Which one do you use? Technical or fundamental analysis?

[Realist]

Re: Which one do you use? Technical or fundamental analysis

Bunyip has repeated the essence of a post he made some time ago which changed my attitude towards stock selection and timing. As a result, I am considerably more profitable.

Please explain what you did differently Julia?

I know you sold WDC which has gone up nearly 10% in the past month and will pay large dividends next month.

How does your tax bill go seeing as though you sell and buy more often than investors?

What have you sold and since bought that has made you so much more profitable?


Everyone here seems to be arguing me and not arguing the point.

I have read a couple of books on trading, Darryl Guppy and Leon someone, I've tried and tried to comprehend it but I can not see past my views I agree, I am blinded by Ben Grahams theories I admit it. I am not hiding it at all, I am biased, but I am open to others views - I do not instantly dismiss them. I listen to them then usually dismiss them.

Those trading books themselves even admit 90% of traders lose.

Some of you need to admit you are blinded by trading theories and can't see the bigger "investing" picture as well.

And some of you are confused as to whether you are a trader, and fundamental investor or neither. There is no middle ground, either you believe in Fundamentals or you believe in charts or you are confused. You can not be half pregnant or half a Fundamental investor.

 

[Sean K]

Re: Which one do you use? Technical or fundamental analysis

Realist, I read Leon Someone's book as well. Great read.

 

[eddievanhalen]

Re: Which one do you use? Technical or fundamental analysis

And some of you are confused as to whether you are a trader, and fundamental investor or neither. There is no middle ground, either you believe in Fundamentals or you believe in charts or you are confused. You can not be half pregnant or half a Fundamental investor.

Plenty of ridiculous statements in this thread but that's a doozy. I agree that investing is best when you're undercapitalised as you need to have a higher % win rate and a GOOD fundamentalist will get a higher win/loss than a TA trader. A TA trader doesn't require a high win/loss as ,if they're any good, their $won/$lost is very high. You really need a decent kitty though as you'll need a decent spread of stocks to make the stats work for you.

I mentioned earlier in this thread that 10 years ago I was a devout Buffettologist and read everything about Buffett I could get my hands on and ONLY used fundamental analysis. That's before the days of the internet being so full of info - I used to ring the companies and get them to send me 5 years of annual reports in the post. Fortunately I decided to try my hand at futures and learned a lot about what could be accomplished by trading sentiment/trends in combo with strict risk management.

I have 2 distinct portfolios Realist - I spend just as much time reading balance sheets and announcements as I do analysing charts. So I should be some sort of reference for you. I made 3 TIMES the % return in my trading portfolio last FY as I did in my investment portfolio and I consider myself a better than average fundamentalist.

Why don't I just trade TA if it's so good?? Well all my investments/FA stuff need to have decent charts (so there's some cross over) - "cheap" stocks often get cheaper until all the skeletons are out of the closet- and I can only trade and watch so much money actively.

It's almost pointless trying to get in and change a closed mind - you can only try. To repeat myself - all the better traders I know have a good grasp of FA and TA. Fortunately for those people most others are firmly in one camp or the other and won't be told otherwise.

Ed

 

[Sean K]

Re: Which one do you use? Technical or fundamental analysis

I'm with you eddie, it's a combination for me. I think the 1/2 pregnant analogy doesn't quite fit with investing. Sorry Blondie.

 

[cuttlefish]

Re: Which one do you use? Technical or fundamental analysis

a couple of points made in the previous posts that I'd comment from a fundamentalists point of view

Seriously if people think they can value a Company from its published Balance sheet they are DREAMING.

Looking at historical P&L and Balance sheet, in combination with announcements to date can be used to identify significantly undervalued companies with very good yields and take a safe profitable position in them, often with a succesful capital gain resulting out of it as well.

A stock that is in a downtrend is what Fundamentalists like. Turn a chart upside down first if you want to use them for Technical analysis!!

Fundamentalists don't look for stocks that are falling in price - they look for companies that are undervalued. A companies stock price can be rising and it can be undervalued, and a company can have a rising stock price and still go from being overvalued to undervalued even while the price is rising.

 

[Realist]

Re: Which one do you use? Technical or fundamental analysis

I have 2 distinct portfolios Realist - I spend just as much time reading balance sheets and announcements as I do analysing charts. So I should be some sort of reference for you. I made 3 TIMES the % return in my trading portfolio last FY as I did in my investment portfolio and I consider myself a better than average fundamentalist.

Why don't I just trade TA if it's so good?? Well all my investments/FA stuff need to have decent charts (so there's some cross over) - "cheap" stocks often get cheaper until all the skeletons are out of the closet- and I can only trade and watch so much money actively.

Ridiculous. You are confused what you are. And I suspect your results did not take into account all expenses.

Please advise what stocks you'd tip I buy now using your theory??

The half pregnant argument is a bit unfair agreed, in cricketing terms you are a fast spin bowler who bats a bit - not fast enough to scare anyone and you don't turn the ball enough to worry anyone. And your batting os no betting than any of the other bowlers.

You can't be both and truly succeed. No-one ever has - examples please???

Charts and Fundamental analysis have no overlap. Warren Buffet would not read charts, Leon whatshisname does not read balance sheets.

First of all Traders make more money in a short period of time. No argument.

My argument is tax and brokerage water that down so much, and compouding and dividends increase "investing" so much that ultimately the investor wins!

Anyone argue with that?

 

[eddievanhalen]

Re: Which one do you use? Technical or fundamental analysis

How would you know that nobody ever has?? You win mate - I give up

 

[Realist]

Re: Which one do you use? Technical or fundamental analysis

Fundamentalists don't look for stocks that are falling in price - they look for companies that are undervalued. A companies stock price can be rising and it can be undervalued, and a company can have a rising stock price and still go from being overvalued to undervalued even while the price is rising.

I know. I know.

You still obviously need to do the fundamental analysis.

BUT A company that has doubled in price is less likely to be undervalued than one that has just halved. Obviously.

CDO is a good example!! It went down - too much and came back up.

Fundamentalists do look for companies that have gone down in value. Look where Buffet bought Coke!! He bought it when it went down.

Fundamentalists do buy stocks cause they go down. I bought BHP and RIO cause they went down!

If a company is worth $1.00 and is selling for $1.10 but then drops 35% overnight because the world trade centre got bombed I would buy it, purely cause it dropped!

 

[Realist]

Re: Which one do you use? Technical or fundamental analysis

How would you know that nobody ever has?? You win mate - I give up

Examples please.....

I'm not saying I know no-one has.

I am saying I do not know of anyone who has?

Big difference - please advise who has?

 

[cuttlefish]

Re: Which one do you use? Technical or fundamental analysis

realist I think you're mixing up comparing trading and investing, vs fundamental and technical.

A trader is running a business buying and selling stock.

An investor is looking for a place to put their wealth so that it will continue to grow.

A trader is active, an investor is passive.

A trader can use fundamental, technical or both as triggers for entry and exit criteria.

An investor probably can use both as well but would typically focus on fundamentals.

 

[eddievanhalen]

Re: Which one do you use? Technical or fundamental analysis

Examples please.....

I'm not saying I know no-one has.

I am saying I do not know of anyone who has?

Big difference - please advise who has?

You can't be both and truly succeed. No-one ever has

Haha

I'll PM you.

Ed

 

[wayneL]

Re: Which one do you use? Technical or fundamental analysis

Anyone argue with that?

Would love to! But it ain't worth it! You will spin whatever anyone says to satisfy your psychology, to convince yourself you are doing it the right way.

In the end it wouldn't alter my bottom line one iota, so it would be an exercize in futulity.

Realist, if you like the way you do it, be happy dude!

Cheers

 

[Realist]

Re: Which one do you use? Technical or fundamental analysis

realist I think you're mixing up comparing trading and investing, vs fundamental and technical.

Yes you are right. I am generalising.

I am assuming all traders use charts and all "investors" use fundamental analysis which is incorrect.

As I said before most "investors" use neither. They buy companies they like without doing any analysis.

The definition of an investor is very tricky, not as simple as you stated - is someone who puts money in a term deposit an investor?

Semantics though - I'm sure you get what I am saying Fundies v Techs - I'll remember to use the correct terminology.

Hey Cuttlefish - see CMI has rocketed up (30%). Eventually its value is being recognised??

the last share I bought is PRG - what do you think?

 

[Realist]

Re: Which one do you use? Technical or fundamental analysis

Would love to! But it ain't worth it! You will spin whatever anyone says to satisfy your psychology, to convince yourself you are doing it the right way.

In the end it wouldn't alter my bottom line one iota, so it would be an exercize in futulity.

Realist, if you like the way you do it, be happy dude!

Cheers

C'mon Wayne. You've got to admit this thread is very popular.

No one is going to win this argument outright. It is the fun of the fight they're enjoying!!

 

[mit]

Re: Which one do you use? Technical or fundamental analysis

One of the reasons Im T/A. This is the 70's. Most charts we see start from 1980 which shows the market doing nothing but go up. Here you see for a decade that the market went nowhere. To me however, I think that there is enough swing to make at least 30% a year on an EOD system (More if you are like Wayne and want to stay awake all night). Also before Realist asks this is after Brokerage and Interest.

For a pure fundamental investor you would end up losing money in real terms.

MIT

 

[cuttlefish]

Re: Which one do you use? Technical or fundamental analysis

Hey Cuttlefish - see CMI has rocketed up (30%). Eventually its value is being recognised??

Realist - with CMI I didn't dispute it was undervalued - just pointed out some things about the capital structure that you hadn't necessarily taken into account in doing your assessment of it.

The reason I checked it out was because on the surface it looked like it might match my criteria for making a fundamental investment, but on closer examination it didn't quite meet it. That doesn't mean it isn't a good buy and won't continue to go up - I've just got a set of criteria it didn't quite meet.

What price did you buy CMI at?

 

[cuttlefish]

Re: Which one do you use? Technical or fundamental analysis

.

For a pure fundamental investor you would end up losing money in real terms.

MIT

I'd dispute that - often in sideways or bear markets fundamental investing comes to the fore. Just because the market went nowhere, doesn't mean individual stocks went nowhere. Also an investment can do very well without the price of the stock rising.

 

[ghotib]

Re: Which one do you use? Technical or fundamental analysis

Just because the market went nowhere, doesn't mean individual stocks went nowhere.

:iagree:

One of the most useful remarks I've read on any forum was that every property investment decision is a microeconomic decision. Same applies to stocks, and any other investment vehicle for that matter. It's a great relief to get free of market crystal balling.

 

[Realist]

Re: Which one do you use? Technical or fundamental analysis

For a pure fundamental investor you would end up losing money in real terms.

Maybe, but you are forgetting about divdends....

You double your money (before tax, fees and inflation indexed) buying a share that pays 7% dividends over 10 years if the share price does not go up in value at all!!!

 

[mit]

Re: Which one do you use? Technical or fundamental analysis

Maybe, but you are forgetting about divdends....

You double your money (before tax, fees and inflation indexed) buying a share that pays 7% dividends over 10 years if the share price does not go up in value at all!!!

Not much of a return on risk after inflation. Also, the You'd do better to invest in investment grade bonds. I'll take the 30% thanks.

Think how much even a fundamental investor would make who timed his buys and sells using a simple index filter.

MIT