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Address by Marcus Padley

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Julia said:
especially those who believe that "if a stock gets cheaper, then it's more of a bargain", and that "averaging down" makes any sort of sense.
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As a blanket statement I think that's a nonsense but reasonable advice for those who trade, time to 'fess up, I am not smart enough to trade

As an example, I purchased LEI $ $23.50 when I thought they were reasonable value. I purchased LEI again @ $18.14 where I though they were excellent value. The "price" today is $21.45 as I just checked now. Was I averaging down ? or was I happy to purchase what I consider a decent stock at a what I consider a good price ? Time will tell I guess
 
Could you say what your buy signal was at $23.50? If LEI continued to fall, would you continue to buy, as on your rationale above, the further it fell the more 'decent' the price would be?
Or perhaps I'm not properly understanding what you're saying.

Marcus Padley's denigration about the practice of averaging down is probably directed more towards stocks that are in a clear downtrend (think Allco, ABC Learning, BNB etc). And I don't think he's talking about short term traders at all.
 
Julia said:
Could you say what your buy signal was at $23.50?
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Yes. + or - $5 as I am pretty hopeless at valuation I had been watching LEI for some time. The Rudd Government is want to waste my tax dollars on poorly thought out infrastructure projects, LEI seem well positioned to get some of my wasted tax dollars back to me in the coming years, in the form of earnings. I was (and still am) nervous about LEI's dealings in Dubai.

Julia said:
If LEI continued to fall, would you continue to buy,
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I did and yes I would have (my last purchase was in late Feb) but now, not so much. I stopped buying some time ago (back in late Feb). I assume LEI will fall back and I will purchase again if that happens, I am looking for even more value now, I no longer want to pay so much if not and it keeps going up, I will be satisfied with the purchases I made and look for other opportunities.

Julia said:
as on your rationale above, the further it fell the more 'decent' the price would be?
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Indeed. A bit like how I buy and eat more tomatoes when they are cheaper but I have identified the value in Tomatoes before I buy and then determined the price I am happy to pay, the juxtaposition for me is that when they get to expensive, I stop buying, same with my share purchases. Others seem happy to keep buying no matter how expensive.

Julia said:
Or perhaps I'm not properly understanding what you're saying.
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Possibly not.

Julia said:
Marcus Padley's denigration about the practice of averaging down is probably directed more towards stocks that are in a clear downtrend (think Allco, ABC Learning, BNB etc). And I don't think he's talking about short term traders at all.
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No idea, I just thought it a sweeping generational that I disagree with, as a sweeping generalisation. eg What about those that purchased RIO at $120+ on a stock trending up ? I bet those "guys" are over the moon...

eg No matter how cheap ABC was, I could not see the value, I was still amazed that he guys in Singapore could, which gave me pause for thought a few times

I am guessing Marcus is buying LEI now ? 'cause someone sure as hell is.
 
What complete rubbish. Will buy cheaper with the downside bias?
Words like cheap and expensive are not good for investing nor trading.

There sure is a lot of crap out there.
 
Julia said:
Marcus Padley's denigration about the practice of averaging down
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I also "averaged down" BHP ---> $28.17, $27.86 and $25.09 back late last year, nice a bloke as Marcus appears to be on Lateline Business, I might eschew his "advice" on this one and apply my own rigour to valuations.

My point, albeit apparently poorly made, was averaging down is not the problem per se, buying crappy stocks is.
 
And it's an excellent point, Trevor. I was thinking that following your comments about LEI.

The thing I've noticed, though, is that there seem to be a lot of very inexperienced people who do average down with those crappy stocks and hopefully Mr Padley's advice might allow them to reconsider this.
 
Most people who average down, do so because they think the stock offers "good value". They will not accept stock's crappiness until it's too late.

Trevor it's not just BHP/LEI, the whole market has gone up, including the crappy stocks. Take Bank of America for example. Despite its toxicity, it has actually outperformed BHP. So I'm not sure if I would use price movements of BJP/LEI to make conclusions.
 

M8 - BHP at under 30 dollars is a good thing... averaging down works fine as long as
u get the timing right...and are prepared to take profit at the appropriate time.

Don't listen to the trendies...there obsessed with the trend....its all they see.

They wouldn't know value, if it walked up and slapped them in the face.
 
A hindsight realisation of luck under the guise of "value" and "cheapness".

Ever the cynical idealists may want to be a bit more careful with risk determination rather than opportunity cost magnification.

But just on buying multiple times as a stock gets lower in price, why not just call it "buying value with a disregard to time and opportunity"?

Yes some trendies may be so inclined.
 
Julia said:
And it's an excellent point, Trevor. I was thinking that following your comments about LEI.
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Digging this back up. I am still happy with my decision to chase LEI down thorough the end of Nov '08 to Feb '09 but it doesn't particularly matter, as I haven't "taken a profit", probably to the disgust of Marcus and his take a profit philosophy (nothing wrong with "taking a profit") and his broking business in general.

I won't know if I have been "right" until I go to sell, which will probably be never unless I think LEI has gone completely off the rails or something totally unplanned for happens to me.

Julia said:
The thing I've noticed, though, is that there seem to be a lot of very inexperienced people who do average down with those crappy stocks and hopefully Mr Padley's advice might allow them to reconsider this.
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There's a lot of inexperienced people buying stocks, highlighting averaging down as a bad policy is a nonsense when it's used to generalise IMO. I still maintain following ABC down (for example) is not the fault of using averaging down but the fault of picking a crappy stock, the market is replete with them.
 
Calliope said:
If he dispenses information so freely, then who buys his Daily Newsletter? I would appreciate it if a current subscriber could rate it.
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I have been subscribing for 2 yrs now, at about $500 a yr.

So on the whole, 8.5 out of 10

At its best, 10 out of 10

At its worst, 6 out of 10

From an update point of view its very good. He also picks up on a lot of things I have noticed other sites/analysts miss, or dont worry about.

And, the afternoon mail usually is quite good from the articles/stupid questions section.

I should add, that he does on a occasions have a slight bais, after all he is working for Patersons.
 
stocksontheblock said:
I should add, that he does on a occasions have a slight bais, after all he is working for Patersons.
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Now he is but before that it I believe he was with Tricom.

Anyway, I don't consider that it really matters how people build their wealth provided it is legal and you haven't ripped someone else off. And if people are comfortable with their level of wealth, however you may describe or count wealth which may not necessarily be monetary, so be it and all good fortune to you.
 
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