Robusta fundamental, leveraged investments

[tech/a]

Yes, but he only started in July. Given that FA is closely related to the earnings of a company and these are reported every 6months, you'd need to watch it over a longer term.

But I do agree that if that sort of return were to continue, there are some serious issues there.

How might he improve return ?

(1) Have some stop loss conditions.
(2) Have some position sizing conditions
(3) Have some filtering introduced. (Index either whole index or group or both)
(4) Look at Equity curve filter.
(5) Look at entry timing conditions.

As a few ideas. I cant see why these cant be introduced into Robustas fundamental method.

 

[Klogg]

How might he improve return ?

(1) Have some stop loss conditions.
(2) Have some position sizing conditions
(3) Have some filtering introduced. (Index either whole index or group or both)
(4) Look at Equity curve filter.
(5) Look at entry timing conditions.

As a few ideas. I cant see why these cant be introduced into Robustas fundamental method.

A good suggestion and probably worth looking into whether they fit with his approach.

From my experience, a stop-loss is very hard to use with FA. I don't personally use one, but there are others ofcourse who are comfortable with them.

Thanks tech.

 

[robusta]

Robusta

This has an average of around $12,500 a day traded?
You allowed yourself 3c slippage to buy?? And were the only trade for the day.
Look I know your having a go and doing your best but--
Sorry I really shake my head.

Sorry to bring this up again, but what do your charts say abou PET now?

Well with a - 43% return on capital you may consider how successful this idea is.

Doing the same thing day in and day out and expecting a DIFFERENT result is often not that productive.

Actually I think I may have missed some costs, probably closer to -90%, anyway it is leveraged results will vary. I am confident the returns will come.

How might he improve return ?

(1) Have some stop loss conditions.

I want to buy low and sell high, so if I own something (almost by definition I think it is cheap if I hold) and the price falls, the two options are buy more or hold, all things equal. Not sell.

(2) Have some position sizing conditions

Lots of drama for me in the past on this issue. Page 6 of this thread, since then I have been fairly happy.

(3) Have some filtering introduced. (Index either whole index or group or both)

I filter for high ROE, low debt/equity, good earnings history...

(4) Look at Equity curve filter.

You taught me something here tech, I had to look it up. Started reading about buying when price crosses over the moving average and looking for reoccurring patterns and I thought it was all to difficult.

Much simpler for me to look at a business, work out a estimation of value and quality then buy if the quality is good good enough and the price is cheap enough.

(5) Look at entry timing conditions.

Sorry I am no good at timing, will just have to learn to give my investments time.

 

[slooi1]

Sorry I am no good at timing, will just have to learn to give my investments time.

I'm normally a lurker and don't post much - but thought I'd jump in here as well.
First of all, I think Robusta is an extremely brave chap to put his investing and trading history on this board for all to see and critique - that'd be quite a hard move for most of us I reckon.

Robusta has fundamental analysis view based on ROE and growing earnings which provides a set of filtered companies to purchase at the right prices. That's a great starting point. It gives a higher probability of success, and a margin of safety.

My concern is this. Having identified the companies, from what I've read in the board posts to date is it appears that Robusta is merely trading the companies based on which one has a bigger discount to the intrinsic value. This means that technical analysis and market entry/timing is of importance to ensure that the great entry and exit prices. Because the trades are short term (< 1 year) - he's more likely to get his gains from the movement of prices based on sentiment, than any movement in prices based on changing intrinsic value (which I see as growing slowly over many years - barring major company changing events).

I believe a learning is really for Robusta to focus on market entry and market timing. Both fundamental and technical analysis is important, especially if he plans on trading companies. If however, the plan is to buy and hold for a longer period (1+ years), market timing is less relevant in my opinion.

I myself am a fundamental investor, but always keep an eye on the price action / volumes etc to ensure I'm getting the best bang for my buck.

slooi1

 

[sammy84]

Sorry to bring this up again, but what do your charts say abou PET now?

It went up 2% on average volume. I wouldn't be getting ahead of myself.

 

[burglar]

It went up 2% on average volume. I wouldn't be getting ahead of myself.

Agree with you sammy, A cute lil tree-frog crowing at a talking duck!

Sorry robusta, I could not help myself *giggle*

 

[skc]

It went up 2% on average volume. I wouldn't be getting ahead of myself.

The problem with something like PET is that, if there's something wrong, you can expect horrible slippage on exit because of the lack of liquidity. It's like staying in an overseas hotel with no fire escape. It's cheap and doesn't really matter if nothing goes wrong. But if there's a fire...

And the fact that with something like PET, you can't really expect it to outperform your interest cost by more than a few percent over the long run... which happens to be your entry/exit spread.

 

[robusta]

It went up 2% on average volume. I wouldn't be getting ahead of myself.

Tech/a seemed to imply that my entry price ($0.03 above the last traded price) was inept of maybe even stupid. I was trying to point out that since then more shares have traded at my entry price and some even higher since that date.

Agree with you sammy, A cute lil tree-frog crowing at a talking duck!

Sorry robusta, I could not help myself *giggle*

LOL, you think I am cute?

If I wanted to crow COH and NVT are a fair percentage up but the only price that will matter to me is the one I sell at - hopefully a long time into the future.

 

[robusta]

I'm normally a lurker and don't post much - but thought I'd jump in here as well.
First of all, I think Robusta is an extremely brave chap to put his investing and trading history on this board for all to see and critique - that'd be quite a hard move for most of us I reckon.

It helps to have a crazy (some would say delusional) confidence that given time positive returns will be generated.

Robusta has fundamental analysis view based on ROE and growing earnings which provides a set of filtered companies to purchase at the right prices. That's a great starting point. It gives a higher probability of success, and a margin of safety.

My concern is this. Having identified the companies, from what I've read in the board posts to date is it appears that Robusta is merely trading the companies based on which one has a bigger discount to the intrinsic value. This means that technical analysis and market entry/timing is of importance to ensure that the great entry and exit prices. Because the trades are short term (< 1 year) - he's more likely to get his gains from the movement of prices based on sentiment, than any movement in prices based on changing intrinsic value (which I see as growing slowly over many years - barring major company changing events).

I believe a learning is really for Robusta to focus on market entry and market timing. Both fundamental and technical analysis is important, especially if he plans on trading companies. If however, the plan is to buy and hold for a longer period (1+ years), market timing is less relevant in my opinion.

I myself am a fundamental investor, but always keep an eye on the price action / volumes etc to ensure I'm getting the best bang for my buck.

slooi1

I have to agree with you regarding the amount of trading to date, in the future I plan to rectify this.

COH, NVT, PET I regard as core holdings and plan to hold for the long term, having said that if the price rises past my estimation of IV selling may be a consideration.

MTU, TGA, OKN and PRV have the opportunity of being long term holds if the returns are satisfactory.

Opportunities like QBE I will take as they come but I am not sure how TA would improve my entry and exit.

 

[robusta]

The problem with something like PET is that, if there's something wrong, you can expect horrible slippage on exit because of the lack of liquidity. It's like staying in an overseas hotel with no fire escape. It's cheap and doesn't really matter if nothing goes wrong. But if there's a fire...

And the fact that with something like PET, you can't really expect it to outperform your interest cost by more than a few percent over the long run... which happens to be your entry/exit spread.

Should be no surprise I disagree on this one SKC. I would expect a minimum 10% CAGR, but probably closer to 15% on NTA, the sp should follow and even close the discount to NTA on these positive results, also a nice little franked dividend while I wait.

 

[Ves]

I won't pretend I am interested in LICs, but I think it is better to focus not on the current gap between share price and NTA, but the historical average discount to NTA that it trades on. Robusta, do you know the long-term average discount of PET's share price to NTA? This would most likely fluctuate during the market cycle, of course. Probably handy to figure out where it is at the moment. Best to buy when this the current NTA discount is greater than the average by a reasonable margin; if you think the LICs investments are sound.

 

[skc]

Should be no surprise I disagree on this one SKC. I would expect a minimum 10% CAGR, but probably closer to 15% on NTA, the sp should follow and even close the discount to NTA on these positive results, also a nice little franked dividend while I wait.

Based on Comsec, total shareholder return (TSR) for PET is:
1 yr = 2.7% p.a.
3 yr = 14% p.a.
5 yr = -2.7% p.a.

And here are some examples of 10-yr TSR of other LICs:
AFI = 7.9%
MLT = 7.2%
ARG = 6.2%
DJW = 7.1%
WAM = 8.0%
AUI = 6.8%

There isn't a lot left after paying 6-7% interest on your loan. IMO the majority of LICs only offer great return for the management team, and is a relatively lazy way to "value invest".

Anyway, plenty of good information on the ASX website on LICs.

The LIC index (slightly negative since 2006)
http://www.asx.com.au/products/listed-investment-companies-index.htm

Qtrly report by Bell Potter
http://www.asx.com.au/documents/products/Bell_Potter_LIC_Report_December_2011.pdf

 

[McLovin]

I won't pretend I am interested in LICs, but I think it is better to focus not on the current gap between share price and NTA, but the historical average discount to NTA that it trades on. Robusta, do you know the long-term average discount of PET's share price to NTA? This would most likely fluctuate during the market cycle, of course. Probably handy to figure out where it is at the moment. Best to buy when this the current NTA discount is greater than the average by a reasonable margin; if you think the LICs investments are sound.

I agree. Wasn't this discussed recently in this thread or a very smilar one?

 

[odds-on]

There isn't a lot left after paying 6-7% interest on your loan. IMO the majority of LICs only offer great return for the management team, and is a relatively lazy way to "value invest".

Agree lazy but it is also simple! A simple strategy is an advantage. Have some spare cash, buy LIC X when at Y% discount to NTA. Repeat.

I saw on the RM blog that he is going to start a retail fund. Any takers? Skc? Robusta? McLovin?...........................perhaps Craft?

 

[robusta]

New Investment

Collins Foods Limited

Bought 1896 shares @ $1.055 = $2000.28

CKF listed around $2.50 recently and have been absolutely hammered on a profit downgrade. Things don't look that bad unless Queenslanders are going to give up KFC.

This is a bit of a departure from the high ROE stocks in the portfolio but the dividend should more than cover my cost of money and the growth should provide a nice margin on top of inflation.

Population growth will also give these guys a nice little kick along, hell I would love to live in Queensland if it wasn't so full of Queenslanders.

 

[Ves]

This is a bit of a departure from the high ROE stocks in the portfolio but the dividend should more than cover my cost of money and the growth should provide a nice margin on top of inflation.

Curious, do you know what pay-out ratio and forecast dividend for 2012? I looked at this stock late last year, but have found better opportunities so far. Looks interesting still. Another profit downgrade and it could be under $1.

 

[robusta]

Curious, do you know what pay-out ratio and forecast dividend for 2012? I looked at this stock late last year, but have found better opportunities so far. Looks interesting still. Another profit downgrade and it could be under $1.

You know what? I have no idea, I imagine in this type of business somewhere either side of a third of profits will be retained for costs and growth and the remainder will be paid to us as owners.

Another downgrade and it will be earning 14 to 16 cents per share, may pick up some more if the price is right.

 

[StumpyPhantom]

You know what? I have no idea, I imagine in this type of business somewhere either side of a third of profits will be retained for costs and growth and the remainder will be paid to us as owners.

Another downgrade and it will be earning 14 to 16 cents per share, may pick up some more if the price is right.

Is there any hurry to pick up the stock? All it's technical indicators are still pointing downward in circumstances where the fundamentals don't appear to be capable of a quick about-face in the current macro economic environment.

Or am I missing something?

 

[Ves]

Is there any hurry to pick up the stock? All it's technical indicators are still pointing downward in circumstances where the fundamentals don't appear to be capable of a quick about-face in the current macro economic environment.

Or am I missing something?

Not at all. Hence why I have not been in any rush to even look at it properly for the time being.

 

[McLovin]

Not at all. Hence why I have not been in any rush to even look at it properly for the time being.

I'm with you. As I said over in the CKF thread, management either lied or was incompetant. They were sold as a defensive investment and yet they have been anything but that. Considering they are apparently running the business on the smell of an oily rag and still might not make their revised profit, you do have to wonder.

The falling revenue is a concern. Especially given the way the company was sold to investors.