Are there any Graham stocks on the ASX?

[systematic]

Yes, I meant you personally.

Thanks for your response. This is, I guess, where Graham devotees are different from eg trend followers.
Personally, I'd never buy anything without considering the company's prospects in a given physical and economic environment. e.g. using MND as an instance, if mining really falls over, MND is going to be disadvantaged compared to when mining boom is at full swing.

PS Absolutely not disposed to turn this into yet another FA v TA discussion. I was just curious about this point.

No problem Julia. Enjoyed reading your thoughts.

Just to clarify - I'm (in this thread) looking at some Graham stuff - I don't use it myself as I've not yet explored his work really.

I totally can appreciate the idea of considering industry. I found your comment re: difference between Graham devotees and trend followers very interesting indeed. Saying that a trend follower is more likely to consider a company's prospects in a given physical and economic environment is new to me - in my experience, trend followers are more likely than value investors to be following a systematic approach!

Which really, you can consider industries, outlooks, fundamentals, sentiment etc. whether you're a "TA" or an "FA". I consider myself neither really, as it's the "A" in either that I don't do (as a deliberate philosophy, for want of a better word that I can't think of right now).

I appreciate your thoughts Julia and you're welcome to be as robust as you like! There are some silly FAvsTA threads around, no doubt...but good robust discussion is always cool (with me, anyway).

So, although it's maybe a topic for another thread entirely: do you approach the industry/outlook thing as a TA? A trend follower? Using fundamentals, or?

 

[systematic]

A few questions...

1. Do you intend to start performing business analysis on each business in the list? That is a lot of work that requires many years of practice and will create human judgement risk!
2. Why not just use the above 20 to create a portfolio? Most of those companies seem from memory to be ok.
3. Why not use a value weighting system to create the portfolio? The stocks at the top of the list get more cash and so on down the list.

As far as I am concerned the purpose of the Defensive graham criteria is NOT to start doing in depth business analysis. Just buy a portfolio that meet the Defensive criteria and move on with life. Obviously the cheaper are going to be out of the favour with the market e.g.mining industry.

Cheers

Oddson

I think you could guess my answers already

1. Absolutely not! There are not many who are truly good at it (many who think they might be though). One of my main reasons for being 'systematic' is to protect me...from me!

2. Absolutely you could. I wouldn't with this list personally – as it’s more about quality. I prefer (a) value first and then (possibly) (b) quality. Magic formula equal weights both, essentially. From what I’ve seen, you do better with the former. I’ve been happy without quality, but am looking at it recently. However, only in the context of value first. That’s not necessarily the right way of course, but what I’m comfortable with from what I’ve read.

3. That would be a great way to implement the whole list and tilt it to value. It just (probably) won’t give as high an absolute return as being more value focused. Which is totally fine – depends on what your investing goals are. My goals are tilted more towards doing what’s needed to increase absolute return. For me that means more value focused and more concentrated. Paying the price of higher volatility is something I have to be prepared to do. But it’s different goals for different investors. Many others may well be better off going for a more reasonable and rounded approach, as if they ‘style drift’ due to volatility, they won’t get the benefits anyway.

Totally agree with your sentiments re: not doing in depth business analysis and sticking to your system.

 

[systematic]

IMO, the key to make this quant systems working is sticking to the criteria with discipline.

Absolutely agree!

Doesn’t matter whether you use market price, volume, liquidity, volatility or financial accounting data…if you’re a systematic investor, you have to agree with this. System investing (of any kind) will sometimes have you investing in a stock that you wouldn't have from an "analysis" point of view (and that goes for fundamental or technical 'analysis').

I'd only add the words "over time" to the end of your sentence. Spot on, in my opinion.