Technical Analysis vs. Fundamental Analysis

[Tysonboss1]

Take the 2008 free fall for example, if you were to have invested in January you would have had very little capital left by April 2009.

Anyone can pick times, dips and peaks, and winning stocks with hindsight. If there is one thing about all the 'experts' on ASF they all have such wonderful hindsight.

When predicting the future - everyone is stumped. You just have to look past the June stock tipping competition to work that out.

Let's revisit this thread in 6 months time and see if sc is in fact up at least 10% and if the investment would be been better off earning 6.51% in the bank.

 

[sammy84]

Take the 2008 free fall for example, if you were to have invested in January you would have had very little capital left by April 2009.

Anyone can pick times, dips and peaks, and winning stocks with hindsight. If there is one thing about all the 'experts' on ASF they all have such wonderful hindsight.

When predicting the future - everyone is stumped. You just have to look past the June stock tipping competition to work that out.

Let's revisit this thread in 6 months time and see if sc is in fact up at least 10% and if the investment would be been better off earning 6.51% in the bank.

That's why I referred to active investing. Not picking tops and bottoms. That is what we all aim to achieve but not as easy. The other reasons outlined by other members are also very relevant. If it is not hitting home to you then it is probably safer for you keep your money in term deposits rather that shares.

Ok no more biting from me on this thread. You are right. I am wrong. For your sake I hope inflation picks up, that way the RBA may increase interest rates and you could be earning close to 10%. You’ll be rich in, um, 30 years*

*$100k compounded at 8% PA compounded for 30 yrs equals $1m. Let’s ignore the effects of inflation.

 

[robusta]

Wouldn't it be more meaningful to quote your buys in terms of capital invested, given widely varying share prices?
So , instead of quoting a buy of 1000 shares in XYZ, you quote $10,000 invested in XYZ.

What I'd be interested to see, say at the end of 12 months, is if you have e.g. $100,000 invested, the % return on that capital. It would just offer a clearer picture of what actually matters.

On a 12 months basis, you'd obviously include dividends and franking credits so as to provide a proper summary of what you've earned on your initial investment.

The small gains and losses, month to month, sometimes don't mean much over a longer period, especially given the present volatile market.

Julia has a excellent point here.

If I assume a equally weighted portfolio and track it against the ASX 200 it should be interesting to see the results over the medium to long term.

It would also be interesting to get any input from any other points of view to see any correlation between different investment techniques. Or if anyone wants to put up a alternative portfolio?

CBA $50.50
CSL $32.50
JBH $19.59
MCE $4.95
FGE $4.05
FRI $1.40

ASX 200 4694.90 20/10/2010

Robusta's starting portfolio.

198 x CBA @ $50.50 = $9999.00
307 x CSL @ $32.50 = $9977.50
510 x JBH @ $19.59 = $9990.90
2020xMCE @ $4.95 = $9999.00
2469xFGE @ $4.05 = $9999.45
7142xFRI @$1.40 = $9998.80

= $59,964.65 invested , $35.35 cash

Ok here is my 6 at today's close (i own stocks with *)

• BPT 0.615*
• CPU 9.71*
• TSI 0.665*
• PTM 4.75*
• CIF 1.15
• APN 1.95

So_Cynical's starting portfolio

16260 x BPT @ $0.615 = $9999.90
1029 x CPU @ $9.71 = $9991.59
15037 x TSI @ $0.665 = $9998.27
2105 x PTM @ $4.75 =$9998.75
8695 x CIF @ $1.15 = $9999.25
5128 x APN @ $1.95 = $9999.60

= $59.987.36 invested , $12.64 cash

 

[robusta]

Robusta's starting portfolio.

198 x CBA @ $50.50 = $9999.00
307 x CSL @ $32.50 = $9977.50
510 x JBH @ $19.59 = $9990.90
2020xMCE @ $4.95 = $9999.00
2469xFGE @ $4.05 = $9999.45
7142xFRI @$1.40 = $9998.80

= $59,964.65 invested , $35.35 cash



So_Cynical's starting portfolio

16260 x BPT @ $0.615 = $9999.90
1029 x CPU @ $9.71 = $9991.59
15037 x TSI @ $0.665 = $9998.27
2105 x PTM @ $4.75 =$9998.75
8695 x CIF @ $1.15 = $9999.25
5128 x APN @ $1.95 = $9999.60

= $59.987.36 invested , $12.64 cash

Our portfolio's today would be:

Robusta

198 x CBA @ $51.78 = $10252.44 $261.36 div
307 x CSL @ $32.50 = $9977.50 $107.45 div
510 x JBH @ $16.41 = $8369.10 $244.80 div
2020xMCE @ $7.91 = $15978.20 $60.60 div
2469xFGE @ $5.80 = $14320.20 $98.76 div
7142xFRI @$1.00 = $7142.00 $214.26 div

= $59,964.65 invested , $35.35 cash

Total $66,039.44 + $987.23 cash = total portfolio $67,026.67

So_Cynical

16260 x BPT @ $0.90 = $14,634.00 $121.95 div
1029 x CPU @ $8.64 = $8890.56 $144.06 div
15037 x TSI @ $0.845 = $12706.26 $390.96 div
2105 x PTM @ $4.12 =$8672.60 $210.50 div
8695 x CIF @ $1.01 = $8781.95 $608.65 div
5128 x APN @ $1.295 = $6636.87 $358.96 div

= $59.987.36 invested , $12.64 cash
Total $60, 324.24 = + $1,847.73 cash = total portfolio of $62,171.97

Not a bad return from either of us from $60,000 in 8 months when the ASX 200 has gone from 4694.9 on 20/10/2010 to 4598.10 (-2.1%) .

 

[nulla nulla]

In the current prevailing market environment, why would you lock yourself into a stock for long term (Unless of course you bought it in 2003 and it owes you nothing)?

Buying and holding in a sideways bear market would be worse than parking your capital in fixed interest, surely?

 

[robusta]

In the current prevailing market environment, why would you lock yourself into a stock for long term (Unless of course you bought it in 2003 and it owes you nothing)?

Buying and holding in a sideways bear market would be worse than parking your capital in fixed interest, surely?

11.71% up in 8 months from buy and hold?. Buy and hold is dead. long live buy and hold.

In my actual portfolio MCE and FGE are the only two I still hold, they were my largest holdings back then and are still my largest holdings (MCE 34.6%, FGE 28.10%). The rest have been replaced with businesses I also intend to hold indefinately.

 

[So_Cynical]

What a difference equal weightings make. :dunno:

I have roughly 3K in dividends and distributions too (counting the divs just gone)...that should be over double what you (robusta) should have...and would even us up a little.

Nice to see we are at-least not bleeding capital.
~

 

[So_Cynical]

In the current prevailing market environment, why would you lock yourself into a stock for long term (Unless of course you bought it in 2003 and it owes you nothing)?

Buying and holding in a sideways bear market would be worse than parking your capital in fixed interest, surely?

Its working for me...low cost averaging into "buy and hold" ~ my dividends and distributions are equivalent to a yield on current portfolio value of about 5.4% (gross) and by increasing my buy and hold positions over time, by low cost averaging, my D&D yield grows annually...every time i exit a new trade i leave a few shares behind (profit) and so the $ yield grows.

Annually up over 200% from last FY, if i can even maintain half that figure going forward, in just 4 years i be making more from D&D than i do in my day job.

^^^ not really possible...but its an interesting statistic.

 

[KurwaJegoMac]

So_Cynical, what software/platform are you using for the Portfolios you're posting (yours and Robusta's)? It's very simple and clean, I like it.

Thanks.

 

[So_Cynical]

So_Cynical, what software/platform are you using for the Portfolios you're posting (yours and Robusta's)? It's very simple and clean, I like it.

Thanks.

https://www.smartportfolio.com.au/

Yep its simple, clean and well designed...has some nice charts and tax, P/L reports too.

problem is for me is that it cant do parcels and as i found out tonight cant do some dividends, as i was getting a calculation error and it didn't like excepting dividends that weren't pre loaded....but hey i paid nothing to join the site 2 years ago so cant really complain.

Its free to use for a trail period but now they want you to pay to keep using it....the people behind the site are active developers and are constantly working to upgrade the site...its improved heaps over the time ive been using it.

 

[Tysonboss1]

Buying and holding in a sideways bear market would be worse than parking your capital in fixed interest, surely?

Nope, the fixed intererest offers no hope of capital growth, and the interest is eroded by taxes with next to no tax benefits and inflation.

On the other hand it is possible to invest in assets that are producing dividends equal to or higher than bank interest, that are tax free with the franking credits and if there is inflation over time the asset prices should generally keep pace with it and produce a natural infaltion hedge.

They real question you have to ask is , "Are current asset prices at speculative levels, or do they reflect the earning power of the asset"

If the answer is that they are not part of a speculative bubble then they will perform better than cash, over time.

 

[nulla nulla]

Nope, the fixed intererest offers no hope of capital growth, and the interest is eroded by taxes with next to no tax benefits and inflation.

An investment in fixed interest would achieve 6% before tax, an investment in your mortgage would equate to 7.5% (or there-abouts) tax free.

On the other hand it is possible to invest in assets that are producing dividends equal to or higher than bank interest, that are tax free with the franking credits and if there is inflation over time the asset prices should generally keep pace with it and produce a natural infaltion hedge.

The number of shares producing dividends above 6% p.a before tax is minimal and the number producing dividends above 6% p.a, with franking credits is even less. The "current market environment" is sideways and down. The global economic crisis fallout with sovereign debt is bubbling to another explosion and collapse. The medium term forward projection is gloomy at best. The likelihood of capital gains on "long" investments keeping pace with cpi is dubious .

They real question you have to ask is , "Are current asset prices at speculative levels, or do they reflect the earning power of the asset"

If the answer is that they are not part of a speculative bubble then they will perform better than cash, over time.

The answer to this (in my opinion) is "Yes, share prices are still at speculative levels mostly at inflated price/income levels and returning yields less than cumulative bank interest rates. The speculation that "long" investments will garner capital gains that combine with yield to out perform bank rates is not supported by recent economic figures.

In my opinion, So Cynical has it right when he combines swing trading with dividend stripping for short term gains of 3 - 6% per trade. Cumulative, over 12 months, will see his return on initial capital expand per trade and easily exceed 15% p.a. Holding some shares bought on a low entry price after the trade, for "free carry" , and topping these up while preserving his initial trading capital is a sensible hedge although it does reduce his trade capital and could reduce his posible returns.

 

[Tysonboss1]

An investment in fixed interest would achieve 6% before tax, an investment in your mortgage would equate to 7.5% (or there-abouts) tax free.



The number of shares producing dividends above 6% p.a before tax is minimal and the number producing dividends above 6% p.a, with franking credits is even less. The "current market environment" is sideways and down. The global economic crisis fallout with sovereign debt is bubbling to another explosion and collapse. The medium term forward projection is gloomy at best. The likelihood of capital gains on "long" investments keeping pace with cpi is dubious .



The answer to this (in my opinion) is "Yes, share prices are still at speculative levels mostly at inflated price/income levels and returning yields less than cumulative bank interest rates. The speculation that "long" investments will garner capital gains that combine with yield to out perform bank rates is not supported by recent economic figures.

In my opinion, So Cynical has it right when he combines swing trading with dividend stripping for short term gains of 3 - 6% per trade. Cumulative, over 12 months, will see his return on initial capital expand per trade and easily exceed 15% p.a. Holding some shares bought on a low entry price after the trade, for "free carry" , and topping these up while preserving his initial trading capital is a sensible hedge although it does reduce his trade capital and could reduce his posible returns.

I wasn't talking about large capital gains from economic growth, I was simply talking about capital gains related to inflation over time.

for example, if a company owns an asset that produces a product or service even if the number of units it produces and profit as a % of input costs per unit remain relatively the same the capital value of that asset will increase along with inflation,

Say westfeild owns a shopping centre and earns 6% net profit, each year the rent it charges will probably increase along with inflation, so each year their 6% rental return grows along with inflation and the capital value will grow with inflation to match the increased rent.

In comparison the bank interest will not grow each year with inflation and neither will the capital value of the deposit, so any inflation has to be taken from the income rather than having an asset that provides a natural hedge.

example,

Bank deposit - invested $100 earning 6.5% = $6.5earnings minus $1.95 tax and $3 inflation = $1.55 real earnings

share owning real assets - invested $100 earns 6% franked dividend = $6 minus $0.00 tax inflation hedged by real asset = $6 real earnings + chance of economic growth of the company

 

[robusta]

The number of shares producing dividends above 6% p.a before tax is minimal and the number producing dividends above 6% p.a, with franking credits is even less. The "current market environment" is sideways and down. The global economic crisis fallout with sovereign debt is bubbling to another explosion and collapse. The medium term forward projection is gloomy at best. The likelihood of capital gains on "long" investments keeping pace with cpi is dubious .

Not if you can find good quality companies that are cheap IMO.

The answer to this (in my opinion) is "Yes, share prices are still at speculative levels mostly at inflated price/income levels and returning yields less than cumulative bank interest rates. The speculation that "long" investments will garner capital gains that combine with yield to out perform bank rates is not supported by recent economic figures.

Depends on the "long" investments you are in, I am confident my portfolio will outperform bank rates in either capital gains or dividends in the longterm and furthermore by a large margin when capital gains are combined with dividend yield.

Take for example mt FGE holdings most people look at it as a growrh stock yielding only ~ 1.4% at current prices but when you look at my average purchace price @ $2.563 it is yielding me 3.51% on my investment and growing with a nice 128.2% potentual capital gain to come. It would not surprise me if the yield reached ~ 20% before I exit this company.

Why would I want to trade such a excellent company

Buy and hold for me.

 

[nulla nulla]

Not if you can find good quality companies that are cheap IMO.

For the record why not name them. We can come back to monitor their progress on a 6 monthly basis.

Depends on the "long" investments you are in, I am confident my portfolio will outperform bank rates in either capital gains or dividends in the longterm and furthermore by a large margin when capital gains are combined with dividend yield.

Going on the list provided, we can come back to it on a regular basis to see whether your optimism is justified.

Take for example mt FGE holdings most people look at it as a growrh stock yielding only ~ 1.4% at current prices but when you look at my average purchace price @ $2.563 it is yielding me 3.51% on my investment and growing with a nice 128.2% potentual capital gain to come. It would not surprise me if the yield reached ~ 20% before I exit this company.

3.51% is less than bank rates and "potential capital gain" is a bit like counting your chickens before the eggs have hatched.

Why would I want to trade such a excellent company

Buy and hold for me.

Moving in and out on the highs and lows like So_Cynical would increase your stake in the company at no further capital outlay. IMO buying and holding, in this environment, limits your opportunity to maximise the return on your investment capital.

 

[robusta]

For the record why not name them. We can come back to monitor their progress on a 6 monthly basis.

Sorry I am getting a little bored with this argument if you are interested you could use the portfolio posted (MCE, FGE, CBA, CSL, FRI) or my actual current portfolio with apropriate weightings if you like:

Company Cost Weighting
MCE $4.518 34.31%
FGE $2.563 29.21%
ZGL $0.528 12.8%
VOC $2.49 11.05%
CCV $0.807 5.64%
TSM $0.658 4.30%
PHK $0.073 2.69%

Going on the list provided, we can come back to it on a regular basis to see whether your optimism is justified.

You sure can if you like.

3.51% is less than bank rates and "potential capital gain" is a bit like counting your chickens before the eggs have hatched..

True let us see how many chooks we end up with.

Moving in and out on the highs and lows like So_Cynical would increase your stake in the company at no further capital outlay. IMO buying and holding, in this environment, limits your opportunity to maximise the return on your investment capital.

True but I have no idea when the highs or lows are reached instead I will stick to buying when IMO companies are cheap and selling when they are overvalued.

Maybe it would be more interesting if you could show us how much better you do with trading?

 

[Tysonboss1]

3.51% is less than bank rates and "potential capital gain" is a bit like counting your chickens before the eggs have hatched.


l.

Not after tax and inflation. remember bank interest is only about 1% after inflation and tax.

it won't be steady, but as inflation devalues the currency, the price of real assets will increase, so a 3% cashflow from a real asset is naturally hedged against inflation and better than a higher unhedged yield, especially when you factor in franking and retained earning that are reinvested.

Thats the last I will say.

 

[nulla nulla]

Sorry I am getting a little bored with this argument

Sorry, I'm not arguing, just voicing a difference of perspective.

Maybe it would be more interesting if you could show us how much better you do with trading?

Naturaly anything I post would be unsubstantiated. Without divulging private and personal information, enabling figures to be corroberated, I could post anything (or be open to the suggestion I have).

I think Tysonboss is right. No point in arguing, I'll leave you to your prefered style of trading. Cheers.

 

[So_Cynical]

Maybe it would be more interesting if you could show us how much better you do with trading?

I'm certain i can do much better trading...TSI has been taken over so do you mind if i put my TSI money (profits & Capital) into something else?

 

[robusta]

I'm certain i can do much better trading...TSI has been taken over so do you mind if i put my TSI money (profits & Capital) into something else?

No worries, also I am not sure if I worked out the dividends properly however we may as well re-invest them in whatever we want.