For something as simple as buying cash flows for less than they are worth – it isn’t easy.
The more you listen to the market and everybody tell you you’re wrong the harder it is.
Particularly if the trade is also heading south.
Are you wrong? Only you can answer that and you have to answer it unequivocally before you can happily stand in the face of volatility, criticism and uncertainty and come out the other end holding the excess return that doing so offers.
If you see that your valuation is one you wish to take advantage of---wouldn't it be easier if you waited to take the trade when it was heading north?
If you have any doubts that you can be a strong hand (truly committed) the earlier you choose to fold the better.
Agree.
But is true commitment a guarantee of profit?--No
Could be blind faith in your valuation in face of evidence to the contrary.
Surely a confluence of positive price action with valuation be desirable.
Being wrong (being defined as wrong on the business analysis) on some stocks doesn’t mean you’re not suited to an analysis approach – It just means sometimes you’re wrong.
Any approach really
Sell, take your punishment and move on. No matter how you tackle the market you have to become a good loser.
Great point and one Ill add to.
This releases you to be able to take advantage of other opportunity.
I think also it can often be a case of timing---right analysis---wrong time---often my problem.
But easily overcome if evidence continues to confirm your analysis---just keep at it!
But the question of magnitude of an individual loss is an important factor – fundamental investing doesn’t lend itself to small loses on individual stocks when the businesses fail to perform how we expect.
True but it can---again timing.
I for the life of me cant see why you cant hold a long term undervalued view---yet monitor your timing of entry and in many cases re entry based upon price.
If you need near term liquidity or the market to immediately reinforce your opinion/position use a market price reactive approach
.
OR as I have suggested a synergistic approach
My personal opinion is that there is no easily available excess return from such a crowded, transactionally expensive, zero sum approach but it may be better then capitulating as an investor.
A few here including me would disagree.
Why don't we run a test case.
The Fundi experts picks say 5-10 stocks that are undervalued and we trade them longer term and I and the other Techi experts use the same stocks picked by the Fundies but the Techies attempt to out perform the pure Fundi traded portfolio's
If we decide not to trade it give us a few more in the portfolio to have a watch list--say 5 more so say have a stable of 15 and try and get the best performance out of each method.
Run it for a year or 3
I made this suggestion last year when the best fundamental picks for 2014 came out.
Was met with horror at even suggesting it!---don't know why.
Surely we can collaborate!