# F/A, T/A or Combo?



## ceasar73 (16 May 2007)

I am a newbie to this game. I  have been an ASF member for two weeks and have been reading past posts with great interest (Im hooked). I guess the main thing I have been trying to establish is whether I'm a F/A , T/A or combination of both. Forum members like( bullmarket,tech/a,edvanhalen,happy trader,bunyip,realist,duc...etc) all make great points - thus making my choice difficult. At the moment - I see the benefits of both methods so at this stage am leaning towards a combo of the two.

With property I am definitely a long term investor. However with shares I see myself as both an investor/trader, heck - why not collect and enjoy my fruits once and a while, cant leave everything to my children right? ;-}

At this early stage my gut feeling is that both f/a and t/a can work if one has common sense and is willing to put in the hard yards. 

The fundamentalists do loose me on one point however, I agree that the management of a company is super important and that it would be best to invest in a company with a great management team....BUT how does an investor make this assessment of a companies management team? Unless you have worked with them closely, I would suggest it is near impossible to pick a bad,good or great manager. I would love to hear how the fundies amongst us are able to do this?? Please let me know if I am missing something when it comes to assessing management teams. 

I am truly enjoying reading past posts and the recommended books in some of the threads. 

Thanks!

ceasar73.


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## tech/a (16 May 2007)

*Re: F/A,T/A or Combo?*

Analysis is simply the tools to paint the opportunity.

So if these tools were given to you and you made an F18 hornet would you think that youd then be able to fly it??

My point is its not just the tools!
In answer to your question.
Become an expert in something!
F/A T/A or Both.


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## ceasar73 (16 May 2007)

*Re: F/A,T/A or Combo?*

tech/a

I agree. However my question was to the F/A out there regarding management.

thanks.


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## bvbfan (19 May 2007)

Look at the managements ability to deliver on what they have said.

Of the companies I have followed and liked/invested in I could say that management test fails on most companies.

Either they promise something that doesn't occur or they keep pushing back the timeframe for delivery.

Under promise and over achieve may be something these people could learn.

Also look at the pay they receive, if you think they are doing a fair job for the money they receive?
Again the majority of them receive crazy amounts for not much delivery on the share price or forward movement of the company.


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## nizar (19 May 2007)

I just trade the price action.

Good management iv seen the SP rocket or get smashed.
Rubbish management iv seen the SP rocket or get smashed.

JORC announcement iv seen the sp get smashed.
JORC announcement iv seen the sp run like a champion.

Broker upgrades iv seen, the share price get smashed or bought up.

Do i need to know the reason what moves the share price?
NO.
Why?
Because the same cause maybe next time we dont get the same effect.
The only thing thats clear is that (if im long) if the share price goes up, i make money, if not, i lose money. It really is that simple.

Leave the analysis to the analysts who get paid for their "analysis", rather than their trading, we as traders, get paid by trading.


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## It's Snake Pliskin (20 May 2007)

nizar said:


> I just trade the price action.
> 
> Good management iv seen the SP rocket or get smashed.
> Rubbish management iv seen the SP rocket or get smashed.
> ...




I hear echoes of the book to forum kind 
I am interested in the highlighted in red sections. 

Could you explain "price action" and what it involves to trade it, and how is it different to trading price?
As a trader, what would be some pertinent considerations when faced with "price action" and "liabilities" of the cashflow kind?


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## nizar (20 May 2007)

It's Snake Pliskin said:


> I hear echoes of the book to forum kind
> I am interested in the highlighted in red sections.
> 
> Could you explain "price action" and what it involves to trade it, and how is it different to trading price?
> As a trader, what would be some pertinent considerations when faced with "price action" and "liabilities" of the cashflow kind?




Well yes what iv learnt from this forum is priceless and thanks to all for that.

Well what i mean by trading the price action, is that i use the price as my indicator whether to buy and sell. *Not just the price alone but the trend.*

I tend to look for stocks in which the price has "broken out" either from a long stage-1 ie. flat period where trading is between narrow ranges, such as FMG at $22.50-23.00 and AED at $4.50-5.00. These stage-1s can last a while so i wait for the first clear break above this resistance. Eg. the first white candle with AED on strong volume for this move didnt even tempt me, because thats happened before and it got smashed down. But the gap up and the candle into previous unchartered territory meant i had to buy. Or even a break through some historical resistance.

With these moves, basically the more historical the resistance, and the more times its been tested, the more impressive the break.

Also, be careful about placing your stops. I dont place stops in the market anymore, and use EOD stops, i pretty much trade end of day now.

Initially when i started trading i wanted to "daytrade" ie, buy and sell the same day, this cannot be done, at least not by me, and even buy/sell within a few days so you get more of the move, but still, even then, i dont think professionals really clean up by daytrading. With the hours spent in front of the computer, the transaction costs, the stress - its just not worth it.

TRading longterm trends is where the big money is to be made. You dont make quick money, and its much less of an adrenaline rush then those quickies, but im here to WIN (yeah i think thats straight out of a book, LOL).

I like using volume also for confirmation. If i see 2 stocks which have broken out, and capital only for one of them, thats when volume comes into play.

ALso what iv started doing is buying on the breakout a half parcel, and then topping up on the pullback. If the pullback is textbook, like THX was, then you get in after the bounce.

But if theres no pullback that just tells you the strength and momentum of the buyers. See OEL as an example.

Well thats explains your top red section.

The bottom one is just something iv read from Michael who has posted that and i think its rather self-explanatory.



> As a trader, what would be some pertinent considerations when faced with "price action" and "liabilities" of the cashflow kind?




As for this, im not sure what you mean, so maybe you can answer this one please snake, you clean up the markets big time thats pretty obvious, i just pick up the crumbs. Id be keen to hear your thoughts.

But thanks for the grilling, got me thinking...


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## It's Snake Pliskin (20 May 2007)

nizar said:


> Well yes what iv learnt from this forum is priceless and thanks to all for that.
> 
> Well what i mean by trading the price action, is that i use the price as my indicator whether to buy and sell. *Not just the price alone but the trend.*
> 
> ...




In answer to your forehand, how does price action, price bring home PAY to pay those bills etc? I was just relating the reality of bills etc to the world of paying for them using trading profits. 

One knows the life of a bill or debt, liability. But what is the life of a profit in the pocket? No one knows until in hindsight it is realised.

Basically, trading to pay bills before keeping profits is not as easy as books and people lead people to believe.

As an exercise what is your opinion of ROC oiler? I have already made up my mind on it. Is it a long or short?


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## Dutchy3 (20 May 2007)

Hi All ... for me TA and then if the chart looks like something I could have a relationship with I do FA in terms of understanding the business and making sure any corporate actions are receiving popular support.


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## nizar (20 May 2007)

It's Snake Pliskin said:


> In answer to your forehand, how does price action, price bring home PAY to pay those bills etc? I was just relating the reality of bills etc to the world of paying for them using trading profits.
> 
> One knows the life of a bill or debt, liability. But what is the life of a profit in the pocket? No one knows until in hindsight it is realised.
> 
> ...





Snake.
For me, circumstances are different, paying bills and day to day expenditures is from my working income (i got a day job) and the stock trading is for long term capital growth where everything is reinvested.

ROC looks good, clear uptrend, more volume on the updays compared to the downdays, i would not take a position now personally but rather see which way it breaks, its been sideways last 6 trading days and could go sideways for who knows how long, so i would wait for the breakout. But thats only because i trade a daily timeframe.


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## stargazer (20 May 2007)

Hi Nizar

Interesting area this PRICE ACTION.

With all the companies on the ASX what alerts you to the PRiCE ACTION of a company to start to look at it a bit closer?

What time frame do you put on it?

When do you Sell?

Do you take the days price on close and monitor if Higher than previous day etc.

Could you cite an example

Cheers
SG


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## nizar (20 May 2007)

stargazer said:


> Hi Nizar
> 
> Interesting area this PRICE ACTION.
> 
> ...





I basically look for breakouts, or even stocks which are consolidating in tight ranges. I saw NWE at .19 but it was still consolidating between .175-.19. So i kept it on the watchlist, when it closed above 20c and volume confirmation was there i got some at .205.

AED i saw it at $5. Damn it was there for ages. DIdnt touch it until it broke out. The first white candle of this run took it to $5.10 the close on volume, i wasnt convinced, this has happened before and it got smashed down into the $4s. So i waited for the next day, it gapped up and another white candle into blue skies, i knew i had to get it, so i bought at the next day open at 5.43.

I look at daily charts.
I sell when the initial stop is hit if not then i let them ride until an exit is triggered.

My exit differs for each system, one of them im using is a time stop.

Still very busy havent had time to work on systems development as yet, so basically im taking my short term trading style (which is discretionary with placement of stops according to support/resisance), but with a longer timeframe.


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## stargazer (20 May 2007)

Thanks Nizar

Cheers
SG


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## Julia (20 May 2007)

nizar said:


> Good management iv seen the SP rocket or get smashed.
> Rubbish management iv seen the SP rocket or get smashed.
> 
> JORC announcement iv seen the sp get smashed.
> ...




This is a good point.  Market sentiment can override the fundamentals.
An example is Wesfarmers (WES) which is widely held to be very well managed.  However, in five years the SP has only risen from about $28 to $38.


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## It's Snake Pliskin (21 May 2007)

Julia said:


> This is a good point.  Market sentiment can override the fundamentals.
> An example is Wesfarmers (WES) which is widely held to be very well managed.  However, in five years the SP has only risen from about $28 to $38.




Yes Julia,

Good management doesn't always relate to lots of share price appreciation. 

Julia I'm thinking of moving to QLD is the weather worth it?

Snake


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## It's Snake Pliskin (21 May 2007)

nizar said:


> Snake.
> For me, circumstances are different, paying bills and day to day expenditures is from my working income (i got a day job) and the stock trading is for long term capital growth where everything is reinvested.
> 
> ROC looks good, clear uptrend, more volume on the updays compared to the downdays, i would not take a position now personally but rather see which way it breaks, its been sideways last 6 trading days and could go sideways for who knows how long, so i would wait for the breakout. But thats only because i trade a daily timeframe.




Oh yes that breakout, (with a wry smile). 
Lets see where it goes.


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## ducati916 (21 May 2007)

> The fundamentalists do loose me on one point however, I agree that the management of a company is super important and that it would be best to invest in a company with a great management team....BUT how does an investor make this assessment of a companies management team? Unless you have worked with them closely, I would suggest it is near impossible to pick a bad,good or great manager. I would love to hear how the fundies amongst us are able to do this?? Please let me know if I am missing something when it comes to assessing management teams.




The answer is in two parts. The first part someone has already illustrated. If management promise and deliver...or promise and fail.

The second, their results reflect themselves in the operating results.
If their results are consistently good, transparent, honest, you have good management.

If they are good results but are opaque, manipulated, then they are not so good.

jog on
d998


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## tech/a (21 May 2007)

> If they are good results but are opaque, manipulated, then they are not so good.




How on EARTH do you determine that from a report?
Technical analysis is said to be voodoo!!


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## ceasar73 (21 May 2007)

ducati916 said:


> The answer is in two parts. The first part someone has already illustrated. If management promise and deliver...or promise and fail.
> 
> The second, their results reflect themselves in the operating results.
> If their results are consistently good, transparent, honest, you have good management.
> ...




duc,

1- If management promise and fail its already too late (investor looses). Also - great management teams can promise and fail. Failure does not mean  management is bad.

2- tech/a makes a good point here.

As i said previously, im new to this, im more of a f/a than t/a. I dont think an inverstor can ever be certain about the the quality of management - unless of course they do a buffet and replace management with thier own team.

thanks to very one for their great replies.

ceasar.


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## ceasar73 (21 May 2007)

nizar said:


> I just trade the price action.
> 
> Good management iv seen the SP rocket or get smashed.
> Rubbish management iv seen the SP rocket or get smashed.
> ...




hard to argue with this nizzar. you make a good point here.

thanks.

ceasar.


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## ceasar73 (21 May 2007)

Hi nizar - which books (if any) do you recommend for a beginner? 

thanks. 

ceasar.


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## nizar (21 May 2007)

ceasar73 said:


> Hi nizar - which books (if any) do you recommend for a beginner?
> 
> thanks.
> 
> ceasar.




1. Alexander Elder - Trading for a living
2. Van Tharp - Trade your way to financial freedom 
3. Stan Weinstein - Secrets to profiting in bull and bearmarkets


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## dhukka (21 May 2007)

ceasar73 said:


> The fundamentalists do loose me on one point however, I agree that the management of a company is super important and that it would be best to invest in a company with a great management team....BUT how does an investor make this assessment of a companies management team? Unless you have worked with them closely, I would suggest it is near impossible to pick a bad,good or great manager. I would love to hear how the fundies amongst us are able to do this?? Please let me know if I am missing something when it comes to assessing management teams.




ceasar,

This is taken from an excellent book called A wonderful company at a fair price for those interested in F/A. The following is a good checklist of what to look for in identifying *bad* management.



*[*]A fondness for empire-building with overpriced acquisitions that permanently diminish ROE.

[*]The use of share buy-backs to support the price rather than paying suppliers or reducing debt.

[*]Unbridled and unfounded optimism, leading to irresponsible actions.

[*]A lack of full and proper disclosure. Failure to keep the market informed ahead of time, and reluctance to highlight the negatives and take responsibility for bad decisions. 

[*]Misrepresentation - failing to revalue assets to market value or make proper provision in the accounts for replacement cost. 

[*]The payment of unfranked dividends when the company needs additional capital.

[*]A failure to think as proprietors.*

Various naive acts of share price promotion, including splitting shares under the guise of bonus issues, or the stated intention of making the stock more marketable.

The employment of remuneration systems such as options, that not only make an investment in the business less viable, but also provide incentives for management to work against shareholder's interests.

The payment of dividends that could be beneficially reinvested in the business.

The retention of profits that do not add sufficient value to the business and therefore would be more beneficially distributed as dividends.

The author goes on to say that nearly all companies have at least 2 of these traits but that the first 7 (highlighted in bold) are bad omens whilst the others you may choose to live with - at least for a while.

If you are looking for good management traits have a look at Westfield Holdings (WDC) as a case study in how to run a very successful well managed business.


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## Julia (21 May 2007)

It's Snake Pliskin said:


> Julia I'm thinking of moving to QLD is the weather worth it?
> 
> Snake



Hi Snake,

Yep, the weather is wonderful, but bring your own water.  I will PM you.


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## dhukka (21 May 2007)

tech/a said:


> How on EARTH do you determine that from a report?
> Technical analysis is said to be voodoo!!




Plenty of ways,

In addition to the list above,

Capitalising costs

Changing depreciation rates

raising capital to pay dividends

just to name a few.


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## ceasar73 (21 May 2007)

dhukka said:


> ceasar,
> 
> This is taken from an excellent book called A wonderful company at a fair price for those interested in F/A. The following is a good checklist of what to look for in identifying *bad* management.
> 
> ...




dhukka fantastic!! exactly what i was after, thanks.

ceasar.


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## ceasar73 (21 May 2007)

nizar said:


> 1. Alexander Elder - Trading for a living
> 2. Van Tharp - Trade your way to financial freedom
> 3. Stan Weinstein - Secrets to profiting in bull and bearmarkets




thanks nizar 


ceasar.


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## ducati916 (21 May 2007)

And all the examples dhukka provided are found in the Financial results.
The financial results are the managements scorecard.
Bad score = bad management.

jog on
d998


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## ceasar73 (22 May 2007)

Found this site :

http://www.directorstransactions.com.au

is there any use in knowing the moves of company directors?

does anyone know of a better source for type of information?

thanks

ceasar.


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## dhukka (23 May 2007)

Caesar,

Just took a quick glance at that site it seems it only covers a certain amount of companies. You can access all director's interests notices for all companies in the announcements section of www.asx.com.au

btw. If you are looking for a case of blatant mismanagement, go back and read the last 6 months of announcements for AWS culminating in their application for voluntary administration today.


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## ceasar73 (23 May 2007)

I would be lost without you dhukka  

Thanks!

ceasar.


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