# Contrarian Investment Journal



## Cam019

Hi all,

I'm relatively new to this forum but after having a bit of a read through robusta's and KnowThePast's documented investment journeys, I have decided to start one of my very own. I am using a fairly simple systematic deep value investing strategy to find stocks trading at a significant discount to tangible book value. This portfolio will be long positions only with an emphasis on contrarian strategy and a 3-5 year holding period, but I will hold longer if and when it is required. Position sizing in the portfolio will be equal value for each purchase. No leverage. The number of positions in this portfolio will eventually vary from between 10-30.

Businesses need to meet the following criteria to be considered as a buy for the portfolio:

- Minimum $30 million dollar market capitalization
- No to low debt
- Reasonable current ratio
- Trading at least 1/3 below tangible book value per share (TBVPS)

It is also a bonus if the business is:

- Trading at or near a 52 week low. A low over a longer period is even better

Sell strategy:

- When a position has reached its TBVPS
- When TBVPS is less than what I originally paid for the stock
- When the current ratio falls below my chosen threshold
- When the debt/equity ratio rises above my chosen threshold

Each position in this portfolio will be bought solely based on balance sheet valuations. I don't think I have forgotten anything but if I have don't hesitate to ask, throw out a comment or some constructive criticism.

I will be documenting all my trades but due to the simplistic nature of this strategy there won't be too much reasoning behind each purchase, but I will try to give some insight.


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## Cam019

14/12/2016 - I bought 1191 of MDL @ 0.420


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## jjbinks

one of the things to consider is what the likely TBVPS is going to be now and how you estimate it. If you just look at the last annual report for example you may be making purchases on information which is no longer correct.


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## luutzu

Cam019 said:


> Hi all,
> 
> I'm relatively new to this forum but after having a bit of a read through robusta's and KnowThePast's documented investment journeys, I have decided to start one of my very own. I am using a fairly simple systematic deep value investing strategy to find stocks trading at a significant discount to tangible book value. This portfolio will be long positions only with an emphasis on contrarian strategy and a 3-5 year holding period, but I will hold longer if and when it is required. Position sizing in the portfolio will be equal value for each purchase. No leverage. The number of positions in this portfolio will eventually vary from between 10-30.
> 
> Businesses need to meet the following criteria to be considered as a buy for the portfolio:
> 
> - Minimum $30 million dollar market capitalization
> - No to low debt
> - Reasonable current ratio
> - Trading at least 1/3 below tangible book value per share (TBVPS)
> 
> It is also a bonus if the business is:
> 
> - Trading at or near a 52 week low. A low over a longer period is even better
> 
> Sell strategy:
> 
> - When a position has reached its TBVPS
> - When TBVPS is less than what I originally paid for the stock
> - When the current ratio falls below my chosen threshold
> - When the debt/equity ratio rises above my chosen threshold
> 
> Each position in this portfolio will be bought solely based on balance sheet valuations. I don't think I have forgotten anything but if I have don't hesitate to ask, throw out a comment or some constructive criticism.
> 
> I will be documenting all my trades but due to the simplistic nature of this strategy there won't be too much reasoning behind each purchase, but I will try to give some insight.





To me, this kind of value investing is something to get into when you cannot see any quality businesses selling for a reasonable price. And if it's to be done mechanically like how I understand from your description, it can be dangerous and not as profitable to you when it works out well either.

For example, MDL might mathematically match all your value criteria... but finance and business and accounting have a way of fooling readers who read the accounting without knowing where or how the assets and liabilities got there.

For instance, where and what are those net tangible assets MDL recorded on its book value? Is it some reserves they have yet to quantify precisely but are certain there's that much value under it; is it from patents or some IP or mere R&D.

It hasn't earn much profit over the past decade... is there a good reason for that? Are those losses about to turn the other way or will you and other shareholders be forking out more cash to keep it chugging along?

In other words, I think you ought to be able to put context and histories behind the reported figures. THis mean reading the annual reports, the presentations and really know the business and its industry, know its assets and know whether management is just being optimistic with those tangible asset estimates.

Once you understand the business to that detail, it might very well be a true bargain. But 'til then, it'll be risky as fortunes do change and what is "worth" a million today can be written down to nothing in a few years time. Or could be just its fair value when the industry crashes - say the property market.

Given the effort you'd need to put in to comfortably make these kind of value/bargain hunting judgment... might as well pay attention to great businesses that sells for cheap/er prices given its history and potential. An investor makes more money from a great business than a mere bargain bin hunt.

Not saying that bargain hunting is bad... just to do well at it requires a whole lot more effort than they're made out to be. And if you're wrong, or right but wrong in the timing... people and market can scare you out of it quite easily. To not be scared, you have to do a lot of homework and research... if you're going to do that, then might as well focus on quality businesses selling at cheap or reasonable price because even if you're wrong in your estimate of value (and most are), its future might be so brilliant that it'll make you look like a genius despite that error.

Anywhoo... worth looking into Mermaid Marine (MRM); Sirtex (SRX); Anaeco (ANQ).

I have holdings in them, so do your own research and all that.


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## Cam019

jjbinks said:


> one of the things to consider is what the likely TBVPS is going to be now and how you estimate it. If you just look at the last annual report for example you may be making purchases on information which is no longer correct.




This is 100% true jjbinks. But, by purchasing stocks that are trading at such a large discount, it gives me a bit of wiggle room if I make a mistake when calculating a companies current TBVPS.



luutzu said:


> To me, this kind of value investing is something to get into when you cannot see any quality businesses selling for a reasonable price. And if it's to be done mechanically like how I understand from your description, it can be dangerous and not as profitable to you when it works out well either.
> 
> For example, MDL might mathematically match all your value criteria... but finance and business and accounting have a way of fooling readers who read the accounting without knowing where or how the assets and liabilities got there.
> 
> For instance, where and what are those net tangible assets MDL recorded on its book value? Is it some reserves they have yet to quantify precisely but are certain there's that much value under it; is it from patents or some IP or mere R&D.
> 
> It hasn't earn much profit over the past decade... is there a good reason for that? Are those losses about to turn the other way or will you and other shareholders be forking out more cash to keep it chugging along?
> 
> In other words, I think you ought to be able to put context and histories behind the reported figures. THis mean reading the annual reports, the presentations and really know the business and its industry, know its assets and know whether management is just being optimistic with those tangible asset estimates.
> 
> Once you understand the business to that detail, it might very well be a true bargain. But 'til then, it'll be risky as fortunes do change and what is "worth" a million today can be written down to nothing in a few years time. Or could be just its fair value when the industry crashes - say the property market.
> 
> Given the effort you'd need to put in to comfortably make these kind of value/bargain hunting judgment... might as well pay attention to great businesses that sells for cheap/er prices given its history and potential. An investor makes more money from a great business than a mere bargain bin hunt.
> 
> Not saying that bargain hunting is bad... just to do well at it requires a whole lot more effort than they're made out to be. And if you're wrong, or right but wrong in the timing... people and market can scare you out of it quite easily. To not be scared, you have to do a lot of homework and research... if you're going to do that, then might as well focus on quality businesses selling at cheap or reasonable price because even if you're wrong in your estimate of value (and most are), its future might be so brilliant that it'll make you look like a genius despite that error.
> 
> Anywhoo... worth looking into Mermaid Marine (MRM); Sirtex (SRX); Anaeco (ANQ).
> 
> I have holdings in them, so do your own research and all that.




I can understand and appreciate where you are coming from regarding buying great businesses at reasonable prices, that is a great investment strategy and has shown to be immensely profitable over time. But I am not Warren Buffet and I do not pretend to have his (or any other successful investors using the same strategy) skills. My investment strategy is more based around Walter Schloss's investment style. A diversified portfolio of stocks that are selling at a significant discount to their TBV, with little to no debt.


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## luutzu

Cam019 said:


> ....
> 
> I can understand and appreciate where you are coming from regarding buying great businesses at reasonable prices, that is a great investment strategy and has shown to be immensely profitable over time. But I am not Warren Buffet and I do not pretend to have his (or any other successful investors using the same strategy) skills. My investment strategy is more based around Walter Schloss's investment style. A diversified portfolio of stocks that are selling at a significant discount to their TBV, with little to no debt.




What make you think Schloss's method isn't as intelligent as Buffett's? If done in a business-like manner, it's more difficult and require a lot more work.

I was trying to say that there really is no way around understanding the business. You might think that simply getting the NTA or any ratio is as straight forward as it sound... it's not.

I mean, sure you can get the historical or the present ones... but you'd need to know if the factors that adds up to the ratio are sound and reliable. You can't just take any ratio and accounting figures on face value - that's why they have notes attached to them.

In other words, you'd have to be able to paint a picture, tell the business story from the figures reported. Then see how comfortable you are with making decisions based on the ratio or calculation that derives from them.

For example. At last Annual Report, Mermaid Marine (MMA Offshore) have NTA of some $1.70 per share. It is selling at about $0.29 a share. That's about 17 cents on a dollar. 

Its current ratio reports a negative; its total debt is some $400M.

taken at face value, the market probably think it's going to go broke; or need a big capital raising that'll dilute its shares.

Maybe the market will be proven right, maybe they'll be proven wrong as MRM stands; maybe new development yet unseen may change the entire game for MRM...

Mere checking of ratios won't answer how likely each of those scenarios would be. And so you'd play safe and might forgo a chance to make 5 times your investment... or if you work out the dilution scenario, could easily double... or not.

Anyway, that's my two cents... badly worded but yea... Schloss and Buffett came from the same school... they all try to understand the business they buy into... not try to out-accounting the market and its super-computers.


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## KnowThePast

Hi Cam,

Well done on starting a journal, I personally found it a great help in my investment career. Having people look over your shoulder makes me more thorough, even if the onlookers are only virtual.

I'll be watching with interest.

May I ask why you've chosen this particular strategy? Just curious how you've arrived at it.

For what it's worth, I ran your strategy through a backtest for the past 10 years on AU data.
Setup:
$50k portfolio, 4% per trade.
Brokerage: $30
4% cash rate
Dividends included
Re-evaluate monthly.

Buy criteria:
Market Value > $30m
Debt/Equity < 0.4
Current Ratio > 0.6
Price/NTA < 0.34

Sell Criteria
Price/NTA > 1 OR
Current Ratio < 0.4 OR
Debt/Equity > 0.6

Result:
Total return: 214.30%. Portfolio grew from $50k to $170,529
Hit rate: 54.43%
Average hold duration: 716 days

XAO returned 2.4% for this period, so this has been a good strategy the last 10 years...

See screenshot for more stats as well as equity curve vs XAO.


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## Cam019

Purchased 1266 of MCE @ 0.395


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## Habakkuk

KnowThePast said:


> For what it's worth, I ran your strategy through a backtest for the past 10 years on AU data.





KTP, a question about the back test.

On any given monthly re-evaluation there would be a mismatch in the number of qualifying candidates versus positions for the available capital. To clarify: on January 2, 2007 there would not have been exactly 25 companies qualifying for the buy criteria, there were probably more, or maybe fewer, I don't know.

Did you implement some ranking system to decide which ones enter the portfolio?

Because if there isn't one and the selections are random, the dispersion in outcomes would be enormous and the path-dependence will be the main determinant of returns. Every month may have several branches, resulting in a vast number of paths over 10 years.

And if there _is_ some ranking criteria, it will be the major determinant and not the quality of the fundamental analysis.

What I'm getting at is the fact that you are quoting a single run of Cam's strategy. Unless I've missed it, his selections must contain this discretionary ranking component.

It's in many ways like people who subscribe to Stock Doctor and have to choose from 100-200 Star Stocks. Unless you believe that they're all equal and will produce pretty much the same return ...


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## Cam019

KnowThePast said:


> Hi Cam,
> 
> Well done on starting a journal, I personally found it a great help in my investment career. Having people look over your shoulder makes me more thorough, even if the onlookers are only virtual.
> 
> I'll be watching with interest.
> 
> May I ask why you've chosen this particular strategy? Just curious how you've arrived at it.




Thanks KTP. 

I find value investing really interesting. The idea of buying businesses at a significant discount to its intrinsic value just made sense. I started reading about successful value investors strategies from Benjamin Graham, Seth Klarman, Warren Buffett to Tobias Carlisle and one day I came across Walter Schloss. The idea that Walter wasn't interested in buying businesses based on earnings, but rather assets, just seemed so logical to me seeing that earnings forecasts _usually _have more variability than a companies assets. So, I took his broad strategy, combined it with a bunch of other information I found useful... and here we are! 



Habakkuk said:


> KTP, a question about the back test.
> 
> What I'm getting at is the fact that you are quoting a single run of Cam's strategy. Unless I've missed it, his selections must contain this discretionary ranking component.




You have not missed anything Habakkuk, my stock selections do contain a ranking component.


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## KnowThePast

Habakkuk said:


> KTP, a question about the back test.
> 
> On any given monthly re-evaluation there would be a mismatch in the number of qualifying candidates versus positions for the available capital. To clarify: on January 2, 2007 there would not have been exactly 25 companies qualifying for the buy criteria, there were probably more, or maybe fewer, I don't know.
> 
> Did you implement some ranking system to decide which ones enter the portfolio?




Hi Habakkuk,

That's an excellent point.

This particular strategy did not have many available trades and was under-invested most of the time, so ranking was not strictly necessary. It absolutely is for most strategies.

Re-running it again, now ranking by Price/NTA ascending.

212.09% return, almost the same as before.


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## Cam019

Monthly update:


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## Cam019

Portfolio value up 6.16%

XSO +2.96% (Start value 2313.90, Last 2382.40)


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## Cam019

Bought 971 of MML @ 0.515


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## luutzu

Cam019 said:


> Monthly update:
> 
> View attachment 69307





Check with your broker to see if they have a minimum parcel requirement. I think Commsec have something like minimum of $500 per trade. So if you buy at $500 and it goes down, do you plan to hold on until it moves above that.


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## Cam019

luutzu said:


> Check with your broker to see if they have a minimum parcel requirement. I think Commsec have something like minimum of $500 per trade. So if you buy at $500 and it goes down, do you plan to hold on until it moves above that.




Yes. If I buy a parcel at $500 and the price goes down, I will continue to hold until it moves back above a $500 parcel size as long as NTAVPS remains above what I bought it for.


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## Ves

luutzu said:


> Check with your broker to see if they have a minimum parcel requirement. I think Commsec have something like minimum of $500 per trade. So if you buy at $500 and it goes down, do you plan to hold on until it moves above that.



I don't think Commsec has a minimum consideration if you are selling.   The $500 only seems to apply to purchases.


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## Cam019

Cam019 said:


> Portfolio value up 6.16%
> 
> XSO +2.96% (Start value 2313.90, Last 2382.40)




There was a miscalculation. Portfolio was not up 6.16% for the month of December. It was up 2.96%, right in line with the XSO index.


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## luutzu

Ves said:


> I don't think Commsec has a minimum consideration if you are selling.   The $500 only seems to apply to purchases.




Thanks. Just assumed it works both way all these years.

Guess I don't have to wait for those odd-parcels buyback from the company then.


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## Cam019

Monthly update:

Portfolio value +3.68%

XSO -2.86% (Start value 2391.50, Last 2323.20)


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## SirRumpole

Looking at my term deposit interest rates vanishing I'm looking to enter the market.

I don't want to be a micro trader, I just want a reliable dividend yield, and if a stock has that then it would probably capital appreciate as well, as long as the yield is sustainable.

I could Google a lot of things and probably will . I've got a sub to 'The Motely Fool' , but any other advice would be welcome before I bother my broker.

You may have guessed I haven't been a big player in the market so far.


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## nioka

Cam019 said:


> Hi all,
> 
> I'm relatively new to this forum but after having a bit of a read through robusta's and KnowThePast's documented investment journeys, I have decided to start one of my very own. I am using a fairly simple systematic deep value investing strategy to find stocks trading at a significant discount to tangible book value. This portfolio will be long positions only with an emphasis on contrarian strategy and a 3-5 year holding period, but I will hold longer if and when it is required. Position sizing in the portfolio will be equal value for each purchase. No leverage. The number of positions in this portfolio will eventually vary from between 10-30.
> 
> Businesses need to meet the following criteria to be considered as a buy for the portfolio:
> 
> - Minimum $30 million dollar market capitalization
> - No to low debt
> - Reasonable current ratio
> - Trading at least 1/3 below tangible book value per share (TBVPS)
> 
> It is also a bonus if the business is:
> 
> - Trading at or near a 52 week low. A low over a longer period is even better
> 
> Sell strategy:
> 
> - When a position has reached its TBVPS
> - When TBVPS is less than what I originally paid for the stock
> - When the current ratio falls below my chosen threshold
> - When the debt/equity ratio rises above my chosen threshold
> 
> Each position in this portfolio will be bought solely based on balance sheet valuations. I don't think I have forgotten anything but if I have don't hesitate to ask, throw out a comment or some constructive criticism.
> 
> I will be documenting all my trades but due to the simplistic nature of this strategy there won't be too much reasoning behind each purchase, but I will try to give some insight.



With a plan like that don't give up your day job. AND don't invest more than you can afford to lose.


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## So_Cynical

SirRumpole said:


> Looking at my term deposit interest rates vanishing I'm looking to enter the market.
> 
> I don't want to be a micro trader, *I just want a reliable dividend yield*, and if a stock has that then it would probably capital appreciate as well, as long as the yield is sustainable.




Was going to suggest yield ETF's like YMAX, ETF, DIV and IHD - there are others.

Single stocks is another story.


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## SirRumpole

So_Cynical said:


> Was going to suggest yield ETF's like YMAX, ETF, DIV and IHD - there are others.
> 
> Single stocks is another story.




Thanks for the pointer to ETF's . I'll do some research on these.


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## Wysiwyg

SirRumpole said:


> I don't want to be a micro trader, I just want a reliable dividend yield, and if a stock has that then it would probably capital appreciate as well, as long as the yield is sustainable.



Switzer ASX listed managed fund looks like an interesting longer term investment with quarterly income. Don't think much of Boubouras (well on telly he puts a lot of spin on things but they all do at times) but regard Paul Rickard highly as having substantial market knowledge and integrity.

https://www.switzerassetmanagement....owth-fund-2/?gclid=CNaH8Yvu79ECFQ9wvAodVWEFbg


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## Cam019

Sold MML today (black arrow) for a loss of $168.07 (-31.13%) and here is the reason why:




So, it turns out that I bought MML (green arrow) as a down trending stock trading below the 30 day EMA and 50 day SMA. 3 months prior, the 15 day EMA crossed below its 30 day EMA (death cross) indicating a bearish signal. On Wednesday, we can also see a change in polarity. The previous support line was broken and has now become resistance and no telling how much further the price will fall. I did not have a trailing stop for this stock which is why I have lost over 30% of the original positions value (a steep but important learning curve about stop loss orders and money management).

Yes, yes, yes... I know this is all technical analysis, BUT have been doing a fair chunk of reading and have come to the conclusion that basing all my future buy and sell orders off technical analysis is going to be more beneficial towards turning a profit and protecting my capital (and profits) than buying and holding down trending stocks HOPING that they will one day eventually turn around. Plus, it turns out that I prefer analysing charts than reading annual reports!


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## Cam019

My trailing sell was executed today selling MCE at 0.500 for a profit of $93.03 (+17.23%).




Making a profit off this stock was all luck. I managed to buy this stock right before the 15 day EMA crossed above the 30 day EMA (golden cross) indicating a bullish signal and what turned out to be a short term up trend. Two days ago I triggered a volatility based trailing sell order (black line) which was executed today (black arrow). The trailing sell was: 0.575 - (4*ATR). I did also notice the Dojis late last week and into this week and had considered selling at about 0.56-0.57 but went with the trailing sell hoping that the upward trend would continue. No such luck.


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## Cam019

Monthly update:

Portfolio value -10.63%


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## Cam019

Bought 6000 of MAH @ 0.155


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## Cam019

Sold MAH @ 0.155 today for a loss of $39.90 (-4.11%).

Sold MDL @ 0.430 today for a loss of $27.99 (-5.18%).


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## peter2

Keep it coming *Cam019*. You're gaining experience in the market while you sort out your preferred trading style. I see you closed the MAH trade. Hope you learned to look at the recent news, especially when you see a price chart like MAH. A gap up followed by the same price traded over many days generally indicates a take-over offer. 

You can be profitable trading moving average crossovers, but you have to learn how to do it.


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## Cam019

Thanks peter2, will definitely keep it coming.


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## jjbinks

hey cam nicework.
Just wondering what % profit per winning stock are you aiming for and what 
just asking because with your current position size of $500 you have to make at least 4% to beat commission. Your strategy may work with bigger accounts but you may find that in your case commissions will make it very hard.
anyway thanks for posting.


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## Cam019

jjbinks said:


> hey cam nicework.
> Just wondering what % profit per winning stock are you aiming for and what
> just asking because with your current position size of $500 you have to make at least 4% to beat commission. Your strategy may work with bigger accounts but you may find that in your case commissions will make it very hard.
> anyway thanks for posting.




Hey jjbinks,

Thank you and thanks for the question. I don't currently have a minimum profit percentage that I aim for. Actually, with a $500 position size I need to make a minimum of 7.98% in order to break even. $19.95 to purchase the position and $19.95 when it is sold. To be honest, I hadn't even considered this when I bought the first three positions with a value investing focus. Since making the transition to technical analysis the disadvantage I was placing myself in, has become apparent.


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## jjbinks

the two things which may help is
1)time frame - its obviously easier to make higher %profit if you hold a growing stock for longer

2)lower brokerage
-i know this sounds obvious but easy to forget
-it can be a pain to set up with a new broker. I also use comsec for shares so can't advise you about this but I think there are a few threads which may help you find a slightly cheaper broker. If not I'm sure other members can point you in the right direction. From what I'm aware Interactive broker tend to be the cheapest.


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## Cam019

Back at university now which is currently taking up a lot of my time. The only trade for March was MAH. On a break from uni for about 2 weeks as of now. Hopefully some opportunities present themselves over the coming weeks and I can partake in some trading!

Monthly update (end of March):


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## Cam019

Trading update: New trade

*PRL:* Bought 52,631 @ 0.037 (green line) today after a breakout on Friday. iSL 0.028 (red line). Up bar today on extreme volume with some supply entering. Nothing alarming, currently.


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## Cam019

Sell trigger update:

*PRL:* raised sell trigger to TS <= 0.038 (break even).


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## Cam019

Trading update:

Sold *PRL* @ 0.042 today for profit of $223.25 (+11.23%).
Yesterdays high was tested today and unable to be held. I sold out around lunchtime due to the increasing amount of supply entering that was unable to be absorbed by demand.


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## Cam019

Trading update:

Bought *OIL* @ 0.125 yesterday preempting the close above 0.12, iSL @ 0.115. It wasn't to be with a closing price yesterday of 0.115. I sold my position this morning @ 0.115.


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## Cam019

I was thinking today about whether I should continue posting in this thread, but looking at the number of views and a few previous comments from people there must be some people watching, so I will continue for those people who have commented and everybody else lurking in the shadows.

I guess I should just elaborate on my trading style a little:

- I am trading using VSA on quite a small capital base.
- I will be deploying anywhere between 45-50% of my capital on any one trade and only holding a maximum of 2 trades in the portfolio at any one time.
- Trade risk on any given trade could be, and has been, up to and including 5% of my total capital base. I do try and make an effort to not let it get above that.
- I also prefer to trade shares with relatively high volatility with a price less than $2 per share, but definitely would definitely consider something in the $2.01 - $5 if the right set up presented itself.

Due to brokerage, and my small capital base, I have decided that this is the most effective way to deploy my capital to trading, and one that I am comfortable doing.


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## peter2

Cam019 said:


> Thanks peter2, will definitely keep it coming.




You have to keep it going because you said you would.

I would like you to consider altering the thread title (ask Joe) as your style is no longer a "deep value" one and the current title is misleading. 

You're trying to learn a hard to master skill. It's going to take time. Use this thread to record your thoughts and help organise them into a clear trading plan. As you gain experience you'll have a record of your accomplishments and this should give you some confidence that you're learning. 

Knowing that people are watching should help you "do the right thing". Perhaps you could setup a chart to show the progress of your portfolio. 
eg ABC +12%, XYZ -6%, DEF +13%, MNO -10% Progressive total = +7% / 3 mths.

The forum has discussed the pros and cons of a 1 or 2 stock portfolio. Consider doing some paper trades on the side to help you gain more experience.


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## Cam019

peter2 said:


> You have to keep it going because you said you would.



Yes I did, and I will continue.



peter2 said:


> I would like you to consider altering the thread title (ask Joe) as your style is no longer a "deep value" one and the current title is misleading.



I had considered this, but point taken. Thread name and location changed.



peter2 said:


> You're trying to learn a hard to master skill. It's going to take time. Use this thread to record your thoughts and help organise them into a clear trading plan. As you gain experience you'll have a record of your accomplishments and this should give you some confidence that you're learning.
> 
> Knowing that people are watching should help you "do the right thing". Perhaps you could setup a chart to show the progress of your portfolio.
> eg ABC +12%, XYZ -6%, DEF +13%, MNO -10% Progressive total = +7% / 3 mths.



I will try and modify my current trading spread sheet and consider posting more regular portfolio progress updates than once each month.


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## Cam019

Trading update: New trade

Bought *PAA* @ 0.066 (green line) on Mondays open, iSL is a close <=0.059 (red line). Note the bullish pennant forming with the last 7 days of price action.


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## peter2

Good, now you're starting to get serious. 

My next suggestion is to develop a playbook. A playbook is a collection of your favourite setups. Each setup is clearly defined by a set of variables. This may include how your going to find them and how you're going to trade them. [ref. Mike Bellafiore's book: The PlayBook. There is also plenty of free material on the SMB Capital website.]

As you learn more about VSA you'll be attracted to a few ideas that seem easy to understand and you can see how to trade them. Review how tech/a trades his charts, he's done a lot in many threads, not just his current one. Develop your own rules, see how they work out using the training mode available in many charting packages.

I'm steering you into a discretionary style because that's my own. If, after plenty of work you realise that your ideas have potential but you're not working it properly, consider if there are benefits to automating your strategies. That's a whole different journey and fortunately we have an expert in that field that has plenty of reference material. 

If you put in the work and ask the right questions, you'll get plenty of help.


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## tech/a

I agree with Pete.
It's rare to see anyone put up Thier trades and thoughts
Those that do should be encouraged
It's a long road.It takes time to find, mark up and follow
Charts.

I like your thinking Cam and I think Pete has nailed it by 
Pointing out your trade planning.
It's critical to success. By choosing VSA or in my case my
Own slant on my findings in it, your clearly not one to buy
Hold and hope.

I've said many times practical application of analysis and 
Trade management are often the keys that are missing or
Full of holes.

Lastly you'll know when you've got it.
10 wins, 10 Losses in a row won't matter you'll know exactly
How to minimise loss and maximise profit in any situation.

If you need a hand just holla!


----------



## tech/a

PAA

My first observation is what appears to me to be a random entry
Into this trade and a random ISL.

Can you explain your thinking here and how you intend to manage the trade.

I'm also interested in how you intend to manage risk and maximise profit.
As a VSA chartist you'll begin to notice a few things
What have you found?
One thing I will say is that PATIENCE pays
Take A2M and MSB as recite to examples.


----------



## Cam019

peter2 said:


> Good, now you're starting to get serious.
> 
> My next suggestion is to develop a playbook. A playbook is a collection of your favourite setups. Each setup is clearly defined by a set of variables. This may include how your going to find them and how you're going to trade them. [ref. Mike Bellafiore's book: The PlayBook. There is also plenty of free material on the SMB Capital website.]
> 
> As you learn more about VSA you'll be attracted to a few ideas that seem easy to understand and you can see how to trade them. Review how tech/a trades his charts, he's done a lot in many threads, not just his current one. Develop your own rules, see how they work out using the training mode available in many charting packages.
> 
> I'm steering you into a discretionary style because that's my own. If, after plenty of work you realise that your ideas have potential but you're not working it properly, consider if there are benefits to automating your strategies. That's a whole different journey and fortunately we have an expert in that field that has plenty of reference material.
> 
> If you put in the work and ask the right questions, you'll get plenty of help.



Thanks for the invaluable suggestions and advice Peter. I shall get a start on them.



tech/a said:


> I agree with Pete.
> It's rare to see anyone put up Thier trades and thoughts
> Those that do should be encouraged
> It's a long road.It takes time to find, mark up and follow
> Charts.
> 
> I like your thinking Cam and I think Pete has nailed it by
> Pointing out your trade planning.
> It's critical to success. By choosing VSA or in my case my
> Own slant on my findings in it, your clearly not one to buy
> Hold and hope.
> 
> I've said many times practical application of analysis and
> Trade management are often the keys that are missing or
> Full of holes.
> 
> Lastly you'll know when you've got it.
> 10 wins, 10 Losses in a row won't matter you'll know exactly
> How to minimise loss and maximise profit in any situation.
> 
> If you need a hand just holla!



Thanks tech/a, will do.



tech/a said:


> PAA
> 
> My first observation is what appears to me to be a random entry
> Into this trade and a random ISL.
> 
> Can you explain your thinking here and how you intend to manage the trade.



The entry was made after noticing the second decreasing low volume down bar after the 3 bar up move (what I consider a sign of strength). I use EOD data so I was unable to enter Fridays close @ 0.064 which then lead to my entry on Monday morning @ 0.066.

The iSL was placed at a closing price of <=0.059 to give it some room to move before a break through of 0.072. I have given it the range of Wednesdays extreme volume up bar to move around in and taking into account Wednesdays low not trading lower than Tuesdays close of 0.06, I chose a close of 0.059 or lower as the iSL. The trades will be managed EOD and sold at the next mornings open if we have a close below the iSL level.



tech/a said:


> I'm also interested in how you intend to manage risk and maximise profit.



This is where is gets interesting. The iSL stop is not in the market. It is a mental stop that I will trigger when and if the price closes below my iSL. Once we have a breakout I monitor the price action and will move my stop loss up to an appropriate price once a new support level have been defined and price is tracking away from it. If I see some wide range up bars on extreme volume or supply entering at the top end I will consider entering a trailing sell order in the market to maximise profits but I am cautious about this because price could bounce back and close above the trailing sell trigger price.



tech/a said:


> As a VSA chartist you'll begin to notice a few things
> What have you found?



Not everything is as it seems!


----------



## tech/a

> Not everything is as it seems




Ha yes
But there is much more there than most who look at a chart see.
Ill expand with an example later---maybe the weekend as I'm flat out
building things!


----------



## Rypieee

Hey Cam019, great work on starting your own thread, it is no easy task!
You make me want to start one up as well so the peeps at ASF can keep me and my trading in check, might consider opening up a thread soon.

My trading style is based on fundamental & technical analysis and I am a trend follower that take my positions on breakouts (new highs or horizontal resistance - very similar to Pete's method).

Would love to learn about VSA in the future

I am just intrigued by your decision to allocate up to 50% of your capital to a single trade - reasons?
I allow myself 8-12 positions within my portfolio and each position size is based on max risk/loss on the single trade.

Good luck with your thread!!
Ryan


----------



## tech/a

Perhaps a follow my trade section---*how about it* *JOE?*


----------



## Joe Blow

tech/a said:


> Perhaps a follow my trade section---*how about it* *JOE?*



Am happy to create a *Follow My Trade* subforum for *Trading Strategies/Systems* if people would like to see it. Those who would, please 'like' this post to register your vote.


----------



## Cam019

Rypieee said:


> I am just intrigued by your decision to allocate up to 50% of your capital to a single trade - reasons?
> I allow myself 8-12 positions within my portfolio and each position size is based on max risk/loss on the single trade.



Ryan, the reasons are due to a small capital amount and brokerage costs. I trade using CommSec and brokerage costs are $19.95 each time you buy and each time you sell a position, this means brokerage on one trade (in and out) is $39.90. If I were buying position sizes of $500 this means that in order for me to break even on a trade the price would have to move up 7.98% and as you can see, this is quite significant and difficult to regularly achieve. In order to combat this, I increase my position sizes (and therefore risk) so when I buy a position it need only increase by 2% (as capital increases I hope to lower this further, aiming for 1% or less) in order for me to hit break even, and then onward to profit.


----------



## Rypieee

Cam019 said:


> Ryan, the reasons are due to a small capital amount and brokerage costs. I trade using CommSec and brokerage costs are $19.95 each time you buy and each time you sell a position, this means brokerage on one trade (in and out) is $39.90. If I were buying position sizes of $500 this means that in order for me to break even on a trade the price would have to move up 7.98% and as you can see, this is quite significant and difficult to regularly achieve. In order to combat this, I increase my position sizes (and therefore risk) so when I buy a position it need only increase by 2% (as capital increases I hope to lower this further, aiming for 1% or less) in order for me to hit break even, and then onward to profit.




I see, did not take in account capital constraints when I was drafting the question

Nevertheless, good luck on your journey and maybe you might see my thread on ASF soon enough


----------



## Cam019

Rypieee said:


> Nevertheless, good luck on your journey and maybe you might see my thread on ASF soon enough



I look forward to it. Good luck!


----------



## tech/a

Cam here is my take on PAA as of NOW

Note
Low volume in itself for bars after a high volume wide range bar
are not an indication that supply will stay contained and demand will follow.
It is possible that price may continue to fall on low volume if there is no demand.

What we want to see is how NEW higher volume is handled---is it supply or demand
absorbing supply or something else. It will come but not on this chart YET.
.


----------



## tech/a

Cam Perhaps an exercise. I have left out a lot


----------



## Cam019

Thanks for your thoughts on PAA @tech/a. I always enjoy seeing how other people read unfolding stories. Uni and work are taking up a lot of time currently, I will give BIG a crack later on and post up what I can see.


----------



## tech/a

As the market hasn't opened and it is easier to read after the fact
here is how I see things at the Right side of the page.

BIG has risen on moderate volume with a test to the up side the day
after the breakout. I think the gap 2 days ago could signal support.

Ooops I didn't hit the send button!


----------



## Cam019

Alright @tech/a, here it is.


----------



## tech/a

Cam 
This is very good analysis
I'm impressed with your ability to read the story in the chart

Just a couple of things 
Low volume bars in consolidations and those highlighted as 
Possible entry points would NOT be an entry for me .
They are just an INDICATION that the consolidation is not
Under attack from supply. 

Many indications are not confirmed
If you see something that ALTERS the state of play then
You see an opportunity 

To the right hand side
A filling of the gap and a continuation through it particularly 
In ONE bar would indicate a change in sentiment.
My stop is now a couple of ticks below the gap.

 Good job Cam


----------



## Cam019

tech/a said:


> Cam
> This is very good analysis
> I'm impressed with your ability to read the story in the chart



Thanks for the positive comments tech. It's good to know I am on the right track with my education.



tech/a said:


> Just a couple of things
> Low volume bars in consolidations and those highlighted as
> Possible entry points would NOT be an entry for me .
> They are just an INDICATION that the consolidation is not
> Under attack from supply.



Interesting. So tech, if you didn't have a position before the consolidation immediately following the high volume, down, volume/range control bar in the BIG chart, there is no entry signal for YOU before the first gap up, correct?


----------



## tech/a

Correct

Lots of things I like that INDICATE continuation
But nothing that confirms demand.


----------



## Cam019

By the looks of that BIG chart, demand after a consolidation is only ever indicated by gap up bars/up bars on moderate-high volume and then they usually swing into consolidations.

I would prefer to get in before the move up, which now I look at it more, is what happened with the PAA chart, trying to preempt the next breakout bar hoping for the price to continue long (as you stated).

The only bar I can see than might indicate demand before a breakout is Monday, April 3rd. Am I on the right track?


----------



## tech/a

19th is the first bar you can be sure
If you are watching the stock the 18th shows a stand off between supply and demand.
If you saw the gap on open and were on it that is a trade but I doubt I'd have been that keen.

So if it was me I'd be watching this consolidation.
Going too early is expensive.
After a while you'll see what I mean!


----------



## Cam019

End of month (April) update:


----------



## tech/a

Cam you should NEVER let a stock slip 30%


----------



## Cam019

tech/a said:


> Cam you should NEVER let a stock slip 30%



That was one of the purchases when I was using a 'deep value' strategy.


----------



## Cam019

Trading update:

Sold *PAA* @ my iSL of 0.059 for a loss of $252.03 (-12.35%) after my falling sell was triggered. I placed a falling sell into the market this morning after yesterdays wide range down bar on increasing volume and concern that today would lead to a close outside the volume/range control bar. On to the next trade.


----------



## Cam019

Trading update: New trade

Rising buy order was triggered this morning purchasing *TGG* @ 1.375 (green line) after a break above 1.37, iSL was set @ 1.34 (red line), SL has now been moved up to 1.36 (orange line).


----------



## peter2

IMO you've moved your exit trigger too soon. I'd rather see some follow through (higher prices) before raising the stop. 

You may as well have started the iSL at 1.36 and left no room for a down tick or two. 

A minor point is that this company is a fund manager and the prices won't move too much, but there's a nice smooth trend that's ideal if you're sitting in the sun with a lap rug and a mug of cocoa.


----------



## Cam019

peter2 said:


> IMO you've moved your exit trigger too soon. I'd rather see some follow through (higher prices) before raising the stop.
> 
> You may as well have started the iSL at 1.36 and left no room for a down tick or two.
> 
> A minor point is that this company is a fund manager and the prices won't move too much, but there's a nice smooth trend that's ideal if you're sitting in the sun with a lap rug and a mug of cocoa.




Thanks for your opinion Peter. I'm happy with the SL @ 1.36, but I do agree in hindsight that I probably should have placed the iSL @ 1.36, not 1.34. That was my original decision and this thread is all about keeping me honest, so I stuck with it.

My problem has been allowing the SP too much space to fluctuate between my buy price and the iSL, which was bought to my attention.

My stops are usually in the market to reduce my losses from unexpected down bars, so I'm trying to walk the fine line between giving the SP enough room to move without getting stopped out of a trade, whilst also preserving my capital.


----------



## peter2

Yes it is a fine line to tread. Our task is to use the SL method that is most appropriate for our trading style. If our TP uses a signal bar then the entry and SL can be based on the signal bar. If our TP uses a pattern with multiple bars then the entry/SL should be based on the pattern, not one bar within the pattern. 

Ideally we want our exit triggers to be out of the noise. The noise being the normal daily movement of price. If we place our SL's within the noise then we must be prepared to act quickly (use automated orders) and be prepared for the occasional price shock against us (opening gap). 

The best* SL method for each of us can only be determined from back testing and it has to be applied consistently.

*best - the method that produces the most favourable distribution of results for you.


----------



## tech/a

Don't agree or disagree
But Cam by having your initial S/L at $1.34
You have half the position size you would have if you'd have 
Used $1.36
Make it work regardless


----------



## Cam019

Trading update:

Sold *TGG* yesterday @ my SL of 1.36 for a loss of $58.48 (-3.35%).


----------



## aus_trader

I Agree with Peter, SL is so tight that even a slightly volatile day would trigger it and take you out of the trade. IMO only day traders or intra-day traders use stops this tight.

I am planning to post a medium/longer term portfolio on this site as there are good posters like Peter to watch over you. I've had success with this type of thing in the past and was lucky enough to get into Blackmores (BKL) for a very good gain in 2015. Currently my best gain is with NBN serving company called Service Stream (SSM). But I will not include any of these past or current stocks  but will start fresh portfolio as I buy stocks going forward. I will keep you posted...


----------



## Rypieee

aus_trader said:


> I Agree with Peter, SL is so tight that even a slightly volatile day would trigger it and take you out of the trade. IMO only day traders or intra-day traders use stops this tight.
> 
> I am planning to post a medium/longer term portfolio on this site as there are good posters like Peter to watch over you. I've had success with this type of thing in the past and was lucky enough to get into Blackmores (BKL) for a very good gain in 2015. Currently my best gain is with NBN serving company called Service Stream (SSM). But I will not include any of these past or current stocks  but will start fresh portfolio as I buy stocks going forward. I will keep you posted...




I do enjoy reading on others' trading/investing journey so can't wait for you to post something up! Finding it a great tool to stay committed to updating the ASF community and keeping yourself in check with the many wandering eyes


----------



## aus_trader

Thanks Rypieee. I am going to start a thread called "Medium/Longer Term Stock Portfolio". I want to actively manage it and check it's stocks are doing well. I find that by having it displayed, others can help me with it's stocks developments, announcements etc. Also I can learn from other experienced investors and traders here.


----------



## traderxxx

Hi All,
excuse my ignorance but what is a vsa(chartist)?
did a follow my trades subforum ever get set up?


----------



## rnr

traderxxx said:


> Hi All,
> excuse my ignorance but what is a vsa(chartist)?
> did a follow my trades subforum ever get set up?




VSA = Volume Spread Analysis (search for TradeGuider Software).

See Private Members Forum + others throughout the AS Forums.


----------



## traderxxx

thanks rnr.


----------



## aus_trader

As I mentioned in this forum before, I was going to start a thread with my own portfolio called "Medium/Longer Term Stock Portfolio". Well it got posted today with just two stocks to begin with...


----------



## Cam019

I have chopped and changed between F/A and T/A in this thread trying to discover what investing/trading strategy is suited to my personality and views of financial markets. I keep coming back to a long-term contrarian strategy - buying companies that are currently unloved by the market and that are trading with a large margin of safety and then selling them once they have recovered.

Companies will be selected from the nano, micro, and small cap sectors of the market to begin with (and will expand into the mid and large cap sectors down the track) based on loose stock screener criteria and then further analysis will be applied to determine whether a company belongs in the portfolio.

What further analysis? Debt to equity, free cash flow, enterprise value, operating earnings and other factors that give me an insight into the companies ability to survive through an industry or economic downturn, and whether there is a fundamental problem responsible for the current unloved share price or just short term over reaction of the market.

What risk management will I deploy? Short answer - none. I am not interested in diversification across industry sectors to reduce unsystematic risk, just for the sake of it. I will simply be investing in companies that have a significant margin of safety that protects my downside against a permanent loss of capital. I plan to hold for a bare minimum of 12 months (although I will not hesitate to sell within a 12 month period if a company shoots up to my calculation of intrinsic value).

As always, if I've missed anything you would like to know, please, chime in.


----------



## Cam019

The first pick for this portfolio is *Mobile Embrace Ltd (MBE)*. MBE is a mobile commerce company which is comprised to two sectors; carrier billing and mobile marketing. Over the 12 months prior to purchase date (10-07-17), MBE's SP was down over 78%.




MBE's SP has had two significant dips of 42% and 46.67% respectively off the back of two market updates over the past 12 months and has external factors impacting international DCB market roll-out, but I don't believe this to have a long-term detrimental effect on the SP. MBE have stated they are being cautious and prioritizing cash preservation and accumulation for increased growth over FY18 and beyond. MBE's mobile marketing division has now become the main revenue and earnings driver due to the short-term external factors currently impacting DCB.

MBE has reaffirmed they are on track to meet FY17's revenue and EBITDA forecasts, and although both being lower than FY16's numbers, my belief is that it is nothing to be concerned about with a long-term investment horizon.

Using the numbers or the FY16 financial statements, MBE has an:

EV - $38.1 million
Operating Earnings - $11.95 million
FCF - $3.7 million
FCF Yield - 9.69%
Acquirers Multiple: EV/Operating Earnings (Tobias Carlisle metric) - 3.19
Earnings Yield - 31.38%
ROIC - 10.74%
Long Term Debt/Equity - 31.66%

I believe this company is undervalued and currently trading at significant discount to its intrinsic value. I'm in @ 0.063.


----------



## tech/a

Don't mind this short term 
Technically


----------



## OmegaTrader

Cam019 said:


> I have chopped and changed between F/A and T/A in this thread trying to discover what investing/trading strategy is suited to my personality and views of financial markets. I keep coming back to a long-term contrarian strategy - buying companies that are currently unloved by the market and that are trading with a large margin of safety and then selling them once they have recovered.
> 
> Companies will be selected from the nano, micro, and small cap sectors of the market to begin with (and will expand into the mid and large cap sectors down the track) based on loose stock screener criteria and then further analysis will be applied to determine whether a company belongs in the portfolio.
> 
> What further analysis? Debt to equity, free cash flow, enterprise value, operating earnings and other factors that give me an insight into the companies ability to survive through an industry or economic downturn, and whether there is a fundamental problem responsible for the current unloved share price or just short term over reaction of the market.
> 
> What risk management will I deploy? Short answer - none. I am not interested in diversification across industry sectors to reduce unsystematic risk, just for the sake of it. I will simply be investing in companies that have a significant margin of safety that protects my downside against a permanent loss of capital. I plan to hold for a bare minimum of 12 months (although I will not hesitate to sell within a 12 month period if a company shoots up to my calculation of intrinsic value).
> 
> As always, if I've missed anything you would like to know, please,ch company be equal wa chime in.




Good on you for posting in so much depth and especially for having a go.

I am still an amateur myself. This not advice, just what I see as an outsider.

What I see is you are still finding what works for you and changing the rules. Your mind seems torn. For example you entered a position based on fundamental indicators and then left because of technical indicators. Which wasn't really in your plan.

I could say that, if you have a plan stick to the plan. If it doesn't work change part of plan or the strategy etc. But changing midway doesn't really help to nuance the plan or strategy. That is a mental game to have control. 

Imagine a index tracker fund just changing to technical analysis mid way haha. Investors would not be that happy at all.

Also that in part led to the 30% drop, which could/can/is quite destructive 

Also as you stated that brokerage is really destructive at  8% round trip is ridiculous. But this is to learn not for a fulltime job so in that context it makes sense.

You wanted to trade based on fundamental, then technical, now back to fundamental value investing.
I know it is easy to succumb to an ideology but try it all and pick what works for you for your circumstances.

To confirm what are you actually using at the moment?

 or are you just still exploring?

1)Why is the position sizing equal?
Before you stated 40-45% on one trade with 5% of total capital lost as a maximum. What is your rule now?


2) Why do you use a technical indicator for an entry but only fundamental indicators for an exit?t is a bit confusing?.

A true true true value investor would stay there no matter what the price was doing only when the fundamentals changed, it is about owning an asset not what other participants think reflected in the price. But obviously that could create conflict. I see you torn again.

I think try and have the rules first.

Finally a long term time frame will be very hard to evaluate and could require 10-20 years of performance to determine if it is working.

Just some thoughts

Cheers

Omega


----------



## Cam019

OmegaTrader said:


> Good on you for posting in so much depth and especially for having a go.
> 
> I am still an amateur myself. This not advice, just what I see as an outsider.
> 
> What I see is you are still finding what works for you and changing the rules. Your mind seems torn. For example you entered a position based on fundamental indicators and then left because of technical indicators. Which wasn't really in your plan.



Hey Omega,

Thanks, and you are correct. I did buy MCE, MML, and MDL as fundamental asset plays, and then sell them using T/A. I wasn't at all trying to mix T/A and F/A. I was just selling out of those positions so I could transition into a T/A (VSA) based trading portfolio.



OmegaTrader said:


> Imagine a index tracker fund just changing to technical analysis mid way haha. Investors would not be that happy at all.



Haha, no, they definitely would not be happy! I guess that freedom to swap between strategies with no outside influence is both the benefit and detriment of managing your own funds. I will not be making another switch now though.



OmegaTrader said:


> To confirm what are you actually using at the moment?
> 
> or are you just still exploring?



I am no longer exploring and am now using a value based strategy buying temporarily unloved companies that can be bought at a significant discount to their intrinsic value.



OmegaTrader said:


> 1)Why is the position sizing equal?
> Before you stated 40-45% on one trade with 5% of total capital lost as a maximum. What is your rule now?



Equal position sizes at the moment due to low capital base (university student life). Also, the broker I use (CommSec) now has $10 brokerage for entry and exit into positions less <=$1000. So I am using a maximum $1000 position size for the time being.



OmegaTrader said:


> 2) Why do you use a technical indicator for an entry but only fundamental indicators for an exit?t is a bit confusing?.



I am not using technical indicator for entry and fundamental indicators for exit (I'm a little confused as I can't work out where I have used T/A for entry and F/A for exit). I am now using F/A for entry and if and when the time comes, F/A for exit.



OmegaTrader said:


> A true true true value investor would stay there no matter what the price was doing only when the fundamentals changed, it is about owning an asset not what other participants think reflected in the price. But obviously that could create conflict. I see you torn again.



I won't be torn. I know what does and does not need to be done now.



OmegaTrader said:


> Just some thoughts



I appreciate the thoughts, thanks Omega.


----------



## aus_trader

Hey Cam, Good to see you back and making changes to improve your strategy. I haven't come across "Tobias Carlisle" company valuations, but there may be something in this, so I will keep watch...


----------



## OmegaTrader

Cam019 said:


> Hey Omega,
> 
> Thanks, and you are correct. I did buy MCE, MML, and MDL as fundamental asset plays, and then sell them using T/A. I wasn't at all trying to mix T/A and F/A. I was just selling out of those positions so I could transition into a T/A (VSA) based trading portfolio.
> 
> Haha, no, they definitely would not be happy! I guess that freedom to swap between strategies with no outside influence is both the benefit and detriment of managing your own funds. I will not be making another switch now though.
> 
> I am no longer exploring and am now using a value based strategy buying temporarily unloved companies that can be bought at a significant discount to their intrinsic value.
> 
> Equal position sizes at the moment due to low capital base (university student life). Also, the broker I use (CommSec) now has $10 brokerage for entry and exit into positions less <=$1000. So I am using a maximum $1000 position size for the time being.
> 
> I am not using technical indicator for entry and fundamental indicators for exit (I'm a little confused as I can't work out where I have used T/A for entry and F/A for exit). I am now using F/A for entry and if and when the time comes, F/A for exit.
> 
> I won't be torn. I know what does and does not need to be done now.
> 
> I appreciate the thoughts, thanks Omega.




Yeah thanks for clearing that up.

So 2% round trip is an improvement. Still in the future look for ways around this as it is just throwing away money for nothing in return.

Also to reiterate 3-5 years is a long time. To have a significant sample size will be a long time.

Imagine a tennis match with only 15 points. Hard to tell which player is the best...

Say in 10 years there may only 10-15 trades/investments. That could be hard to determine the success of the strategy. If the stock market is bearish and the strategy is returning 7-10% that would look really really good but if the market is going up and up  like in the US. One can start to question what all the time and effort was for. 

In terms of position sizing each person has their own methodology and approach. What I would say is A more volatile strategy in general would require smaller position sizing. Some of these small cap companies can be all over the place or even go bankrupt. So in this case one needs to determine the volatility they are comfortable with as well as the sweet spot between making returns and taking too much risk.

In other cases looking at larger companies, in general less movement, so people may use derivatives or gearing to increase the volatility.

Say $5,000 capital and you pick 5 stocks at $1,000 each. 2-3 or all of them get busted. That is it. Rodeo to the end and over the cliff. Now the strategy has to catch up on the massive losses

In my opinion, there has to be some form of risk management. Even fundamental investors will get out if fundamentals have changed or there is a miscalculation.

Also more specific or thought out position sizing is better than just equal weighting in my opinion. But other people will prob disagree with that too.

See you in another 3 years ahhaha   

Good luck and have the momentum to keep going.

Cheers

Omega


----------



## Cam019

I'm not really concerned with monthly performance, with that said, I am still going to put up EOM summaries measuring absolute returns just in case readers are interested.

EOM July 2017:


----------



## aus_trader

MBE is having a brief pull back at the moment (around 7.4c as I write); will probably bounce back up if the upward momentum continues...


----------



## aus_trader

Well looks like there is upward momentum on MBE today Cam... Helped by an announcement on FY17 guidance and market update. Looks like this one is doing well...


----------



## Cam019

Okay... second pick for this portfolio is *Countplus Ltd (CUP).* CUP is a national aggregate network comprised of 18 professional services practices. Over the 12 months prior to purchase date (09-08-2017), CUP's SP was down over 46%.




Interestingly, not unlike MBE, CUP's SP has had two substantial dips of 22.98% and 11.1% respectively over the past 12 months off the back of a market update and strategic review/revised dividend policy update.

With the appointment of new CEO Matthew Rowe in February this year, the board is now focused on the transformation of Countplus Ltd with measures including debt reduction, capital management and potential acquisitions to support the companies new growth strategy.

The dividend for the quarter ending 30-06-2017 was cut, and dividends have also been moved from quarterly, to biannually. Dividends are intended to be between 40-70% of NPAT and minority interests.

Using the numbers from the FY16 financial statements, CUP has an:

EV - $108.5 million
Operating Earnings - $36.7 million
FCF - $9.2 million
FCF Yield - 8.48%
Acquirers Multiple - 2.95
Earnings Yield - 33.86%
ROIC - 4.46%
Long Term Debt/Equity - 42.98%

I'm in @ $0.485.


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## Cam019

Just found an error in my spreadsheet that I use for EOM reporting. Please see below for the revised EOM July summary.


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## aus_trader

Hey Cam, I was going through the stocks in my watch list and saw big news on your stock MBE with an aquisition today...


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