Robusta fundamental, leveraged investments

[burglar]

...

Thats MY WHOLE POINT.
Lost on most.

The bots are removing their own edge as humans are pushed out of trading.

The market as described to me three decades ago was a very different place to when I joined in, a decade ago.

And now it is different again!
Ohh well!!

 

[Ves]

Short to medium term traders will possibly be affected by HFT bots.

However, over the longer time horizon only the underlying success of a business can matter. Anything else and equities are ignoring the underlying reality of the situation (whether it be to the downside or the upside). Even this cannot matter. It is no different to anything previous, everything reverts to the mean based on actual business performance. Time-tested rules, as discussed by others in this thread, will tell you what this means in terms of opportunity or flight.

 

[craft]

Efficient market theory on steroids I hope this gains some followers as I believe it will create more opportunity for me.

Me too.

Exactly. But some arguments aren't worth having.

Aint that the truth.

if I can't quantify my edge and monitor it---I wont be doing it!

Thats MY WHOLE POINT.
Lost on most.

We are focused on the value of the business – price is just opportunity. That is or edge. The more price fluctuates from value the more opportunities we get.

I’m happy with a logical basis for profit and a live result to validate it.


Sinner and Motorway - Nice responses you put together there.

 

[robusta]

Investment sold

Well picked up 15 shares in the QBE spp and as I have previously explained was looking to sell so;


Sold 200 x QBE @ $13.76

 

[robusta]

Investment sold

Credit Corp
Sold 853 x CCP @ $5.84 = $4981.51

This is more a portfolio decision, I am starting to see some value in the market (have two unfilled orders at the moment) and I will be investing in the MTU spp.

CCP is the holding that I think is closest to my estimate intrinsic value so sold to free up cash - and reduce capital losses incurred to date.

Bring on the volatility, I have no particular macro view of where the markets will go but thought it prudent to have capital available to take advantage in the event of a correction.

 

[tech/a]

We are focused on the value of the business – price is just opportunity. That is or edge. The more price fluctuates from value the more opportunities we get.

I’m happy with a logical basis for profit and a live result to validate it.


Sinner and Motorway - Nice responses you put together there.

Your valuation is simply opinion.
Your valuation is not likely to be supported by others
Sellers at lower prices certainly don't support your view ( your --- being value investors).
How can you call it an edge.Particularly when fluctuations particularly away from perceived value is seen as further opportunity?..

Others may and do see it as fair value--- they want out!

 

[robusta]

You know you don't have to be right that often
In fact you can be wrong 90% of the time and still be profitable.
You just have to know what to do when your wrong and what to do when your wrong!
First step is to know your right and or wrong within your model.
If you don't know either then you can't tinker with your outcome!

Think about it!
It's NOT ABOUT BEING RIGHT!

If we take a step back and look at the business, the investment decision for me is about being right or wrong. (actually considering the various shades of grey more right or less wrong will have to do)

As a value investor we are looking at the performance of the business to dictate the share price in the long term, so picking a good to great business at a fair to cheap price is IMO more right than the opposite.

If it was---- your valuation would match everyone else's and you'd all ride the trade to " fair value" and everyone would be in Barbados.

Lucky for you and me this market is made up of a heap of different strategies and opinions, may we both go forth and profit.

 

[robusta]

Your valuation is simply opinion.

Yep you are right

Your valuation is not likely to be supported by others

Well just my opinion but I hope not in the short term, in the long term my opinion is that the businesses will perform to a level that will make the earnings difficult for the market to ignore.

Sellers at lower prices certainly don't support your view ( your --- being value investors).

Hard to argue with that but that does not bother me, actually I will often take advantage of those sellers if the prices fall enough to justify a larger position.

How can you call it an edge.Particularly when fluctuations particularly away from perceived value is seen as further opportunity?..

Others may and do see it as fair value--- they want out!

Sorry tech/a take a second look at the last couple of pages on this thread, if you don't get it sorry I cant explain better.

 

[tech/a]

Sorry tech/a take a second look at the last couple of pages on this thread, if you don't get it sorry I cant explain better.

Your right.
I dont get it and frankly dont want to.
I dont see any edge that interests me.

Thanks for your help though.

 

[RandR]

Your right.
I dont get it and frankly dont want to.
I dont see any edge that interests me.

Thanks for your help though.

Horses for courses tech one question that's relatively simple. If someone bought every company in the asx200 that was PROFITABLE, without buying those that weren't. Would that portfolio outperform the asx200 index under a simple buy and hold ? If yes ... would that not constitute an edge ?

 

[tech/a]

Horses for courses tech one question that's relatively simple. If someone bought every company in the asx200 that was PROFITABLE, without buying those that weren't. Would that portfolio outperform the asx200 index under a simple buy and hold ? If yes ... would that not constitute an edge ?

Strangely some of the most amazing market moves for stocks come from those which haven't turned a profit.
Particularly in the mining/tech areas.

Profitability isn't the magic bullet.

In answer to your question has anyone tested that?
Sounds logical but then logic doesn't equate to positive result in many cases.

 

[sinner]

In answer to your question has anyone tested that?

Yes, about a million billion times in the literature.

Sounds logical but then logic doesn't equate to positive result in many cases.

Maybe the results aren't as good as leveraged momentum, but they have proven to be outsized beyond transaction costs and slippage and liquidity.

 

[tech/a]

Yes, about a million billion times in the literature.



Maybe the results aren't as good as leveraged momentum, but they have proven to be outsized beyond transaction costs and slippage and liquidity.

Why cant you leverage "Value Investing" if thats what you think gives momentum the edge?
Opportunity cost is what I see as one of the main draw backs with waiting for "Value"
"Value" is nothing more than an opinion which takes time to be confirmed or refuted.

 

[sinner]

You know what, nevermind, f this.

 

[tech/a]

You know what, nevermind, f this.

----OK----

 

[kermit345]

tech/a I don't think anyone is disputing that technicals allow you to have a mathmatical edge and expectency in your returns based on entering/exiting using a set of rules that are proven to work. We understand this is where your coming from and that using a technical approach your likely to generate outperformance with a positive expectancy based on years of price and volume data validating the approach. (All assuming your rules have been tested, tried and work etc)

The thing with technicals is that its all based on history which is fine, the data is readily available to virtually anyone and allows ideas, theories etc to be proven.

Fundamentals on the other hand is based on looking forward with an element of also looking back. There is 'some' historical data available but its not exactly readily available or easy to utilise for testing etc unless you have the time and resources. This means Fundamentals investing does have a reasonable element of Opportunity Cost risk while waiting for value which does take time to confirm, your 100% correct there.

However what studies, papers and history tells us is that well managed, financial healthy companies continue to flourish, grow and generate returns providing they continue to remain well managed and financially healthy. Everything discussed in this thread on the last few pages including the referrenced materials show that 'value' investing on a whole provides outperformance in comparison to various growth or regular indices over the long term.

If I enter ABC company at X price can I 'expect' Y return based on my backtesting with fundamentals? - No. But can I make the assumption that based on other peoples findings that if I continue to invest in ABC company due to a number of widely used and accepted metrics such as ROE, D/E and Book to Market that I will over time generate better then market returns? I believe yes providing you also use risk management techniques such as investing with a Margin of Safety and being prudent with valuations.

I don't think your going to find the answer your pushing for tech/a, that the returns of fundamentals can be reasonably expected based on historical evidence of a ruleset being applied to a set of data. I believe everyone in this thread who is operating on a fundamentals basis is fine with that based on the assumption that value trumps general index's and growth index's over time. Can we prove any of our techniques are better then each others, I don't believe so unless we jump into the future 20-30 years from now and look backwards.

 

[Ves]

Why cant you leverage "Value Investing" if thats what you think gives momentum the edge?

Because longer term value-investing has a lumpier equity curve compared to something like momentum investing which ideally has a much flatter equity curve.

Opportunity cost is what I see as one of the main draw backs with waiting for "Value"
"Value" is nothing more than an opinion which takes time to be confirmed or refuted.

The opportunity cost of value investing is no different to that of any other form of trading of investing. You are confusing returns over a shorter time frame with total actual return. If you can make a larger return over a longer time frame why would you want to make a lesser return over a number of shorter time frames just because you are missing out when the returns are flat or negative for some time windows?

This obviously does not apply to those investors who have no business analysis skills and cannot implement a value-investing strategy.

 

[tech/a]

tech/a I don't think anyone is disputing that technicals allow you to have a mathmatical edge and expectency in your returns based on entering/exiting using a set of rules that are proven to work. We understand this is where your coming from and that using a technical approach your likely to generate outperformance with a positive expectancy based on years of price and volume data validating the approach. (All assuming your rules have been tested, tried and work etc)

My discussion here has come from the many many posts I have seen on the A-Z stock threads. Many many of these people struggle. their rhetoric is convincing but their trading ability is woeful. Sure there are the odd few who will jag an outlier event but less than a handful who would turn a profit year in your out.
My discussion or writings here are meant to be thought provoking to those who feel disillusioned.
All others will ignore.

The thing with technicals is that its all based on history which is fine, the data is readily available to virtually anyone and allows ideas, theories etc to be proven.

So most believe.
To me they present set-ups/or opportunity which can be measured.They give time frame and very clear right or wrong--within that time frame.

Fundamentals on the other hand is based on looking forward with an element of also looking back. There is 'some' historical data available but its not exactly readily available or easy to utilise for testing etc unless you have the time and resources. This means Fundamentals investing does have a reasonable element of Opportunity Cost risk while waiting for value which does take time to confirm, your 100% correct there.

Look I have no problems with fundamentals.
My biggest issue is that the valuation is an opinion and not one which is unanimous!
If it was then there'd be no waiting only UP.

However what studies, papers and history tells us is that well managed, financial healthy companies continue to flourish, grow and generate returns providing they continue to remain well managed and financially healthy. Everything discussed in this thread on the last few pages including the referrenced materials show that 'value' investing on a whole provides outperformance in comparison to various growth or regular indices over the long term.

Like most analysis in any field----in the right hands. Problem is in the retail sector very few succeed. Ponder this.
Im sure pretty well all traders or would be traders wouldn't have any trouble Trading/Investing 5% of their net worth---whatever that is.
But how many would trade their entire Super fund---presuming they have one.
Say $500K plus.How many would sit $100k of that super in sat RED which Ive seen valued buy many as $3.00 plus. OR PEN which I say over a $ at one time OR MAD which is another $3 stock at the moment.

Not what you'd invest in as a "Value" stock? Well according to some they have their life's savings in them.

If I enter ABC company at X price can I 'expect' Y return based on my backtesting with fundamentals? - No. But can I make the assumption that based on other peoples findings that if I continue to invest in ABC company due to a number of widely used and accepted metrics such as ROE, D/E and Book to Market that I will over time generate better then market returns? I believe yes providing you also use risk management techniques such as investing with a Margin of Safety and being prudent with valuations

.

I think your a bit short here.
If it drops from a bargain price you paid for it say 25% then it will need to rise 50% (Nominally) to recoup that loss. But people dont weight up THOSE METRICS.
All of a sudden a 25% drop in THEIR bank accounts mean bugger all----Strange that!

I don't think your going to find the answer your pushing for tech/a, that the returns of fundamentals can be reasonably expected based on historical evidence of a ruleset being applied to a set of data. I believe everyone in this thread who is operating on a fundamentals basis is fine with that based on the assumption that value trumps general index's and growth index's over time. Can we prove any of our techniques are better then each others, I don't believe so unless we jump into the future 20-30 years from now and look backwards.

Not looking for an answer---planting a seed.
Va,ue only trumps indexes when you get it right.
I've seen it terribly wrong!----often and in far less than 30 yrs.
Company metrics seem so important.
Personal portfolio---what metrics?

Because longer term value-investing has a lumpier equity curve compared to something like momentum investing which ideally has a much flatter equity curve.

I believe it can be flattened--A lot

The opportunity cost of value investing is no different to that of any other form of trading of investing. You are confusing returns over a shorter time frame with total actual return.

I am?
I dont care what you trade or invest in.
If you sit there while it does nothing your not that good at it!
I sell houses when they stop increasing in value. I then keep those which are making a positive return. Ill use their equity when I find better opportunity in which to put those funds.

If you can make a larger return over a longer time frame why would you want to make a lesser return over a number of shorter time frames just because you are missing out when the returns are flat or negative for some time windows?

Because the longer time frame doesn't have a guaranteed return.
I and most everyone else can pick a shorter term move far more often than a longer term one. "Small Fish are sweet"

This obviously does not apply to those investors who have no business analysis skills and cannot implement a value-investing strategy.

 

[Ves]

Because the longer time frame doesn't have a guaranteed return.
I and most everyone else can pick a shorter term move far more often than a longer term one. "Small Fish are sweet"

I'm confused, you have gone from expected returns to talking about guaranteed returns? I used the word "if" as an explanation of "why" you might consider the opportunity cost to be worth the risk.

You and I are both working with probabilities in the end, but over different timeframes. The difference is that you are using a stop loss to protect your capital rather than a margin of safety.

Your main beef with value investing seems to revolve around the fact that you cannot quantify everything. I happen to enjoy the qualitative aspects of F/A.

 

[robusta]

Late February I bought a small holding in MEF

NEW INVESTMENT

MEF - Merricks Capital Special Opportunity Fund Limited

Bought 2976 x MEF @ $0.63 = $1874.88

MEF is the old Fat Prophets LIC (FAT) with a big change of direction.

"Merricks Capital Special Opportunity Fund Limited (Fund) is listed and trades on the Australian Stock Exchange (MEF-ASX). The current market capitalisation of the Listed Fund is approximately $30m.
The Fund was renamed as the Merricks Capital Special Opportunity Fund at the AGM on 15 November 2010.
On 1 August 2010, Merricks Capital commenced acting as the Manager of the Fund. On 1 October 2010, Merricks Capital and Independent Directors of the Fund announced the new investment mandate of the Fund.
The Fund focuses on having between 3 to 10 investments at any given time.
Generally the Fund focuses on making investments with small to mid-cap Australian listed companies.
The types of investments that the Fund targets are:
Obtaining a strategic stake in a desired small to medium sized listed company via placement of new securities or acquisition of securities.
Construction of unlisted convertible securities offering equity-type returns but with debt security characteristics.
Combining with other investors to acquire significant stakes in companies with a view to actively agitating for change, which could release hidden value to all shareholders.
Investments that reward the provision of liquidity.
The Fund seeks to make investments that will allow the Fund to pay regular and consistent dividends.
The Fund is able to target sectors of the market where there is a shortage of competitors.
The Fund also has the ability to co-invest in opportunities with Merricks Capital’s other funds."

MEF had a NTA backing in Jan @ $1.01 / share. The portfolio is very concentrated as of Janruary announcement.

50.93% ASX listed SRQ - Straits Resources, a copper, and gold producer and explorer with some decent assets - DYOR but well worth a look.

29.9 % digital harbour mezzanine loan, a loan to developer of a property leased by Melbourne Water (should underpin a $0.04 a share dividend for the 2012 financial year.

12.99% ASX listed IEF - ING Real Estate Entertainment Funds, looking for a good yield here

Well today

Increased Investment

Bought 3174 x MEF @ $0.63

I don't want to bore you with all the geological details but today SRQ announced they drilled some holes and found some stuff.

Probably too much to expect a direct correlation between the sp of MEF and SRQ but maybe the value will shine through and a decent return will be generated.

Anyhow these guys are unloved and as such I expect a bit of disagreement on this one.