# Your thoughts on this strategy...



## whizz21 (1 October 2008)

Hi there, 

Assume there is a basket of stocks with many having gone down significantly in value since the time they were purchased, say in 2006-2007.

Assume some of the portfolio is in small stocks and another part is in index type funds. 

Now, I'm thinking about selling these two types of investment in the not to distant future, at a loss and re-invest into large caps, possibly financial stocks. My reasoning is that as financial stocks have gone down the most (and may go down further) and are likely to re-bounce the fastest and the strongest. (and quicker than small caps as well as funds)

Any thoughts on this strategy?


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## nioka (1 October 2008)

I believe now is a good time to switch one stock for another. My suggestion is to forget charts and T/A and closely examine the fundamentals. If ever there is a time when F/A is superior to T/A it is now. There are many fundamentally sound stocks that have a price drop which is not justified. there are plenty of cashed up companies with sound incomes and a good future even in uncertain times.


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## ROE (1 October 2008)

whizz21 said:


> Hi there,
> 
> Assume there is a basket of stocks with many having gone down significantly in value since the time they were purchased, say in 2006-2007.
> 
> ...




Are your stock portfolio good stock? ie are they making money, what's the ROE and ROIC, cash flow, market dominance, are management people like sort of WOW, JB hi-Fi, Reject shop, CBA type of management or more like Eddy Grooves and Phil Green type people.

if they are quality stock there is no need to get rid of them if they down in value because of bear market but if they are bunch of junk then get rid of them and move into better company.

Blue chip doesn't mean it's a quality stock nor price will come back when the market rebounce ... Market reward good company with solid profit and balance sheet. 

If the earning is there price will reflect the earning sooner or later.
the market is mostly efficient so price will rise once the earning show up.

the occasional times when it's inefficient due to fear and panic that where I like to buy


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## apra143 (1 October 2008)

nioka said:


> If ever there is a time when F/A is superior to T/A it is now. There are many fundamentally sound stocks that have a price drop which is not justified. there are plenty of cashed up companies with sound incomes and a good future even in uncertain times.




Even if you found a company that had decent fundamentals and undervalued, it could be days/weeks/months/years before price swings your way.

Trying to get in "early" and "cheap" is like picking bottoms. Whatever happened to looking at the primary trend, and sticking to sidelines when there is just so much fear and uncertainty?

Beginners should look away, let the pros handle this market 

Just my


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## nioka (1 October 2008)

apra143 said:


> Even if you found a company that had decent fundamentals and undervalued, it could be days/weeks/months/years before price swings your way.
> 
> let the pros handle this market
> 
> Just my




That is what investing is all about. Days weeks months years.

It is the "pros" that have created the problem.


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## skyQuake (1 October 2008)

nioka said:


> That is what investing is all about. Days weeks months years.
> 
> It is the "pros" that have created the problem.




The myth with picking tops and bottoms is with fundamentals. Its too hard to pick a timely bottom when value is relative. Technicals *can* pick bottoms (eg capitulation lows, major support levels etc...)
Not saying one is superior to the other but you gotta look at both and understand the merits and weaknesses of both.

Anyways, jumping into financials because they are 'cheap' or have 'fallen harder than the rest' is simply dangerous. A lot of people jumped into AIG and Lehmans because it was 'cheap' and hit harder than everything else...
imo, re-analyse the initial reasons you bought the stock, are they still valid or has the picture changed? Are the reasons for ur buy and hold still valid?


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## Trembling Hand (1 October 2008)

nioka said:


> If ever there is a time when F/A is superior to T/A it is now.




Would you like to prove such an out right ridiculous statement?


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## Nick Radge (1 October 2008)

Of course those that have been using FA over the last 12-months have no money left even if now was a good time to use it...


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## nioka (1 October 2008)

Trembling Hand said:


> Would you like to prove such an out right ridiculous statement?



 My bank balance proves it for me. I don't have to prove it to anyone else.


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## wayneL (1 October 2008)

nioka said:


> My bank balance proves it for me. I don't have to prove it to anyone else.



Oh brother! 

The king of cop out statements. LOLOL


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## nioka (1 October 2008)

Nick Radge said:


> Of course those that have been using FA over the last 12-months have no money left even if now was a good time to use it...



 Possibly no SPARE money. It is all tied up in fundamentally sound stocks. Those taking the advice of a lot of posters here would have had margin calls that have decimated their capital and left them out of the market completely.


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## nioka (1 October 2008)

wayneL said:


> Oh brother!
> 
> The king of cop out statements. LOLOL




 Thought you would say that. I'm waiting for the great expert , chops, for a reply too. I think he is busy on another thread.


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## Trembling Hand (1 October 2008)

nioka said:


> My bank balance proves it for me. I don't have to prove it to anyone else.




We are all Internet millionaire's hey?

Funny about that you were only complaining a couple of days ago about your holdings being manipulations down. Must be some special bank account. 

Here is your FA over TA for you. What a laugh.


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## skyQuake (1 October 2008)

nioka said:


> Possibly no SPARE money. It is all tied up in fundamentally sound stocks. Those taking the advice of a lot of posters here would have had margin calls that have decimated their capital and left them out of the market completely.




How do you gauge the fundamental soundness of a stock in this environment with certainty? Stocks in the ASX 20 can move by 50% in a day. Fundamentals mean little when fear and greed take over.
So are you saying now is a good time spend all your money in value stocks and invest for the long term?


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## mazzatelli1000 (1 October 2008)

nioka said:


> I believe now is a good time to switch one stock for another. *My suggestion is to forget charts and T/A and closely examine the fundamentals.* If ever there is a time when F/A is superior to T/A it is now. There are many fundamentally sound stocks that have a price drop which is not justified. there are plenty of cashed up companies with sound incomes and a good future even in uncertain times.





Try using some common sense as well. It helps keep your bank balance positive


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## nioka (1 October 2008)

Trembling Hand said:


> We are all Internet millionaire's hey?
> 
> Funny about that you were only complaining a couple of days ago about your holdings being manipulations down. Must be some special bank account.
> 
> Here is your FA over TA for you. What a laugh.




You show the chart for OZL. A good example. Sure I am in the red there 

BUT. I traded MCR for OZL when MCR was worth more than OZL and increased the number I hold. Then as the OZL price ran ahead of the MCR I traded back. I now have 11% more MCR than I had a month ago. I believe they are both fundamentally sound and am prepared to hold both as a long term investment. In doing the trades I have a capital loss which I can use this financial year.


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## skyQuake (1 October 2008)

Could have a LOT more of both if u sold earlier...


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## wayneL (1 October 2008)

nioka said:


> Thought you would say that.




As you correctly noted in another post, Aussies are not stupid. Yet you continuously insult their intelligence with posts like this and others.

As for the the TA/FA debate: It's all a bit tribal for some people, as if it really mattered that their method of analysis has to be validated by popular assent.

To get a true idea, we must look to the folks who do this for a living. Not fee takers like fund managers and brokers, people who pay the grocery bills and what ever other goodies they buy with their profit.

The reality is that there are both types of people in that group. Some use TA, some use FA.

Whatever works is real, and that varies from personality to personality.

Now let's have enough of this puerility.


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## ROE (1 October 2008)

apra143 said:


> Even if you found a company that had decent fundamentals and undervalued, it could be days/weeks/months/years before price swings your way.
> 
> Trying to get in "early" and "cheap" is like picking bottoms. Whatever happened to looking at the primary trend, and sticking to sidelines when there is just so much fear and uncertainty?
> 
> ...




Uncertainty and fear create opportunity for you to buy quality company at discount price.. any other time you pay full price and a whole lot more and your chance of getting smack around your capital is hell a lot higher than someone paying 30% or 40% less in a bear market if the core business
stay in tack...earn may go up and down but if the core business is intact you better off buying it at lower price.

and buying stuff cheap doesn't mean you are picking bottom, when the value of the stock fall below what I consider intrinsic value I call that is cheap whether the stock trade in a Bull or Bear market is irrelevant 

What I consider cheap? If TAH ever fall to around $7 that is a cheap stock
not because it it's has fallen from $18-$19 Dollar but the earning power and 
business going forward in my book going to earn you a lot more than $7 you invest into it some 10 years down the track.

Amen


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## nioka (1 October 2008)

skyQuake said:


> Could have a LOT more of both if u sold earlier...




 Remember I'm the dumb one. I don't have hindsight. Nor do I have a crystal ball or a time machine.

 To me each day is a new one. I check my watch list and look for something that is overvalued, in my eyes, on that day. If I find one I sell and look for another that is undervalued that I may buy.

I don't worry too much about price on the day. I just stay invested as I have done for many years. I take the good with the bad. I don't believe in using borrowed funds and have enough cash available for the immediate future.

I'm also not trying to be the richest man in the cemetary and my conscience is clear that I have not got to be where I am at the expense of others. I also have a little more patience than some. Slow and steady wins the race.

P.S. I also have thick skin so all the rubbish that is thrown at me lately is just water under the bridge.


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## ROE (1 October 2008)

skyQuake said:


> How do you gauge the fundamental soundness of a stock in this environment with certainty? Stocks in the ASX 20 can move by 50% in a day. Fundamentals mean little when fear and greed take over.
> So are you saying now is a good time spend all your money in value stocks and invest for the long term?




Investment is subjective it's your cash, what do you want to do with it
are you in for a quick bucks or wanting to save for retirement 30 years from 

now or just want to take a bit of risk to get a bit better gain than what the banks deposit offer? ... 

and how long is your long term? 1 years? 5 years? 10 years? 30 years?

I have a few stocks on my list right now that I want someone short the hell out of it or create fear and greed and knock it down I then buy 

TAH is one of them


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## Trembling Hand (1 October 2008)

Nioka I love your absolutes that you never back-up.

I don't give a toss what anyone uses, TA, FA, Stars or Dart board, BUT when someone makes a statement like....



> If ever there is a time when F/A is superior to T/A it is now.




They, in my humble opinion, need the :bs: flagged waved at them. And asked to justify it. Which you cannot.


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## 2BAD4U (1 October 2008)

It is in volatile markets like this that FA gets thown out the window because there is no logical (FA) explaination for what some companies share price is doing.  Some people who rely solely on FA will actually turn to TA in these times to try and make some sense of what's going on. It is also argued that TA provides better forecasts in these times.

And to support this statement read McGrath's _Financial institutions, instruments and markets _(2007) by Christopher Viney. Pg 298.


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## chops_a_must (1 October 2008)

Trembling Hand said:


> I don't give a toss what anyone uses, TA, FA, Stars or Dart board, BUT when someone makes a statement like....



At the 'right' prices in this market, I'm sure the majority of us TAers will become FAers in something, at some time.

Really there are no fundamentals at the moment. No-one can tell you what a company's costs will be like in 6 months, 12 months time, so how on earth is anyone truly a FAer now? It's beyond me...

Just strategic punting is all I can call it...


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## It's Snake Pliskin (1 October 2008)

nioka said:


> Thought you would say that. I'm waiting for the great expert , chops, for a reply too. I think he is busy on another thread.



I'll respond to your ridiculous statement a few posts back. 

Rubbish. 

You don't have to prove anything, but the disinformation is pathetic.


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## nioka (2 October 2008)

2BAD4U said:


> It is in volatile markets like this that FA gets thown out the window because there is no logical (FA) explaination for what some companies share price is doing.  .




Of course there is no logical explanation, f/a or t/a, for what a companies SHARE PRICE is doing. So forget the share price to some extent, except for the fact that they are low. Concentrate on the fundamentals, chose companies with sound fundamentals ( cash on hand, good management etc,etc.) and accept that it is a good time to build a decent share portfolio. T/A basically tries to imitate the past by projecting it into the future. The past is history, times have changed dramatically. There has never been times like these. The future will be different. T/A is for traders. F/A is for investors . Maybe the opinions of a moron in some eyes but nothing posted yet has changed my mind.


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## wayneL (2 October 2008)

This post actually deserves a response as it actually shows some rational though



nioka said:


> Of course there is no logical explanation, f/a or t/a, for what a companies SHARE PRICE is doing. So forget the share price to some extent, except for the fact that they are low. Concentrate on the fundamentals, chose companies with sound fundamentals ( cash on hand, good management etc,etc.) and accept that it is a good time to build a decent share portfolio.



Maybe. But I would reclassify FA from *F*undamental *A*nalysis to *F*orensic *A*nalysis. The published fundamentals cannot be current in the present environment. So if one is good at looking deeper and projecting future numbers on upcoming conditions, one could perhaps find some good buys.



nioka said:


> T/A basically tries to imitate the past by projecting it into the future.



This may be true for some, but not all. Just as there are different types of FA, not everybody buys when the green line crosses the red, or even try to predict at all. For many, it is about creating boundaries (to borrow Nick's phrase) of correct and incorrect.



> The past is history, times have changed dramatically. There has never been times like these. The future will be different.



These statements are true for any point in time. Not just now. But it is an important point that conditions change on us regularly. Adapt or die - true for any type of analyst.



> T/A is for traders. F/A is for investors .



 In general terms yes, but with large overlap



> Maybe the opinions of a moron in some eyes...



Be careful here about making sensible statements, you have a reputation to uphold.



> ...but nothing posted yet has changed my mind.



Ahh! The _coup de grace_... at least we know it's you and not some imposter.


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## skyQuake (2 October 2008)

nioka said:


> The past is history, times have changed dramatically. There has never been times like these. The future will be different.




History doesn't repeat, but it sure as hell looks damn similiar


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## Shrewd Crude (4 October 2008)

> whizz21
> 
> Assume there is a basket of stocks with many having gone down significantly in value since the time they were purchased, say in 2006-2007.
> 
> ...




hey wizz,
Theres no problem about investing in financials, but theres a good way to go about it to limit yourself in a downtrending sector... If you buy when it is downtrending, you will most likely continue to watch the stock fall... its quite rare to pick an absolute bottom...
So, in theory you should wait for the sector to start a new trend, and then get in just above the bottom as it rises up... This way you save yourself time (the opportunity cost lost while you held onto it on the way down and then back up).... the potential added losses of the sector countinuing to get sold off... and further more, the potential that if it kept falling for you to get stopped out or sell out lower, for it to only rebound...
and by waiting -> the added bonus of buying into an uptrending stock/sector...
as an investor, accept tht you will rarely pick the bottom... be smart... perhaps sometimes you will get it at the same price but three months later, and a whole lot less heartache...

As for small stocks vs large stocks...  The bigger they are the harder they fall... Large stocks have been getting pummled just like mini stocks...
The Spec end of the market looks so sold off, that its hard to see it falling further... big stocks will fall alongside little ones... your real questions should be... How can I limit downside risks?
you dont evade the problem by just switching from small stock to a large stock, as market risk is the same if you hold big or small, in theory this relationship between small vs large and market risk might not quite be true... but its clear to see the big popas coming down...
Im at the spec end of the market...
and I feel save with the market sold off and reduced risk of major market falls, which is what we want to avoid... If no crash... we survive... and then we perform...

.^sc


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## kam75 (13 October 2008)

whizz21 said:


> Hi there,
> 
> Assume there is a basket of stocks with many having gone down significantly in value since the time they were purchased, say in 2006-2007.
> 
> ...





Financials bouncing the quickest?  In this current market its hard to tell if and when anything will bounce.  Depends on your strategy.  Perhaps if you're a long term investor, whatever that means, buying financial stocks AFTER THEY BOUNCED may be the thing for you.  Dont go out catching falling knives.


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## BBand (19 October 2008)

If you are looking for some current trading ideas - have a look at www.forexfactory.com/showthread.php?t=2331.

Quite interesting, I have read up to page 5 so far - lots more pages to go


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## shulink (21 October 2008)

I think there is no guarantee that stocks dropping the most will rise the most when the economic condition recovers.


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## The Edge (2 November 2008)

Saturday  1 November 2008

Interesting discussion/defense of opinions.

To add to the mix:

nioka says:

> Of course there is no logical explanation, f/a or t/a,
> for what a companies SHARE PRICE is doing. 

Aren't share prices supposed to reflect the fundamental
value of a company?  If not, of what good is any
fundamental information?

> Concentrate on the fundamentals...

Because they have been such a good guide?

> T/A basically tries to imitate the past by projecting 
> it into the future.

From where do you draw this conclusion?  It sounds
like a silly statement to make, but I would be interested
to know how you arrived at it, basically.

Shoot as many arrows at T/A as you will, but at least
put a point on them.

> The past is history...

True.

> There has never been times like these.

So much for past history!

> Maybe the opinions of a moron in some eyes but 
> nothing posted yet has changed my mind.

Based on your train of thought, no opposing post
ever will.  Yet, you still advance your own unfounded
beliefs about technical analysis, as though valid.

I have not been able to glean from your comments,
do you know what technical analysis is?


whizz21 says:

> Now, I'm thinking about selling these two types of ...

[No need to repeat the original premise]


Shrew Crude provided a very viable answer, and if
followed, actually dismisses the case for fundamental
analysis.  Not intentionally, but it makes a case.

 > Any thoughts on this strategy?

It is an excellent Q, and it shows you are seeking a
solution.  

It is all about the trend.  When the trend is down,
as it is pretty much across the world spectrum, it
makes little sense to be long anything, and that 
includes exchanging one sinking ship for another  
that is not sinking as quickly.

It would be imprudent of me to suggest a remedy
in view of the damage already done.  The situation
is unwieldy right now.  As an aside, we have not yet
seen the lows, and this downtrend has legs.  Not
immediately from here, but caveat emptor.

---

I will submit, not to be argumentative, that a simple
reading of any chart, even with the most rudimentary
understanding of technical analysis, gave sufficient
warning not to be long, [visably showing a change in
trend to the downside.]

These warnings went unheeded because most hold
the belief that fundamentals will prevail, expecting it
to be business as usual, and no one could foresee the 
severity of the current situation as it dramatically 
unfolded.  [Its major flaw has been exposed.]

Further, even dismissing technical analysis from any
consideration, and allowing for fundamental information
to prevail, where was there any responsible use of
money management to limit one's risk exposure, the
most fundamental principle of all: preservation of
capital?!  

Trillions lost for want of a simple rule.

---

kam75 says:

> Dont go out catching falling knives.

Well said.  No fundamental or technical arguement,
no bias, just common sense.


shulink says:

> I think there is no guarantee that stocks dropping 
> the most will rise the most when the economic 
> condition recovers.

Very true.  If I could tailgate on your thought to add,
those stocks which drop the most do so because they
are the weakest, and the weakest will take the most
time to recover, and some may never, so watch for
those stocks which have dropped the least.

Always, always buy strength.  Buy that which is
outperforming the overall market. A simple, but very
effective rule.

I have no quarrel with fundamental analysis, or even
with those who rely upon it.  There is a place for it, 
yet those who do rely upon it fail to see its major flaw.
It is lousy for timing.

I have an immense quarrel with technical analysis, and
for the record, it is the only thing I have ever used.

My quarrel is with those who misuse it, who do not fully
understand it, or use it blindly under all market conditions. 
[Confession: guilty, at one time.] For as long as TA is 
misused, and then touted by the misusers are superior 
over fundamental analysis, the fundamentalists have open 
season on TA, deservedly so.

TA is a skill to be acquired, and once acquired, an art to
employ.


Let me add, open season does not apply to me.

Cheers!


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## Pairs Trader (2 November 2008)

I remember reading somewhere that if you had missed the 60 best up days of the market over the last 40 years you gain would had gone from 12% avg p.a. to 3.4% avg p.a. that means you either hold in there or you better have bloody good timing. I prefer not to worry about FA or TA and trade arbitrage methods, the true trading profession and providing value/liquidity to the market.


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