# Being contrarian can be very lucrative



## bowman (10 July 2009)

How on the nose was PBG several months ago? I for one thought management were behaving very badly and stayed away.

Only missed a seven bagger and it looks like it's not done yet.


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## robusta (4 September 2010)

Is now the time to be looking in the Real Estate Sector?

I have recently picked up Finbar Group at a significant discount to my calculations of it's intrinsic value.

In The Financial Review today Trevor Hoey has highlighted Cedar Woods Properties and Diploma Group in his article Hidden gems to be found beyond the main players.

A couple of months ago in the doom and gloom JBH and Oroton were standout value in Consumer Dicretionary sector.

I would be interested to hear your thoughts on undervalued companies or sectors.


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## robusta (9 September 2010)

OK I guess by definition a contrarian thread will never be popular. I thought I might list a couple of investments I have made that might generate some interest. I understand it is a fine line between value investing and contrarian investing but here goes:
FGE Forge Group. OK these guys are the flavour of the month but when shares purchased from mid- April to late May we were in the middle of mining tax, soverign debt and talk of asset bubbles in China.
Average price paid  $2.582
Price Today           $3.71
Paper Profit           43.7%
Dividend to be paid $0.05

JBH JB HiFI. JBH also look good but when purchased mid June things were not looking good (read above minus mining tax)
Average price paid  $18.636
Price Today           $21.81
Paper Profit           17%
Dividend received    0.33

FRI Finbar Group. To quote Comsec Market Bulletin regarding sharemarket sectors " Real Estate  -  Investors are not ready to embrace commercial property " All other sectors except IT are rated index weight or over weight.
Purchased early this month
Average price paid  $1.061
Price Today           $1.025
Paper Loss            -3.4% I hope it gets cheaper so I can buy some more.


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## ParleVouFrancois (9 September 2010)

Hey robusta, a somewhat personal question here and a bit off topic, but are you a fan of Roger Montgomery? I swear you two have the same picks, you even talk similarly. You might even be Roger, who knows!  Anyway, I'm a big fan of his style of investing as well, high returns on equity etc, though I think it's a bit 'stiff', as in he plays by his rules and never really bends them to go for the smaller caps etc, but obviously that's working for him and he's probably quite wealthy now .

Anyway, for my "contrarian" pick I'm long GDO, or gold one international, a gold producing company based in South Africa, market cap of 200 million, producing about 80,000 ounces of gold a year, and cash costs of 300-400 per ounce. Excellent value. I'm not sure if that makes it "contrarian" as gold is a pretty popular theme against the backdrop of the "GFC Mark II", however it hasn't had much of a run up compared to it's peers, and the 200 market cap should be more like 500 million imo, due to the production rate and cost of production. So I'd call it a contrarian pick in the gold sector, due to it's underperformance when compared to it's gold producing peers, such as RMS.

DYOR etc etc.


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## robusta (9 September 2010)

Ok you got me ParleyVouFrancois I am a big fan of Roger Montgomery and yes I follow a lot of his stock picks however I am very happy to go for smaller caps ONT is a example that I hold.
Good luck with GDO however I am not sure how to value it as I don't know where the gold price is going. (maybe I am Rogers ventriliquist doll). Got burnt holding ERA personally I would rather hold mining services than the miners themselves.
The only problem I have had trying to follow Roger Montgomerys investment style is learning patience and waiting for the price to be a decent discount to intrinsic value.


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## explod (9 September 2010)

Being contrarian is just that and it is gambling.

Fundamentals and technicals have their place but the real deal is trend following.  ie. the hottest thing (commodities, financials, materials, real estate, etc etc in its turn and in its time) to back it the hottest sector and then the stock with the best background on all points and its trend.

One of the most valuable books I ever read for investment was, "Trend Following" by Michael Covel.  I think it was published about 05, my copy is as usual on loan.

The big issue is *sentiment*.  It is why the world markets and our All Ords follow the Dow like a little puppy wagging its tail.  Think about it, sentiment drives the herd, half the kids that followed the beatles did so because that was the thing amongst the peer group.  Observed the frenzie of it first hand.

Go figure, but that's it and has rewarded me well since I got on board.  "The trend is your friend untill the bend".

The idea that there is easy and fast money is a pipe dream, steady as she goes on a solid company in a solid trend.  

In my very humble opinion of course.


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## robusta (9 September 2010)

explod said:


> Being contrarian is just that and it is gambling.
> 
> Fundamentals and technicals have their place but the real deal is trend following.  ie. the hottest thing (commodities, financials, materials, real estate, etc etc in its turn and in its time) to back it the hottest sector and then the stock with the best background on all points and its trend.
> 
> ...




Guess I am very firmly in the Fundamentals camp it just seems logical to me. I notice you look for solid company in a solid trend how to you define / find solid companies?
With trend investing how do you detect over valued companies, sectors and / or markets ? eg ABC Learning, Dot Com bubble.
Not advocating easy or fast money I have been very lucky with FGE but I also had to have patience and confidence in the intrinsic value as I started buying @$2.95 and kept on buying all the way down to $2.38. FRI may take years to record large gains but I will be happy to hold as I like the fundamentals.


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## suhm (9 September 2010)

With forge if you bought it at 30-50c i'd agree you were being contrarian, but above $2 it was in a huge uptrend already my .


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## robusta (9 September 2010)

Could not disagree more. The companies I have invested in are quality companies. They all share high ROE, little or no debt and were purchased a dicount to intrinsic value.
I got lucky with FGE and JBH as the market realised how undervalued they were and the sp has increased quickly giving a large paper profit in a short period of time. As for FRI I don't care about the sp as I believe over time it will have to rise to reflect intrinsic value and rising profits, may take 2 months, may take 2 years while I am waiting I will be happy to take dividends and keep looking for more out of fashion contrarian quality companies.


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## explod (9 September 2010)

As you are probably aware I follow the gold up trend.  That to me is one of the strongest sectors as it has gone up on average more than 17% every year since 2001.   The GFC caused all stocks to fall, gold stocks included.  The GFC also highlighted some of the fundamental problems with currencies and reinforced to me why the gold price would continue to rise.

I could give you countless examples but OGC jumps to mind as a very good one, I also liked it as being a NZ mine it has no soveriegn risk.  OGC was beaten down to 25 cents but when it returned to 50 cents anyone could see the trend was back on.  What a great trade for holders.  I sold mine at $1.10 to something I felt better (but that's life.)   However to make these sorts of decisions you need to go to the books (like the one I mentioned) and plan a strategy around, good fundamentals, the right sectors and the right entry exits and reasons for staying with trends.


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## robusta (9 September 2010)

suhm said:


> With forge if you bought it at 30-50c i'd agree you were being contrarian, but above $2 it was in a huge uptrend already my .




Maybe you are right I don't really look at trends all I know is when I started buying the sp was heading down maybe if I was more patient I could have bought at a cheaper average price.
There are similarities between value and contrarian investing (maybe they are the same thing different name) and it would not surprise me if you could achieve the same results with trend investing.


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## So_Cynical (9 September 2010)

WD robusta...you caught a nice bottom with JBH for sure, Forge i don't watch so i wont comment, Finbar well im a big fan of the real estate stocks at the moment  - trend following V value buying V bottom buying it can often mean all 3 trading the same stock for different reasons at different times with different objectives.

Its all about what we are comfortable with...i could never trend follow :crap: i get a shiver down my spine even thinking about it.



explod said:


> However to make these sorts of decisions you need to go to the books (like the one I mentioned) and plan a strategy around, good fundamentals, the right sectors and the right entry exits and reasons for staying with trends.




Mate i brought TRY at 0.77 and MDL at 0.38 and i didn't need to read a book on trend following to make that decision and i certainly didn't buy them because they were trending up...i brought the bottoms.



robusta said:


> There are similarities between value and contrarian investing (maybe they are the same thing different name) and it would not surprise me if you could achieve the same results with trend investing.




Most Trendy s buy the trend...not the stock, its all about the price action.


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## Julia (9 September 2010)

explod said:


> Being contrarian is just that and it is gambling.
> 
> Fundamentals and technicals have their place but the real deal is trend following.  ie. the hottest thing (commodities, financials, materials, real estate, etc etc in its turn and in its time) to back it the hottest sector and then the stock with the best background on all points and its trend.
> 
> ...



I absolutely agree, explod.  You can buy the greatest company ever, with the best fundamentals but if market sentiment isn't with you, the SP is not going to rise and you are simply not going to see any capital growth.     


So_Cynical said:


> trend following V value buying V bottom buying it can often mean all 3 trading the same stock for different reasons at different times with different objectives.



Yes, you would often be right about that.



> Its all about what we are comfortable with...i could never trend follow :crap: i get a shiver down my spine even thinking about it.



Ah, So Cynical, here we go on the same merry go round again.
I likewise get shivers down my spine thinking about holding a stock bought just on fundamentals, trying to persuade myself that the dividends and franking are enough to offset the falling share price.

Good that we can all be comfortable with what suits us best.



> Most Trendy s buy the trend...not the stock, its all about the price action.



Well yes, but nonetheless I wouldn't be buying just the trend without checking  such things as debt levels, company background, directors, history of EPS, DPS etc.  In other words, always am sure to buy a solid company but one which has an uptrending SP.


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## robusta (9 September 2010)

Julia I respect a lot of your opinions do you really think market sentiment is a permanent thing?
If you can buy the best company ever with the greatest fundamentals when sentiment is against it surely you are going to buy at a great price and sooner or later the market can no longer ignore the great returns the company will be giving its shareholders and sentiment will change.


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## suhm (9 September 2010)

The problem if there is no catalyst for the market to bridge the gap between what you think the intrinsic value is and the current market price there is no reason why the stock will not continue to trade at that discount. But in the interim there is a huge opportunity cost associated with holding the stock if it just goes sideways and even more so if it goes down.


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## So_Cynical (9 September 2010)

suhm said:


> The problem if there is no catalyst for the market to bridge the gap between what you think the intrinsic value is and the current market price there is no reason why the stock will not continue to trade at that discount. But in the interim there is a huge opportunity cost associated with holding the stock if it just goes sideways and even more so if it goes down.




Its the time frame...show me a 1 year chart of a stock not rising (continuing to trade at a discount) you cant, and that's because there's always someone buying/selling, there's always someone like me that looks at XYZ and thinks Dude! XYZ has 250 million in cash, no debt, making 3 million a week in profit from a plant with a 1 billion dollar replacement value, and a market cap of 800 mill....im buying!


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## Julia (9 September 2010)

robusta said:


> Julia I respect a lot of your opinions do you really think market sentiment is a permanent thing?
> If you can buy the best company ever with the greatest fundamentals when sentiment is against it surely you are going to buy at a great price and sooner or later the market can no longer ignore the great returns the company will be giving its shareholders and sentiment will change.



Robusta, I understand the principle, but for me it's about having my capital working to best effect all the time.  So if funds are tied up in a stock that's falling or trading sideways, I'm just not comfortable with that when there are usually some stocks around that are doing better.  It's about opportunity cost as Suhm describes below.

Or sometimes I just prefer to stand aside, especially when cash rates are OK.
Probably also has to do with one's age and whether or not you're generating all your income from your capital, as distinct from investing on the side when you have a full time job.  My first priority is to preserve my capital and existing profits.



suhm said:


> The problem if there is no catalyst for the market to bridge the gap between what you think the intrinsic value is and the current market price there is no reason why the stock will not continue to trade at that discount. But in the interim there is a huge opportunity cost associated with holding the stock if it just goes sideways and even more so if it goes down.


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## basilio (10 September 2010)

I see a large part of the problem as organizations and markets which make money from share trading rather than the companies that are represented by the shares.

The theory of the stock market is that companies float with a prospectus, investors buy shares based on the story and the quality of the management. Again in theory the company proves commercially successful  -  or fails- and the result is reflected in the SP and/or dividends.

The reality ? I think the stock market resembles a giant casino with hundreds of mini games. Many are bent and almost all with the house taking it's cut.

In this reality the stock brokers and  stock markets are forever wooing punters to buy shares because 

1) They get commissions on sales 
2) They are selling shares for companies and get commissions on successful placements  
3) The owners of the stack market get wealthy on the turnover.

It doesn't actually matter a hill of beans* what* gets sold , or how worthwhile it is.  Every sale rings a commission regardless of the quality of the stock. That should make one think.

Again in this reality if someone can just tell a good enough story to get enough people to believe a stock will be a winner *that belief alone* will encourage enough people to jump in and create the price rise that will give the quick buck. We call this ramping don't we ? Or it could be market sentiment.

And sitting in the middle of all this are the people who establish companies with a pitch and a prospectus, give themselves millions of shares  for their efforts and then turn these paper assets into real dollars if they can convince  enough punters to jump in. 

*All of this will make big, quick  bucks*. You would have to be a right mug to pass the easy money for the hard uncertain work of actually building a profitable business when it could be so much easier to play this game.

And this is the cornerstone of our economic system and our financial security.

way too late. Lets pack this in...:


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## Bushman (10 September 2010)

basilio said:


> I see a large part of the problem as organizations and markets which make money from share trading rather than the companies that are represented by the shares.
> 
> The theory of the stock market is that companies float with a prospectus, investors buy shares based on the story and the quality of the management. Again in theory the company proves commercially successful  -  or fails- and the result is reflected in the SP and/or dividends.
> 
> ...




I take it you do not own shares then? 

For all these sentiment investors, remember that an asset value is simply the present value of its future cashflows, discounted at rate of return that compensates you, the shareholder, appropriately for the risk you are taking on. 

It is actually quite simple and contrarian plays for fundamentally sound companies will always deliver a profit in the longer run. This is how you make money in the sharemarket and everyone on this forum should be aiming to take advantage of undervalued shares. That is what share market participants do. 

If you lose money in the share market, you have stuffed up the cash flow forecasts or paid too much for the risk assumed. Simple as that. 

Get a grip guys. You are prima facie examples of why retail investors lose money in the sharemarket - buy at the wrong time, sell at the wrong time, capitulate at the wrong time, take bad advice etc. Its all emotion, no reason. 

Robusta - good call re commercial outside the top 10 REITs (which are at fair value now). The Australian commercial property market has sailed through the GFC when compared to past downturns. This is due to the strength of the Australian economy. Valuations, a lagging indicator, will start the reflect this improved outlook. Watch out for refinancing pressures though as the banks are still playing hard ball with the train wrecks.


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## skyQuake (10 September 2010)

So_Cynical said:


> Its the time frame...show me a 1 year chart of a stock not rising (continuing to trade at a discount) you cant, and that's because there's always someone buying/selling, there's always someone like me that looks at XYZ and thinks Dude! XYZ has 250 million in cash, no debt, making 3 million a week in profit from a plant with a 1 billion dollar replacement value, and a market cap of 800 mill....im buying!




Any of the LICs


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## nioka (10 September 2010)

basilio said:


> I see a large part of the problem as organizations and markets which make money from share trading rather than the companies that are represented by the shares.
> 
> The theory of the stock market is that companies float with a prospectus, investors buy shares based on the story and the quality of the management. Again in theory the company proves commercially successful  -  or fails- and the result is reflected in the SP and/or dividends.
> 
> ...




Agree 99% As I say "Pyramid selling"

However I dont agree that it is too late and we should pack it in. Realise it is happening and will not change much in the short term. Ride with the punches and use them to your advantage.


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## doogie_goes_off (10 September 2010)

The quickest way to make a million is take $1 off a million people. The punter mostly loses out to the middle man.


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## robusta (10 September 2010)

suhm said:


> The problem if there is no catalyst for the market to bridge the gap between what you think the intrinsic value is and the current market price there is no reason why the stock will not continue to trade at that discount. But in the interim there is a huge opportunity cost associated with holding the stock if it just goes sideways and even more so if it goes down.




We may have to agree to disagree on this one suhm.

Yes the stock may trade at a large discount but in my opinion this should be more than compensated for when price does catch up to value particularily if you are invested in a company with a rising intrinsic value.

As for opportunity cost when following the trend do you ever have stocks that plateau or reverse trend with its own opportunity cost risk plus extra brokerage, taxes ect ?


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## suhm (10 September 2010)

I actually don't trend follow, but now I look for a reason for the market to bridge the gap, I don't have the capital base to hold stocks for years and now I'm willing to miss the first 10-20% before buying in.


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## robusta (10 September 2010)

suhm said:


> I actually don't trend follow, but now I look for a reason for the market to bridge the gap, I don't have the capital base to hold stocks for years and now I'm willing to miss the first 10-20% before buying in.




Ok I think I understand how this may work for you. You find a quaility undervalued company and then wait for some positive macro economic, industry or company specific news before buying. Is that correct?


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## So_Cynical (10 September 2010)

skyQuake said:


> Any of the LICs




Any of the LIC's...i follow a heap of LIC's and most of them offer a easyish 8 or 12% bottom to top as they drift sideways...BKI and ALF great examples of that over the last 12months, but sure i can see where your coming from as they are both trading under asset backing (as pretty much all LIC's do) and both trending down (sideways at best) over the last 12 months.

LOL probably makes ALF look like a good buy. 



suhm said:


> I don't have the capital base to hold stocks for years and now I'm willing to miss the first 10-20% before buying in.




I've always wondered who was on the other side of my trades when im exiting after a 10 to 20% run up from the bottom...and now i know.


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## robusta (29 September 2010)

robusta said:


> OK I guess by definition a contrarian thread will never be popular. I thought I might list a couple of investments I have made that might generate some interest. I understand it is a fine line between value investing and contrarian investing but here goes:
> FGE Forge Group. OK these guys are the flavour of the month but when shares purchased from mid- April to late May we were in the middle of mining tax, soverign debt and talk of asset bubbles in China.
> Average price paid  $2.582
> Price Today           $3.71
> ...




It's been about 3 1/2 weeks since the above post and I thought I might update my little contrarian portfolio's progress. After the above post I recieved a bit of feedback from trend followers particularily regarding the loss with FRI with warnings of opportunity costs, the trend is your friend ....
FGE
Average price paid  $2.582
Price Today           $4.07
Paper Profit           57.6%
Dividend recieved   $0.05

JBH
Average price paid  $18.636
Price Today           $21.13
Paper Profit           13.4%
Dividend received    0.33

FRI
Average price paid  $1.061
Price Today           $1.025
Paper Profit            17.8% I hope it gets cheaper so I can buy some more


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## ParleVouFrancois (29 September 2010)

Surely that's a typo robusta (FRI price)? Either that or my eyes are broken again and I need new glasses!

EDIT: Checked on ASX just then, 1.25 nice buy there.


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## So_Cynical (29 September 2010)

robusta said:


> It's been about 3 1/2 weeks since the above post and I thought I might update my little contrarian portfolio's progress. After the above post I recieved a bit of feedback from trend followers particularily regarding the loss with FRI with warnings of opportunity costs, the trend is your friend ....
> FGE
> Average price paid  $2.582
> Price Today           $4.07
> ...




Yeh but its a little like...what hasn't gone up in the last 3 and a half weeks.


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## Julia (29 September 2010)

So_Cynical said:


> Yeh but its a little like...what hasn't gone up in the last 3 and a half weeks.




Excellent point.  If there had happened to be a series of bad news events from the US, and/or here, the market would likely have gone down instead of largely up.

This is not to rain on your parade, but just to keep a check on the macro economic factors involved.  Hope your picks continue to do well.


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## robusta (29 September 2010)

So_Cynical said:


> Yeh but its a little like...what hasn't gone up in the last 3 and a half weeks.




Fair point but I think FRI may have outperformed the market.



Julia said:


> Excellent point.  If there had happened to be a series of bad news events from the US, and/or here, the market would likely have gone down instead of largely up.
> 
> This is not to rain on your parade, but just to keep a check on the macro economic factors involved.  Hope your picks continue to do well.




Thankyou Julia and yes once again I don't discount a bit of luck in the timing.
If the market had gone down instead of up I probably would have bought more of this business.

"Over long periods of time, the share price of an extraordinary business tends to follow the increasing intrinsic value of that business." Roger Montgomery

So following on with that logic I valued all three companies at a discount to intrinsic value with that value rising over time before buying. When bad macro economic news causes that sp to drop I check my calculations and buy more of a good thing at a greater discount to intrinsic value. This worked well with FGE.

Thought I might have to wait longer than 3 weeks for FRI to start to appreciate but still think more to come....


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## robusta (6 December 2010)

robusta said:


> OK I guess by definition a contrarian thread will never be popular. I thought I might list a couple of investments I have made that might generate some interest. I understand it is a fine line between value investing and contrarian investing but here goes:
> FGE Forge Group. OK these guys are the flavour of the month but when shares purchased from mid- April to late May we were in the middle of mining tax, soverign debt and talk of asset bubbles in China.
> Average price paid  $2.582
> Price Today           $3.71
> ...




Almost three months since the above post time to update and I have just added another holding to this portfolio

DWS Advanced Business Solutions Limited. DWS on the 1/12/10 announced a reduced EBITDA forecast due to reduced work for a client in the telecommunications sector. The sp plunged from ~ $1.55 to ~ $1.25 in two days.
DWS Advanced Business Solutions Limited
Average price paid  $1.294
Price Today           $1.27
Paper Loss            -1.4% 

FGE Forge Group
Average price paid  $2.582
Price Today           $4.59
Paper Profit           77.8%
Dividend received $0.05

JBH JB HiFI
Average price paid  $18.636
Price Today           $18.69
Paper Profit           0.3%
Dividend received    0.33

FRI Finbar Group
Average price paid  $1.061
Price Today           $1.31
Paper Profit            23.5%


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## ParleVouFrancois (6 December 2010)

Hey Robusta, you should check out a thread by SKC, "SKC fundamental positions" or something, his method appears to differ to yours a little (more of a short term focused arbitrage sort've gig going), and both differ from my 'value investing' style of deep value plays (CFE and LNC 1 or 2 months ago good examples of the types of companies and at what prices I like to buy). Just a suggestion to have a look, it's a good read, and you might look to branch out a little from ol' Roger Montgomery's Value-Able method of valuing stocks .


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## robusta (6 December 2010)

ParleVouFrancois said:


> Hey Robusta, you should check out a thread by SKC, "SKC fundamental positions" or something, his method appears to differ to yours a little (more of a short term focused arbitrage sort've gig going), and both differ from my 'value investing' style of deep value plays (CFE and LNC 1 or 2 months ago good examples of the types of companies and at what prices I like to buy). Just a suggestion to have a look, it's a good read, and you might look to branch out a little from ol' Roger Montgomery's Value-Able method of valuing stocks .




Thankyou I will have a look - allways looking to learn. CFE and LNC are not really on my radar as I have trouble finding a value for mining / energy stocks.
I bought a heap of ERA earlier this year and only got out loosing half my shirt.

Mind you I have found the returns using ol' Roger Montgomery's Value-Able method of valuing stocks  to be very satisfactory so far.


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## skc (7 December 2010)

robusta said:


> Thankyou I will have a look - allways looking to learn. CFE and LNC are not really on my radar as I have trouble finding a value for mining / energy stocks.
> I bought a heap of ERA earlier this year and only got out loosing half my shirt.
> 
> Mind you I have found the returns using ol' Roger Montgomery's Value-Able method of valuing stocks  to be very satisfactory so far.




I always find it amusing that people debate about trend following vs fundamental with one camp usually avoiding the other like a plague...To me the best thing to do is to exercise both strategies. There will be times when the market is poised for breakout and every boat is raised by the rising tide, and there will be other times when the market is disgruntle and only fundamental analysis will throw up good investing / trading opportunities.

P.S. Bought some ERA last week which was definitely contrarian...


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## skc (7 December 2010)

ParleVouFrancois said:


> Hey Robusta, you should check out a thread by SKC, "SKC fundamental positions" or something, his method appears to differ to yours a little (more of a short term focused arbitrage sort've gig going), and both differ from my 'value investing' style of deep value plays (CFE and LNC 1 or 2 months ago good examples of the types of companies and at what prices I like to buy). Just a suggestion to have a look, it's a good read, and you might look to branch out a little from ol' Roger Montgomery's Value-Able method of valuing stocks .




My thread is actually quite boring... I was just attempting to show how one might find decent opportunities with some fairly elementary analysis. But actually more importantly I wanted to show how one needs an exit plan for fundamental positions. Too often people got hung up thinking they bought into good companies and just couldn't let their position go... hopefully I will able to show how that is done in that thread with some of the losses.

I posted some simple analysis here on DWS. https://www.aussiestockforums.com/forums/showthread.php?p=596170&highlight=dws#post596170

If I was a holder on fundamentals I would be selling, as clearly assumptions of growth made in the valuation model have proved incorrect. There is no reason to give management benefit of the doubt with your hard earn. With fundamental investment I prefer big fat margins of safety and not relying on optimistic scenarios playing out. For DWS it may well turn out to be a small bump on the road, but the truth is it is impossible to tell from the information available without an element of faith.


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## frankbaozhu (12 January 2011)

All of you guys have good points. There are multiple ways to earn big bucks in the market. It is as true to a value investor as to a day trader. The only question is if you are good enough. To me, Mr. Warren Buffett is the most successful one ever in this business, and it makes sense to follow his lead. Why bother to try other stuff while the method to success has been tested over forty years?


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## robusta (12 January 2011)

frankbaozhu said:


> All of you guys have good points. There are multiple ways to earn big bucks in the market. It is as true to a value investor as to a day trader. The only question is if you are good enough. To me, Mr. Warren Buffett is the most successful one ever in this business, and it makes sense to follow his lead. Why bother to try other stuff while the method to success has been tested over forty years?




That is my aim. IMO the technique I am following is the closest I can find to Buffett's. I would appreciate any input positive or negative however.


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## Tysonboss1 (12 January 2011)

frankbaozhu said:


> All of you guys have good points. There are multiple ways to earn big bucks in the market. It is as true to a value investor as to a day trader. The only question is if you are good enough. To me, Mr. Warren Buffett is the most successful one ever in this business, and it makes sense to follow his lead. Why bother to try other stuff while the method to success has been tested over forty years?




Number crunching only gets you so far, The investors broad knowledge of the economy, business etc.etc is what separates the Great value investors from the also rans.

Also many people claim to be value investors who clearly are not.


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## Tysonboss1 (12 January 2011)

explod said:


> Being contrarian is just that and it is gambling.




I would say that buying an overly popular stocks, at levels far above their intrinsic value that already has overly optimistic future earnings forecasts priced into them is more of a gamble than buying a company that in trading not far above it's net asset value while producing solid stable earnings but for some reason has been forgotten by the market.


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## Tysonboss1 (12 January 2011)

explod said:


> One of the most valuable books I ever read for investment was, "Trend Following" by Michael Covel.  I think it was published about 05, my copy is as usual on loan.
> 
> .




One of the most valueable books I ever read was "The Intelligent Investor" by Benjiman Graham. It was published over 50 years ago, my copy is never lent to any one it sits pride of place in my study allong with "Security analysis" by Gramham and Dodd and on recomendation from Warren Buffett I have a copy of "An inquiry into the wealth of nations" by Adam smith, which I have just started reading.


----------



## tech/a (12 January 2011)

frankbaozhu said:


> All of you guys have good points. There are multiple ways to earn big bucks in the market. It is as true to a value investor as to a day trader. The only question is if you are good enough. To me, Mr. Warren Buffett is the most successful one ever in this business, and it makes sense to follow his lead. Why bother to try other stuff while the method to success has been tested over forty years?






robusta said:


> That is my aim. IMO the technique I am following is the closest I can find to Buffett's. I would appreciate any input positive or negative however.




Guys Seriously!!

Buffett Bought Hathaway ---(The Whole Company) stripped it and turned it into something OF VALUE.
Buffett *OWNS* the Value.

He doesnt invest anywhere remotely close to anyone of us here.

*HE OWNS things not INVESTS in.*
When you *CONTROL* then your investing like Buffett.


It always amuses me when I see people convinced they're doing what Buffett does.
Not even CLOSE!


----------



## robusta (12 January 2011)

tech/a said:


> Guys Seriously!!
> 
> Buffett Bought Hathaway ---(The Whole Company) stripped it and turned it into something OF VALUE.
> Buffett *OWNS* the Value.
> ...





Long before Berkshire Hathaway Buffett invested in equities, to this day he still invests in companies like Wells Fargo, AMEX, Coke... in addition to the companies he owns outright. The investment decision remains the same - "do not own shares in a company unless you were happy to own the whole company"


----------



## Tysonboss1 (12 January 2011)

tech/a said:


> *HE OWNS things not INVESTS in.*
> When you *CONTROL* then your investing like Buffett.




Here is berkshires stock holdings, 

American Express Co. (13.1%)
Anheuser-Busch Cos. (4.8%)
Bank of America
BYD Company (9.89%)[7]
Carmax (10%)
The Coca-Cola Company (8.6%)
Comcast
Comdisco (38%)
ConocoPhillips (5.6%)
Costco Wholesale
Diageo PLC
Gannett
General Electric
GlaxoSmithKline
Goldman Sachs
The Home Depot
Ingersoll Rand
Iron Mountain
Johnson & Johnson (2.2%)
Kraft Foods (6%)[8]
Lowe's Companies
M&T Bank (6.1%)
MidAmerican (83.7%)
Moody’s Corporation (19.1%)
NRG Energy
Nike
Norfolk Southern Corp.
Outback Steakhouse
Posco (4.5%)
Procter & Gamble Co. (3.3%)
Sanofi-Aventis (1.3%)
ServiceMaster
Shaw Communications
SunTrust Banks
Tesco (2.9%)
Torchmark (3.2%)
UnitedHealth Group
Union Pacific Railroad
United Parcel Service
USG (19.0%)
U.S. Bancorp (4.4%)
WABCO
Wal-Mart Stores Inc. (0.5%)
The Washington Post Company (18.2%)
Wells Fargo (9.2%)
Wellpoint

Yes they have a big list of wholly owned companies as well but I think WB would have a problem with some one saying he is not an investor


----------



## tech/a (12 January 2011)

Berkshire made him
All you need is a Berkshire then you'll emulate Buffett.

A few here think they're Sorros!!

Me I think Im a Duck!


----------



## Tysonboss1 (12 January 2011)

tech/a said:


> Berkshire made him
> All you need is a Berkshire then you'll emulate Buffett.
> 
> A few here think they're Sorros!!
> ...




Warren Buffett to this day counts buying Berkshire Hathaway  as one of his biggest mistakes ever.

He bought a stake in the company because believed it was worth I think $12 a share and he was buying it for $9 and there was a rumour there would be a management buy out.

The management approach buffet and offered to buy his stock, 2 moths later he got a letter from management offering him 50c less per share than they had aggreed earlier so he got a bit emotional and took over the company just so he could fire the CEO.

Once he had control of the company he ran it for 19 years as it limped along making a small amount of profit which he directed out to other investments. When it finally become stopped earning and slipped into loss he broke up the company for what he could.


----------



## Tysonboss1 (12 January 2011)

tech/a said:


> Berkshire made him
> All you need is a Berkshire then you'll emulate Buffett.
> 
> !




http://www.youtube.com/watch?v=kJKZVP4tX4k

Here's the interview, Turns out it was only 15c that the manager tried to undercut buffett.

Its a good little video you should watch it.


----------



## tech/a (12 January 2011)

Well ill be a Duck!

But just listening to Buffett.
Do people seriously think they can emulate the guy!


----------



## robusta (12 January 2011)

tech/a said:


> Well ill be a Duck!
> 
> But just listening to Buffett.
> Do people seriously think they can emulate the guy!




Aim high. Why would I try to emulate the crowd?


----------



## Tysonboss1 (12 January 2011)

tech/a said:


> Well ill be a Duck!
> 
> But just listening to Buffett.
> Do people seriously think they can emulate the guy!




I think any investor who puts in the time and effort to study Buffett and Graham and some of the newer practitioners such as roger montgomery will become better investors, having better returns and taking less risks.

For me personally when I started studing value investing it just made so much common sense to. aspects of it I had used for years, but it still felt like some one had turned a light on and suddenly I could see a different world.

But No you can't simply watch an interveiw with buffett and think you know all you need to know about investing. I think becoming an Investor is somthing that takes time and study and should be regarded as somewhat of a university course, but like any course you have to be studying the right texts.

Buffett himself learned by emulating Benjiman Graham, He read the intelligent investor when he was 19 and he said it changed his whole concept on investing.

He then went and studied under graham at columbus university and later worked as a securities analylist at grahams hedge fund.


----------



## Tysonboss1 (12 January 2011)

tech/a said:


> Well ill be a Duck!
> 
> But just listening to Buffett.
> Do people seriously think they can emulate the guy!




http://www.youtube.com/watch?v=HCZMs01W0KM

This is an insightfull video


----------



## Tysonboss1 (12 January 2011)

Tysonboss1 said:


> Here is berkshires stock holdings,
> 
> American Express Co. (13.1%)
> Anheuser-Busch Cos. (4.8%)
> ...




I just relised that Warren has a stake in Bundaberg Rum, who would have thought.


----------



## robusta (13 January 2011)

The reason I started posting on this thread is this Buffett quote

"Be fearful when others are greedy. Be greedy when others are fearful."

Buffett is probably known as a value or growth investor but he is also a contrarian investor.

When AMEX had a scandal with one of it's subsidaries the sp plunged that was the time to buy. In the middle of the GFC BRK were buying banks.

That is why after identifying extraordinary companies the best time to buy is when "bad" news hits.


----------



## motorway (13 January 2011)

robusta said:


> The reason I started posting on this thread is this Buffett quote
> 
> "Be fearful when others are greedy. Be greedy when others are fearful."
> 
> ...




When Buffett sees opportunity  like the AMEX case

He can buy in such quantity and he now needs to.. That he can turn back the tide of fear..
And happy doing it  he is too....

Can you ? IF not .. Then you run the risk of buying too early..

Say you saw the Amex opportunity... And you wade in the mkt to buy  100 shares
and after you finished buying what will happen ?
Is it likely you could have bought cheaper ?

Contrarian works best near the turning points 
But Then its called good timing ( I am not talking about perfect timing )

Mr Mkt might want to sell 1,000,000,000s of shares
Now If you only want 100
You are not Mr Buffett Today''
You are maybe Mr Buffett when he was just starting out

With limited capital and no worry about getting filled

In Buying  100 shares it is not smart to fade Mr market
You have to work a bit more in harmony with him
And when he is exhausted ... Time your moves a little smarter

You have to be more a "Hitch Hiker"
and less a mover and shaker who decides now is the time to buy
and buys his 100 shares without taking  a little more care



Motorway


----------



## pixel (13 January 2011)

Brilliantly explained, motorway.

In another forum, we have a young whippersnipper, who refers to WB to justify just about any funnymental nonsense he tries to emulate. And scoffs at any experienced trader that uses Analysis techniques - be they technical or fundaments - to try and read, then *follow* the Market Makers.

I don't want to send him here - not sure either Forum Admin would appreciate that; nor do we have the need for a disrespectful loudmouth in this place.
But if you don't mind, may I quote you next time he compares himself to WB?

Thanks heaps, Pixel.


----------



## motorway (13 January 2011)

Yes  Pixel that is fine..

Motorway


----------



## frankbaozhu (13 January 2011)

motorway said:


> When Buffett sees opportunity  like the AMEX case
> 
> He can buy in such quantity and he now needs to.. That he can turn back the tide of fear..
> And happy doing it  he is too....
> ...




I have two things in mind after I read the your post. First, Mr. Buffett did not have the influence when he bought Amex in the scandal. Rather, he was a vague figure back then. Second, when something is cheap, it is cheap. Whether it goes up or down after your purchase does not change this fact. So if you buy cheap enough, why should you bother to worry if it will go down another 20%?

In investing, being big like Mr.Buffett is a curse rather than blessing. If you ever had run large sum of money, you will know it is not easy to run them.


----------



## frankbaozhu (13 January 2011)

Tysonboss1 said:


> I think any investor who puts in the time and effort to study Buffett and Graham and some of the newer practitioners such as roger montgomery will become better investors, having better returns and taking less risks.
> 
> For me personally when I started studing value investing it just made so much common sense to. aspects of it I had used for years, but it still felt like some one had turned a light on and suddenly I could see a different world.
> 
> ...




I could not agree more. It takes time and efforts to be really good at everything. I do not think anyone is identical to anyone else, and this is true in investing too. But I saw one common trait among those successful ones: THEY WORKED ****ING HARD TO BE WHERE THEY ARE!


----------



## tech/a (13 January 2011)

> Second, when something is cheap, it is cheap. Whether it goes up or down after your purchase does not change this fact. So if you buy cheap enough, why should you bother to worry if it will go down another 20%?




Its only cheap --- relative to the current information.
Often cheap is what its worth to the market and as price drops cheap becomes cheaper and can and often does find its *REAL* value at the "Cheap" level.
Ducati a poster here did a 2 yrs challenge on the "Value" investing theme. He's no Fundamental slouch.
Went broke in that time. The very lengthy thread is here somewhere on the forum.



> But I saw one common trait among those successful ones: THEY WORKED ****ING HARD TO BE WHERE THEY ARE!




I Dont know I saw another --- they worked damned SMART!


----------



## motorway (13 January 2011)

> why should you bother to worry if it will go down another 20%?




Who said the price you pay determines your future return  ?
And  what about the base ball analogies of waiting for the right PITCH

and why worry so much about Mr Market ?

Why   why ?

because   *   The price you pay determines your future return  *

Motorway


----------



## frankbaozhu (13 January 2011)

tech/a said:


> Its only cheap --- relative to the current information.
> Often cheap is what its worth to the market and as price drops cheap becomes cheaper and can and often does find its *REAL* value at the "Cheap" level.
> Ducati a poster here did a 2 yrs challenge on the "Value" investing theme. He's no Fundamental slouch.
> Went broke in that time. The very lengthy thread is here somewhere on the forum.
> ...




I still do not get it. Let's say you go into the supermarket and buy yogurt for 1 dollar. You have been buying this for a long time and today it is selling for 70c. If what you said is true, then this 70c is not cheap. It has to go down further and get even cheaper. Let's say the price is now 50c. But the thing is that, you still do not think 50c is cheap unless the price starts going up. 

For all the successful people I know in this business, they worked very hard. I am not sure if we meant the same, but work smart alone does not guarantee a successful career.

I am kind of lost in this discussion. Maybe I should stay in HotCopper.


----------



## nomore4s (13 January 2011)

frankbaozhu said:


> Second, when something is cheap, it is cheap. Whether it goes up or down after your purchase does not change this fact. So if you buy cheap enough, why should you bother to worry if it will go down another 20%?




Because 20% cheaper is 20% that could have been in your pocket when it is all said and done, and that is not even considering things like opportunity cost by having your money tied up in a losing stock.



frankbaozhu said:


> I still do not get it. Let's say you go into the supermarket and buy yogurt for 1 dollar. You have been buying this for a long time and today it is selling for 70c. If what you said is true, then this 70c is not cheap. It has to go down further and get even cheaper. Let's say the price is now 50c. But the thing is that, you still do not think 50c is cheap unless the price starts going up.




It is only cheap if you can re-sell it for more then 50c, if you can only sell it for 40c then it is not so cheap.



frankbaozhu said:


> For all the successful people I know in this business, they worked very hard. I am not sure if we meant the same, but work smart alone does not guarantee a successful career.




And hard work alone does not guarantee a successful career.


----------



## tech/a (13 January 2011)

frankbaozhu said:


> I still do not get it. Let's say you go into the supermarket and buy yogurt for 1 dollar. You have been buying this for a long time and today it is selling for 70c. If what you said is true, then this 70c is not cheap. It has to go down further and get even cheaper. Let's say the price is now 50c. But the thing is that, you still do not think 50c is cheap unless the price starts going up.




Exactly.
Using your analogy after a while the Yogurt would be worth Zero! But in a Company situation unless investors agree and start to buy at higher prices then your "cheap" valuation is entirely yours.



> For all the successful people I know in this business, they worked very hard. I am not sure if we meant the same, but work smart alone does not guarantee a successful career.




After 17 yrs I know the effort.
But it is in itself effortless in that its a joy to spend the time.
The money comes through understanding "What Makes the money" and importantly having a capital base which is comensurate with a business.
Making a Couple of K a day is vastly different to a couple of Hundered---*More to the point is how *you handle a drawdown of Thousands not hundereds.



> I am kind of lost in this discussion. Maybe I should stay in HotCopper.




You could and if you did you'd learn bugger all.


----------



## robusta (13 January 2011)

pixel said:


> Brilliantly explained, motorway.
> 
> In another forum, we have a young whippersnipper, who refers to WB to justify just about any funnymental nonsense he tries to emulate. And scoffs at any experienced trader that uses Analysis techniques - be they technical or fundaments - to try and read, then *follow* the Market Makers.




Don't we all use analysis techniques? I am just not entirely sure the best results are to be achieved by following the market (crowd) but I would be interested to learn.




pixel said:


> I don't want to send him here - not sure either Forum Admin would appreciate that; nor do we have the need for a disrespectful loudmouth in this place.
> But if you don't mind, may I quote you next time he compares himself to WB?
> 
> Thanks heaps, Pixel.





Just having a little trouble identifying the disrespectful loudmouth.


----------



## Tysonboss1 (13 January 2011)

It all comes back to what I was saying about there is more than just number crunching, you have to have a good understanding of business and economy etc.

it's not somthing that is quickly learned.

As  I said most people that have an opinion on Value investing don't actually have a good understanding of it.

It not about buying somthing that has gone down in value,

It's about buying good business at sensible prices. The fact is that if you own a portfoilio of good businesses that you have bought at sensible prices over time you will do well.

Granhams teachings in no way say that it is easy to become a successful value investor, In fact alot of his teaching are styled as warnings to people who are going to try and beat the market, he recomends 90% of investors limit them selves to index funds type investments.


----------



## KurwaJegoMac (13 January 2011)

robusta said:


> Don't we all use analysis techniques? I am just not entirely sure the best results are to be achieved by following the market (crowd) but I would be interested to learn.




You can have really good results following the market (crowd as you put it) - after all, what causes the SP to move? At a very basic level, if the market wants your stock then it will go up. If they don't want your stock it'll go down. Regardless of how cheap you perceive a stock to be or how great it's earnings potential is, at the end of the day it'll all come down to who wants it and how much they're willing to pay.

This applies not only to stock, but commodities, real estate, metals, etc - any asset you can think of. Therefore you can exploit supply/demand by following the market. Most people try and buy low and sell high - but there's nothing wrong with buying high and selling higher. 'The trend is your friend' and all that sort of jazz.


----------



## Tysonboss1 (13 January 2011)

Tysonboss1 said:


> Granhams teachings in no way say that it is easy to become a successful value investor, In fact alot of his teaching are styled as warnings to people who are going to try and beat the market, he recomends 90% of investors limit them selves to index funds type investments.




He does however believe that those that do have a good understanding of business and the right emotional attitudes to fluctuations and who dedicate time to correct security analysis can generate gains higher than the market average overtime while also taking less risk.

And this has been true for (real) value investors accross the world,


----------



## KurwaJegoMac (13 January 2011)

Tysonboss1 said:


> He does however believe that those that do have a good understanding of business and the right emotional attitudes to fluctuations and who dedicate time to correct security analysis can generate gains higher than the market average overtime while also taking less risk.
> 
> And this has been true for (real) value investors accross the world,




Quite right. Most of the people that get involved in investing have neither the time nor the inclination to properly educate themselves before risking their $$. Most people are just after a get rich quick scheme. They learn the hard way pretty soon


----------



## Tysonboss1 (13 January 2011)

KurwaJegoMac said:


> Quite right. Most of the people that get involved in investing have neither the time nor the inclination to properly educate themselves before risking their $$. Most people are just after a get rich quick scheme. They learn the hard way pretty soon




Yeah, and to these people a defensive approach of dollar cost averaging into an index fund and maybe buying their own home will still see a decent return over time.

If they try to time the market or any other number of silly mistakes without the correct understanding over time they will be sure to have worse performance than those simply taking a defensive approach.


----------



## tech/a (13 January 2011)

KurwaJegoMac said:


> Quite right. Most of the people that get involved in investing have neither the time nor the inclination to properly educate themselves before risking their $$. Most people are just after a get rich quick scheme. They learn the hard way pretty soon




Hang on you guys.
Theres far more than one way to skin a cat!
We dont have to Buffettologists!

Case 1
30 min last night --$1400 the average guys wage!




Fact 2
I have no idea what these companies do.
Todays P&L $3022.

Sure not in Buffetts League

If you think these are flukes
Think again!




Takes an hr a day and I wouldnt know what their balance sheets
had in them.


----------



## Tysonboss1 (13 January 2011)

tech/a said:


> Hang on you guys.
> Theres far more than one way to skin a cat!
> We dont have to Buffettologists!
> 
> ...




Know doubt there is more than one way to skin a cat. I am not saying you can't make money in other ways than valur investing.

But in my opinion, and it is just an opinion.

You don't have to trade to make money. You can Invest and if the policy in which guides your investing is sound you can have a results that are as good or better than even the best Traders over time, while taking less risk and spending less time glued to the computer screen making daily trades.

But as was said earlier we are all different, I for one certainly don't have the apptitude for trading.


----------



## KurwaJegoMac (13 January 2011)

tech/a said:


> Hang on you guys.
> Theres far more than one way to skin a cat!
> We dont have to Buffettologists!
> 
> ...





Sorry Tech/a you might have misunderstood me - when I was referring to not taking the time to educate yourself I wasn't talking about Buffetology specifically. More around educating yourself in your chosen analysis or investment vehicle first.

I.e. to be the trader you are, you had to educate yourself first. Most people just want to dish out money like you do, yet don't bother to learn skills like risk and money management, entry and exit techniques, etc.

That's what i'm referring to when I mean educating yourself.

(Personally im a TA too and don't subscribe to the Buffetology way - each to their own )


----------



## tech/a (13 January 2011)

Education is fine but *EDUCATION IN WHAT*?

How many 1000s think Fundamental or Technical analysis will bring you success?

How many study and implement *EITHER* and fail never to return again?

How many Dont have a clue what will guarantee them success in the long term regardless of method used.

How many study for years "stuff" which has no/little bearing the end result.


----------



## Tysonboss1 (13 January 2011)

tech/a said:


> Education is fine but *EDUCATION IN WHAT*?
> 
> How many 1000s think Fundamental or Technical analysis will bring you success?
> 
> ...




As i said for 90% of people a defensive stratergy involving index funds with dollar cost averaging is fine.

the other 10% can do what ever they want, for we it is a value based stratery.

What education?- Books- Intelligent investor, security analysis, Every warren buffett letter since the early 70's, 

Plus business experiance and gerally economy litereature adam smiths "the wealth of nations" is good.


----------



## robusta (13 January 2011)

KurwaJegoMac said:


> You can have really good results following the market (crowd as you put it) - after all, what causes the SP to move? At a very basic level, if the market wants your stock then it will go up. If they don't want your stock it'll go down. Regardless of how cheap you perceive a stock to be or how great it's earnings potential is, at the end of the day it'll all come down to who wants it and how much they're willing to pay.




Just occasionally the market will not want the stock in a excellent company and this is where IMO the best buying opportinities are. I make no effort to work out what the sp will do in the short term but believe that sooner or later the market will see the earnings growth and capital gains will follow. 




KurwaJegoMac said:


> This applies not only to stock, but commodities, real estate, metals, etc - any asset you can think of. Therefore you can exploit supply/demand by following the market. Most people try and buy low and sell high - but there's nothing wrong with buying high and selling higher. 'The trend is your friend' and all that sort of jazz.




No argument here. This is also a valid investment technique, just not the one I use.



tech/a said:


> Hang on you guys.
> Theres far more than one way to skin a cat!
> We dont have to Buffettologists!
> 
> ...




Not trying to change anyone's investment philosophies, just trying to refine mine. Best of luck to you tech/a.


----------



## tech/a (13 January 2011)

robusta said:


> Not trying to change anyone's investment philosophies, just trying to refine mine. Best of luck to you tech/a.




Well

Maybe its time to come over to the dark side?


----------



## johnnyg (13 January 2011)

tech/a said:


> $1400 the average guys wage!




Looking for workers?


----------



## robusta (13 January 2011)

tech/a said:


> Well
> 
> Maybe its time to come over to the dark side?




It would take a lot of convincing. I am very happy with my returns so far.


----------



## Julia (13 January 2011)

[



KurwaJegoMac said:


> You can have really good results following the market (crowd as you put it) - after all, what causes the SP to move? At a very basic level, if the market wants your stock then it will go up. If they don't want your stock it'll go down. Regardless of how cheap you perceive a stock to be or how great it's earnings potential is, at the end of the day it'll all come down to who wants it and how much they're willing to pay.



This says it all imo.   



> This applies not only to stock, but commodities, real estate, metals, etc - any asset you can think of. Therefore you can exploit supply/demand by following the market. Most people try and buy low and sell high - but there's nothing wrong with buying high and selling higher. 'The trend is your friend' and all that sort of jazz.



Again, agree entirely.





robusta said:


> Just occasionally the market will not want the stock in a excellent company and this is where IMO the best buying opportinities are. I make no effort to work out what the sp will do in the short term but believe that sooner or later the market will see the earnings growth and capital gains will follow.



And this is essentially where the difference lies between the two approaches, i.e. time frame.  Trend followers will make the most of a rising SP rather than wait for months/years until the market eventually recognises the magnificent value of your fundamentally brilliant company.

I do, however, really respect those people who are prepared to put so much thought into analysing what they term value companies.

And Tech/A:  I well remember that fascinating thread with Ducati.


----------



## pixel (14 January 2011)

robusta said:


> Don't we all use analysis techniques? I am just not entirely sure the best results are to be achieved by following the *market (crowd)* but I would be interested to learn.



Hi robusta,
I said I'd try and follow the *Market Makers* - definitely NOT the crowd.
For example, my trading method begins with evidence that some "deep pockets" hold the price down low while accumulating. That is usually a coordinated effort and definitely not random crowd behaviour.
Another way of separating actions by the Makers from those of the crowd is what's called a BMI, or "Big Money Indicator". 
Once I detect such "purposeful" activity, I look for evidence that they're all but finished and about to let the sp snap back up; initially, in the breakout from that accumulation range, they're taking out all and any half-undecided sellers that may have kept their sell orders a little above the price action. And that accounts for the high volume that we often observe on the day of the breakout.

I reckon that makes it obvious that this kind of activity is initiated by the Big Money leading as buyers; the retail masses are selling like good sheeple are expected to do. Then, when the breakout has occurred, the followers will start buying again - and complain about how fickle the Markets are and it's just not fair that they were made to sell low when they were so sure they should've held. ..... and then they start to buy again when the Big Money and its followers take part profit to finance the initial "price management."

All of that is quite transparent - and as legal as Sunday School,


----------



## burglar (14 January 2011)

pixel said:


> ...
> a BMI, or "Big Money Indicator".
> Once I detect such "purposeful" activity, I look for evidence that they're all but finished and about to let the sp snap back up; ...




You listen for the cranking of the handle ... and wait for the "Thwak"!


----------



## robusta (14 January 2011)

tech/a said:


> Well
> 
> Maybe its time to come over to the dark side?




Thought I might update this little portfolio to explain in part why I am happy with my chosen investment philosophy.



robusta said:


> Almost three months since the above post time to update and I have just added another holding to this portfolio
> 
> DWS Advanced Business Solutions Limited. DWS on the 1/12/10 announced a reduced EBITDA forecast due to reduced work for a client in the telecommunications sector. The sp plunged from ~ $1.55 to ~ $1.25 in two days.
> DWS Advanced Business Solutions Limited
> ...





This portfolio is starting to diverge a little from my personal portfolio as I have sold JBH to free up cash to participate in the FRI spp and to leave a little spare cash for the next bargain to turn up. For the sake of this exercise I will adopt a buy and hold strategy.

DWS Advanced Business Solutions Limited
Average price paid  $1.294
Price Today           $1.425
Paper Profit            10.1% 

 FGE Forge Group
Average price paid  $2.582
Price Today           $5.30
Paper Profit           105.3%
Dividend received $0.05

JBH JB HiFI
Average price paid  $18.636
Price Today           $19.21
Paper Profit           3.08%
Dividend received    0.33

FRI Finbar Group
Average price paid  $1.061
Price Today           $1.175
Paper Profit            7.00%

In my personal portfolio the initial investment in these companies was far from equally weighted.

FGE is my largest holding at 32.5% of my total portfolio after selling half my holdings at ~$4.15

My next largest holding is MCE currently 29.8% of my portfolio bought @ a average cost of $4.127 - no profits taken yet.

Not trying to sound smug just trying to explain why I am happy learning from Messers Graham, Buffett, Munger and Montgomery and co.


----------



## So_Cynical (14 January 2011)

motorway said:


> Say you saw the Amex opportunity... And you wade in the mkt to buy  100 shares
> and after you finished buying what will happen ?
> Is it likely you could have bought cheaper ?
> 
> ...




Motorway your post reads for me as " you cant pick bottom so don't try, just buy into the rally when others are buying, safety in numbers, don't stick your neck out etc.

While that's a valid strategy i cant help but think its also a little middle of the road and sheepish...in many threads we encourage people to think and do research, read books etc and think for themselves...and now here you are suggesting to just go with the flow, seems a little defeatist to me.

----------------------------


frankbaozhu said:


> I am kind of lost in this discussion. Maybe I should stay in HotCopper.




We expect a little more than what's usual at HC


----------



## tech/a (14 January 2011)

Not smug at all.
Success seems to be frowned upon here.
By paper profit you mean open Profit?

How long did you held these?

The reason I ask is *without* FRG results are pretty average.
How long will you hold a trade which "Goes off the boil"?
Why would you sell a trade?---IE take profit---or Loss?

Without being smug.
LEG returned 100% on capital in 5 days.
UNX 80% in 5 days as well.

Your doing well and if it suits you style of trading and Thats the way you know how to trade then Thats where you should stay.


----------



## motorway (14 January 2011)

Well how are you going to Pick a Bottom is maybe the point

And maybe was the point 

*Better how do You IDENTIFY A BOTTOM
*

Just knowing "your" values does not do it imo
Bottoms are not made by doing some sums

I do not want to follow the crowd
or fade the crowd.
that is too prescriptive and not suggestive of working in Harmony.

Sometimes the crowd has wisdom .. Sometimes it ihas totally lost it..

The key is to distinguish* Beginnings from endings*
there is a cycle and rhythm to things..

Many posts on ASF of mine  deal with this

This old quote I like was in one...

Psychology of the Stock Market

by G. C. Selden 

Ticker Publishing, New York, 1912
Talking about the older material
G C Seldon was Richard Wyckoff's associate editor
at the "ticker" the name was changed in 1912 to "The Magazine of Wall Street."






> The point we fail to remember is that public opinion in a speculative market is measured in dollars, not population. One man controlling one million dollars has double the weight of five hundred men with one thousand dollars each.
> 
> This is why the great body of opinion appears to be bullish at the top and bearish at the bottom. The multitude of small traders must be, as a plain necessity, long when prices are at the top, and short or out of the market at the bottom. The very fact that they are long at the top shows that they have been supplied with stocks from some source.
> 
> ...




No following there !

and this



> Traders respond to input based on the model of the market they have
> built for themselves. A positive response grounded in Wyckoff's
> theory of the Composite Operator will have distinctly different--and I
> would argue, consistently more profitable--outcomes than will a
> ...




The concept of the Composite Operator imo became watered down into MR market
To fully appreciate the difference is something those interested can study..



> Ben ) Graham's association with ( Richard ) Wyckoff began in 1919. When he Submitted an article
> entitled " Bargains in Bonds " to the Magazine of Wall Street and Quickly became a regular contributor.
> 
> Eventually Graham was offered the publication's chief editorship, with a generous salary and a sizable share of the profits. After considering the offer seriously ,he turned it down, perhaps influenced by the lure of a junior partnership that he received in 1920. Graham capitalized on his friendship with Wyckoff, however, to land his brother Victor a job in the periodical's advertising department.
> ...




Here is something From a time when RDW was making a  bit more use of value
( Times change )




> The " Ten Vital Trends " Wyckoff 1920
> 
> Corporate
> 
> ...




7 8 9 10 or relate to Mt market,,, But in the proper guise of the Composite Operator.


Nothing defeatist here  

Identify a  bottom
If you can
If you can't learn HOW

Then ask Tech/A what to do about it 

He will tell you what you do is what is important

Motorway


----------



## robusta (14 January 2011)

tech/a said:


> Not smug at all.
> Success seems to be frowned upon here.
> By paper profit you mean open Profit?




Yes



tech/a said:


> How long did you held these?




FGE about 8 months
FRI about 5 months
DWS about 6 weeks




tech/a said:


> The reason I ask is *without* FRG results are pretty average.




True but these positions are still open...time will tell



tech/a said:


> How long will you hold a trade which "Goes off the boil"?




Indefinately



tech/a said:


> Why would you sell a trade?---IE take profit---or Loss?




Only a few reasons:
1) The sp exceeds my calculation if the iv by a significant ammount.

2) I identify a better prospect

3) To rebalance my portfolio ie FGE was ~ 65% of my portfolio at one stage.




tech/a said:


> Without being smug.
> LEG returned 100% on capital in 5 days.
> UNX 80% in 5 days as well.
> 
> Your doing well and if it suits you style of trading and Thats the way you know how to trade then Thats where you should stay.




Thankyou. It works for me. My SMSF has returned 55.3% this calendar year after contributions, brokerage, fees and taxes.

I could never trade like you do re LEG and UNX


----------



## robusta (14 January 2011)

Tysonboss1 said:


> It all comes back to what I was saying about there is more than just number crunching, you have to have a good understanding of business and economy etc.
> 
> it's not somthing that is quickly learned.
> 
> ...




Just wanted to join the Tysonboss cheer squad. Hard to argue with most of his coments.


----------



## burglar (15 January 2011)

I try to beat the market !

In the bull run, I invariably succeed.

In the bear run, I invariably get savaged.

Happened to me three times now ... You'd think I'd learn??!


----------



## Tysonboss1 (15 January 2011)

motorway said:


> Well how are you going to Pick a Bottom is maybe the point
> 
> And maybe was the point
> 
> ...




I would say that you don't really need to pick the bottom, You just have to buy what makes sense.

 Remember value investors are not traders, we are not banking on selling the stock in a week a month or a year. We buy good businesses when they are at attractive prices and hold them as long as the business is operating well. I only sell something if fundamentally the business changes or it's price rises to a level well above it's fair value and the price is dangerously high or alternativly I may sell somthing to free up cash for somthing else thats better value.

If I can identify a company with a sound business and it's share price suffers falls, But after I re assess things I can see that all is still good and the earnings and cashflow is high compared to the share price, the dividend is high, mangaement are doing smart things with retained capital, I will buy some.

It does not matter to me if the share price falls after I have bought in because this may give me an opportunity to deploy some more capital at a later date.

This may sound crazy, But as a general rule I prefer prices going down, even I stocks I already have a holding in. Every month I have about $10,000 to deploy and I can deploy this much more effectively when share prices are lower.

Offcourse I can't stop the share prices rising, and traditional the bargains I find do double or triple in price, and that is nice. But I would have much prefered they stay at lower levels for a longer period.

I have posted this video in another thread, But the first 2mins 30 has some logic that is missed by most.

http://www.youtube.com/watch?v=9sgCYOeYrnw


----------



## Tysonboss1 (15 January 2011)

burglar said:


> I try to beat the market !
> 
> In the bull run, I invariably succeed.
> 
> ...




Are you a trader or investor.

First 1.5 mins on this video is good.

http://www.youtube.com/watch?v=3XlBrohrIUc


----------



## robusta (15 January 2011)

Tysonboss1 said:


> I would say that you don't really need to pick the bottom, You just have to buy what makes sense.
> 
> Remember value investors are not traders, we are not banking on selling the stock in a week a month or a year. We buy good businesses when they are at attractive prices and hold them as long as the business is operating well. I only sell something if fundamentally the business changes or it's price rises to a level well above it's fair value and the price is dangerously high or alternativly I may sell somthing to free up cash for somthing else thats better value.
> 
> ...




Very insightful video.

I have often noticed I buy into stocks in a falling market early.  Trying to wait for the bottom may cause me to miss out all together.

The way I invest after identifying *EXCEPTIONAL* businesses is to work out my estimation of the iv. If the price is 20% below my iv then I may alocate 5% of my portfolio to that business. If the price drops to 25% below iv then all things being equal and this still being a *EXCEPTIONAL* business then I might double my initial holding.


----------



## burglar (15 January 2011)

Tysonboss1 said:


> Are you a trader or investor.




Hi Tysonboss1,

I started out an investor but greed slowly descended over my plan.
I like to think I have a foot in each camp, if that's at all possible.

Currently holding ADN AXE CIG EXM EXMOA FMS

CIG was a straight out gamble, lost plenty, 
learnt plenty, they're in the bottom drawer!

EXM and EXMOA: I was unaware that they 
had "lost" near 900,000 ozs of gold reserves,
til I read it here at ASF!

I hold out great hope for the rest!

When Warren Buffet decided that energy was the way forward, 
he bought Burlington Northern Railways. 

I like the thinking but my pockets aren't that deep!


----------



## Tysonboss1 (15 January 2011)

burglar said:


> Hi Tysonboss1,
> 
> I started out an investor but greed slowly descended over my plan.
> I like to think I have a foot in each camp, if that's at all possible.




It is possible, But you should have one account for your investments and one for speculation. 

There is intelligent speculation as there is inteligent investing, but you have to have the accounts separate.

Here is grahams thoughts,

http://www.youtube.com/results?search_query=intelligent+investor+2&aq=f


----------



## Tysonboss1 (15 January 2011)

burglar said:


> EXM and EXMOA: I was unaware that they
> had "lost" near 900,000 ozs of gold reserves,
> til I read it here at ASF!




Speculating when you think your investing is the worst type of speculation.


----------



## Tysonboss1 (15 January 2011)

Tysonboss1 said:


> It is possible, But you should have one account for your investments and one for speculation.
> 
> There is intelligent speculation as there is inteligent investing, but you have to have the accounts separate.
> 
> ...




sorry, wrong video

http://www.youtube.com/watch?v=nlG0VPVwTfI


----------



## FxTrader (15 January 2011)

Tysonboss1 said:


> Speculating when you think your investing is the worst type of speculation.




Indeed, and I hasten to add that "investing" in penny dreadful mining stocks is also the worst type of speculation.


----------



## burglar (15 January 2011)

Tysonboss1 said:


> Speculating when you think your investing is the worst type of speculation.



Hi Tysonboss1,

EXM: I had traded them a lot, based purely on their JORC reserve of circa 1.2 million ozs. 
Three good holes, from memory, and an electronic database from previous owners.

All that being said, I agree it was a speccie,
as they were years away from production, i.e. profit. 

How was I to know the company had lied to the ASX about the JORC reserve?

 It's unheard of ... isn't it? 

An independent review downgraded the JORC reserve to roughly 279,700 ozs.


----------



## burglar (15 January 2011)

FxTrader said:


> Indeed, and I hasten to add that "investing" in penny dreadful mining stocks is also the worst type of speculation.




Indeed,,
I made mistakes!
These are what I got stuck with during the GFC. 
A 1 in 100 year event with no precedent!

They do not represent my ideal portfolio.

Not unlike a used car yard when the pretties have
been purchased and the trade-ins dumped in their place.


----------



## So_Cynical (15 January 2011)

robusta said:


> I have often noticed I buy into stocks in a falling market early.  Trying to wait for the bottom may cause me to miss out all together.




I think that alot of success can come in just trying to buy the bottom, buying at the lowest point is near impossible, however what i have found is that in attempting to buy  a bottom i actually end up buying close enough that i doesn't really matter that i missed the bottom or got in to early....most of the time.

Fact is that stock can only be brought at very cheap price levels by those actually trying to buy bottoms and or interested in value.


----------



## Bill M (15 January 2011)

I consider myself as a contrarian investor. Buying really good stocks at really cheap prices is my game. In 2009 at the height of the GFC I was 99% invested which going against the grain of most who were "waiting" for clear signs before buying. By the time they saw the signs the market had jumped 30%. I was very lucky at one stage, I put my last lousy 2k into my ASX 300 ETF on March the 9th. 2009. The rest of my money I had in at higher prices but for me it was value at those prices anyway. No one can pick bottom that's for sure.

At the end of the day you got to do what you feel is right. Some of those so called pros got it all wrong, VERY WRONG. I remember at one time in 2009 one of those pros said that now you should cash in and get out of stocks altogether, what friggin genius he was. Thinking for yourself and being contrarian could be very lucrative indeed.


----------



## burglar (17 January 2011)

I find myself on the back foot defending my position.
Stop!
Rewind!!
I want to be looking forward.

Forget what I said earlier, but thanks for the clarification!


(even Warren Buffett says he doesn't look backwards as it's unproductive).


----------



## burglar (19 January 2011)

Tysonboss1 said:


> http://www.youtube.com/watch?v=kJKZVP4tX4k
> 
> Here's the interview, Turns out it was only 15c that the manager tried to undercut buffett.
> 
> Its a good little video you should watch it.




Its a good little video. I watched it.

Turns out it was only 12.5c ... , 

And she's a good lookin' girl!


----------



## RandR (30 January 2011)

Bill M said:


> I consider myself as a contrarian investor. Buying really good stocks at really cheap prices is my game. In 2009 at the height of the GFC I was 99% invested which going against the grain of most who were "waiting" for clear signs before buying. By the time they saw the signs the market had jumped 30%. I was very lucky at one stage, I put my last lousy 2k into my ASX 300 ETF on March the 9th. 2009. The rest of my money I had in at higher prices but for me it was value at those prices anyway. No one can pick bottom that's for sure.
> 
> At the end of the day you got to do what you feel is right. Some of those so called pros got it all wrong, VERY WRONG. I remember at one time in 2009 one of those pros said that now you should cash in and get out of stocks altogether, what friggin genius he was. Thinking for yourself and being contrarian could be very lucrative indeed.




Excellent post, good advice ! 

Anybody have any contrarian plays there planning/looking at following this year 2011 ?


----------



## robusta (30 January 2011)

RandR said:


> Excellent post, good advice !
> 
> Anybody have any contrarian plays there planning/looking at following this year 2011 ?




If the markets put on 20% plus like some predict I will be looking to take some profits and move to cash.


----------



## Bill M (30 January 2011)

RandR said:


> Excellent post, good advice !
> 
> Anybody have any contrarian plays there planning/looking at following this year 2011 ?




Funny you should mention that RandR, I am looking at QBE right now as a contrarian play. It's also coming up for a dividend in March. Still waiting for even lower prices which may come in the next week but by looking at your signature you already hold them. Top up for you maybe?


----------



## So_Cynical (30 January 2011)

RandR said:


> Anybody have any contrarian plays there planning/looking at following this year 2011 ?




The three big contrarian stock plays i can see for this year are.

Real estate (especially those heavily exposed to residential)
Pharmaceuticals
Infrastructure

Also reckon there will continue to be easy money dividend plays in abundance.


----------



## Tysonboss1 (1 February 2011)

RandR said:


> Anybody have any contrarian plays there planning/looking at following this year 2011 ?




Telstra, Toll holdings among others


----------



## McCoy Pauley (1 February 2011)

So_Cynical said:


> The three big contrarian stock plays i can see for this year are.
> 
> Real estate (especially those heavily exposed to residential)
> Pharmaceuticals
> ...




I might venture to add consumer discretionary stocks to that list, So_Cynical.  As a wag remarked on YMYC a couple of weeks ago, the louder Gerry Harvey bleats about the state of things, the more one should load up on Harvey Norman (please do not take this as an endorsement to buy HVN - I neither hold nor am particularly interested in HVN).


----------



## tinhat (1 February 2011)

Tysonboss1 said:


> Telstra, Toll holdings among others




While I have no interest in owning TLS, I hope that a turn around in its price might pull the rest of the telecom sector up including my shares in IIN and perhaps even give me a reason to buy some TPN


----------



## Tysonboss1 (1 February 2011)

tinhat said:


> While I have no interest in owning TLS, I hope that a turn around in its price might pull the rest of the telecom sector up including my shares in IIN and perhaps even give me a reason to buy some TPN




I am not banking on a quick turn around in it's share price, But it doesn't need to have a quick share price recovery for this stock to generate a sound return. As a matter of fact, I think this stock has such a bad reputation that it may take some time for the share price to recover over $3, But who knows.


----------



## RandR (2 February 2011)

Bill M said:


> Funny you should mention that RandR, I am looking at QBE right now as a contrarian play. It's also coming up for a dividend in March. Still waiting for even lower prices which may come in the next week but by looking at your signature you already hold them. Top up for you maybe?




I got into QBE in January, Im expecting the SP to continue to go down until the report comes through very very shortly.  Very much keeping an eye on it for a top up, I agree i think you'll see lower prices over the next week or two most definitly. But a lot really depends upon the report thats due. The dividend is looking fairly attractive atm.


----------



## TheAbyss (5 February 2011)

Contrarian is one thing but you got to do your research to know when to risk it .

Interesting article regarding risks of contrarian buying which i found interesting.

http://www.theage.com.au/business/s...own-can-go-down-some-more-20110204-1agzb.html


----------



## Tysonboss1 (5 February 2011)

TheAbyss said:


> Contrarian is one thing but you got to do your research to know when to risk it .




That goes without saying with any investment.

Contrarian investing is not about buying things just because the go down, it's about examining the facts and finding areas where the market has over reacted or come to the wrong conclusions and take advantage of it.


----------



## So_Cynical (5 February 2011)

http://www.theage.com.au/business/sh...204-1agzb.html



			
				theage.com.au said:
			
		

> ■ In February last year Gunns fell 26 per cent in a day. In the next three months it fell another 60 per cent.




Hey i brought Gunns about a week after there big drop and for the next 3 months watched my trade go very bad on me  and then watched it come good over the next 2 months and eventually see it trade at about 20% over my buy in price.


----------



## ROE (5 February 2011)

TheAbyss said:


> Contrarian is one thing but you got to do your research to know when to risk it .
> 
> Interesting article regarding risks of contrarian buying which i found interesting.
> 
> http://www.theage.com.au/business/s...own-can-go-down-some-more-20110204-1agzb.html




That got nothing to do with being contrarian

That got to do with catching a falling knife or buy because of big drop

Contrarian is about identified good stock that are out of favor and not price correctly by the market.. Yes big drop maybe part of it but that just one consideration

Oops tb1 beats me to it -


----------



## robusta (20 February 2011)

If I was really a contrarian investor I should be taking profits now. The Dow Jones is heading almost straight up and almost every broker/analyst is predicting a 10-20% rally on the ASX this year.

I did sell my MND holdings recently but this is more to do with my policy of buying companies at a discount to IV and selling when the sp is at a substantual premium to IV. 

The rest of my portfolio is full of companies that IMO are not overpriced. (FGE, MCE, DWS, FRI, ISS and ONT). I did take some profits on ONT @ $4.15 but only to top up some other holdings. (5% of portfolio is speculation stocks).

The other thing to consider is capital gains tax, my two largest holdings FGE and MCE are 65.8% of my entire portfolio but if I were to take profits on these companies it would incur a significant CGT bill. Combine that with a positive long term view on both companies I will not diversify unnecessarily nor will I trade on short term macroeconomic indicators.


----------



## StumpyPhantom (13 May 2012)

ROE said:


> That got nothing to do with being contrarian
> 
> That got to do with catching a falling knife or buy because of big drop
> 
> Contrarian is about identified good stock that are out of favor and not price correctly by the market.. Yes big drop maybe part of it but that just one consideration




I thought a number of posts in the last few weeks on stocks justified reviving them under this thread, as being views of contrarian investors about to jump in.  The stocks discussed were:

LNC - Linc Energy
CKF - Collins Foods
WHC - Whitehaven Coal (this came from the AFR)
MBN - Mirabela Nickel
MCE - Matrix Composites and Engineering

Grateful any thoughts on other contrarian plays (especially if you're onto something that Orbis is doing in this space), or whether you think any of the above remain in the 'falling knife' category.


----------



## skyQuake (13 May 2012)

StumpyPhantom said:


> I thought a number of posts in the last few weeks on stocks justified reviving them under this thread, as being views of contrarian investors about to jump in.  The stocks discussed were:
> 
> LNC - Linc Energy
> CKF - Collins Foods
> ...




MBN should have a bit of a bounce in the short term at least. Though they have mentioned capital raising so gotta watch out for that too.


----------



## notting (13 May 2012)

skyQuake said:


> MBN should have a bit of a bounce in the short term at least. Though they have mentioned capital raising so gotta watch out for that too.



I think that trade was there on Thursday at the close. 
Even that would have been a bit of stab in the dark.
I'd find it rather hard to long after Fridays bounce.
Not sure what could make you think that?


----------



## So_Cynical (13 May 2012)

StumpyPhantom said:


> Grateful any thoughts on other contrarian plays.




The Insurers are all looking a little contrarian at the moment..with QBE and AMP perhaps looking like slightly better value than SUN .. 12 month comparison chart below. 
~


----------



## skyQuake (13 May 2012)

notting said:


> I think that trade was there on Thursday at the close.
> Even that would have been a bit of stab in the dark.
> I'd find it rather hard to long after Fridays bounce.
> Not sure what could make you think that?




Buying thurs close would indeed be stab in the dark. No edge, just gambling.
Its in dead cat bounce mode so long bias is far easier to play
Bought some fri, would be adding monday, but selling up-spikes


----------



## robusta (13 May 2012)

StumpyPhantom said:


> I thought a number of posts in the last few weeks on stocks justified reviving them under this thread, as being views of contrarian investors about to jump in.  The stocks discussed were:
> 
> LNC - Linc Energy
> CKF - Collins Foods
> ...




Perhaps we should look towards Europe, TSM or MUE?

Others may know of more ASX listed stocks with European exposure.


----------



## StumpyPhantom (13 May 2012)

robusta said:


> Perhaps we should look towards Europe, TSM or MUE?
> 
> Others may know of more ASX listed stocks with European exposure.




Thanks for the suggestion.  So the list of 7 is:

MUE - Multiplex European Units
TSM - Thinksmart Limited
LNC - Linc Energy
CKF - Collins Foods
WHC - Whitehaven Coal (this came from the AFR)
MBN - Mirabela Nickel
MCE - Matrix Composites and Engineering

IF there are any other suggestions, I would be grateful for them.  Otherwise, does anyone have a number 1 pick from the above (and why).  Alternatively, if anyone has a view that one shouldn't be on that list, please also say so.


----------



## StumpyPhantom (13 May 2012)

robusta said:


> Perhaps we should look towards Europe, TSM or MUE?
> 
> Others may know of more ASX listed stocks with European exposure.




Thanks for the suggestions.  The list of 7 starters is:

MUE - Multiplex European Units
TSM - Thinksmart Limited
LNC - Linc Energy
CKF - Collins Foods
WHC - Whitehaven Coal (this came from the AFR)
MBN - Mirabela Nickel
MCE - Matrix Composites and Engineering

Does anyone have a number 1 pick from this list (and why)?  Alternatively, would like to hear from you if one should be dropped off (or another added).


----------



## skc (13 May 2012)

StumpyPhantom said:


> Thanks for the suggestions.  The list of 7 starters is:
> 
> MUE - Multiplex European Units
> TSM - Thinksmart Limited
> ...




Here's a few I've been watching:

BTA
ZGL - probably same exposure as MCE
WTP
STB - potash was pretty for a while
DTE - at about 2x cash backing now
WEC
IAU
LYC 

Except BTA which is a biotech, 2 are mining services while the rest are all commodities. The last three have company-specific problems as well as general commodity headwind. 

Re MBN... there are deadcat bounces then there are voluntarily admin... risk would have to be at least 50% for me so even a 30% spike would only be a 0.6R trade for me.


----------



## StumpyPhantom (13 May 2012)

So the present list (apologies if I've missed any) is:

BTA - Biota Holdings Limited
ZGL - Zicom Group Limited
WTP - Watpac Limited
STB - South Boulder Mines Limited
DTE - Dart Energy
WEC - White Energy
IAU - Intrepid Mines
LYC - Lynas Corporation
MUE - Multiplex European Units
TSM - Thinksmart Limited
LNC - Linc Energy
CKF - Collins Foods
WHC - Whitehaven Coal
MBN - Mirabela Nickel
MCE - Matrix Composites and Engineering
QBE - QBE Insurance
AMP - AMP Limited

Is the consensus on MBN is that it should be eliminated from this list?


----------



## skc (15 May 2012)

skyQuake said:


> MBN should have a bit of a bounce in the short term at least. Though they have mentioned* capital raising *so gotta watch out for that too.




And there you go. They definitely left this a bit late, considering that 6 months ago, the share price was 5x today's price.


----------



## Chasero (15 May 2012)

skc said:


> And there you go. They definitely left this a bit late, considering that 6 months ago, the share price was 5x today's price.




Why do nearly all stocks get a huge PUMP and then a C/R?

Wonder how it'll open


----------



## StumpyPhantom (19 May 2012)

Little did I know, at the time of re-starting this thread on 13 May, that the XAO would break below its 200MA the next day.

So whilst it's a little difficult to continue describing stocks mentioned here as 'contrarian' when everything else is also tanking, it's still worth collecting in the one place that group of stocks that might be the first to present the best value when this 'dive' is over.

I've eliminated all the resources (and related) stocks on the basis that whatever global dive we come out of, demand for resources will lag behind at least 12 months, unless an exceptional case can be made for its retention.

So the list now is:

BTA - Biota Holdings Limited
ZGL - Zicom Group Limited
WTP - Watpac Limited
MUE - Multiplex European Units
TSM - Thinksmart Limited
CKF - Collins Foods
QBE - QBE Insurance
AMP - AMP Limited

Eliminated list:

STB - South Boulder Mines Limited
DTE - Dart Energy
WEC - White Energy
WHC - Whitehaven Coal
MBN - Mirabela Nickel
MCE - Matrix Composites and Engineering
IAU - Intrepid Mines
LYC - Lynas Corporation
LNC - Linc Energy

It's a pretty sad indictment of the Australian economy that any list of stocks without resources and energy looks pretty thin on the ground, so grateful any argument to put them back in (or indeed any additions of non-resources stocks to the list).


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## Ves (19 May 2012)

StumpyPhantom said:


> I've eliminated all the resources (and related) stocks on the basis that whatever global dive we come out of, demand for resources will lag behind at least 12 months, unless an exceptional case can be made for its retention.
> 
> So the list now is:
> 
> ZGL - Zicom Group Limited



 Isn't this one influenced by demand for resources to an extent?


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## So_Cynical (19 May 2012)

StumpyPhantom said:


> I've eliminated all the resources (and related) stocks on the basis that whatever global dive we come out of, demand for resources will lag behind at least 12 months, unless an exceptional case can be made for its retention.




Where were you in 2008? the resource stocks fell first and RECOVERED first...my first wave of profits back then was from gold stocks that had bounced 15 > 25% of their Aug > Oct 2008 lows.

Perhaps the biggest true contrarian punt at the moment is Gold and Oil.


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## skc (20 May 2012)

StumpyPhantom said:


> I've eliminated all the resources (and related) stocks on the basis that whatever global dive we come out of, demand for resources will lag behind at least 12 months, unless an exceptional case can be made for its retention.




Not sure this is true. The inherent leveraged nature of material stocks means that they will rise quickly if the commodity prices start rising. Mining services however will have some lag as project decisions take more time.


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## odds-on (20 May 2012)

DJS is on my watchlist. The share price is falling like a stolen car off a cliff. From my research there is going to come a point where if the share price keeps dropping it will be approximately the price of the DJS property assets. The contrarian in me does not believe in this death of retail fear, just think it is cyclical lows. If DJS can be purchased at approx property assets value i think this provides some margin of safety whilst one waits for the cyclical lows to end. My interpretation of the strategic direction presentation is that it will take a few years. My


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## odds-on (20 May 2012)

TFC?


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## StumpyPhantom (20 May 2012)

OK, so the updated list takes into account comments in the last 24 hours, re-inserting the resources stocks but keeping the mining services ones on the sidelines.


BTA - Biota Holdings Limited
WTP - Watpac Limited
MUE - Multiplex European Units
TSM - Thinksmart Limited
CKF - Collins Foods
QBE - QBE Insurance
AMP - AMP Limited
STB - South Boulder Mines Limited
DTE - Dart Energy
WEC - White Energy
WHC - Whitehaven Coal
MBN - Mirabela Nickel
IAU - Intrepid Mines
LYC - Lynas Corporation
LNC - Linc Energy
TFS - TFC Corporation
DJS - David Jones Limited

Eliminated list:

MCE - Matrix Composites and Engineering
ZGL - Zicom Group Limited

Anyone with gold and oil stocks that make this list?  

And just so that no-one is deluded that the above is a 'buy' list, here is some conventional wisdom/definition of being a contrarian, with the construction industry an example:

_There is a lot of value that can come from a contrarian investment approach. When Internet stocks were soaring in 1999 and early 2000, contrarians who decided that valuations were absurd, watched from the sidelines as market watcher called them out of touch for missing out on big gains. The contrarian had the last laugh, however, as those same market watchers watched with embarrassment as those gains vaporized quicker than they accumulated.

*The Intelligent Contrarian*
Yet, being a contrarian merely for the sake of going against the crowd is not smart, if there is no intelligent basis behind it. After all, the collective wisdom of a crowd can often be more useful than one individual's information; the market is usually an efficient arena. But every so often, market pessimism gets so extreme that emotions trump rational thinking. 

Today, the housing industry is so depressed that valuations are at rock bottom levels. To be sure, virtually any business that derives a significant portion of its sales from residential real estate, is losing money today and has been for a few years now; the picture doesn't look encouraging next year. As a result, very few people want to own housing related stocks and for good reason. A contrarian, at the minimum, will look a little closer to see if going against the grain here is a worthwhile endeavor. (Contrarian investors find value in the worst market conditions. For more, see Buy When There's Blood In The Streets.)

*The Bottom Line*
A contrarian bet can have a substantial payoff for patient investors, but offsetting the huge reward is finding out the crowd was right. Contrarian investors, by their nature, are very research intensive. Before going against the grain, make sure you are well equipped with facts. _


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## odds-on (20 May 2012)

ZGL on a US investing website

http://www.gurufocus.com/news/177403/zicom-group--zglau--extremely-mispriced-growth-business-


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## So_Cynical (20 May 2012)

odds-on said:


> TFC?




LOL so im not the only one looking at this hey...its a super punt though on paper doesn't look that bad, and has phenomenal potential...in 10 years time these guys could have 300 > 400 mill (my figures) in annual revenue just from actual forestry production.

TFC is Most certainly on my short list....but probably only for a half a position, money i can afford to lose.



StumpyPhantom said:


> Anyone with gold and oil stocks that make this list?




BPT
PGI


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## StumpyPhantom (20 May 2012)

So_Cynical said:


> LOL so im not the only one looking at this hey...its a super punt though on paper doesn't look that bad, and has phenomenal potential...in 10 years time these guys could have 300 > 400 mill in annual revenue just from actual forestry production.
> 
> TFC is Most certainly on my short list....but probably only for a half a position, money i can afford to lose.




The key to the 'contrarian' nature of this play seems to me to be when their first large-scale harvest is going to happen.

Does anybody know when this is scheduled?  

Their only money-making ATM seems to be selling more MIS and plots to big investors, but like the stupid ostrich-farming boom 15 years ago, it will only be viable once we're all able to tuck our bips in and eat every part of that bird for more than the $10k they charged for each such 'breeding bird'.


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## So_Cynical (20 May 2012)

StumpyPhantom said:


> The key to the 'contrarian' nature of this play seems to me to be when their first large-scale harvest is going to happen.
> 
> Does anybody know when this is scheduled?
> 
> Their only money-making ATM seems to be selling more MIS and plots to big investors, but like the stupid ostrich-farming boom 15 years ago, it will only be viable once we're all able to tuck our bips in and eat every part of that bird for more than the $10k they charged for each such 'breeding bird'.




Harvest of the first wood lots is coming up, acreage im not sure of but wont be much and will certainly build over the next 3 or 4 years...ill email them and ask for hectares by age class.

TFC along with SHV are the only MIS based stocks still going as far as i know :dunno: all the others went under, so the fear of investors in this sector is understandable....however TFC seems to have successfully moved away from the retail MIS funded model to a sophisticated investor one.

And paid out their traditional bank debts..have cash, and have a viable product that's both financially and environmentally sound on a real world forestry costs basis...and yet the share price has been in (trend) decline for almost 4 years.


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## StumpyPhantom (20 May 2012)

Qualified as a true contrarian then, with its own timetable and less subject to the commodities roller coaster.

The task now is to scrutinise the other candidates (and add others)


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## odds-on (21 May 2012)

So_Cynical said:


> LOL so im not the only one looking at this hey...its a super punt though on paper doesn't look that bad, and has phenomenal potential...in 10 years time these guys could have 300 > 400 mill (my figures) in annual revenue just from actual forestry production.
> 
> TFC is Most certainly on my short list....but probably only for a half a position, money i can afford to lose.




I was joking about TFC! To be honest, I cannot figure it out the deal with TFC, maybe I am stupid. From my research over the last couple of years it seems to get bad press and nobody seems to be able to explain the finances for my stupid brain to understand.


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## robusta (21 May 2012)

odds-on said:


> I was joking about TFC! To be honest, I cannot figure it out the deal with TFC, maybe I am stupid. From my research over the last couple of years it seems to get bad press and nobody seems to be able to explain the finances for my stupid brain to understand.




I have trouble working out the cash flow.


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## odds-on (2 June 2012)

odds-on said:


> I was joking about TFC! To be honest, I cannot figure it out the deal with TFC, maybe I am stupid. From my research over the last couple of years it seems to get bad press and nobody seems to be able to explain the finances for my stupid brain to understand.




I am stupid. TFS up approx 20%. What is going on


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