My Investment Journey

[Sir Osisofliver]

Hi KTP,

You know I come in and have a bit of a look in your thread every so often, ask some (hopefully) thought provoking questions for you and then bunk off. So there is a couple of things I wanted to raise with you, and of course I'll do it by voicing a few questions... Remember these aren't for me, I come in here to try and assist you achieving clarity in your process.

I've said before KTP that it's very nice to see someone who laid out their thoughts and yet was still able to converse with those who had differing viewpoints. This appears to remain the same during your thread. It's important to never lose this, no matter how good you get at this thing called investing...we are forever learning...

So first question...have you changed/tweaked anything in your rules due to your now +1 year of direct experience?

This leads to what IMO is the most important aspect of investing....evaluation. Whether you were successful or not it is important to objectively evaluate our performance against some kind of standard. Would you please rate your performance against the following standards?

Did you have fun?
1) What is this thing called fun?
5) Wooh! All funned out.

Did you learn and improve?
1) What? er?
5) Nosce te ipsum to the max!

Did you set correct goals?
1) I didn't get my gold toilet seat!!!
5) I was within a hairs breath of where I thought I would be.

Let's talk about CAB, our last posts on the subject are back on posts 340-350 Disclaimer: I currently don't hold CAB

Ahh you can tell from the above I took my profit out of the trade...here were my words back then
Background
I entered on the 4th of July at $4.1457 for 18,000 units, in accordance with a positional sizing model I use. At that time my target from a technical perspective was $4.50, the point of significant horizontal resistance. This is not a take profit level, merely where I anticipated that the stock would find some price resistance.

In the immediate term however I still have a short-term unsustainable compound curve...meaning that I anticipate a retracement or consolidation in the share price...but only in the short-term. I am therefore faced with a choice. I can take my profit now and then attempt to purchase once again at the bottom of the retracement level, or I can anticipate a retracement will occur, set an appropriate stop level and look to see whether the longer-term emergent pattern is revealed.

Ok so I exited the stock @ $5.7225 for a $28,382.40 profit or ~38% net profit (we had almost the same level of performance).

I asked you about the level of CAB before you'd consider it again...and of course we've also had some changes to the fundamental influences...

So as a little bit of a thought experiment...what are your thoughts in relation to them now?

BTW here's a chart...even though I now you don't like them.

Cheers

Sir O

 

[KnowThePast]

Hi Sir O,

Good to hear from you again and I am glad you've also made some money on CAB.

So first question...have you changed/tweaked anything in your rules due to your now +1 year of direct experience?

Yes, definitely. I've never really posted my full set of changed rules on my thread, but my approach is really nothing like what I started with a year ago.

Now, I use my software to generate a list of prospects that meet my criteria. My criteria came about from 2 things:
1. Backtesting using fundamental analysis to find approaches that work.
2. The succesful strategies were then validated against other studies/theories to make sure it was not just a one off fluke that happened to work in Australia for the last 10 years.

So, my buys and sells are now mostly automated decisions. I do research to make sure it's not a definite loser, and because I find it interesting. I also exercise manual overrides to my automated strategy for risk control - mainly making sure I am not overexposed to a single industry.

4% per trade, but I allow occasional averaging up/down.

A specific strategy/filter I use evolved and will continue to evolve over time. But at the moment, my concetration is mainly on small, cheap, ugly.

This leads to what IMO is the most important aspect of investing....evaluation. Whether you were successful or not it is important to objectively evaluate our performance against some kind of standard. Would you please rate your performance against the following standards?

Did you have fun?
1) What is this thing called fun?
5) Wooh! All funned out.

Did you learn and improve?
1) What? er?
5) Nosce te ipsum to the max!

One answer to both questions - I greatly enjoy investing, and I enjoy it because of the things I learn. The process took me to many places I would not have otherwise learnt about that apply to everything in life, not just investing. I think it makes me a more interesting person. Another way to put it is that I enjoy the results, even though the process is sometimes difficult.

Did you set correct goals?
1) I didn't get my gold toilet seat!!!
5) I was within a hairs breath of where I thought I would be.

Yes, I am so far happy with both goals set and results. My strategy is to hold a fairly diversified portfolio of stocks that I buy as a group, so I never had an expection of large outperformance. My expections are 2%-10%/annual outperformance in an average 3-5 year period, with 1/3 years underperforming.

Out/under performance will mainly happen due to a significant change of fortunes of a company, these will be re-rated very quickly. I expect an average trade to last 3+ years, and I expect my portfolio to mostly move together with the index, until one of the re-ratings.

Current result is so far in line with that. While the raw numbers show a large underperformance last year, it is misleading, as it doesn't include interest on a large cash balance, and time entry. Taking those things into account, I am so far a few percent above my benchmark, so things are tracking within my expectations.

Let's talk about CAB, our last posts on the subject are back on posts 340-350 Disclaimer: I currently don't hold CAB

I asked you about the level of CAB before you'd consider it again...and of course we've also had some changes to the fundamental influences...

So as a little bit of a thought experiment...what are your thoughts in relation to them now?

Exactly where they were a year ago - price changed, but fundamentals remain exactly the same.

I am generally inclined to bet against disruptive technologies. Their success rate tends to be low, although the current threat to CAB I think is good enough, and progressed far enough to dislodge it. But, it is far from certain, and will likely to take at least a few more years before it is successful.

On the upside, CAB will continue making money and paying dividends and has a profitable bus division that on its own is worth a lot of money. There's also a perfectly plausible scenario of them partnering with one of the new companies and adapting.

Many possibilities. The worst one would be to value CAB just for their bus division, the best is that they will continue to go as is, or parternering with other without much of an effect on the bottom line. As well as everything in between.

I bought it at around $4, and I still like it at that price. Now, however, my focus and investment process changed to concentrate on different kind of companies, CAB is just not ugly enough for me, so it's unlikely it will be back in my portfolio.

BTW here's a chart...even though I now you don't like them.

It's all magic to me

Cheers

Sir O

View attachment 60213

Thanks again Sir O, for giving me another chance to express myself

 

[skc]

And did you see WDS, one that I said was better - up 23%.

On WDS, I fully agree with you that it is "better". Unfortunately, I've only seen it get pretty after executing the order for TTN. Had I known at the time, WDS would have been my choice.

FWIW WDS has a stronger balance sheet than TTN... and TTN's revised guidance is still quite an optimistic forecast imo.

Well.. what do you know. The better one revised guidance in 1 month from a small profit to a massive loss. Getting more and more ugly so it should suit you just fine...

 

[KnowThePast]

Well.. what do you know. The better one revised guidance in 1 month from a small profit to a massive loss. Getting more and more ugly so it should suit you just fine...

Boy, that was one bad call from me

Good example to show the importance of luck.

It got more tempting, but I am resisting the temptation. As I said, I am mindful of how many stocks I have in this industry. The majority of ones I do own, also have a hand in other areas (civil, property, etc), they are not fully reliant on mining industry for survival.

 

[KnowThePast]

Monthly update: portfolio down $3,163 (9.5%).

With the whole market down, the mining services sector and small caps are down even more, which didn't help my portfolio which has large exposure to both.

On the bright side, my non mining service stocks have done well so far this year, up 4.2%. I am also still ahead of my XSOAI benchmark by 3.4%.

 

[KnowThePast]

Bought VET, 6500 @ $0.20

Another beauty, just misunderstood.

The VET thread has some excellent discussion on the company, which I won't be able to add much to. I especially liked the comments from ROE, stating that it is a good business model, just some problems around it that need to be fixed.

Quite a spectacular fall from grace - it is very rare for a company to go from such highs as a newly listed company to such lows that even bottom feeders like myself are buying.

 

[Ariyahn2011]

Bought VET, 6500 @ $0.20

Another beauty, just misunderstood.

The VET thread has some excellent discussion on the company, which I won't be able to add much to. I especially liked the comments from ROE, stating that it is a good business model, just some problems around it that need to be fixed.

Quite a spectacular fall from grace - it is very rare for a company to go from such highs as a newly listed company to such lows that even bottom feeders like myself are buying.

Keep the updates coming mate.

Have you ever thought about exposing yourself to overseas markets as well?

 

[Ariyahn2011]

Keep the updates coming mate.

Have you ever thought about exposing yourself to overseas markets as well?

Mate did you make a killing on ICS?

 

[Ariyahn2011]

I have also noticed you tend to invest in companies that have dividends. Is that because you like to get into companies that are actually making money?
Cheers

 

[KnowThePast]

Keep the updates coming mate.

Have you ever thought about exposing yourself to overseas markets as well?

Thanks Ariyahn2011,

Yes, definitely thought about overseas markets, but I will keep this thread Australian only.

Mate did you make a killing on ICS?

Unfortunately not, they did a 1:20 consolidation.

I have also noticed you tend to invest in companies that have dividends. Is that because you like to get into companies that are actually making money?
Cheers

No again, I give almost no consideration to dividends. The fact that most companies in my portfolio pay them is a coincidence.

 

[luutzu]

I have also noticed you tend to invest in companies that have dividends. Is that because you like to get into companies that are actually making money?
Cheers

I think it's a good idea to get into companies that are actually making money

 

[Ariyahn2011]

I think it's a good idea to get into companies that are actually making money

True..I read that in a book. No point investing in businesses that are not making money.

Which is why I am a bit sus about all these new health stocks.

 

[KnowThePast]

I think it's a good idea to get into companies that are actually making money

True..I read that in a book. No point investing in businesses that are not making money.

By that logic, companies that don't make money are not worth investing in and are therefore worthless?

Clearly, they are worth something if they can ever return to being profitable, or be acquired, or sell off assets and do a capital return. And as long as some of these loss making companies recover, there will be a price worth to pay for owning them through the bad times. For an investor, it may require different valuation tools and risk strategies, but they are certainly not worthless.

 

[pinkboy]

Are we going to see an updated spreadsheet soon KTP?


pinkboy

 

[Julia]

By that logic, companies that don't make money are not worth investing in and are therefore worthless?

Clearly, they are worth something if they can ever return to being profitable, or be acquired, or sell off assets and do a capital return. And as long as some of these loss making companies recover, there will be a price worth to pay for owning them through the bad times. For an investor, it may require different valuation tools and risk strategies, but they are certainly not worthless.

Depends on your reason for investing. If you need to generate a living from your capital, it's less than reasonable to have funds tied up in some "might be good one day" company when there are plenty of profitable alternatives.

 

[luutzu]

By that logic, companies that don't make money are not worth investing in and are therefore worthless?

Clearly, they are worth something if they can ever return to being profitable, or be acquired, or sell off assets and do a capital return. And as long as some of these loss making companies recover, there will be a price worth to pay for owning them through the bad times. For an investor, it may require different valuation tools and risk strategies, but they are certainly not worthless.

I don't think we said they're worthless. Just it's better if they do make money.

Leighton is a good example of a barely profitable business with way too much debt that does exactly as you said it would... and I did see that too but was hesitant and didn't buy when it was $16-$18. Bought MND instead and you know, ahem...

 

[Ariyahn2011]

By that logic, companies that don't make money are not worth investing in and are therefore worthless?

Clearly, they are worth something if they can ever return to being profitable, or be acquired, or sell off assets and do a capital return. And as long as some of these loss making companies recover, there will be a price worth to pay for owning them through the bad times. For an investor, it may require different valuation tools and risk strategies, but they are certainly not worthless.

G'day KTP. I never said they are worthless. I guess it just depends on your investment strategy and preferences. Typically, I do like to get into companies that make money. But is not always possible if you like them and envision them doing well once they discover/or develop what they need to generate revenue. I am a bit sus about oil explorers that are not generating actual income, or biotech stocks (only because they are not proven and I have personally lost alot with these types of companies). Just my opinion ofc

 

[TPI]

By that logic, companies that don't make money are not worth investing in and are therefore worthless?

Clearly, they are worth something if they can ever return to being profitable, or be acquired, or sell off assets and do a capital return. And as long as some of these loss making companies recover, there will be a price worth to pay for owning them through the bad times. For an investor, it may require different valuation tools and risk strategies, but they are certainly not worthless.

KTP, how do you go about valuing these companies, do you use things like price to sales ratios? Sorry if it's already been discussed earlier in the thread.

I have a speculative portion of my portfolio in stocks like these and am not sure what is the best way to value them.

 

[KnowThePast]

Are we going to see an updated spreadsheet soon KTP?
pinkboy

I've been away for a few days, so this month's update is a little late, apologies.

December has been another negative month for me, with my portfolio falling a further $1,023 (2.95%). I am now below my XSO benchmark for the year as well. I've been hurt by my large exposure to mining services sector, the rest of the portfolio is doing much better.

 

[Ariyahn2011]

I've been away for a few days, so this month's update is a little late, apologies.

December has been another negative month for me, with my portfolio falling a further $1,023 (2.95%). I am now below my XSO benchmark for the year as well. I've been hurt by my large exposure to mining services sector, the rest of the portfolio is doing much better.

View attachment 60980

I like your SBB hold. I hold SBB myself. Good luck!!