I hope you've read a lot about position sizing being the most important aspect of investing and risk management... and you do need a lot of discipline to follow that, no matter how enticing an opportunity may appear.
Thankyou skc, I am reading about position sizing now. Up until now my strategy has been to weight the investments to the largest dicount (IMO) to intrinsic value.
You would start with an overarching framework of position sizing... more stable stocks can afford larger sizes, more volatile stocks smaller size, near-death stocks probably amounts that are inconsequential. This is the first part of risk management.
The second part is the ability to brutally, honestly and correctly assess fundamental facts surrounding the company, and sell when those facts demonstrate (to whatever confidence level the investor deemed appropriate) that the valuation of the company has changed for the worse. This is as good a stop as any price-based stop.
With time based stop I would adopt that when I have a 'time based' event entry... there is a takeover brewing and I will exit in 3 months if nothing comes. You also size your position accordingly. I think if no takeover comes the stock will fall 10%, so I am comfortable allocating $X to the position. This would be similar to the 2% rule (which is start with controlling how much you lose), but it's application is not as precise.
As to judging fundamental reasons - that's a case by case basis so a bit difficult to say here. Market reaction to news will always depend on its starting point and expectations. Is a resource of 200m Tonnes of copper good or bad news? Good if the expectation was 0, bad if the expectation was 500m. Mis-interpreting expectations and news is bad for fundamental investing without a doubt. The same as mis-interpreting price action and volume is bad for technical analysis.
Not sure yet if the fault lies more with the strategy, execution or the valuation method.
Putting emotion to one side I continue to hold MCE - for now.
Once you have done some reading on position sizing it might be a good idea to review your purchases (and sells) and see how much the results would have differed under certain position sizes. I'd be interested if you could post them under your results thread.
President Bush and the Matrix
"There's an old saying in Tennessee - I know it's in Texas, probably in Tennessee - that says, fool me once, shame on - shame on you. Fool me - you can't get fooled again." George W Bush.
After its AGM on Tuesday, shareholders in Matrix Composite Engineering (ASX code MCE) probably won’t want to be reminded of this quote.
The company fell short of investor expectations at its fiscal 2011 result, and has done so again, only two months later.
At its results presentation in late August, its chief executive Aaron Begley gave guidance of 20 per cent revenue growth for fiscal 2012.
At the AGM he downgraded this to between 0 and 10 per cent, and cited “one-off” costs of $4.8 million that meant the company would break even for the first half.
The funny thing is that despite the disappointments, the company has a great business.
In its words, it is “the only major oil and gas equipment manufacturer and exporter in Australia and the global leader in the manufacture and supply of subsea buoyancy systems.”
Last year its revenues were a shade over $187 million, producing a net profit of $33.6 million, 88 per cent up on the same period a year ago.
Of course, not meeting expectations has hurt Matrix shareholders, which is why the Bush quote won’t seem funny. At $3.03 before today, its stock has fallen about 70 per cent in the past seven months or so.
Getting back to why the business is so good. The main reason is the massive demand for its services from oil and gas producers. This month the International Energy Agency chief economist predicted that $10 trillion in investment between now and 2035 was needed in the oil industry to meet demand.
From a shareholder perspective, Begley and his team appears to be on its last chance. President Bush hails from an oil producing family, and even he might agree that Matrix shareholders won’t be fooled again.
Whether valid or not, I've been averaging into the market slowly since April. I'm currently ahead by a few percent. Pretty much all of my positions are the same size. Some red and some black. Mostly in the bigger end of the index, but my smallest position is a speccy that's down around 20% (purchased in April funnily enough). It's not much (and I don't really care for short term prices) but it would have been much worse if I put my cash into the market all at once. This plan obviously unravels if the market falls into a permanent down trend. I tend to gravitate to businesses with good cash flow, so not massively worried about the next few years (price action wise).His results are more than respectable without the 2nd and 3rd parcel of MCE, and probably beat the market if he simply cut MCE lose soon after the result release.
Apparently when meeting Aaron Begley you should pronounce his name Bodgy.
Funny George Bush quote, especially as he fooled the USA twice! But he was funny.
MCE is just not doing any business with the A$ so high. Manufacturing in Australia
Having said that, they make "Drilling Riser Buoyancy Modules" which sounds really advance and technical. But in the chairman's address there's a slip of tongue and they are called "synthetic foam".
Are you sure he didn't say "syntactic"? That's what it says on their website, any how.Having said that, they make "Drilling Riser Buoyancy Modules" which sounds really advance and technical. But in the chairman's address there's a slip of tongue and they are called "synthetic foam".
Isnt it just a fancy foam floaty ?
Im quite sure ive read that MCE was spun off by another listed company, but I cant for the life of me think back to who it was they were previously a part of ..
anyone know off the top of there head ? Id like to be able to see if I can dig up some financial data from there time before being listed independently as MCE.
Typo? Or have they really been around for 119 years?Established in 1892
Typo? Or have they really been around for 119 years?
i am looking to buy share in mce at the moment? are they available to buy and what is the best way of going about this?
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