TGA - Thorn Group

[tech/a]

My only point is that there is more than one way to make money off an asset. . There's a multitude of variables that determine how you might approach that end. I care about it's ability to generate cash flow, not its price. I understand that others have differnet approaches.

I believe you have said, in the property thread, that in your opinion property will trend sideways for at least a few years but you wouldn't sell your IP's because they are providing a steady cash flow (regardless of price movement). Doesn't this run counter-intuitively to your argument in this thread?

Not when I purchased them at $95000
Thats like buying TGA at 50 c that's fine hold on
But if you buy at $2 and let it fall below buy price particularly 50% below
That in my view is very poor M/M Particularly when liquidation is a mouse click away.

I would get "stop-lossed" out of 90% of stock purchases I make. I might be happy to accept some volatility and some risk because of the expected yield on my investment.

I'd be looking at my entry.

This is an unfair comparison because PEN is a commodity stock. They're notoriously hard to value (ie: almost impossible) because you cannot look at them with any independence to the underlying commodity price. They're extremely cyclical. In this case, they're generally worth, as you love to say "what someone else is willing to pay." Your method of stock selection (technical factors) will probably tell you more about this underlying demand. I'm not interested in it, so I stay right away from those type of stocks (another form of risk mitigation).

Regardless of stock type letting a stock fall excessively and in PENS case 15c to 4c
Is plain crazy. Factors (Fundamental)changed but holders STILL held. They had both fundamental and technical signals to sell. Just as there are changes in TGA---Fear of loss froze those participants--- just as I believe many here are frozen by the fear of capital loss.

Rest assured they have made that loss sell or on hold.

 

[craft]

Every signal defined by what parameter/s?
A meaningless statement.

What ever parameter you like. Your choice and you have all the historical data to curve fit it to. - All I ask is that you apply your chosen parameter(s) consistently over the entire data set not just cherry pick the last decline.

I'm sure you know what I meant - I think you are just stalling/deflecting.

 

[McLovin]

Nevermind, we're just going round in circles.

 

[tech/a]

What ever parameter you like. Your choice and you have all the historical data to curve fit it to. - All I ask is that you apply your chosen parameter(s) consistently over the entire data set not just cherry pick the last decline.

I'm sure you know what I meant - I think you are just stalling/deflecting.

Ok I can come up with a single set of parameters which take only the trends.
Pointless--- but when I have some time I'll mark up a chart and list the parameters.

So, if the cashflow had continued growing as the property declined in value you would have sold it?

Didn't so moot.
With investing I've never held a single stock below a stop loss value.
I've taken as many as 8, 5-10% losses in a group but had at least one often multiple stocks running at 50/100+% my portfolio management ( when trading a portfolio )
Is constantly monitored to deminish risk exposure nd maximize profit exposure.

 

[McLovin]

Didn't so moot.

It's not moot, it goes to the heart of the discussion. I'm saying I buy assets for cashflow. You're saying you sell if price falls, regardless of the underlying fundamentals. So I'm asking what do you do in a scenario where the price of an IP is falling but cash flow is being maintained or rising?

 

[craft]

Whilst we wait for Tech to show us a systematically system to trade TGA I thought I would run the numbers for a buy and hold approach.

The IPO price was 0.50 but I will use the very first trade price as the entry. It opened on 13/12/06 at 71 cents.

Since then it has paid fully franked dividends of 28.83 cents.

Closing Price on Friday was $1.42.

Crunching the numbers the IRR is a CAGR of 19.29% or 21.71% on a grossed up basis

If we had invested 100K on the first day of trading we would have an unrealised gain of 100K today. This is effectively a no interest loan from the government unless we sell out and trigger a CGT event.


There was a renounceable rights offer in July 2011. Those rights were tradable on the ASX and would have had some value – I don’t know what that was, so have not included – but that would bump the IRR up a bit.

Ok I can come up with a single set of parameters which take only the trends.
Pointless--- but when I have some time I'll mark up a chart and list the parameters.

Eagerly awaiting your results - get those back testing computers buzzing.

 

[craft]

Whilst we wait for Tech to show us a systematically system to trade TGA I thought I would run the numbers for a buy and hold approach.

The IPO price was 0.50 but I will use the very first trade price as the entry. It opened on 13/12/06 at 71 cents.

Since then it has paid fully franked dividends of 28.83 cents.

Closing Price on Friday was $1.42.

Crunching the numbers the IRR is a CAGR of 19.29% or 21.71% on a grossed up basis

If we had invested 100K on the first day of trading we would have an unrealised gain of 100K today. This is effectively a no interest loan from the government unless we sell out and trigger a CGT event.


There was a renounceable rights offer in July 2011. Those rights were tradable on the ASX and would have had some value – I don’t know what that was, so have not included – but that would bump the IRR up a bit.

CanOz, if you see this,

Would you be so kind as to also have a look at what parameters could have been used in a systematical system, which if applied consistently between listing and now would have produced a higher CAGR then buy and hold on TGA?

 

[tech/a]

It's not moot, it goes to the heart of the discussion. I'm saying I buy assets for cashflow. You're saying you sell if price falls, regardless of the underlying fundamentals. So I'm asking what do you do in a scenario where the price of an IP is falling but cash flow is being maintained or rising?

If there was a chance that the property would fall below my purchase price in say 12 mths then I'd sell it. Unless I could do something to improve sale price.

I would look for other profitable opportunity.
I wouldn't hold it negatively geared.

 

[sinner]

Eagerly awaiting your results - get those back testing computers buzzing.

Just as a quick example even though I think this argument is silly:

buying when weekly price closed 2 std dev above the 26 week (6 month) avg and going to cash when weekly price closed 2 std dev below 26 week avg would have participated in the majority of the up-move including associated cashflow and rights offer, with a large reduction in overall investment volatility.

The last bit is where technicals play a big role, you might give up 10% of CAGR for a 50% reduction in volatility.

EDIT: Err just to clarify I meant a 10% portion of CAGR, not 10% of CAGR itself.

 

[CanOz]

CanOz, if you see this,

Would you be so kind as to also have a look at what parameters could have been used in a systematical system, which if applied consistently between listing and now would have produced a higher CAGR then buy and hold on TGA?

LOL! Been trying my Double Sevens system on it. I need to know how much my total equity is to start with., I've been using 100,000.

Double Sevens is mean reversion. Flipper is Trend Following, it'll work better.

CanOz

 

[CanOz]

Here is the 20% Flipper - Weekly (300k - 50% risk). I took three or four trades. I'll post the stats later but I've got to go to Mothers day dinner!

 

[craft]

Just as a quick example even though I think this argument is silly:

buying when weekly price closed 2 std dev above the 26 week (6 month) avg and going to cash when weekly price closed 2 std dev below 26 week avg would have participated in the majority of the up-move including associated cashflow and rights offer, with a large reduction in overall investment volatility.

The last bit is where technicals play a big role, you might give up 10% of CAGR for a 50% reduction in volatility.

EDIT: Err just to clarify I meant a 10% portion of CAGR, not 10% of CAGR itself.

What is the CAGR and drawdown using those parameters? Can somebody do a back test and put up the results so we can consider some actual numbers.

 

[McLovin]

If there was a chance that the property would fall below my purchase price in say 12 mths then I'd sell it. Unless I could do something to improve sale price.

I would look for other profitable opportunity.
I wouldn't hold it negatively geared.

Thanks for the answer. I disagree, but I can see it's fairly futile for us to keep disagreeing.

 

[sinner]

What is the CAGR and drawdown using those parameters? Can somebody do a back test and put up the results so we can consider some actual numbers.

Buy Hold from 0.7:
% Gain: 101.43
% Max DD: 54.48
% Max Runup: 69.04
% Time in market: 100
Sample size: 139 bars

Weekly bollinger(26,2) with delayed entry/exit till next open:
% Gain: 32.03
% Max DD: 28.98
% Max Runup: 42.2
% Time in market: 38.57
Sample size: 113 bars



I don't know about you but a max DD >50% is really rough for me. Even 30% still too high I would be toning down the position size by a factor of 30 (or equivalent stoploss).

If potential drawdown == 100% (which it is with buy and hold) then I would be holding 1% of account value TGA in cash to effectively limit its volatility contribution in the portfolio to that 1%...right?

 

[CanOz]

Sorry folks, had to attend a nice mother's day dinner!

For the sake of the discussion:

Here is the 20% Flipper on TGA, 100k AUD - 2006 - 2012. It took three trades. It didn't even look at TGA until 2009, then got out well before this last downturn all because it uses a moving average as a filter, but this is irrelevant. A systematic approach would never trade 100% of the capital in one issue. None the less it managed to almost equal buy and hold for the entire period of the stocks existence, even though it was exposed to little of it, especially the painful downturns.

What could one have done with the capital while not in TGA? Well for starters, you could trade a universe such as the All Ords....what would that have returned non compounded taking the original 100K and dividing it up into 20 equal parts? Check out the 2nd last chart.

Full compounding using 5% total equity risk is the last chart.

I think whats being lost here is that no one knows what stock will be the best performer. So ONE way is to allow price to tell you through an algorithm, which stock meets the criteria of being 'strong'. Apply some good money management techniques over and over, consistently, and it is possible to generate REAL returns above that of an index of choice. This is not new...its what the majority of successful traders do. Many successful hedge funds do similar. Its just much easier to do this as a small retail guy. We just don't have the funds to move the market.

Anyway, there are plenty of ways to skin a wabbit! There are no right or wrong ways in my view. This method is my method of choice. That doesn't mean it has to be everyone else's.

As for this being a curve fitted system it has not ever been optimized. This is the case with robust systems such as the 20% Flipper. It will work and will always work in one way or another, but the basic principle is the same and very simple, strong stocks, strong market, buy high, sell higher. Its all in the book, Unholy Grails.

TGA, you can have your thread back soon!

Cheers,


CanOz

PS - Nice work Sinner, I'm guessing you just whipped up that BB system on short notice...

 

[sinner]

PS - Nice work Sinner, I'm guessing you just whipped up that BB system on short notice...

Yah dude, it's just the implementation of a statistical statement (with some baked in inferences about momentum), right?

I think this chart says a lot:


Sure there is balance sheet fundamentals, but in the end that is 25% vs 75% macro fundamentals. Are you taking those into account (lending conditions, unemployment, confidence/sentiment, etc)? If so then all good with me!

 

[tech/a]

Sinner there are many variants to the bb method.
Buy upper band sell cross back below center band for TGA better.

Anyway you and Can oz have proven the technical point.
But a stupid exercise.

 

[oldblue]

It will work and will always work in one way or another, but the basic principle is the same and very simple, strong stocks, strong market, buy high, sell higher. Its all in the book, Unholy Grails.

Thanks, CanOz, for emphasising this point. For me, it's the essence of the basic TA that I lay over my FA-based decisions.

I'm still not buying TGA, yet.

 

[Nutmeg]

Seems I misread the passage---page 99 LTCM --- Long Term Capital Management
was in deep do do so shopped around its portfolio after losing 1.9 billion during the GFC to Buffett and Soros.

How could you get that wrong? Further, as others have pointed out, Long Term Capital Management was not even around during the GFC. It closed down in 2000 after effectively being broken by the Russian Financial Crisis in 1998.

 

[craft]

Thanks CanOz and sinner.

Sinner – the proposition was all data since listing.

For the data range you selected the results were Buy and hold gain was 101.43% vs 32.03% for your system. Am I reading that correctly?

Can Oz
Annual Return was 12.28% - I assume that doesn’t take into account any dividends collected along the way or interest whilst out of the market or tax on realised profits? I also assume you stayed out of TGA because of an index filter rather than a filter on the actual share price. What are the results without an index filter?

So the systems to date on TGA are not matching the buy and hold return. What they are doing well is limiting the draw down.

The whole point of this exercise is that some people do not see risk as price volatility..........

We choose to invest based on the performance of the business not the performance of the price.

Buy and hold has achieved a return of 20% CAGR and the drawdown’s that so freak technical traders are not a concern to fundamental investors when the underlying business is performing as expected. They are in fact opportunities.

I’m sure a great deal of TA investors appreciate there are many ways to skin a cat, including a business analysis approach. I’m sick of with others.

The risk control is based on Business Analysis.

Buying good business at the right price and holding those businesses through thick and thin price action until the business performance dictates that it should be sold produces the highest expectancy that I can generate.

If it is drawdown that is agitating people then I agree and people should not fool themselves about the difficulties. I personally cannot see any way to invest based on cash flow unless you are prepared to hold long enough to realise those cash flows, selling is only commuting the cash flows and the market may not offer a reasonable price EVER. See what I have posted earlier.

I have control of my buy price and hence have some control over initial drawdown but not over what the market will do to the share price subsequently. If the price runs ahead and pulls back then so be it. The risk of trading and loosing exposure to a good business is not worth it. If the price falls further that is no reason to turn my future cash flows into a loss. Only the business performance dictates my actions, not other peoples onion of its value (aka price)

Successful value investing is about taking meaningful exposure to great businesses and staying the course until the business fundamentals tell you it’s time to leave. The market can do what it dam well likes in the mean time. I’m not going to listen to the market when I know investing in great businesses is and has been life changing, All I have to do is buy right and hold tight, so long as the business performs how I expect.

If you don’t have the analysis skill or the temperament to sit through whatever the market will throw at you then don’t start down the FA road it will be a disaster for you. If however you do have the aptitude there is plenty of opportunity out there.

For those who recognise the market price drawdown issues and are interested more in cash flow then mark to market capital values at any one time, value investing offers wonderful opportunities. The opportunities are probably so great because of the beliefs/arguments that are launched against the approach.

I like to see TA approaches in these company threads. But I’m sick to death of being told by TA exponents how wrong and stupid we are.

Enough