Technical Analysis vs. Fundamental Analysis

[So_Cynical]

It would also be interesting to get any input from any other points of view to see any correlation between different investment techniques. Or if anyone wants to put up a alternative portfolio?

CBA $50.50
CSL $32.50
JBH $19.59
MCE $4.95
FGE $4.05
FRI $1.40

Portfolio total $112.99 ASX 200 4694.90 20/10/2010

Ok here is my 6 at today's close (i own stocks with *)

• BPT 0.615*
• CPU 9.71*
• TSI 0.665*
• PTM 4.75*
• CIF 1.15
• APN 1.95

Portfolio total $18.84 were gona include dividends in this?

21 days into the challenge and im out in front no need for commentary as the % gain tells all, so ill just post up the pic of our portfolios...1000 shares in each stock starting from the close 20/10/2010...dividend/distributions to be included as we go....hope its ok with Joe that we side track this thread.
~

 

[ParleVouFrancois]

Cyn to be honest I'm quite impressed with your style of investing, buying in on dips then selling out and free carrying. I'm wondering how much of the free carries do you still hold in your portfolio? E.g. few thousand shares in small companies (like cash converters for example). Doesn't it get a bit crowded with say 50 shares or so in your portfolio? (built up over time I'd assume with the free carries). Might just be me but I can't really focus on more than 15-20 stocks max at any one time (being 100% up to date and being able to quote figures/projects off the top of my head).

 

[Julia]

21 days into the challenge and im out in front no need for commentary as the % gain tells all, so ill just post up the pic of our portfolios...1000 shares in each stock starting from the close 20/10/2010...dividend/distributions to be included as we go....hope its ok with Joe that we side track this thread.
~

Wouldn't it be more meaningful to quote your buys in terms of capital invested, given widely varying share prices?
So , instead of quoting a buy of 1000 shares in XYZ, you quote $10,000 invested in XYZ.

What I'd be interested to see, say at the end of 12 months, is if you have e.g. $100,000 invested, the % return on that capital. It would just offer a clearer picture of what actually matters.

On a 12 months basis, you'd obviously include dividends and franking credits so as to provide a proper summary of what you've earned on your initial investment.

The small gains and losses, month to month, sometimes don't mean much over a longer period, especially given the present volatile market.

 

[So_Cynical]

Cyn to be honest I'm quite impressed with your style of investing, buying in on dips then selling out and free carrying. I'm wondering how much of the free carries do you still hold in your portfolio? E.g. few thousand shares in small companies (like cash converters for example). Doesn't it get a bit crowded with say 50 shares or so in your portfolio? (built up over time I'd assume with the free carries). Might just be me but I can't really focus on more than 15-20 stocks max at any one time (being 100% up to date and being able to quote figures/projects off the top of my head).

24 months ago i had maybe 9 stocks in my portfolio and total unrealised losses of approximately 70% in the depths of despair and coincidently the bottom of the GFC for the Miners, i decided to just totally commit to averaging down and put every last cent i had into my held stocks, mostly gold producers.

Long story short, i also decided i needed a trading plan and i needed to execute that plan with a measure of discipline...today i find myself with 20 stocks that include 5 of those 9 stocks i held way back when and 15 new stocks that ive added over the 24 months since my bottom.

About 6 months ago i decided to restrict my portfolio to about 18 stocks and just concentrate on re-entering those stocks when given the opportunity at significant SP dips...over the last few months ive come to the conclusion that i was changing a winning plan and i should just stick with whats working for me.

So i recently rediscovered my buying aggression and have now adopted a open ended strategy for my portfolio size that matches my investment time frame...have also gone back to my 10% strategy as letting most of my "open trade" winners run just wasn't working, however i have kept my increased position sizing.

Over the last 12 months ive sold out of 2 stocks that i had established free carry in and that were in substantial profit VRL & MDL and sold 1 big loser CTO and had 1 stock fall over on me for a 91% loss ( i did get 2 dividends )

My current portfolio is below with blue stars indicating 'open positions' with no free carry established, red stars indicate stocks with around 40% free carry / typically 1 trade, pink stars indicate at-least 2 trades and around 60 > 70% free carry, greens stars indicate over 80% free carry and at-least 2 trades, all dates are first entry.....with a bit of luck i would expect to exit (establish free carry) HHL and CTN next week,
~

 

[So_Cynical]

Wouldn't it be more meaningful to quote your buys in terms of capital invested, given widely varying share prices?
So , instead of quoting a buy of 1000 shares in XYZ, you quote $10,000 invested in XYZ.

I started doing that, like with 10K in each stock and it just looked a little all over the place, so it struck me that 1000 shares in each and the % gain was just neater and easier, and it really is all about the % gain anyway.

The small gains and losses, month to month, sometimes don't mean much over a longer period, especially given the present volatile market.

Of course it could easily turn 100% around in another 3 weeks time...i just thought it was an opportune time to put up the first comparison as ive only just tonight made up the watchlists/portfolios...want to put up 6 picks Julia and see how you go?

 

[Julia]

I started doing that, like with 10K in each stock and it just looked a little all over the place, so it struck me that 1000 shares in each and the % gain was just neater and easier, and it really is all about the % gain anyway.

Yes, but to show the % gain on your basic capital invested is more easily understood than fiddling about with percentages on small investments.

Of course it could easily turn 100% around in another 3 weeks time...i just thought it was an opportune time to put up the first comparison as ive only just tonight made up the watchlists/portfolios

OK, obviously it's up to you to do whatever you want. I just made a suggestion as to what I thought would be more interesting.

...want to put up 6 picks Julia and see how you go?

Hell, no. I'm quite out of touch on individual stocks. I'm still standing aside.
This is a very comfortable position, but I'm conscious that I'm in fact missing out on some decent gains on the right stocks recently.

Have been considering posting up something along these lines in the "Passive Income" thread. I'm really surprised to find how quickly my interest in trading/investing has fallen away in the face of that oh so easy interest each month which eliminates any any thought of 'what will the market do today?'

Staying in cash isn't really a good long term option, but it's surprisingly addictive as long as rates stay up.

 

[Muschu]

SC
If I may ask:
Where did you go, if anywhere, for advice in determining your strategy? Was it a "do it myself and fly solo" approach or did you base your approach on particular books you had read / newsletters you subscribed to / investment strategies you had studied / broker recommendations / an analyst or two / astrological signs / or whatever?
I apologise if you have already given an answer along these lines but it's a long thread to go back through...
Regards
Rick

 

[So_Cynical]

SC
If I may ask:
Where did you go, if anywhere, for advice in determining your strategy? Was it a "do it myself and fly solo" approach or did you base your approach on particular books you had read / newsletters you subscribed to / investment strategies you had studied / broker recommendations / an analyst or two / astrological signs / or whatever?
I apologise if you have already given an answer along these lines but it's a long thread to go back through...
Regards
Rick

Rick im afraid ive had a bit of a ramble. i need a editor!

I've always tended to do things on my own terms and have always been a DIY kind of person, my strategy has developed over time and im still tweaking it and re examining it...you probably wont like this but at the core of my strategy is my experience and understanding of gambling, both horses and casino.

When i a teen growing up in the mid 70's mum and dad and there friends would have a punt on the horses and a few beers etc while listening to the Saturday races on the radio...mum would do a tab run maybe twice during the afternoon and put $1 on my 1 selection, i took an interest in it and became a studyer of 'form' and over time started to get a few winners.

Anyway a few years later and im working a crappy factory job for about $60 a week and im still punting 3 and $5 bets on the ponys on a Sat arvo and doing ok with conservative place bets and getting a 30% to 60% return every weekend with my 2 to 4 (safe) bets...one weekend i had 3 $5 place bets and won all 3 giving me a return of about 100% (doubled my money) and the thought somehow occurred to me "what if i had bet $50 in stead of $5" could i make $150 (double my money) simply doing exactly what i would do anyway except increase my bets by a factor of 10?

After much though...the next weekend i did just that except i limited myself to just 1 bet, i did everything as i normally would...followed a rigorous course of elimination to decide the best 3 or 4 bets for the afternoon and then simply cut them until i was left with just 1 horse, 1 bet (and ill never forget) it was a TJ Smith horse from Sydney called Saxonia, having its first run in Melbourne going around the wrong way and down the straight 6 at Flemington...it came second and paid $1.05, i had made a weeks pay in less than 80 seconds.

What followed was a rather intense 5 or 6 months where i regularly made between $100 to $400 a week with place bets on very very carefully selected horses...its was very exiting and very stressful, a real roller coaster ride, one nite a the Gloucester park trots i made $900 on the first 2 races, with 2 winners (i had progressed to $50 each way bets) in a row and left...i was shaking i was that excited. anyway it all ended soon after on a day i call 'Black Saturday' my nerves were shot and i could never recapture that consistency again...i could never punt with big money again as my risk aversion dominated my thinking and thus decisions....so long story short, my stock selection now is very much modelled on my horse selection then.

Except its all so much easier now with all the info that's available, back in the 70's i would buy the evening paper in Perth on a Thursday because it had the track work times for Melb and Sydney horses...I use the watchlists on the ASX site because that's where the bulk of the info i need is, i spend alot of time going back over announcements when im researching...and when i started in the market, the ASX site was great for finding stocks that were in businesses that interested me.

If you think Zinc is under valued type Zinc into the search box and in the first 5 pages of results are all the Zinc stocks you need to know about, works for anything, cattle, sugar, prostitution...whatever, then i would add them to a watch-list and watch...after a while it became obvious that all stock weren't equal and there were other factors....I've learnt alot from the many clued in posters on this forum..i cant remember who it was that had "plan your trade, trade your plan" in there signature, but i know it sparked my interest so i investigated its meaning and thus started to discover that discipline was a very necessary aspect of successful trading.

The first Trendy i found was Nizar..he had a blog where he very generously posted all his trades and i found myself struggling to understand why anyone would want to buy stocks that to me "felt" like they were topping out, when in trend follower speak they were breaking out....still he was in profit overall because his losers were cut at i think around 5% and his winners let to run and it was a bull market then.

So at the bottom of the market for the miners i developed a plan and i planed my trades with the goal of establishing free carry in stocks that i wanted to hold long term...selecting stocks that i really wanted to own because i like there business and or assets but understand that that my edge is to buy when the SP is falling, when the faint hearted etc are running for the exit.

I feel im like a kind of reverse trend follower, except that unlike a trendy im actually buying the stock and not the trend, a falling share price excites me because i can see an opportunity to enter at a significant discount, and when the falling SP belongs to a stock i see potential in...well that's when the stock gets short listed and becomes a possible portfolio stock....I've never been to a investment seminar, or even read a free trial of a news letter, i don't have access to broker recommendations or a mate in the industry, i don't have a full service broker and i have no education or training in finance/investing...ive only read 1 book on the subject and found it a little silly and one dimensional (it was a kind of trend following book) and i think astrology is a crock.

I pick stocks i want to own and buy them at a price i want to pay, establish free carry and re-enter if the opportunity arises or just buy the next on the list if there's no opportunity to re-enter a portfolio stock...ive been in the market since mid 2007 and pick 2.7 winners (approx) for every loser, since i don't cut my losers early they tend to be big and so far i cant find a disciplined way to mitigate that other than to simply make better selections in the first place.

For sure my longest post here ever...phew!

 

[robusta]

21 days into the challenge and im out in front no need for commentary as the % gain tells all, so ill just post up the pic of our portfolios...1000 shares in each stock starting from the close 20/10/2010...dividend/distributions to be included as we go....hope its ok with Joe that we side track this thread.
~

Well done!!! You are certainly light years ahead at the moment.

The only thing I would like to change is a minor accounting issue. 1000 shares of each weights the portfolio heavily towards the more expensive shares. Thankyou for posting the results they certainly make interesting reading.

I've always tended to do things on my own terms and have always been a DIY kind of person, my strategy has developed over time and im still tweaking it and re examining it...you probably wont like this but at the core of my strategy is my experience and understanding of gambling, both horses and casino.

When i a teen growing up in the mid 70's mum and dad and there friends would have a punt on the horses and a few beers etc while listening to the Saturday races on the radio...mum would do a tab run maybe twice during the afternoon and put $1 on my 1 selection, i took an interest in it and became a studyer of 'form' and over time started to get a few winners.

Anyway a few years later and im working a crappy factory job for about $60 a week and im still punting 3 and $5 bets on the ponys on a Sat arvo and doing ok with conservative place bets and getting a 30% to 60% return every weekend with my 2 to 4 (safe) bets...one weekend i had 3 $5 place bets and won all 3 giving me a return of about 100% (doubled my money) and the thought somehow occurred to me "what if i had bet $50 in stead of $5" could i make $150 (double my money) simply doing exactly what i would do anyway except increase my bets by a factor of 10?

After much though...the next weekend i did just that except i limited myself to just 1 bet, i did everything as i normally would...followed a rigorous course of elimination to decide the best 3 or 4 bets for the afternoon and then simply cut them until i was left with just 1 horse, 1 bet (and ill never forget) it was a TJ Smith horse from Sydney called Saxonia, having its first run in Melbourne going around the wrong way and down the straight 6 at Flemington...it came second and paid $1.05, i had made a weeks pay in less than 80 seconds.

What followed was a rather intense 5 or 6 months where i regularly made between $100 to $400 a week with place bets on very very carefully selected horses...its was very exiting and very stressful, a real roller coaster ride, one nite a the Gloucester park trots i made $900 on the first 2 races, with 2 winners (i had progressed to $50 each way bets) in a row and left...i was shaking i was that excited. anyway it all ended soon after on a day i call 'Black Saturday' my nerves were shot and i could never recapture that consistency again...i could never punt with big money again as my risk aversion dominated my thinking and thus decisions....so long story short, my stock selection now is very much modelled on my horse selection then. ~

Love it you taught yourself risk management. I also have a bit of history on the punt but made a terrible gambler. Compounding my losses and basically loosing my shirt every week I admire your discipline.

Except its all so much easier now with all the info that's available, back in the 70's i would buy the evening paper in Perth on a Thursday because it had the track work times for Melb and Sydney horses...I use the watchlists on the ASX site because that's where the bulk of the info i need is, i spend alot of time going back over announcements when im researching...and when i started in the market, the ASX site was great for finding stocks that were in businesses that interested me.

If you think Zinc is under valued type Zinc into the search box and in the first 5 pages of results are all the Zinc stocks you need to know about, works for anything, cattle, sugar, prostitution...whatever, then i would add them to a watch-list and watch...after a while it became obvious that all stock weren't equal and there were other factors....I've learnt alot from the many clued in posters on this forum..i cant remember who it was that had "plan your trade, trade your plan" in there signature, but i know it sparked my interest so i investigated its meaning and thus started to discover that discipline was a very necessary aspect of successful trading.

The first Trendy i found was Nizar..he had a blog where he very generously posted all his trades and i found myself struggling to understand why anyone would want to buy stocks that to me "felt" like they were topping out, when in trend follower speak they were breaking out....still he was in profit overall because his losers were cut at i think around 5% and his winners let to run and it was a bull market then.

So at the bottom of the market for the miners i developed a plan and i planed my trades with the goal of establishing free carry in stocks that i wanted to hold long term...selecting stocks that i really wanted to own because i like there business and or assets but understand that that my edge is to buy when the SP is falling, when the faint hearted etc are running for the exit.~

Looks like we are on the same page here, we both love a falling market or sp as it can present great opportunities.
The free carry concept interest's me. Do you have a set % or $ gain you are looking for when you go into a trade?

I feel im like a kind of reverse trend follower, except that unlike a trendy im actually buying the stock and not the trend, a falling share price excites me because i can see an opportunity to enter at a significant discount, and when the falling SP belongs to a stock i see potential in...well that's when the stock gets short listed and becomes a possible portfolio stock....I've never been to a investment seminar, or even read a free trial of a news letter, i don't have access to broker recommendations or a mate in the industry, i don't have a full service broker and i have no education or training in finance/investing...ive only read 1 book on the subject and found it a little silly and one dimensional (it was a kind of trend following book) and i think astrology is a crock.

I pick stocks i want to own and buy them at a price i want to pay, establish free carry and re-enter if the opportunity arises or just buy the next on the list if there's no opportunity to re-enter a portfolio stock...ive been in the market since mid 2007 and pick 2.7 winners (approx) for every loser, since i don't cut my losers early they tend to be big and so far i cant find a disciplined way to mitigate that other than to simply make better selections in the first place.

Wow very impressive. So would I be right in saying you use charts to identify opportunities but after that use fundamental analysis to identify the best opportunities?

 

[prawn_86]

Is is a very good thread. Thanks for the input s_c, i'm certainly watching with interest and have to admit that i have been watching your results etc over the last 6 months or so

 

[So_Cynical]

Quote Originally Posted by robusta
It would also be interesting to get any input from any other points of view to see any correlation between different investment techniques. Or if anyone wants to put up a alternative portfolio?

CBA $50.50
CSL $32.50
JBH $19.59
MCE $4.95
FGE $4.05
FRI $1.40

Portfolio total $112.99 ASX 200 4694.90 20/10/2010

Quote Originally Posted by So_Cynical
Ok here is my 6 at today's close (i own stocks with *)

BPT 0.615*
CPU 9.71*
TSI 0.665*
PTM 4.75*
CIF 1.15
APN 1.95


Portfolio total $18.84 were gona include dividends in this?

21 days into the challenge and im out in front no need for commentary as the % gain tells all, so ill just post up the pic of our portfolios...1000 shares in each stock starting from the close 20/10/2010...dividend/distributions to be included as we go....hope its ok with Joe that we side track this thread.
~

Time for an end of financial year update on how the robusta (value) portfolio is travelling against the So_Cynical (low cost average) portfolio...surprisingly there hasn't been any overall outstanding results, sure some excellent results from some individual stocks but on a portfolio V portfolio basis...its a little disappointing.

Must say that about 5 or 6 months ago robusta was well up...around 20% i think, until FRI fell of a cliff and the JBH dividend thingy.

• robusta portfolio up 2.63%
• So_Cynical portfolio down 9.50%

Conclusion. :dunno:
~

 

[LifeChoices]

I'm finding it interesting comparing your investments/gambles with Tyler Durden's idea of putting the money in the bank for 6.51% interest.

You don't need to be a mathematician to work out who would be doing better.

 

[sammy84]

I'm finding it interesting comparing your investments/gambles with Tyler Durden's idea of putting the money in the bank for 6.51% interest.

You don't need to be a mathematician to work out who would be doing better.

A mentality like that will restrict you to earning 6.51% throughout your life. It has been a hard year for trading, no one could argue otherwise. But you need to make yourself available to the next good trend, and when it pays off should cover the bank interest a few times over. Need to long term view, even if you trade shorter time frames.

 

[LifeChoices]

^^^ Maybe you need a five year view ^^^

Let's compare the all ordinaries index from July 2006 to July 2011 it has gone down almost 9%

Now you don't have to belong to MENSA to figure that investing money in the bank over the last 5 years would have been a better option.

Yes it's been a tough 5 years and I think it's going to get worse before it gets better.

 

[So_Cynical]

I'm finding it interesting comparing your investments/gambles with Tyler Durden's idea of putting the money in the bank for 6.51% interest.

You don't need to be a mathematician to work out who would be doing better.

I failed maths at school so im certainly no mathematician....however im near certain my little portfolio will be up over 10% in profit within 6 months....at least 10%

^^^ Maybe you need a five year view ^^^

Let's compare the all ordinaries index from July 2006 to July 2011 it has gone down almost 9%

Now you don't have to belong to MENSA to figure that investing money in the bank over the last 5 years would have been a better option.

Yes it's been a tough 5 years and I think it's going to get worse before it gets better.

Depends on what you brought and the time frame...i brought 2 parcels of ILU in mid/late 09 for around $3 a share and sold a few months ago at $12 a share....i brought TRY in mid 2007 at $2.45 and sold 11 months ago for $3.43.

The index shows you the broad story....the detail is so much more interesting.

 

[VSntchr]

and just to add, most people taking a long term view would say 10 years rather than 5. Once you do this, the ASX is in positive territory despite the horrible last 4 years.

No indication of the future, but it does show the long term view you were referring to!

 

[Tysonboss1]

^^^ Maybe you need a five year view ^^^

Let's compare the all ordinaries index from July 2006 to July 2011 it has gone down almost 9%

Now you don't have to belong to MENSA to figure that investing money in the bank over the last 5 years would have been a better option.

Yes it's been a tough 5 years and I think it's going to get worse before it gets better.

Ok, a couple of flaws,

1, your simplistic example includes a once in 30 year event during a 5 year example, which obviously distorts the results,

However the all ords would still win for the following reasons.

1, You failed to include dividends paid on the all ords.

2, Dividends are taxed much more favourably than interest

3, most people invest steadily over time so falls work in their favor, If you started putting $500 a month into the all ords in 2006 and contiuned doing so right through the GFC until now your capital gain and dividend income would far out way the interest in a bank account.

4, the capital gain is taxed much more favourably than any other income, because first you are allowed to let it compound for years before the tax event happens and then you get a 50% discount, you can also further inhance this by timing the event to happen in a year where your other income is low.

 

[sammy84]

^^^ Maybe you need a five year view ^^^

Let's compare the all ordinaries index from July 2006 to July 2011 it has gone down almost 9%

Now you don't have to belong to MENSA to figure that investing money in the bank over the last 5 years would have been a better option.

Yes it's been a tough 5 years and I think it's going to get worse before it gets better.

As other posters have pointed out, you have really missed the point. If we are comparing throwing money in the stock market vs active investment, then yes, you mind numbing statement is correct. But we're not. Obviously you must have an entry and an EXIT. It is this that will deliver you your gains. Take the March 09 rally for example, if you were to have invested then and subsequently protected some of your profits once the market started to stagnate, your bank interest would look like chump change.

 

[LifeChoices]

Take the March 09 rally for example, if you were to have invested then and subsequently protected some of your profits once the market started to stagnate, your bank interest would look like chump change.

Take the 2008 free fall for example, if you were to have invested in January you would have had very little capital left by April 2009.

Anyone can pick times, dips and peaks, and winning stocks with hindsight. If there is one thing about all the 'experts' on ASF they all have such wonderful hindsight.

When predicting the future - everyone is stumped. You just have to look past the June stock tipping competition to work that out.

Let's revisit this thread in 6 months time and see if sc is in fact up at least 10% and if the investment would be been better off earning 6.51% in the bank.

 

[mazzatelli]

Take the 2008 free fall for example, if you were to have invested in January you would have had very little capital left by April 2009.

Anyone can pick times, dips and peaks, and winning stocks with hindsight. If there is one thing about all the 'experts' on ASF they all have such wonderful hindsight.

When predicting the future - everyone is stumped. You just have to look past the June stock tipping competition to work that out.

Let's revisit this thread in 6 months time and see if sc is in fact up at least 10% and if the investment would be been better off earning 6.51% in the bank.

We should all just hit silver and data scrape from Commsec FTW!!!