Letting profits run versus selling at target price

[McLovin]

The one thing I see as an issue is the same thing I
See when value investors make a buy.

That's when it's recognized by the market as a whole
If ever.

Often " value " won't be recognized by the wider market
And price continues to drop. Value investors continue to buy.

When the same value investor sees a change in the business
Then the same thing often occurs and the market as a whole
Doesn't react in the way expected,by the time it is the business
Dynamic has altered again!

Ves
I just haven't seen it.

Not an arguement just an observation over the years that has been
The driving reason I don't try to value a company---it's just too slow.
And far too time consuming.

*shrug*

My observation and experience has been the complete opposite. Where there's value, it always gets recognised. Recognising value is a different story. There's a few on here who can do it, and they know who they are.

It's not easy, maybe TA is easier, I don't know. But I'd say that of those who attempt value investing, with no background in accounting or business, the fail rate will be very high.

 

[Boggo]

Not an arguement just an observation over the years that has been
The driving reason I don't try to value a company---it's just too slow.
And far too time consuming.

Agree entirely.
And the valuations (projected valuations ?) are based on data from the last six months and is usually another couple of months out date before the average investor gets to see it.

Every company is dependant on and influenced by market forces that they have little or no control over, numerous factors such as price to produce or price for product etc.
Any company can have all the P/E's, poggys and other items that look great in a report but the bottom line for anyone is - what is the actual share price doing. You can't trade any of those warm fuzzy feeling producing ratios etc that get quoted regularly.

An old favourite stock that I had a great run with years ago was Fleetwood (FWD).
I have attached a weekly chart of it below and I have inserted an extract from a publically available current summary based on what seems to be accepted as recent data.

The misleading bit is that the data is based on when the company was growing and getting new contracts etc., that has come to an end - temporarily maybe but it is what is occurring, at some point they must plateau, have they reached that point - the price (actual value) has.

Until that new reality is distributed belatedly to the unwashed there is only one reliable item avalilable at any point in time - the actual stock price and its behaviour.

In the pic below, which is accurate at the moment, the price or the text ?
The text information is accurate based on the period of data that is being referred to but it is out of date and bears no resemblance to their current situation or that of the sector they are dependant on.
The only barometer of reality at any point is the share price.

The current stock price is back to where it was in mid 2010 (no allowance made for dividends - or inflation).

(Weekly chart - click to expand)

 

[McLovin]

FWD...

All you had to do was look at margins and you wouldn't have touched it. I wrote about that very fact on some thread, which I can't find now. Not rocket science, at least to me.

 

[So_Cynical]

An old favourite stock that I had a great run with years ago was Fleetwood (FWD).
I have attached a weekly chart of it below and I have inserted an extract from a publically available current summary based on what seems to be accepted as recent data.

The misleading bit is that the data is based on when the company was growing and getting new contracts etc., that has come to an end - temporarily maybe but it is what is occurring, at some point they must plateau, have they reached that point - the price (actual value) has.

The current stock price is back to where it was in mid 2010 (no allowance made for dividends - or inflation).

(Weekly chart - click to expand)

So what's it going to be Boggo...what are the charts telling you?, care to make a 12 month prediction?

Fleetwood is a company at the crossroads, i have been watching with increasing interest over the last 6 months and FWD has been on every new stock short list that i have drawn up in that time.

 

[Boggo]

FWD...

All you had to do was look at margins and you wouldn't have touched it. I wrote about that very fact on some thread, which I can't find now. Not rocket science, at least to me.

Its OK, the daily chart told me something was changing in Feb 2011

 

[McLovin]

Its OK, the daily chart told me something was changing in Feb 2011

Well there you go. So there really is more than one way to skin a rabbit.

What was the point of posting that chart then?

 

[Boggo]

So what's it going to be Boggo...what are the charts telling you?, care to make a 12 month prediction?

Actually, if I apply one form of analysis to the weekly chart the current pattern looks quite good, I would put it on a secondary list at the moment.

 

[Boggo]

What was the point of posting that chart then?

Just to confuse you and in case you didn't study up on the margin

 

[McLovin]

Just to confuse you and in case you didn't study up on the margin

OK. Very good.

My favourite is when you highlighted how bad "dividend" investor had done by buying TLS at $9+.

https://www.aussiestockforums.com/forums/showthread.php?t=24409

I have no idea about TA, at least I admit it.

 

[Boggo]

OK. Very good.

My favourite is when you highlighted how bad "dividend" investor had done by buying TLS at $9+.

https://www.aussiestockforums.com/forums/showthread.php?t=24409

I have no idea about TA, at least I admit it.

That's a MARGINally better effort or is it a MARGINal improvement

 

[McLovin]

That's MARGINally better effort

That's missing an "a", which leads me to believe you should lay off the Sunday sherbets.

 

[Boggo]

My favourite is when you highlighted how bad "dividend" investor had done by buying TLS at $9+.

And just to let you know that TLS and I are now best of friends (TLSIOI around $2.20 atm).
Now, can we get back to the actual topic where I was attempting to highlight that the data ratios etc are usually based on are too far out of date to be of any value in making a price prediction.

 

[McLovin]

And just to let you know that TLS and I are now best of friends (TLSIOI around $2.20 atm).

Good for you.

Now, can we get back to the actual topic where I was attempting to highlight that the data ratios etc are usually based on are too far out of date to be of any value in making a price prediction.

Any ratio will be of little value in making price predictions. Has anyone actually said they are?

 

[cynic]

Well yes there are those whom differentiate between price and value, and then there are those that interpret the current market price as an accurate representation of perceived "value".

Given that I trade using leveraged market instruments (as do many market participants), the associated margin requirements generally oblige subscription to the latter philosophy.

 

[robusta]

That is a good question and reality is that I have never bothered to track "what-ifs" after deciding to sell - gut feel is that in most cases I would have been better off holding but this goes against my basic philosophy. I like my portfolio to be highly likely to generate 15% pa growth per year - once a stock is overpriced (in my opinion), it may keep increasing in price but not at my desired rate (I expect it to fall or flatline).

I know this may sound strange but my preference is for the stock to just slowly increase in value Year on Year so it stays in my value range so you never are put in the position of considering selling them as being over priced.

As an example, I bought CCP in Feb last year for $4.70 back in February as it met my criteria. Good final year result reported, dividend paid and then it has jumped above $8 in November. That's what I view it as being worth at the end of 2015 so couldn't justify holding it. Price may go up or down from here (and it has!) but I wouldnt but it at this price so struggling to justify holding it.

Money off table, reallocate to stocks that offer greater likelihood off meeting my 15% pa guidelines. I find the discipline helps even though I would have preferred a more gentle increase and hold it for years as still believe it is a good company, just overpriced.

I operate much the same way, although got out of CCP at $5.84 back in April to buy something not so good. Just wondering aloud, in the future if a stock is over priced and there is nothing else you could find that meets your criteria would you consider a trailing stop then?
For my I am not so sure as I am paying interest on my money so will probably just continue to take profits when some holdings become over valued.

The other thing to think about is something I read a while ago in Common Stocks and Uncommon Profits by Phillip Fisher

"I remember my sense of shock some half-dozen years ago when I read a [stock] recommendation to sell shares of a company . . . The recommendation was not based on any long-term fundamentals. Rather, it was that over the next six months the funds could be employed more profitably elsewhere."

Read more: http://www.investopedia.com/university/greatest/philipfisher.asp#ixzz2HHyqKHZa

Having trouble finding the other quote I was thinking about but I think it said something like if you hold a truly outstanding business (read competitive advantage) and it sells for a high multiple, why sell? Chances are it will trade for a high or higher multiple at some point in the future.

 

[RottenValue]

In regard to using a trailing stop, I never have used one and suspect that I never will. Not that I am against them for any reason, just that I tend to be either all in or all out with my stock choices.

When I buy it tends to be in 50K+ amounts so that profits are meaningful (I already have a fair amount invested in the market) and when I decide to sell I get out of the stock all together and move on.

No idea whether this is a good, bad or indifferent approach, but it works for me. I have been essentially fully invested over the past two years, but I can see a gradual move to cash occurring over the next 6 months as I no longer have blindingly obvious ideas to invest in and a number of investments are moving to the fully valued level.

 

[skc]

In regard to using a trailing stop, I never have used one and suspect that I never will. Not that I am against them for any reason, just that I tend to be either all in or all out with my stock choices.

When I buy it tends to be in 50K+ amounts so that profits are meaningful (I already have a fair amount invested in the market) and when I decide to sell I get out of the stock all together and move on.

No idea whether this is a good, bad or indifferent approach, but it works for me. I have been essentially fully invested over the past two years, but I can see a gradual move to cash occurring over the next 6 months as I no longer have blindingly obvious ideas to invest in and a number of investments are moving to the fully valued level.

Do you know what trailing stop means? With trailing stop you do most usually sell the whole parcel.

 

[RottenValue]

What I meant was that when I decide to sell, I sell. In essence, my sell decision is being driven by my view that the risk / reward balance for the investment is no longer in my favour. Or put another way, a belief that any future return will not be delivered at my hurdle rate.

A few extra pennies might be nice but having decided to move on, I take my profits (or my loss) and focus on the next target which is more likely to meet my hurdle rate.

 

[tech/a]

What I meant was that when I decide to sell, I sell. In essence, my sell decision is being driven by my view that the risk / reward balance for the investment is no longer in my favour. Or put another way, a belief that any future return will not be delivered at my hurdle rate.

A few extra pennies might be nice but having decided to move on, I take my profits (or my loss) and focus on the next target which is more likely to meet my hurdle rate.

A trailing stop does exactly that.
as does an exit---due to whatever findamental reason.
as does a price target.

Whats a hurdle rate?

 

[tech/a]

What I meant was that when I decide to sell, I sell. In essence, my sell decision is being driven by my view that the risk / reward balance for the investment is no longer in my favour. Or put another way, a belief that any future return will not be delivered at my hurdle rate.

A few extra pennies might be nice but having decided to move on, I take my profits (or my loss) and focus on the next target which is more likely to meet my hurdle rate.

A trailing stop does exactly that.
as does an exit---due to whatever findamental reason.
as does a price target.

Whats a hurdle rate?