Spec stocks

[Boggo]

Man, if you already know that the big guys already know these pricing data, heck, they might even be the price makers, and if not, already have much more powerful databases and what not... and still somehow want to play a game that's rigged against you.

If a small army where to fight a superpower, for it to fight on an open field, using conventional [technical] means, it's not a theoretical conclusions that they will be wipe off the face of the earth.

You guys are looking at the wrong charts.

Sounds like you have got this money making business all sussed out

Please elaborate. What are the correct charts then?

Yes please x 2

 

[luutzu]

Sounds like you have got this money making business all sussed out



Yes please x 2

Yup, all i need now is $20 millions in the bank so I can make $1 million a year

Anyway, much smarter and way richer people than myself (and most others in history) have said the same thing... It seems success or wealth or reason just can't convince some people.

 

[Boggo]

... It seems success or wealth or reason just can't convince some people.

Demonstrating what it is you are rambling on about would be a starting point perhaps or are you more interested in derailing this thread with some irrelevant or obscure butcher shop analogy.

 

[tom82]

Demonstrating what it is you are rambling on about would be a starting point perhaps or are you more interested in derailing this thread with some irrelevant or obscure butcher shop analogy.

Oh good, I wasn't the only one struggling with the butcher shop then!

I was thinking selling a million dollars worth of meat was a lot of meat.

So Boggo what are the steps in your method?

 

[luutzu]

Demonstrating what it is you are rambling on about would be a starting point perhaps or are you more interested in derailing this thread with some irrelevant or obscure butcher shop analogy.

Oh yea, was going to detailed the butcher shop analogy but went to sleep after the pricing analogy that followed
I thought that was pretty good though... Anyway

 

[Wysiwyg]

Yup, all i need now is $20 millions in the bank so I can make $1 million a year

Anyway, much smarter and way richer people than myself (and most others in history) have said the same thing... It seems success or wealth or reason just can't convince some people.

4% bank interest is 800k. You got nothing but words.

 

[luutzu]

4% bank interest is 800k. You got nothing but words.

If i have $20 million, i probably could negotiate and get 5%, at least.

 

[Wysiwyg]

What books and / or other resources can you recommend one regarding investing in spec stocks?
Thank you

You could derive experience by testing strategies for speculative stock trading. Back testing software (also use it for scans to find the stocks of interest) is quicker but is not an accurate replication of what would have happened but can give one confidence to -->. Alternatively, create a portfolio you could afford to actually trade using your strategy for size, entry & exits and trade it for a set period (e.g. 40-50 days). Note market conditions that the results were tested under (rising/falling/sideways, long run up/down, high/low percent change for test period, volume, season). Consider the spec. stocks liquidity and remember speculative stock can be hot potatoes with the risk being the greater fool by buying at what turns out to be the top of a spike.

 

[Boggo]

Oh good, I wasn't the only one struggling with the butcher shop then!

I was thinking selling a million dollars worth of meat was a lot of meat.

So Boggo what are the steps in your method?

You get those on every thread tom, can't contribute but want to be involved.

Back to your topic, pretty much as Wysiwyg has said below.
Basically look at past pattern behaviour that has been successful and try to determine why those were different to the majority.
Then you really need to develop your own way of either scanning for or having the ability to "see" potential in glancing at charts. I am assuming that you are using some sort of programmable software that you can set up to assist.
It took me years to build my systems, actually not that long to build them, more a case of taking time to have confidence in it and looking at it as a numbers process to eliminate emotion.

You can probably understand why I am reluctant to get too descriptive in my process especially when we have the people who intervene, don't contribute but tend to derail the discussion as their relief process after they have finished their busy days work at NASA.

In some ways it is actually easier to eliminate unlikely stocks and that will significantly reduce the number remaining. Put a filter on a scan on a scan and start working with stocks in the 50c to $1 group for starters as an example.
Good info below.

You could derive experience by testing strategies for speculative stock trading. Back testing software (also use it for scans to find the stocks of interest) is quicker but is not an accurate replication of what would have happened but can give one confidence to -->. Alternatively, create a portfolio you could afford to actually trade using your strategy for size, entry & exits and trade it for a set period (e.g. 40-50 days). Note market conditions that the results were tested under (rising/falling/sideways, long run up/down, high/low percent change for test period, volume, season). Consider the spec. stocks liquidity and remember speculative stock can be hot potatoes with the risk being the greater fool by buying at what turns out to be the top of a spike.

 

[luutzu]

You get those on every thread tom, can't contribute but want to be involved.

Back to your topic, pretty much as Wysiwyg has said below.
Basically look at past pattern behaviour that has been successful and try to determine why those were different to the majority.
Then you really need to develop your own way of either scanning for or having the ability to "see" potential in glancing at charts. I am assuming that you are using some sort of programmable software that you can set up to assist.
It took me years to build my systems, actually not that long to build them, more a case of taking time to have confidence in it and looking at it as a numbers process to eliminate emotion.

You can probably understand why I am reluctant to get too descriptive in my process especially when we have the people who intervene, don't contribute but tend to derail the discussion as their relief process after they have finished their busy days work at NASA.

In some ways it is actually easier to eliminate unlikely stocks and that will significantly reduce the number remaining. Put a filter on a scan on a scan and start working with stocks in the 50c to $1 group for starters as an example.
Good info below.

I thought i was making a contribution, one that's somewhat useful.

But I guess you shouldn't correct people... it's rude

 

[tradernor]

When you buy spec stocks, you must invest as much as you can afford to lose. This is like gambling in LV.
I do not buy spec stocks at all.

 

[DeepState]

Hi Tom82

I just got back from feeding my NASA monkeys. Did I miss something?

You have been receiving detailed advice on Technical Trading. It can work. You can dig this up. I can tell you the authors are world class rockstars so this is tight. But obviously the study is old and done prior to the advent of HFT and algo:



Your Tech advisers can give you copious references.

I am going to derail this thread by making an assumption (possibly incorrect) that spec stocks can be regarded as just small cap stocks for this note. Given we do not have common agreement on what represents spec, I'll just go forward with this and you can extrapolate it for your purposes.

If your preference is fundamentally oriented investing instead (it doesn't have to be to the exclusion of technical approaches), then the following is what the professional market has been able to deliver. If you work at it over time, you have decent advantages and might reasonably expect to do very well also.

First, this is a chart of the total return index of the ASX Small Ordinaries (the next 200 stocks after the ASX 100). It's done alright. Since Feb 2001, you've got around 2 1/3 times your money to end of May 2014:




The following chart shows the extent to which the median small cap manager in the Mercer Surveys (These are the leading insto surveys) beats that index on an annual basis. You can see that it is by a very handy amount. It all adds up:




One of the leading managers is Acorn. This is their performance. They have quadrupled your money in the same period. That's a good effort in my view. But you may be aiming for more and that's your prerogative:




One thing to be aware of in truly speculative situations is something called the lottery effect. Stocks which have low price, typically no earnings, low liquidity and/or high volatility (deeply speculative stocks) tend to underperform as a whole. I'm sure you can look up why on the web.

If you are interested in books to read if you wish to pursue some element of fundamental investment (and all the insto investors are fundamentally dominated), then I can recommend that you start with "The Intelligent Investor" by Benjamin Graham. Then, after that, I can recommend "Competitive Strategy" by Michael Porter.

You have been receiving adequate advice on risk management. I might disagree on the edges, but that's not important here.

All the best with your journey.

 

[luutzu]

Hi Tom82

I just got back from feeding my NASA monkeys. Did I miss something?

You have been receiving detailed advice on Technical Trading. It can work. You can dig this up. I can tell you the authors are world class rockstars so this is tight. But obviously the study is old and done prior to the advent of HFT and algo:

View attachment 58225

Your Tech advisers can give you copious references.

I am going to derail this thread by making an assumption (possibly incorrect) that spec stocks can be regarded as just small cap stocks for this note. Given we do not have common agreement on what represents spec, I'll just go forward with this and you can extrapolate it for your purposes.

If your preference is fundamentally oriented investing instead (it doesn't have to be to the exclusion of technical approaches), then the following is what the professional market has been able to deliver. If you work at it over time, you have decent advantages and might reasonably expect to do very well also.

First, this is a chart of the total return index of the ASX Small Ordinaries (the next 200 stocks after the ASX 100). It's done alright. Since Feb 2001, you've got around 2 1/3 times your money to end of May 2014:

View attachment 58227


The following chart shows the extent to which the median small cap manager in the Mercer Surveys (These are the leading insto surveys) beats that index on an annual basis. You can see that it is by a very handy amount. It all adds up:

View attachment 58226


One of the leading managers is Acorn. This is their performance. They have quadrupled your money in the same period. That's a good effort in my view. But you may be aiming for more and that's your prerogative:

View attachment 58224


One thing to be aware of in truly speculative situations is something called the lottery effect. Stocks which have low price, typically no earnings, low liquidity and/or high volatility (deeply speculative stocks) tend to underperform as a whole. I'm sure you can look up why on the web.

If you are interested in books to read if you wish to pursue some element of fundamental investment (and all the insto investors are fundamentally dominated), then I can recommend that you start with "The Intelligent Investor" by Benjamin Graham. Then, after that, I can recommend "Competitive Strategy" by Michael Porter.

You have been receiving adequate advice on risk management. I might disagree on the edges, but that's not important here.

All the best with your journey.

Wrong assumptions.

Speculative stocks are stocks you buy expecting certain outcome without much real evidence to support such hopes beside your gut feelings or some news or hype you've heard. It could be a blue chip or a micro capped company.

Secondly, you're mis-using or misunderstood the application of those charts. That just because a micro fund manager or a stock index or whatever group of stocks generally does well, it does not then mean an investor/trader could do just as well when he engaged in, speculates in, those kind of stocks - that he could only be expected to average or if historical results could predict future returns, could only expect to do similarly well if he buy the index or enough stocks to represent the stocks whose performance has been recorded.

In other words, just because no houses have been burnt down in your state, and your house is burning down but you say it couldn't be because on average no house is burning in your state.

----

Tom, good luck man.

Read the Intelligent Investor... ignore what RY said about Technical analysis could also work... i think he just had a big dinner and was being kind

 

[tom82]

I can report that I have acquired the book The Intelligent Investor by Benjamin Graham (revised edition), I am considering his other book Security Analysis and I have also acquired Roger Montgomery's book Value.able (got it when it first came out a couple years back -limited edition. Also a student of Graham and Buffet).

I have ordered Louise Bedfords books Trading Secrets 3rd edition, Charting Secrets, The Secret of Candlestick Charting Book and Chris Tates The Art of Trading - 2nd edition.

I also have:

Teach yourself about shares revised edition Roger Kinsky
Share Investing for Dummies 3rd Australian edition (well over 400 pages)
Starting out in Shares, The ASX Way 2nd edition
Exchange Traded Funds for Dummies Australian and NZD edition Colin Davidson
Forex made Simple Kel Butcher
Futures made simple Kel Butcher
Commodities for Dummies 2nd edition Amine Bouchentouf
CFD's for Dummies David Land (sent to me from CMC Markets!)
Getting Started in Currency Trading 3rd edition (think they are upto a 4th edition now) Michael Duane Archer
Naked Forex Alex Nekritin
Technecial Analysis Explained Fourth Edition Martin J Pring (also have the study book that goes with it)
Technical Analysis Of The Financial Markets John J Murphy (hardcover)
Technical Analysis for Dummies 2nd edition Barbara Rockefeller
Currency Trading for Dummies Brian Dolan 2nd edition
FX Trading Mark Douglas
Beat The Forex Dealer
Come into My Trading Room Dr Alexander Elder
A CFD book by Catherine Davey
Market Wizards Jack D Schwager
The Warren Buffet Way (want to get the follow up book as well)
Reminiscences of a Stock Operator Edwin Lefevre (I think I should re read this)
Super Trader
Think And Grow Rich
Fibonacci Analysis Constance Brown
The Zurich Axioms Max Gunther (Think I need to re read this)

The books on shares dont really have anything on strategy or method or money management or spec stocks, but hoping that Ben Gram's books principals can be used on spec stocks.

Spec stocks can be small caps as well. Spec stocks are companies that are exploring or in the process of inventing something and or in the process of getting approvals eg medical / bio tech companies and these companies are usually not proven and / or have little history.

 

[tom82]

You get those on every thread tom, can't contribute but want to be involved.

Back to your topic, pretty much as Wysiwyg has said below.
Basically look at past pattern behaviour that has been successful and try to determine why those were different to the majority.
Then you really need to develop your own way of either scanning for or having the ability to "see" potential in glancing at charts. I am assuming that you are using some sort of programmable software that you can set up to assist.
It took me years to build my systems, actually not that long to build them, more a case of taking time to have confidence in it and looking at it as a numbers process to eliminate emotion.

You can probably understand why I am reluctant to get too descriptive in my process especially when we have the people who intervene, don't contribute but tend to derail the discussion as their relief process after they have finished their busy days work at NASA.

In some ways it is actually easier to eliminate unlikely stocks and that will significantly reduce the number remaining. Put a filter on a scan on a scan and start working with stocks in the 50c to $1 group for starters as an example.
Good info below.

I am using the charting software Incredible Charts (After 7PM package), it is possible to run scans, it is a basic software but should be enough to get started for now.
Are you using MetaStock, whats it like, is there on going subscription fees, prices?
I can see and understand your reluctance about descriptions in open forum, we could take the conversation of descriptions to private messages?
I'm aware of some forex training mentors that run seminars and the attendees have to sign a non disclosure document and some online forums and education materials to be treated as in confidence.

 

[DeepState]

Wrong assumptions.

Speculative stocks are stocks you buy expecting certain outcome without much real evidence to support such hopes beside your gut feelings or some news or hype you've heard. It could be a blue chip or a micro capped company.

Secondly, you're mis-using or misunderstood the application of those charts. That just because a micro fund manager or a stock index or whatever group of stocks generally does well, it does not then mean an investor/trader could do just as well when he engaged in, speculates in, those kind of stocks - that he could only be expected to average or if historical results could predict future returns, could only expect to do similarly well if he buy the index or enough stocks to represent the stocks whose performance has been recorded.

In other words, just because no houses have been burnt down in your state, and your house is burning down but you say it couldn't be because on average no house is burning in your state.

----

Tom, good luck man.

Read the Intelligent Investor... ignore what RY said about Technical analysis could also work... i think he just had a big dinner and was being kind

Are you making this up?

Wrong assumptions.

Speculative stocks are stocks you buy expecting certain outcome without much real evidence to support such hopes beside your gut feelings or some news or hype you've heard. It could be a blue chip or a micro capped company.

Did you just make an assumption? I think I see one in there. Wrong assumption. All assumptions in field of investment are approximations. They are all wrong. Given I could not exactly run a backtest on stocks where an investor or others may purchase or sell stocks which they all uniformly define as having little 'real evidence to support such hopes beside their (your) gut feelings or some news or hype they've (you've) heard', I ran with a working assumption which is clearly known to be an approximation.

Secondly, you're mis-using or misunderstood the application of those charts. That just because a micro fund manager or a stock index or whatever group of stocks generally does well, it does not then mean an investor/trader could do just as well when he engaged in, speculates in, those kind of stocks - that he could only be expected to average or if historical results could predict future returns, could only expect to do similarly well if he buy the index or enough stocks to represent the stocks whose performance has been recorded.

If you read the post, the charts are a statement of what happened to the market and to institutional investors in the small cap arena. They are an illustration. It states that if Tom82 works at it, he might do well as well. You have misunderstood what was written.

Here it is:

If your preference is fundamentally oriented investing instead (it doesn't have to be to the exclusion of technical approaches), then the following is what the professional market has been able to deliver. If you work at it over time, you have decent advantages and might reasonably expect to do very well also.

In other words, just because no houses have been burnt down in your state, and your house is burning down but you say it couldn't be because on average no house is burning in your state.

If my house was burning in the state then, on average, there is at least one house burning in the state. You have misunderstood the difference between expectation and outcome.

... ignore what RY said about Technical analysis could also work... i think he just had a big dinner and was being kind

I use a form of price-based analysis. It is very different to what is generally described in this forum but, nonetheless, it is investing on a basis other than fundamental analysis. I am not proud about where things that work arise from. I'll just use them if they make sense to me. Certain forms of price-based analysis are very powerful indeed and come with strong economic rationale. You just haven't been exposed to them and are unlikely to seek them out.

 

[luutzu]

Might also want:

Phillip A Fisher's 'Common Stocks and Uncommon Profit'
Peter Lynch's: One up on Wall Street; Beating the Street.

You can get these, free, from most torrent sites, like... Kickass.to

---

From memory, Fisher's advise regarding speculative stocks... i think he called it specialised situation, is this: That while you could make incredible amount of profit on them, they are too dangerous for an average investor. That unless you have specialised knowledge about the specific company and its specific industry, it is best to avoid it.

I don't think you could know the health of these small, specialised, companies from its financial reports. So unless you're willng and able to go and talk to the company, its management, and know what you see and what they tells you... you might not want to speculate, and probably best not to speculate it based on its share prices.

----

I remember Buffett saying there are two most important chapters from TII - they dealt with Mr. Market analogy, market behaviour and another i think was about valuing the business, not the stock.

I personally preferred Fisher's, but Graham does provide that framework in more concrete terms.

Once you read these 3 guys, you'll find most others are either wrong or just derivatives and your time are better spent reading annual reports to look for opportunities than reading more books.

 

[DeepState]

I can report that I have acquired the book The Intelligent Investor by Benjamin Graham (revised edition), I am considering his other book Security Analysis and I have also acquired Roger Montgomery's book Value.able (got it when it first came out a couple years back -limited edition. Also a student of Graham and Buffet).

I have ordered Louise Bedfords books Trading Secrets 3rd edition, Charting Secrets, The Secret of Candlestick Charting Book and Chris Tates The Art of Trading - 2nd edition.

I also have:

...The books on shares dont really have anything on strategy or method or money management or spec stocks, but hoping that Ben Gram's books principals can be used on spec stocks.

Spec stocks can be small caps as well. Spec stocks are companies that are exploring or in the process of inventing something and or in the process of getting approvals eg medical / bio tech companies and these companies are usually not proven and / or have little history.

You've got quite a library. Hopefully you'll get the chance to convert it into knowledge.

The Intelligent Investor by Benjamin Graham (revised edition): seek out the general underlying philosophy behind valuation and value. Although replete with technical elements, in the end, he felt that the aims sought in this book could be achieved very simply and with a minimum of fuss.

Security Analysis: Not important. A bloody big read loaded with accounting adjustments. I read it and wondered why I did. This kind of detail is not necessary for spec. In spec, just the big picture counts unless you are looking for accounting fraud. You can learn to read and understand detailed financial analysis from Graham and then doing it yourself.

You will get a lot out of Competitive Strategy if you wish to pursue fundamental investment. It related to the assessment of the competitive position which companies operate within. It is a complement to Ben Graham.

If you want to get heavy into risk management...best finish your library first and stick to simple rules. Don't bet what you can't afford to toast.

Cheers

 

[tom82]

You've got quite a library. Hopefully you'll get the chance to convert it into knowledge.

The Intelligent Investor by Benjamin Graham (revised edition): seek out the general underlying philosophy behind valuation and value. Although replete with technical elements, in the end, he felt that the aims sought in this book could be achieved very simply and with a minimum of fuss.

Security Analysis: Not important. A bloody big read loaded with accounting adjustments. I read it and wondered why I did. This kind of detail is not necessary for spec. In spec, just the big picture counts unless you are looking for accounting fraud. You can learn to read and understand detailed financial analysis from Graham and then doing it yourself.

You will get a lot out of Competitive Strategy if you wish to pursue fundamental investment.

Cheers

Who was Competitive Strategy by?

 

[tom82]

Might also want:

Phillip A Fisher's 'Common Stocks and Uncommon Profit'
Peter Lynch's: One up on Wall Street; Beating the Street.

You can get these, free, from most torrent sites, like... Kickass.to

---

From memory, Fisher's advise regarding speculative stocks... i think he called it specialised situation, is this: That while you could make incredible amount of profit on them, they are too dangerous for an average investor. That unless you have specialised knowledge about the specific company and its specific industry, it is best to avoid it.

I don't think you could know the health of these small, specialised, companies from its financial reports. So unless you're willng and able to go and talk to the company, its management, and know what you see and what they tells you... you might not want to speculate, and probably best not to speculate it based on its share prices.

----

I remember Buffett saying there are two most important chapters from TII - they dealt with Mr. Market analogy, market behaviour and another i think was about valuing the business, not the stock.

I personally preferred Fisher's, but Graham does provide that framework in more concrete terms.

Once you read these 3 guys, you'll find most others are either wrong or just derivatives and your time are better spent reading annual reports to look for opportunities than reading more books.

I thought there was some books by Fisher, but couldn't think what they were.
Is Common Stocks and Uncommon Profit a book or only an audiobook?