am prone to a hard hit due to lack of diversification.  

*Choosing Shares*
I am a big fan of the book Contrarian Investing.  I do my own version of the low PE/ high yield approach.  Basically I filter out smaller stocks by only investing in shares that Comsec allows 50% portfolio leverage (or higher) margin loan on.  This filters my list of shares down to about 60 shares and I feel this is a reasonable protection from speculator stocks. 

I then list all the shares from that list that have a PE below market or div yield higher than market.

Then I use a formula, which is pretty straight forward. 

(Market PE / Share PE) = PE Rating
PE Rating is just a variable name I have given to the answer.  The higher that rating the higher it is on my "to buy" list.  

(Share Yield / Market Yield) = Yield Rating
Again, the higher the Yield Rating the higher the share is on my "to buy" list.  

Then with these results I go like this...
(PE rating x Yield Rating) x (PE Rating + Yield Rating) = Buy Rating
The stocks with the highest buy rating are the ones that I buy.  I calculate with the above formula as I think the data is more reliable if the PE and Div Yields compared to market have a low deviation from each other.  By multiplying PE rating and Yield Rating together, the outcome is weighted to shares that have PE and Yield Ratings close together.  However I did not want this to dominate my formula so I added the right hand side of the formula to smooth things out.

I follow this formula blindly unless a Buy Rating comes out at over 10 (which usually means a crazy low PE ratio), then I have a basic look at fundamentals to see if there is anything suspect.

*Selling the shares*
This is the part I need to neaten up.  Some things I am considering.

Minimising Tax - try not to sell shares within one year so as to halve capital gains tax.  
Stop Loss - I don't think I will use one.  My reasoning is that if my formula says I should buy it now, then I should keep it now.  
Bailing out - if ComSec stops allowing margin loans on the shares then I will bail out.
Locking in profits - I need to set a point at which I will sell shares to lock in profits.  I am thinking this can be based on some hard figure in my formula.  However I need to take in to account the tax benefits of holding for 1 full year.
Updating the portfolio - Once I have held a stock for 1 year I will sell it and buy a top rated stock according to my formula.  However, with transaction fees and tax I am better off holding the stock provided these costs are less than the opportunity cost of being in a share that is top rated according to my formula.  I haven't made a rule for this yet.  


*Summary*
So that is the plan so far.  The philosophy is that I want to limit my emotional involvement in the buying and selling process by having hard and fast rules.  When the computer says buy, I buy.  When the computer says sell, I sell.  


I'm open to feedback


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## AlterEgo (26 June 2012)

Have you back-tested this strategy? How do you know if it's likely to be profitable or not?


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## skc (26 June 2012)

xxjohnboy said:


> Then I use a formula, which is pretty straight forward.
> 
> (Market PE / Share PE) = PE Rating
> PE Rating is just a variable name I have given to the answer.  The higher that rating the higher it is on my "to buy" list.
> ...




An interesting approach to finding shares...

Too often you find low PE and high dividend yield because things have changed for the worse. Your earnings and yield numbers are historical but your share price has marked the new reality. I'd be interested to see what your top 10 buy candidates are and I would not be surprised to see 8-9 dogs with fleas (BBG / SWM / FXJ comes to mind).

Consider adding a two filters. Earning per share growth >0% and dividend yield growth >0%.

This will help to only buy shares when fundamentals are moving in the right direction. Your filter of Buy rating >10 needs thorough investigation is also a useful filter.

My guess is, if you do this properly you have a decent chance of beating the market, but not necessarily be able to generate absolute return.

Good luck.


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## Happy (26 June 2012)

Locking in profits can be replaced with protect profit strategy with:

*Protect profit stop.*

And I would strongly urge you to reconsider your determination not to use stop loss.

$19.95 per trade is bit much for $2000 parcel to my liking.

(Hope Chi-X operation will make some waves in transaction's cost reduction in Australia, Interesting if it had anything to do with E-Trade to drop down to $19.95 per trade)


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## sinner (26 June 2012)

I think skc pointed out the main thing, dividend payers should have their payout ratio considered and growth.

Otherwise, while your plan is in the infancy stages, congratulations on having a much more detailed and logical plan than most who post similar thoughts.

If you go to http://papers.ssrn.com and type in "contrarian" there are a huge amount of papers on, basically, what you're trying to do, with results from most of the developed world stock markets, including breakdowns on where returns can be expected to come from etc. You will probably find that either your investment horizon is too long (targetting short term contrarian profits is often a fade of <3months momentum with most of the returns coming from common factors and unpriced news) or too short (long term contrarian profits is often 3-5 years momentum fade).

Size is a very important characteristic here, so don't go filtering out stocks just based on what you think is fundamentally correct because you might be filtering the stocks sizes which provide outsized contrarian returns. Generally large and small is where these return profiles exist, not just in the larges.


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## So_Cynical (26 June 2012)

xxjohnboy said:


> *Buying Strategy*
> Firstly, I will invest as much of my income as possible in the share market, and as soon as I have another $2000 saved up I will buy another lot of different shares.  I came to the conclusion that anything less than $2000 meant that the $39.90 (2 x $19.95 for buy and sell) transaction fee with CommSec was too big a loss to start with.




2K is probably not really enough...i started off using 5 then 18 months later upped it to 7 because i was having so much success (position sized for profit) and got punished a little following the Larger position size so have now adjusted it back to  4 > 5 (position sizing for risk) and feel more comfortable with that....i also had limited funds when starting off and still do somewhat.



xxjohnboy said:


> *
> This means I am not diversified right now, but that is just too bad.  My plan is to continue buying in $2000 lots until I have at least 10 different shares in my portfolio without any of them making up an inappropriately large portion of my entire portfolio due to crazy gains.  I need to clarify how many eggs I am going to allow in one basket, though I am so far from this stage that right now it isn't all that important.  I know I am prone to a hard hit due to lack of diversification.




Dont get to hung up about diversification just yet, and don't worry about how big your basket is either...i started with 3 stocks back in Mid 2007 and now hold 23...i just looked back at an old portfolio screen shot (i take one every couple of months) and in June 2009 i was holding 13 stocks and still hold 4 from that portfolio.... opportunities come and go.



xxjohnboy said:


> *
> 
> *Choosing Shares*
> I am a big fan of the book Contrarian Investing.  I do my own version of the low PE/ high yield approach.  Basically I filter out smaller stocks by only investing in shares that Comsec allows 50% portfolio leverage (or higher) margin loan on.  This filters my list of shares down to about 60 shares and I feel this is a reasonable protection from speculator stocks.




The vast majority of my profits have come from small and micro caps (mostly not prospectors/miners) so sticking with stocks on commsecs margin list will servilely handicap you, dividend yield and trading profits are greatest with the mid, small and micro caps....small and micro caps are NOT speculator stocks just because of their cap size.

Also i don't think you can be a true Contrarian investor and use stop loss orders...the 2 don't go together IMO, a Contrarian investor makes decisions and backs their judgement...investors/traders using stop loss orders don't (in general)

Good luck.


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## xxjohnboy (28 June 2012)

Thanks for your feedback everyone,

I'll get back to a proper reply and keep you posted.  Right now I am behind on a few things so don't have the luxury of writing a nice long post for you.  

Thanks again!

JB


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## xxjohnboy (27 July 2012)

Hi guys,

Thanks for your input.  Sorry, this is another short reply as I have been a data monkey for the last hour or more and need to run away from the computer before I cramp up.  But I have made a spreadsheet which gives all the results using my formulas based on today's data from commsec.

I have made a separate portfolio to track the top 70 stocks (buy rating over 3) and see what happens.

It took me quite a while to compile the information so you may find it quite useful.  

Cheers

John W


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## xxjohnboy (27 July 2012)

It seems the p/e ratios on CommSec keep changing even after trading for the day is over.  So that made my data entry rather annoying.  But, that aside, I have come up with a new formula.  And it would give me these shares an that order.  I have taken in to account forecast earnings and yield for 2013 according to commsec. I basically used my "Buy value" formula in my first post on forecast eps and dps in 2013.  I divided forecast buy value by current buy value and got rid of anything that was below 1 (meaning the company was going down hill).  Then I multiplied that number by my current buy rating and tada!   

Now it is late, and I need to check for flaws in the formula.  And explain it better.  But I just wanted some closure for the evening by posting this message 

Cheers

John W

KCN	KINGSGATE CONSOLIDATED LIMITED.
ARI	ARRIUM LIMITED
MGX	MOUNT GIBSON IRON LIMITED
TFC	TFS CORPORATION LIMITED
APZ	ASPEN GROUP
ILU	ILUKA RESOURCES LIMITED
PPC	PEET LIMITED
BKN	BRADKEN LIMITED
EHL	EMECO HOLDINGS LIMITED
GFF	GOODMAN FIELDER LIMITED.
TWR	TOWER LIMITED
BLY	BOART LONGYEAR LIMITED
HGG	HENDERSON GROUP PLC.
SGN	STW COMMUNICATIONS GROUP LIMITED
MIN	MINERAL RESOURCES LIMITED
CMW	CROMWELL PROPERTY GROUP
SLM	SALMAT LIMITED
AAD	ARDENT LEISURE GROUP
TSE	TRANSFIELD SERVICES LIMITED
HIL	HILLS HOLDINGS LIMITED


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## herzy (28 July 2012)

I am by no means experienced, and clearly your method varies to mine, but I would hesitate to look purely at P/E ratios (and even forecasts). My advice would be to use this as a preliminary if you desire, but then make sure to research the company thoroughly, try to look at upcoming announcements or key events for the company, the sector, and the market in general. There can be dangers in simply looking in the rearview mirror or relying on past earnings, as SKC and So_Cynical have pointed out (more or less). 

A good example would be Linc (LYC). Extremely low forecast P/E at the moment, but ongoing delays on their TOL (temporary operating license) at their processing plant in Malaysia have seen their sp hammered. A little research would allow you to decide whether or not it's a good medium term buy (i.e. if TOL will get approved soon) or not - based purely on forecast p/e, you would be at a significant disadvantage. 

I would also advise against relying on Commsec margin call data, as a lot of exciting companies can be found in small cap. 

I also recommend IB - there are a few disadvantages (such as not owning the shares, and no DRIP), but at $6 brokerage you'll be able to have much smaller parcel sizes, which would be a significant advantage in your situation. You'd need a 2% increase (Commsec) before any profits, vs a .6% increase before profits (IB).


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## xxjohnboy (28 July 2012)

Hi,

Thanks for your recent feedback Herzy.  Another reason for using the margin lending as a filter is that if I can get a formula that I am comfortable with I would like to leverage it as well.  That I could not be bothered entering all the data for the whole market at this stage.  

I've not heard of IB, so I will have to do some research in to this.  

Gotta run, but here is my new formula before I go.   And also attached is a spreadsheet of it.  

Choosing Shares
I filter out smaller stocks by only investing in shares that Comsec allows 50% portfolio leverage (or higher) margin loan on. 

I then list all the shares from that list that have a PE below market or div yield higher than market.

Then I use a formula, which is pretty straight forward.

(Market PE / Share PE) = PE Rating
PE Rating is just a variable name I have given to the answer. The higher that rating the higher it is on my "to buy" list.

(Share Yield / Market Yield) = Yield Rating
Again, the higher the Yield Rating the higher the share is on my "to buy" list.

Then with these results I go like this...
(PE rating x Yield Rating) x (PE Rating + Yield Rating) = Buy Rating
The stocks with the highest buy rating are the ones that I buy. I calculate with the above formula as I think the data is more reliable if the PE and Div Yields compared to market have a low deviation from each other. By multiplying PE rating and Yield Rating together, the outcome is weighted to shares that have PE and Yield Ratings close together. However I did not want this to dominate my formula so I added the right hand side of the formula to smooth things out.

Anything with a buy rating < 3 gets filtered out.

Allowing for future earnings
(Market PE / Future Share PE) = Future PE Rating
(Future Share Yield / Market Yield) = Future Yield Rating
(Future PE rating x Future Yield Rating) x (Future PE Rating + Future Yield Rating) = Future Buy Rating

Future Buy Rating / Current Buy Rating = Growth Prospect Rating

Anything with Growth Prospect Rating < 1 gets filtered out

Current Buy Rating x Growth Prospect Rating = New Buy Rating

Using This Formula, I ended up with the following shares in this order


KCN	KINGSGATE CONSOLIDATED LIMITED.	   
ARI	ARRIUM LIMITED	   
MGX	MOUNT GIBSON IRON LIMITED	   
TFC	TFS CORPORATION LIMITED	   
APZ	ASPEN GROUP	   
ILU	ILUKA RESOURCES LIMITED	   
PPC	PEET LIMITED	   
BKN	BRADKEN LIMITED	   
EHL	EMECO HOLDINGS LIMITED	   
GFF	GOODMAN FIELDER LIMITED.	   
TWR	TOWER LIMITED	   
BLY	BOART LONGYEAR LIMITED	   
HGG	HENDERSON GROUP PLC.	   
SGN	STW COMMUNICATIONS GROUP LIMITED	   
MIN	MINERAL RESOURCES LIMITED	   
CMW	CROMWELL PROPERTY GROUP	   
SLM	SALMAT LIMITED	   
AAD	ARDENT LEISURE GROUP	   
TSE	TRANSFIELD SERVICES LIMITED	   
HIL	HILLS HOLDINGS LIMITED	   
LEI	LEIGHTON HOLDINGS LIMITED	   
NWH	NRW HOLDINGS LIMITED	   
MLB	MELBOURNE IT LIMITED	   
WHG	WHK GROUP LIMITED	   
FBU	FLETCHER BUILDING LIMITED	   
CGF	CHALLENGER LIMITED	   
SVW	SEVEN GROUP HOLDINGS LIMITED	   
NAB	NATIONAL AUSTRALIA BANK LIMITED	   
PRG	PROGRAMMED MAINTENANCE SERVICES LIMITED	   
FPH	FISHER & PAYKEL HEALTHCARE CORPORATION LIMITED	   
BEN	BENDIGO AND ADELAIDE BANK LIMITED	   
AHE	AUTOMOTIVE HOLDINGS GROUP LIMITED	   
CAB	CABCHARGE AUSTRALIA LIMITED	   
TGA	THORN GROUP LIMITED	   
CDI	CHALLENGER DIVERSIFIED PROPERTY GROUP	   
ALZ	AUSTRALAND PROPERTY GROUP	   
SGP	STOCKLAND	   
WBC	WESTPAC BANKING CORPORATION	   
GUD	G.U.D. HOLDINGS LIMITED	   
ANZ	AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED	   
ORL	OROTONGROUP LIMITED	   
GWA	GWA GROUP LIMITED.	   
CHC	CHARTER HALL GROUP	   
PMV	PREMIER INVESTMENTS LIMITED	   
TOL	TOLL HOLDINGS LIMITED


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## Julia (28 July 2012)

xxjohnboy said:


> I've not heard of IB, so I will have to do some research in to this.
> 
> Gotta run, but here is my new formula before I go.   And also attached is a spreadsheet of it.
> 
> ...



Do you have a basis for believing the formula is/will be successful?
Are you going to eliminate any company which has a high PE?



> KCN	KINGSGATE CONSOLIDATED LIMITED.
> ARI	ARRIUM LIMITED
> MGX	MOUNT GIBSON IRON LIMITED
> TFC	TFS CORPORATION LIMITED
> ...



I've only taken a look at the above long list down as far as HIL.  Of these, only TWR and SGN are demonstrating even the slightest uptrend.  Most are in downtrend or at best flat.
Perhaps the latter half of the list will all be winners.

Can you say how you will pick your chosen stocks from this list?

  I'm assuming you will not be buying all of them.


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## noirua (29 July 2012)

I still reckon that if a method of trading/investing is complicated, or drawn out, it either wont work or gets buried in a portfolio of confusion, or being very rude 'a load of crap'.

Cash, as we all know, is the closest to 100% safe and if half your portfolio is just that you massively reduce the risk. 

Contrarian thinking by anyone who is inexperienced is a load of tosh, it's plain dangerous, and best avoided. We are up against other investors and many go short or long and place limit orders to buy and sell, and for this reason trailing stop losses are absolutely vital. Yes, you must reduce losses and run profits, and this is part of investment discipline.
I trade mainly on the LSE:AIM market, the mad house, and learn't the hard way at times. No 1, I learn't 'I'm not clever'; No 2, NO system works; No 3, always blame myself and never point to anything else or broker; No 4, absolute discipline at all times; and No 5, if I should have sold a losing stock and suddenly it recovers 'I HAVE FAILED' the worse thing in disciplined trading that can happen. 
Spread betting and CFDs are even more important to maintain a rod of iron on discipline and pay extra to cover every eventuality; if you don't then one day your account will be wiped out, and financially, you/me with it.

Many know all this and perhaps my comments upset a few, 'TOUGH', get over it -- good luck and good fortune.


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## So_Cynical (29 July 2012)

xxjohnboy said:


> Using This Formula, I ended up with the following shares in this order
> 
> 
> KCN	KINGSGATE CONSOLIDATED LIMITED.
> ...




In order hey .. jeez thats a funny looking (in order) list of large/mid cap Contrarian potentials...with many stocks im watching, a few i have owned and 2 i do own and a few suprises.

Its hard to see how AHE, ALZ, CDI, CMW and SGP are a Contrarian play at the moment with their share prices where they are..so many of the others are commodity/China/Global growth linked stocks.

Still almost certainly there will be 3 or 5 stocks on that list that will out perform, and 3 or 5 that will significantly under perform, how you find the out performers i don't know.


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## xxjohnboy (30 July 2012)

noirua said:


> I still reckon that if a method of trading/investing is complicated, or drawn out, it either wont work or gets buried in a portfolio of confusion, or being very rude 'a load of crap'.




I don't believe my formula is very complicated or drawn out at all.  It started simply as a combination of low PE and High Yield stocks.  After reading skc's post about adding a growth filter I decided it was a good idea.  This is because the dummy portfolios I have been closely monitoring have in fact been hammered by the shares with forecast profits and yields going down.  I didn't quite do it the way skc suggested, but it results in a similar result which gives weighting to bigger prospects of growth in eps and yield.  

The ones that have hurt are APN, SWM, MYR, HGG, RIO and HGG

The only shares that have not beaten the all ords since creating any of the 4 dummy portfolios I have made at different times this year(1 in Feb, 1 in March, and 2 in April) are
BBG, HGG, GFF, RIO, APN, ARI, SWM, SLM, MYR, SGN.  
All except one of the big losers of APN, SWM, BBG, MYR, RIO could have been avoided using my new formula taking in to account forecast earnings and yield.  GFF, ARI, SLM, SGN and HGG are shares I would still have bought and they had far less in losses than the other shares.  In fact on my February portfolio ARI actually beats the all ords.    My old portfolios consisted of the following shares.  These old portfolios used an old and different formula but their results are still useful for creating a new formula.  They were based on low pe, or low pe and yield.  

AAD
AIX
ALS
APN
BBG
CIF
CTX
GFF
GWA
HGG
MYR
OST
RIO
SGN
SLM
STW
SWM
TAH
TTS
TWR
VAS

That is 20 shares in total, with 10 out of 20 not beating the all ords.  And overall they are not beating the all ords either.  Like skc said, the dogs with fleas bit me pretty hard.  I believe the new filter will have a significant impact so I will wait and see what results they deliver as time goes on.  

And of course, I know this is all in hind sight so the figures and things will have changed around.  I am not putting any guarantees on this new formula.  I am trying it out.  I tried the old formula and it has so far proved to be unworthy.  I am performing bigger tests with more shares now to try and give more data to work with and more reliability in the formula.  




> Contrarian thinking by anyone who is inexperienced is a load of tosh, it's plain dangerous, and best avoided. We are up against other investors and many go short or long and place limit orders to buy and sell, and for this reason trailing stop losses are absolutely vital. Yes, you must reduce losses and run profits, and this is part of investment discipline.



Maybe you are right, but I am going to think like a contrarian anyway.  



> Have you back-tested this strategy? How do you know if it's likely to be profitable or not?




The reason for my belief in the low pe and high yield approach is based on the Book by David Dreman called Contrarian Investing I read in 2000.  He did comprehensive studies on the markets and it seemed to point to a simple way of beating the market, which was to go with low pe stocks.  He offered alternative approaches as well which included the high yield approach.  I'm not looking to be a trader or anything, I just want to get good medium term profits with minimal effort and stress.  

Also, Sinner.  Thanks for link  http://papers.ssrn.com  I will check it out some day soon.  

Thanks everyone for both positive and negative feedback.  This post has made me think through my process more thoroughly and been very helpful to me.  I really appreciate it.  

Thanks

John W


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## noirua (31 July 2012)

You cant run profits if you do not control losses and unless you are the one and only genius you can only do that with a stop loss in place. You could of course watch your screen from 10am to 4pm every trading day but you will end up shouting at stocks, "go up, go up, damn you". If you have limit orders in place and stop losses you can go to work and let matters take care of themselves -- unless like me you don't have to work, but I do trade and invest in three markets and I would get only about 3 hours sleep a day without a strong disciplined trading method.

It has been difficult to trade in 2011 and 2012 particularly in the resource sector due to a continuous market drift due to forced and frustrated stock holders. Australia has been particularly badly hit by European problems. If Greece sneezed the ASX wobbled all over the place. If good news arrived a stock went up but sellers came in by the lorry load to take it back down again. Any strategy must fail if there are so many desperate to get out of bombed out stocks -- unless you turn to shorting. 

Maybe markets will be good from here on and perhaps for many years - so if we get 15% rises every year most strategies will SEEM to work.


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## herzy (1 August 2012)

Please explain to me how AAD is in a downtrend Julia? Like SC I am familiar with a few stocks the list has thrown up, but only (interested in) holding AAD. 

That said, there are many companies there I would avoid (e.g. OST, BBG).


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## odds-on (1 August 2012)

Hi Johnboy,

The following book is for any true contrarian investor! Have you read it?

http://www.amazon.com/The-Contrary-Thinking-Humphrey-Neill/dp/087004110X

You might enjoy it.

Have you thought about using other search criteria for medium term contrarian investment ideas? For example:-

-	$100 million < Market Cap < ASX20
-	Price to sales ratio < 1
-	52 week percentage change < -30%

In my experience it throws up some interesting stocks where a bit of contrary thinking could be profitable due to the cyclical nature of a business or it just being out of favour in the market.

Cheers

Oddson


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## Julia (1 August 2012)

herzy said:


> Please explain to me how AAD is in a downtrend Julia? Like SC I am familiar with a few stocks the list has thrown up, but only (interested in) holding AAD.
> 
> That said, there are many companies there I would avoid (e.g. OST, BBG).



I said I'd only looked at some of them.  I also said most I'd looked at were in a downtrend *or flat*.
After a spike up in April AAD has been rangebound.  Not in an uptrend by my definition.
But hey, if you like it, good luck.


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## herzy (1 August 2012)

Julia said:


> I've only taken a look at the above long list *down as far as *HIL.  Of these, only TWR and SGN are demonstrating even the slightest uptrend.  *Most are in downtrend or at best flat.*
> Perhaps the latter half of the list will all be winners.






Julia said:


> I said I'd only looked at some of them.  I also said most I'd looked at were in a downtrend *or flat*.
> After a spike up in April AAD has been rangebound.  Not in an uptrend by my definition.
> But hey, if you like it, good luck.




My apologies Julia I read your post incorrectly to mean you'd read all of the stocks down to HIL, and concluded that most are at best flat. Not being a technical-based investor, I can't comment on AAD's trend in the future, but was interested to know why you thought it was going down. Sorry for the confusion.

Thanks for your analysis of AAD as well. For anyone interested, I like AAD because of a low p/e, high payout, and (IMO) sustainable earnings with logical avenues for growth being acted upon. 

Contrarian? Probably not, although it is involved in tourism and leisure, which I suppose aren't seen as particularly favourable conditions at the moment (due to high AUD, depressed economy = less people going out, etc).


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## Julia (1 August 2012)

Heavens, herzy, what a civil and courteous response.  Thank you.
I thought of continuing to say in my earlier post that if you were to be buying dips and selling peaks within the last few months it could be quite profitable, but I decided not to on the basis that you're pretty clearly a long term investor and wouldn't be interested in such a suggestion.

I know nothing about the stock and was only looking at any on that list in terms of what the price was doing.

Hope it works out well for you.


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## ROE (1 August 2012)

consistency matters work out a method and stick to it, dont be afraid if you made a few bad moves
stick to your conviction and methods.

good luck and hope you do well...you got time and compounding on your side


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## xxjohnboy (2 August 2012)

So far, 16/30 shares are beating the all ords, but overall I am down against the all ords.

Me =  0.78%
AOD = 1.51%

Of course, ridiculously early days.  I got hammered by APZ, which I wouldn't have been able to buy due to halt but will keep on there.  Also a typo put KCN at the top.  It would actually have been about 40 on my list so wouldnt have been bbought.  But again ill keep it on there to scope it out.   

Cheers

Code	Gain%
KCN	-6.15%
ARI	7.43%
MGX	3.28%
TFC	0.00%
APZ	-18.24%
ILU	6.44%
PPC	1.54%
BKN	8.96%
EHL	4.55%
GFF	3.13%
TWR	2.69%
BLY	-5.98%
HGG	5.14%
SGN	-1.56%
MIN	-2.13%
CMW	0.70%
SLM	5.12%
AAD	1.95%
TSE	5.71%
HIL	-0.23%
LEI	1.50%
NWH	-7.76%
MLB	1.68%
WHG	3.45%
FBU	4.25%
CGF	-1.48%
SVW	1.28%
NAB	4.04%
PRG	-4.11%
FPH	-1.69%


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## herzy (5 August 2012)

Julia said:


> Heavens, herzy, what a civil and courteous response.  Thank you.
> I thought of continuing to say in my earlier post that *if you were to be buying dips and selling peaks within the last few months it could be quite profitable*, but I decided not to on the basis that you're pretty clearly a long term investor and wouldn't be interested in such a suggestion.
> 
> I know nothing about the stock and was only looking at any on that list in terms of what the price was doing.
> ...




This was my uneducated assumption as well - but you are right, I'm not trading. Still, the aim is to buy shares and watch them go up, so may as well try to develop a bit of an understanding of tech... Also buying dips and selling peaks can be a handy way of accumulating a stock (i.e. buying $1000, waiting for a 10% rise and then selling $1000 worth)


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## AFTScouk (10 August 2012)

to xxjohnboy

i do not trade stocks, i prefer forex but you might want to look out for a book called the zulu principal by james slater. It will help your stock picking i think.

John


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## xxjohnboy (15 August 2012)

So far so good.  My portfolio is up 5.3% compared to 1.71% for AOD.  Shame about my GWA shares going down though, since I actually own those.  

KCN	-7.52%
ARI	6.76%
MGX	7.10%
TFC	2.41%
APZ	-25.88%
ILU	19.54%
PPC	10.77%
BKN	26.04%
EHL	15.58%
GFF	15.63%
TWR	2.69%
BLY	-4.38%
HGG	15.25%
SGN	10.94%
MIN	1.37%
CMW	2.82%
SLM	4.19%
AAD	8.20%
TSE	14.86%
HIL	9.30%
LEI	3.97%
NWH	-2.41%
MLB	0.00%
WHG	1.15%
FBU	9.59%
CGF	4.15%
SVW	5.96%
NAB	0.04%
PRG	2.28%
FPH	-1.35%


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## Julia (15 August 2012)

> So far so good. My portfolio is up 5.3% compared to 1.71% for AOD.



Over what period?
How does it compare with the index for that period?


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## Boggo (15 August 2012)

Julia said:


> Over what period?




I was wondering the same thing.
Just looking at the list and you are still holding a stock that is down 25% while we have had a bull market since the beginning of June.
What are you going to do if the market turns south, are you going to become an "investor" with a big bottom drawer.

IMO you are setting yourself up for a fall if you are willing to hold onto losers.

You may have a method but don't get carried away with your ability in a bull market, even the "bargain at these prices" brigade can make money when everything is rising.

A rising tide raises all boats.

Just my


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## So_Cynical (16 August 2012)

Boggo said:


> I was wondering the same thing.
> Just looking at the list and you are still holding a stock that is down 25% while we have had a bull market since the beginning of June.
> What are you going to do if the market turns south, are you going to become an "investor" with a big bottom drawer.
> 
> ...




A Bull market since June...seriously a bull market.

I'm inclined to call it a bit of a rally, a rally that's much the same as the one we had late last year and the one before that and so on....a bull market when we are still way below the May top and the 9 tops before that.


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## Boggo (16 August 2012)

So_Cynical said:


> A Bull market since June...seriously a bull market.




OK then, a bullish market for the period (call it what you want), a period where anyone intent on (and capable of)  survival should be making a good profit rather holding on to a 25% loser.

Even basic investors should have been recouping some of their losses in this period.


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## So_Cynical (16 August 2012)

Boggo said:


> a period where anyone intent on (and capable of)  survival should be making a good profit rather holding on to a 25% loser.
> 
> Even basic investors should have been recouping some of their losses in this period.




While we are on the subject of basic investors. 

I've had a great last 2 months, completing a trade a week on average since late June....if i can just get out of 2 more trades ill be more than happy for the world to end again.


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## xxjohnboy (17 August 2012)

Only since 27th of July, so early days.  But I would say that over 300% better than a positive all ords is a good result.


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## Julia (17 August 2012)

OK, thanks, yes, well done.  Any time you're putting up a % result it's only meaningful if you include the relevant time period.


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## xxjohnboy (28 August 2012)

Result to date are below, but I will just give some extra thoughts I am having.  I actually own GWA shares and they are doing a div buy back scheme at 2.5% discount.  Seems pretty good.  Only thing is that dividend forecast is going down, even though EPS growth is predicted.  Based on forecasts, it is still a reasonable buy according to my formula, so I will most likely go ahead with the buy back.  So I was wondering about whether my formula should really take in to account div growth at all (since I am basically ignoring it anyway).  EPS seems to be what I care about.  

As for results below, MGX would be getting sold right now if I held it, but for this folio I will see how things play out.  I would sell because forecast eps goes down.  BKN still looks good as a winner, PPC has a very high PE now but has pretty good forecasts to back it up. 

SLM makes me think about what to do though.  2013 forecast is up, 2014 forecast is below 2013.  So that would normally be an automatic sell.  But the price has spiked up.  Anyway, I need to do more research in to this.  I really am missing a clear sell strategy.  

So since 27th of July I'm up 7.3% vs AOD of 3.6%.  Yippee!

KCN	13.67%
ARI	7.43%
MGX	-16.39%
TFC	-2.41%
APZ	-21.18%
ILU	15.06%
PPC	23.08%
BKN	28.96%
EHL	14.29%
GFF	11.46%
TWR	6.92%
BLY	-4.38%
HGG	15.60%
SGN	11.46%
MIN	1.37%
CMW	7.04%
SLM	18.60%
AAD	0.78%
TSE	17.14%
HIL	10.70%
LEI	2.46%
NWH	0.00%
MLB	4.47%
WHG	1.15%
FBU	13.07%
CGF	10.09%
SVW	14.18%
NAB	4.12%
PRG	0.00%
FPH	10.14%


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## xxjohnboy (3 November 2012)

Latest Results  
Me = up 2.11%
AOD =  up 5.88%

So I am getting quite beaten.  Though for research I have held on to my duds such as APZ in the portfolio.  But it certainly supports a clear sell strategy.  The clear one to me seems to be getting rid of stocks with dropping eps forecasts.  

I would be dumping BLY, MGX, APZ for sure.  I haven't checked through all the stocks as I don't have time.  Tehy're just the big losers. 

I was going to check my stocks that are doing well but CommSec is locking up, gotta run.

KCN	24.60%
ARI	-5.41%
MGX	-24.59%
TFC	-3.61%
APZ	-61.18%
ILU	12.41%
PPC	47.69%
BKN	0.42%
EHL	-14.29%
GFF	18.75%
TWR	19.23%
BLY	-39.24%
HGG	27.66%
SGN	7.29%
MIN	2.00%
CMW	16.20%
SLM	20.00%
AAD	7.81%
TSE	-7.43%
HIL	-20.93%
LEI	4.51%
NWH	-26.55%
MLB	-1.12%
WHG	24.14%
FBU	20.70%
CGF	-7.12%
SVW	-2.41%
NAB	2.56%
PRG	-5.02%
FPH	26.35%


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## systematic (4 November 2012)

From my skim read of the thread: you're choosing stocks that are a combination of low PE/high div yield, yeah?


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## xxjohnboy (5 November 2012)

systematic said:


> From my skim read of the thread: you're choosing stocks that are a combination of low PE/high div yield, yeah?




Pretty much, and in the latest group of shares I am updating they also had EPS growth at the time I made the list.


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