...
Thats MY WHOLE POINT.
Lost on most.
Efficient market theory on steroids I hope this gains some followers as I believe it will create more opportunity for me.
Exactly. But some arguments aren't worth having.
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.
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 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.
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!
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.
Horses for courses techone 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 ?
In answer to your question has anyone tested that?
Sounds logical but then logic doesn't equate to positive result in many cases.
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.
You know what, nevermind, f this.
Because longer term value-investing has a lumpier equity curve compared to something like momentum investing which ideally has a much flatter equity curve.Why cant you leverage "Value Investing" if thats what you think gives momentum the edge?
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?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.
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.
Because longer term value-investing has a lumpier equity curve compared to something like momentum investing which ideally has a much flatter equity curve.
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.
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.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"
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
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