GTP - Great Southern Plantations

[Julia]

Great Pig and Bunyip

Thank you both for comprehensive and useful responses - much appreciated.

You've both pretty much confirmed my present approach which treats stocks such as GTP quite differently from, say, ANZ.

This is why I get just a bit irritated when various people advocate any given method of managing stocks as the be all and end all, regardless of the individual characteristics of particular stocks, and the differing reasons for buying them in the first place. I might buy an archetypal blue chip with the intention of holding it for many years. In this case obviously I'm not going to be jumping out every time there is a correction which on a shorter time frame would represent a clear exit. But, as you have both said, if I buy a stock where the expectation is a short term gain, then the minor correction becomes a clear exit.

Thanks for your input.

Julia

 

[TheAnalyst]

Very nice pig and bunyip appreciate your time and great comments on this thread

 

[bunyip]

Hi Julia

You're welcome - its good to see your willingness to ask questions and learn.
Its interesting to see the reactions when you come on a forum and try to help people. An odd one gets his nose out of joint and tells you to go stick your advice, but fortunately there are others like yourself who appreciate that someone is taking the time and trouble to try and help them.

Talking of exit strategies based on trailing stops, another simple way is to use a 20 period EMA. In your chosen time frame you can trail your stop on the 20 EMA until you're stopped out. Or you can move your stop up to just under any bar that penetrates below the 20 EMA.
This strategy worked very well on a weekly chart during the big uptrend in GTP in 2003/04
Every time the weekly chart retraced to near or below the 20 week EMA, you could have moved your stop to 2% below the bottom of that retracement. In this case you would have captured huge gains of hundreds of percent in two years.
The 20 EMA is not only useful as trailing stop/exit system either - it can also have useful application as an entry setup. The GTP weekly chart shows pullbacks in May and September 04 that culminated in Hammers. The long lower tails of the Hammers showed a rejection of lower prices and suggested that higher prices would follow.
These were suitable signals to enter the trend if you were not already aboard, or to add to your existing position.
These candlestick reversal patterns were particularly significant because they occured in the vicinity of the 20 week EMA. The 20 EMA is followed by many technical traders who know that prices frequently turn at or near that level. Linda Bradford-Raschke and Larry Connors wrote about this phenomenon in their book "Street Smarts". Alex Elder talks about it in his book "Come Into My Trading Room".
In fact you can design an entire technical trading system based entirely on the 20 EMA in your chosen time frame. Once a new uptrend begins, prices rise above the 20 EMA and tend to stay above it for the duration of the trend (in that particular timeframe).
Your entry setup can be any retracement that pulls back to or near the 20 EMA, then puts in a bullish candle. You can buy above the bullish candle and put a stop under the same candle, or under the low that preceded it. You can trail your stop on the 20 EMA until stopped out. Alternatively you can trail your stop below any pullback that breaches the 20 EMA.
A lot of retracements don't reach the 20 EMA, but if you follow enough stocks you can find plenty that do. In the 1000 US stocks I follow, virtually every day there are a number of stocks that pull back near the 20 EMA, then put in a bullish candle.
If you put this system over a few years of GTP on a daily chart, you can see lots of examples where it would have enabled you to take handy bites out of trending moves.

Getting back to trailing stops for exits.....Some of the best information can be found in Stan Weinstein's book "Secrets For Profiting In Bull And Bear Markets". Stan outlines two methods of trailing your stops - one for investors, and a slightly different one for traders. An entire chapter of his book contains more than 50 pages on this subject.
Its well woth reading - you can buy it from moneybags.com.au

Cheers
Bunyip

 

[bunyip]

Very nice pig and bunyip appreciate your time and great comments on this thread

Analyst.....No problem - thanks for your positive feedback.
Over the last 10 years I've had a lot of help from some very knowledgable traders.
Sharing whatever knowledge I've aquired is my way of giving something back.

Cheers
Bunyip

 

[GreatPig]

Julia,

I think charting software that easily let's you see the effect of different parameters is very worthwhile for this sort of thing.

Take for example ANZ and assume you were fortunate enough to buy near the dip in Feb 2000. Where, if anywhere, would have been a good exit?

Since ANZ is now about as high as it's ever been, then never getting out would quite possibly have been the best long-term solution, assuming you weren't interested in trying to scalp ever little up and down along the way. But during the intermediate down trend that started in June 2002, after which it never really took off again until late 2004, you could not have known how low it would go or if it would ever recover (although being one of the big banks, you might have decided to risk it for that reason alone).

Say you'd decided to use weekly charts and an ATR trailing stop based on 21 bars (generally ATR stops are not too sensitive to the time period if the stock is not too volatile). A good fit in hindsight might give a multiplier of around 2.5 (typically expressed as 2.5 x ATR(21)). This would look like this:

However, that would have kicked you out twice en-route to the intermediate downtrend, once in early 2001 and again in late 2001. Once the uptrend resumed properly in mid-2004 though, you wouldn't have been kicked out again (although it might depend on exactly when you bought and the trailing stop started):

If, on the other hand, you'd selected a wider multiplier of say 4, then you'd have got this:

That wouldn't have taken you out until really into the intermediate downtrend, and ultimately at around the same price as before since the exit is on the same bar in both cases, but your risk would have been higher along the way. If the dips in early or late 2001 had continued down, you would have been out at lower prices than with the tighter stop.

Anyway, by fiddling with the parameters in the charting software, you can see the effect on the chart of different settings, and come up with what looks best for the most recent period and volatility. And once you have the parameters set, you can easily see exactly what price you'll be out at on any bar (ignoring gaps or plunges through your stop) and thus calculate what your profit would be if stopped out on any bar. Note though that you won't always be able to exit at exactly your stop price, as it will depend on the prices at the moment you decide to place the trade.

[Edit: hmm... I probably should have used GTP as the example. Forgot this was a GTP thread ]

Cheers,
GP

[The above charts were taken from AmiBroker using my stops plugin]

 

[TheAnalyst]

would like to see a GTP one pig if not too much hassle but also like your ANZ demo as well.

 

[Julia]

GP and Bunyip

I do appreciate your efforts to encourage me to be more technically enlightened.

To follow both of your suggestions, presumably one would need software.

Most of my portfolio constitutes long term investments which have over the years produced steady growth and reliable dividends with 100% franking.
Barring some drastic fundamental news on, say, the big banks, I am happy to just go with the ups and downs of the market. I like Buffet's maxim of "buy stocks you will never want to sell" though can't believe he would have meant that to be taken absolutely literally.

I suppose it could be an element of laziness on my part, but I do believe that, given a portfolio of mostly good quality well managed companies,
"time in the market" often in the end may win over "timing the market", even if one is only paying minimal brokerage. There's also the additional paperwork and accounting fees to consider.

GTP is one of only three stocks in my portfolio for which I really look for technical opinions - such as you both have offered - so I have some doubts about how much I would actually use sophisticated tech software.
Am I being a luddite in this? Quite possibly.

GP I know you almost never refer to fundamentals. Bunyip, does the same apply to you, or do you take consideration of fundamentals in the decisions you make?

Just in case anyone is still feeling generous and prepared to look at another couple, some technical comments about FWD and CGF would be much appreciated.

Thanks indeed to you both for your time and interest.

Julia

 

[pch]

Hi Julia

Interesting perspective.. I am virtually the same as you.. held TIM (and TIMPA) since 50 odd cents and got GTP at just over $1. But when GTP dropped signficantly, I was never concerned because after redoing the valuations I still felt that even with the most conservative assumptions the stock was worth $4.20 (this is back when it was at $3 so I bought more GTP at that stage).

I also accumulate and I've never used TA, purely because my mentor went all Buffet on me (he used to use TA) and FA is relatively easy in Excel..

So Julia, why did GTP make you look for technical indicators?

regards

(TA guys, don't interpret this as anti TA as I'm not qualified to comment on TA).

 

[GreatPig]

Julia,

To follow both of your suggestions, presumably one would need software.

It would be easier to have charting software, but you could probably use formula in Excel for a stop loss if you didn't make the calculation too complex. I'm not very familiar with the abilities of Excel though, as I only use its most basic functions.

Most of my portfolio constitutes long term investments which have over the years produced steady growth and reliable dividends with 100% franking.

If that's a strategy you're happy with, then I think that's fine. In the end it's whatever return you're happy with for the amount of effort you're prepared to put into it.

Cheers,
GP

 

[bunyip]

Julia

If you have an investment style that's producing the results you want, then you should stick with it.

Yes, you need charting software to do the sort of technical analysis that pig and I have told you about.

Regarding the fundamentals, the Bunyip and the Pig are in the same pen.....we let the charts do the talking. Its not that I don't consider the fundamentals to be important, its just that I believe that everything known and considered important about the fundamentals is reflected in the trend of the stock.
Strong downtrender? My view is that the fundamentalsits know something negative about the company, and they're dumping the stock and forcing it lower.
Strong uptrender? My view is that the fundamentalsists have uncovered some positive info about the company, and as a result they're so keen to buy it that they're willing to pay increasingly higher prices just to get a slice of the action.
Sideways trend? Clearly the fundamentals are neither good nor bad, with the result that there's a general lack of interest in the stock.

I guess you could say that trend analysis is the lazy trader's way of doing fundamental analysis.
Take FWD for example.....the ferocious downtrend tells me that investors and traders are so keen to dump this stock that they're accepting increasingly lower prices just to get out of it. Why would so many people be stampeding for the exit gate? The most likely reason is that the fundamentals aren't too flash.
Now maybe, just maybe this might be one of those stocks that are fundamentally sound, but have been hit hard regardless. But I'll stick with my theory that in most cases a stock will be strongly downtrending because of poor fundamentals. And I reckon I'll be right more times than wrong.
In September 2001 FWD was $1.25, and a little over three years later it had risen to more than $9.50. Some investors must have made huge gains from such a big uptrend, and I can understand how they'd fall in love with a stock like that. But the simple fact is that when the party is over the party is over.
The FDW party ended in late 2004/early 2005 when the weekly trend fell decisively below the 20 week EMA, and the stock began making progressively lower peaks and troughs.
Hang on to it after that time and you'd see your big gains start melting away. Buy it after it starts downtrending and you greatly increase your chances of losing money as the downtrend continues longer than you expected, which is what downtrends usually do.
The current technical picture of FDW is that its a 'south easter', i.e. it's chart is heading south east towards the bottom right corner of our screens.
Because I believe the fundamentals to be crook (based on my observation of the trend) I would not in my wildest imagination consider buying it.
If it starts uptrending, different story. A new uptrend would suggest that the fundamentals have changed and investors, knowing this, are buying up the stock and pushing it higher. In which case it would certainly warrant my attention as a possible buy, IF the right chart pattern showed up.

If you already hold this stock, only you can decide if you're willing to sit through the current downtrend in the hope that one day it will come back up. For your sake I hope it's value won't be decimated before it starts heading north east once more.....if it ever does head north east again. (it may not)

CGF? Another south easter. Weekly chart has broken decisively below the 20 week EMA, daily chart is heading south at a rate of knots and is making progressively lower peaks and troughs....a clear downtrend.
As with FDW, my feeling is that its downtrending because people are dumping it on account of it's unsatisfactory fundamentals. Again, I'll concede that it could be a fundamentally sound stock that's been hit unduly hard. But I wouldn't count on it. I'll go with my 'fundamentally unsound' theory on account of what the trend is telling me. And on that basis, no way would I even think of buying this stock at present.
If you hold it, well, once again you have to decide how much pain you can bear, how far it must fall before you decide you're on a sinking ship, and you head for the life raft.
That's another reason you should read Weinstein's book......he deals with this exact problem of falling in love with a stock that's treated you kindly in the past, so you hang on to it even after clear evidence that the party is over and yesterdays's wonder stock has become today's disaster story.
He outlines specific strategies for dealing with this situation without losing your shirt in the process.

Cheers
Bunyip

 

[TheAnalyst]

Below is the PEG calculation as Micheal Selway is up to date with the EPS forecast for GTP i ask him kindly if he would like to do the PEG calculation for us as i am very tired from reading all the new IFRS's which is the new AASB's all week end.

thx


Question:

Could you explain the idea behind the PEG ratio?

Answer:

The idea of the PEG ratio is that a fair value for a stock is when its rate of growth in earnings per share is about the same as its PE ratio. The example on my web site shows how you make the calculation.

If the fair value is 1, then it follows that when the PEG ratio is greater than 1 (PE ratio is greater than EPS growth), then the market is paying too much for the stock and it is therefore too expensive.

Likewise, if the PEG ratio is less than 1 (PE ratio is less than EPS growth), then the market is underpricing the stock and it is therefore cheap.

You can not rely on the PEG ratio entirely. It is simply a filter to get a short list of stocks for further research. Always remember that a stock could be cheap because the market does not expect it to reproduce the last profits in the future.

There is quite a lot on the Internet about it. Put PEG+ratio into any decent search engine.



Question:

What is the PEG ratio and how is it interpreted?

Answer:

The PEG ratio stands for Price Earnings Growth.

It is a measure of whether a stock represents growth at a reasonable price.

The formula is PEG = PE / EPS growth

PE = the Price Earnings Ratio

PE = Price / EPS times

EPS Growth = Earnings Per Share Growth%.

EPS growth is normally = (Latest EPS - Previous EPS) / Previous EPS x 100

Some people prefer to use the average EPS growth for the last three years to even out big fluctuations.

It could also be calcualted using estimated EPS, but that is only as good as the estimator's skill.

Example:

Latest price $8.00

Latest year's EPS = 50c

Previous year EPS = 40%

EPS growth = (50 - 40) / 40 X 100 = 25%

PE = 800 / 50 = 16 times

PEG = 16 / 25 = .64

To interpret the PEG ratio:

1.0 = fair value

>1.0 = expensive

<;1.0 = cheap


Question:

In your answer about the PEG ratio, could you explain what the example EPS Growth = (50-40) / 40 X 100 = 25% is doing?

Answer:

All we are doing here is calculating the rate of EPS growth as a percentage.

If last year's EPS was 40c and this year's EPS was 50c, then you should be able to see without the equation that EPS is up by 10c, which is up by one quarter, which is 25%.

However, it is not always that easy to see, so we have to calculate the EPS growth.

The first part of the equation is (50 - 40) = 10, which is how much EPS have gone up (what they are this year minus what they were last year).

However, the naked figure is not of any use. We must know what it is relatively. So, we take the increase divided by the starting value (10/40) which is one quarter or 0.25. As a percentage, it is 0.25 multiplied by 100 = 25%.

 

[GreatPig]

would like to see a GTP one

Using the same 2.5 x ATR(21), if you'd bought near the bottom in early 2003 you would have been kicked out during the consolidation period in late 2003, but otherwise it would have gone very nicely, with a final exit around $4.35.

Applying the same trailing stop to the current period looks okay except that it starts quite far from the prices. If it had started falling from the moment of purchase, the exit would have been at $2.22, a drop of about 27% from a purchase price of $3.05. Even at the most recent bar, the stop of $3.41 is a drop of about 16%.

Mind you, with the first one bought in early 2003 the stop started about 19% below prices too. As this constitutes loss of initial capital (as opposed to profits), it may be preferable to use a different value for initial stop that is closer to prices and switch to trailing stop as prices rise.

Remember though that this is only one type of stop based on ATR. Other forms may be more appropriate to other stocks (or even this one).

Cheers,
GP

 

[GreatPig]

Hey... that was my 1000th post!

Just call me Millenium Man

(yeah, I know... I'm not the first...)

GP

 

[michael_selway]

Using the same 2.5 x ATR(21), if you'd bought near the bottom in early 2003 you would have been kicked out during the consolidation period in late 2003, but otherwise it would have gone very nicely, with a final exit around $4.35.

Applying the same trailing stop to the current period looks okay except that it starts quite far from the prices. If it had started falling from the moment of purchase, the exit would have been at $2.22, a drop of about 27% from a purchase price of $3.05. Even at the most recent bar, the stop of $3.41 is a drop of about 16%.

Mind you, with the first one bought in early 2003 the stop started about 19% below prices too. As this constitutes loss of initial capital (as opposed to profits), it may be preferable to use a different value for initial stop that is closer to prices and switch to trailing stop as prices rise.

Remember though that this is only one type of stop based on ATR. Other forms may be more appropriate to other stocks (or even this one).

Cheers,
GP

Hi GP, thansk for the charts

Btw based on TA, what do u think the price of GTP is likely to head to given that it broke the $4 barrier recently?

thx

MS

 

[bunyip]

On hundreds of occasions over the last ten years I've seen brokers put 'buy' recommendations on stocks because at current levels they were 'fair value'.
Only problem was that 'fair value' became even fairer value a few weeks or months later as the stock fell further, sometimes a lot further.
Sometimes the brokers declared a stock 'currently undervalued' - yet the stock continued getting cheaper.
An estimation of fair value is quite useless if the market disagress with the valuation.....which it frequently does.

Herein lies the main difference between the technical approach and the fundamental approach..............

The fundamentalist deals in theories....he uses various fundamental studies, including estimated fair value, in an effort to find stocks that should (at least in theory ) go up at some time in the future.

The technician deals in facts.....he doesn't concern himself with looking for stocks might go up in the future - he focuses on finding those that are going up right now.

Bunyip

 

[Julia]

Hi Julia

Interesting perspective.. I am virtually the same as you.. held TIM (and TIMPA) since 50 odd cents and got GTP at just over $1. But when GTP dropped signficantly, I was never concerned because after redoing the valuations I still felt that even with the most conservative assumptions the stock was worth $4.20 (this is back when it was at $3 so I bought more GTP at that stage).

I also accumulate and I've never used TA, purely because my mentor went all Buffet on me (he used to use TA) and FA is relatively easy in Excel..

So Julia, why did GTP make you look for technical indicators?

regards

Hello pch

The reason I sought technical input on GTP was the erratic nature of the SP over the last few months. It traded sideways for a while, had a small run up, down again, sideways etc etc. One noticeable feature was that it tended to put on several cents when there was a downturn in the market in general.
This could be no more than coincidence.

Probably my imprecise remarks above are irritating to TA people who will express what they observe in the charts much more clearly. Sorry.

My portfolio is somewhat overweight in GTP so I want to sell some. As I said earlier in this thread, I sold 5000 at 4.04 . I would like to sell a further 10,000 and will hold for $5 unless it all falls apart before then. Traditionally the stock rises in May/June as more investors buy into the Trees MIS schemes for their tax deductibility before the end of the financial year.
Fundamentals show GTP to be a sound company which has had to weather the past problems of government changing the rules regarding managed investment schemes' tax deductibility. Once an idea of uncertainty re tax considerations has anchored itself in potential investors' minds, it takes a while to be reversed after government has offered reassurance of the ongoing tax deductibility.

I'm also less than convinced as to the viability of the sort of diversification GTP has engaged in - grapes and olives etc. Even the subliminal awareness of the present grape glut will tend to register in investor's minds as "why are they doing this?" GTP's response to that is that by the time their vines are ready for harvest there will once again be a shortage of wine grapes.
We will see.

Julia
(

 

[Julia]

Julia

If you have an investment style that's producing the results you want, then you should stick with it.

Yes, you need charting software to do the sort of technical analysis that pig and I have told you about.

Regarding the fundamentals, the Bunyip and the Pig are in the same pen.....we let the charts do the talking. Its not that I don't consider the fundamentals to be important, its just that I believe that everything known and considered important about the fundamentals is reflected in the trend of the stock.
Strong downtrender? My view is that the fundamentalsits know something negative about the company, and they're dumping the stock and forcing it lower.
Strong uptrender? My view is that the fundamentalsists have uncovered some positive info about the company, and as a result they're so keen to buy it that they're willing to pay increasingly higher prices just to get a slice of the action.
Sideways trend? Clearly the fundamentals are neither good nor bad, with the result that there's a general lack of interest in the stock.

I guess you could say that trend analysis is the lazy trader's way of doing fundamental analysis.
Take FWD for example.....the ferocious downtrend tells me that investors and traders are so keen to dump this stock that they're accepting increasingly lower prices just to get out of it. Why would so many people be stampeding for the exit gate? The most likely reason is that the fundamentals aren't too flash.
Now maybe, just maybe this might be one of those stocks that are fundamentally sound, but have been hit hard regardless. But I'll stick with my theory that in most cases a stock will be strongly downtrending because of poor fundamentals. And I reckon I'll be right more times than wrong.
In September 2001 FWD was $1.25, and a little over three years later it had risen to more than $9.50. Some investors must have made huge gains from such a big uptrend, and I can understand how they'd fall in love with a stock like that. But the simple fact is that when the party is over the party is over.
The FDW party ended in late 2004/early 2005 when the weekly trend fell decisively below the 20 week EMA, and the stock began making progressively lower peaks and troughs.
Hang on to it after that time and you'd see your big gains start melting away. Buy it after it starts downtrending and you greatly increase your chances of losing money as the downtrend continues longer than you expected, which is what downtrends usually do.
The current technical picture of FDW is that its a 'south easter', i.e. it's chart is heading south east towards the bottom right corner of our screens.
Because I believe the fundamentals to be crook (based on my observation of the trend) I would not in my wildest imagination consider buying it.
If it starts uptrending, different story. A new uptrend would suggest that the fundamentals have changed and investors, knowing this, are buying up the stock and pushing it higher. In which case it would certainly warrant my attention as a possible buy, IF the right chart pattern showed up.

If you already hold this stock, only you can decide if you're willing to sit through the current downtrend in the hope that one day it will come back up. For your sake I hope it's value won't be decimated before it starts heading north east once more.....if it ever does head north east again. (it may not)

CGF? Another south easter. Weekly chart has broken decisively below the 20 week EMA, daily chart is heading south at a rate of knots and is making progressively lower peaks and troughs....a clear downtrend.
As with FDW, my feeling is that its downtrending because people are dumping it on account of it's unsatisfactory fundamentals. Again, I'll concede that it could be a fundamentally sound stock that's been hit unduly hard. But I wouldn't count on it. I'll go with my 'fundamentally unsound' theory on account of what the trend is telling me. And on that basis, no way would I even think of buying this stock at present.
If you hold it, well, once again you have to decide how much pain you can bear, how far it must fall before you decide you're on a sinking ship, and you head for the life raft.
That's another reason you should read Weinstein's book......he deals with this exact problem of falling in love with a stock that's treated you kindly in the past, so you hang on to it even after clear evidence that the party is over and yesterdays's wonder stock has become today's disaster story.
He outlines specific strategies for dealing with this situation without losing your shirt in the process.

Cheers
Bunyip

Bunyip

Many thanks. The technical picture you describe supports my own views about both of these. FWD is quite interesting. There are three brokers with a Buy recommendation on this stock. There have been some problems, I gather, in the business in the past year, which are now deemed to be resolved and analysts are declaring the future looks very rosy. But, as you have observed, the market is yet to be convinced. (And so am I!)
I was foolish enough to buy this on the recommendation of one of the major brokers without doing much research on the company myself. It has just gone ex dividend so it gets another week or two of latitude before it is for the chop. Plenty of other better opportunities out there.

CGF's descent I think probably reflects some uncertainty about current management.
Again, as you suggest, the SP reflects the market's feelings.

Joe, I don't know if you are reading this, but if you are, then I'd like to say that the responses I've received to my TA queries on this thread, offer justification (if any were needed) to you for keeping ASF going.

To me this genuine exchange of views with the aim of being helpful and constructive is why I value ASF.

Thanks again, especially GP and Bunyip.

Julia

 

[Julia]

Hey... that was my 1000th post!

Just call me Millenium Man

(yeah, I know... I'm not the first...)

GP

Congratulations, GP. And even better, the content was worth reading!

Julia

 

[GreatPig]

Btw based on TA, what do u think the price of GTP is likely to head to given that it broke the $4 barrier recently?

Well to TA, the $4 barrier doesn't mean anything. That's just a psychological level of interest to humans only.

Some TA patterns and techniques have measured moves where a target price can be indicated, but my current technique for GTP is just based on a short-term trend line for my own visual inspection, and the EMA combination used by my system in AmiBroker. Neither give any indication of target prices, so I would normally just follow until an exit is indicated, wherever that may end up being.

However, as I'm off to Japan for a couple of weeks odd on Friday, I may end up selling most of my trading stocks before I leave - or at least reducing my exposure.

GP

 

[RichKid]

Hey... that was my 1000th post!

Just call me Millenium Man

(yeah, I know... I'm not the first...)

GP

Great work there GP! I've really enjoyed reading your posts and discussing issues with you, hope to be reading your 10,000th post too!

Nice trailing stop there, I don't use ATR but should look at it closely as I've been shaken out of a few, it might help me with assessing the best position size and entry price to ensure my stop measures up to the volatility.

All the best!