I have given bottom buying a lot of thought over the years and have come to a few conclusions.
- Bottom buying is good, the greatest return on capital (both trade & div) can only be done with the cheapest entry.
- Bottom buying can only be done on a down trend and only by accident, as no one knows where the bottom is.
- Bottom buying can only be done deliberately, as in one seeking the bottom.
So its a deliberate act of chance, buying in the hope/belief that it is the bottom, or at least close enough that it doesn't really matter, works really well with an open ended time frame and little or no leverage...its worked out for me that over the last 5 years roughly 1 in 6 of my entry's has been a bottom.
So it would seem that if one consistently seeks bottoms it is bottoms that one will find.
I guess this also leads into when to be confident enough to average down and when to leave well enough alone?
On the subject of portfolio management I am starting to feel a little uncomfortable being almost fully invested at the moment, the recent purchase of Vocus in particular may have been a error.
The first half of one of the most overused quotes, "Be greedy when others are fearful and fearful when others are greedy" has served me OK up until this point but I am starting to see a little greed around. It may be prudent to free up at least 10% of my capital over the next year as selling opportunities present themselves.
Rules, ya gota have em, everyone has to draw a line in the sand somewhere..trend followers follow rules, value investors follow rules and contrarian averagers follow rules.
Personally i allow for 3 average downs of mixed sizes...with a cash invested limit of X that is roughly 9% of my total portfolio value, of the 47 stocks i have held since June 2007 this strategy (to date) has worked in 42 of them...so a 88.6% success rate.
Good to see im not the only person having these feelings...this rally has brought the market back to the 2009/10 peak and yet nothing has changed that much, i have 5 positions (open trades) now in the sell zone (profit in double figures) and im thinking this is an opportunity to free up a heap of cash and close out all but 2 of my open trades...and sit back and wait.
If the US, Japan, Europe and the UK were all businesses I would not touch them - too much debt.
I have given bottom buying a lot of thought over the years and have come to a few conclusions.
- Bottom buying is good, the greatest return on capital (both trade & div) can only be done with the cheapest entry.
- Bottom buying can only be done on a down trend and only by accident, as no one knows where the bottom is.
- Bottom buying can only be done deliberately, as in one seeking the bottom.
So its a deliberate act of chance, buying in the hope/belief that it is the bottom, or at least close enough that it doesn't really matter, works really well with an open ended time frame and little or no leverage...its worked out for me that over the last 5 years roughly 1 in 6 of my entry's has been a bottom.
So it would seem that if one consistently seeks bottoms it is bottoms that one will find.
I doubt many rational investors would disagree with the following:
• The ASX300 market is broadly efficient. The majority of the time all businesses will trade within a “fair value range”.
• The inefficiencies are in small cap stocks.
• Profit margins are mean reverting – most listed businesses can be best described as fair. Only in exceptional cases are profit margins not mean reverting.
• A business that has been successfully operating for a few years has the same probability of failure as a business with decades of operating history.
So creating a diverse portfolio of businesses with some operating history and a focus on buying bottoms allows the investor:
• Profit from buying at the lower end of the fair value range of ASX300 listed stocks
• Minimise risk (permanent loss of capital) by holding a diverse portfolio.
• Recycle capital to maximise portfolio expectancy. Once a stock has gone up a reasonable amount, further gains are dependent on the mood of Mr Market or improved earnings, both of which are near impossible to predict with certainty, time is better spent searching for the next bottom.
• Just follow the market and buy bottoms.
The open ended timeframe and no leverage make it work. I really do like your approach to the market. When I have a larger pot of capital and further experience I will look to implement a bottom buying system.
Right now anyone with a brokerage account is making money.
The question is how much are they making relative to money invested.
Personally I think that before this year is out the folly of BOTH of your views will become aparent.
Investment Increased
HHL - Hunter Hall International Limited
Bought 717 @ $2.83 = $2049.06 including brokerage.
Actually expected the FUM to fall more at the H/Y report, the investment returns are improving however and while the dividend has been reduced I do not expect this to be a permanent state of affairs.
The share price has fallen further from the recent highs as they have gone ex dividend.
So you've watched a 30 % profit all to zero and now your buying more.
I just can't see this as smart/intelligent investing/trading.
You let profits go west and buy a falling knife.
I see self justification for adding to a bad trade.
In my opinion you must lock in profits.
You must minimize loss
Follow the money up---not down.
Take it off the table before it slips through your fingers.
Actively manage your portfolio.
Personal opinion obviously.
I am confident the returns will improve
I think this sector is set to boom
Outflows are likely to continue for some time to come
If total funds under management remain at current levels, ongoing cash profit from Investment Management for the 6 months to June 2013 should roughly match the $4m posted in the December 2012 half year
As a result of better investment performance the rate of fund outflows started to slow from about
September 2012. Outflows are likely to continue for some time to come but we have been able to maintain our funds level at around $1.2 billion for nearly six months. Funds outflows are a lagging
indicator and we hope the operational changes we are making will continue our run of good
performance and eventually allow a return to net inflows.
You could be right about SHV, I will have to take a closer look.
Your a trendy tech... don't know why you bother with these threads. :dunno: i mean you can stop yourself posting in the political and real estate thread/s.
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Trade wise the HHL SP is lagging the other fund managers, reason to believe that at some point HHL will catch up...all things being equal.
Brty, fund outflows were offset by appreciation in the market value of fund investment assets. Therefore FUM remains the same as quoted by management. That's the tricky thing about these businesses - at the top and bottom of the market cycle fund in or outflows can be playing tug of war with the increase or decline of investment assets.In the HHL half yearly report, we get the following in the 'outlook' part...
One of these quotes is what management believes, the other a 'what if' scenario. The market has acted accordingly.
This whole paragraph should set off alarm bells for every investor in the company, from the chairman and chief investment officer...
Rate of outflow slowed from September,and they are likely to continue, is totally inconsistent with "we have been able to maintain our funds for 6 months. Which is it??
If you derive your income from a percentage of FUM, then fund outflows are clearly a leading indicator, not a lagging indicator.
Then the proverbial "we hope", added to "will continue our run of good performance". A 35% decline in ongoing cash profit from the prior corresponding period and a 22% decline in revenue from investment management is regarded as a good performance by the chair.
What worries me about HHL is that they are still having outflows after we've gone up in a straight like for 5 months now and the fact they are signalling it wont stop soon makes me think a dealer group may have taken the fund off of their approved product list and this is fueling the consistent outflows. I know recently in the dealer group I work for we've been constantly reducing the size of our approved product list which means some fund managers lose out on reasonable FUM if the dealer group is big enough.
"Looking forward to you lesson So Cynical." - It's like your baiting him in for another flame war over his style
No I'm actually looking forward to how you can profit without a trend.
Will be something I and everyone here will learn.
If he or anyone else wishes to label my "type" of trading as something different to his or anyone else.
I beg to differ.
Label it what you want
Mean reversion/Value/Fundamental/Technical/Systematic----we all trade/invest trends.
But if you can profit without one I sure as hell am all ears---aren't YOU?
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