Which one do you use? Technical or fundamental analysis?

[swingstar]

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

MichaelD
P.S. I liked that piece you wrote about institutional trading - must respond to that at some point - really interesting perspective

Have you guys read Market Wizards? A lot of the traders were initially institutional traders yet still out did colleagues by heaps. Just pulling out a snippet on Michael Marcus... "In a number of years, his profits exceeded the combined total profit of all the other traders. Over a ten-year period, he multiplied his company account by an incredible 2,500-fold!"

As MichaelD said, I'd argue that few people in the investment bank industry know how to trade. Dare I say most are just academics who trade parrot fashion, and they probably have a lot reigns pulled tight on them.

A private trader... it is their livelihood, hobby, and career. There is a lot more at stake, however there is also a lot more freedom to grow and move.

"Why dont the investment banks just hire a team of chartists with etrade accounts and margin loans?"

So, not sure what context this was in, but why don't intitutions just hire a bunch of private traders? Well it then depletes any reason a trader chooses to take that path, and would probably have negative consequences on their results. However, it may be beneficial if they were free to go wild. But what is the likelihood of say AMP setting up accounts with people's super and investment funds for a bunch of retail traders? LOL, I don't think it's going to happen...

 

[insider]

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

The European markets are currently trading Possitively

 

[clayton4115]

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

Okay Bunyip, or anyone else that agrees with this theory...

To prove this please advise me of the last share you bought, or the next you intend to buy. Assuming I buy it this Monday morning 11am.


I'll tell you 2 ASX shares to buy on Monday morning and we'll see what happens.

Okay my shares are FGL ($5.55) and WDC ($17.20) - and I recommend you hold them for 30 years minimum and reinvest dividends

_____________________________________________________________________________________
Above quoted June 2006

lets see 3 1/2 years later

FGL $5.58
WDC $13.17

would have earned more in a term deposit,

point is some stocks you buy and hold could be complete dogs.

 

[nulla nulla]

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

_____________________________________________________________________________________
Above quoted June 2006

lets see 3 1/2 years later

FGL $5.58
WDC $13.17

would have earned more in a term deposit,

point is some stocks you buy and hold could be complete dogs.

Interesting. I don't know much about fgl but wdc went up to $22.00+ then down to less than $9.00 and is now trending slowly back up again. In the last 3 1/2 years it has paid a good annual dividend which if turned back into the market would have generated further returns. While your capital base in the fixed deposit would still be safe, i'm not sure it would have generated a higher rate of return than wdc?

 

[alphaman]

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

According to Comsec's data, WDC's annualised total shareholder return is -6.6% over the last 3 years, 2.7% over the last 5 years. So term deposit wins, for now.

 

[bunyip]

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

I'll tell you 2 ASX shares to buy on Monday morning and we'll see what happens.

Okay my shares are FGL ($5.55) and WDC ($17.20) - and I recommend you hold them for 30 years minimum and reinvest dividends.

Why buy them? Great companies, great brands, they pay dividends, worldwide market leaders, property and wine is a bit out of fashion at the moment but will surely be back in fashion sooner or later. They are fairly valued. And I firmly believe people (mainly Aussies but worldwide as well) will shop at Westfield and buy beer and wine in 30 years time.

Must be a couple of years since I've seen Realist on the forum...not sure if he's still with us or not.
It's interesting to see how WDC and FGL have performed since he picked them three and a half years ago.

If we look at the period from 17/06/06 (the date of Realist's two picks) until 1/11/07 when the bull market peaked, we see that........

* The All Ords gained 39% over this period.
* FGL gained 30% plus dividends
* WDC gained 36.5% plus dividends

But since then they've both caved in.
FGL is now at $5.31 (4.3% loss in the 3.5 years since he bought it)
WDC is now at $12.21 (29% loss in the 3.5 years since he bought it)

To be fair, his strategy of holding for 30 years still has another 26.5 years to run. Both stocks may be much higher by then. Or much lower. Worst case scenario - both companies may no longer exist. Who knows what the next 26 years will bring for these two stocks. So far at least, their performance has been pretty dismal.

Realist could have utilised his capital much more effectively by implementing the strategy he scoffed at - investing in blue chip stocks that were outperforming the general market, and sticking with them only as long as they continued to outperform.

While the All Ords gained a further 39% after he made his two picks, there were many stocks that performed much better over the same period.
Some gained several hundred percent. A few gained over 1000%, e.g. FLX gained 1269%
His lost opportunity cost has been enormous.

Results 26 years from now? Unknown at this stage.....his two stocks might be doing very well or very badly by then, or may not even exist.
If he was to follow a strategy of buying the outperformers over the next 26 years, and holding them only as long as they continued to outperform, it's highly likely that this would prove to be a superior strategy to buy and hold.

 

[alphaman]

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

bunyip, how do you define outperformance and loss of outperformance?

 

[condog]

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

A bit of both, but with out a doubt Fundamental is far more important, as id rather buy an over priced good stock then a cheap dog of a stock anyday....

We use fundamental to find the stocks we want and to know what represents good and bad value with that stock......

Then we just look at price and Relative Strength Index to find a better entry point. My opinion is fundamental analysis wins hands down, its just much harder / more expensive to do....

 

[condog]

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

According to Comsec's data, WDC's annualised total shareholder return is -6.6% over the last 3 years, 2.7% over the last 5 years. So term deposit wins, for now.

That in fact may be the case.....

Fact is their returns have been smashed by write downs in asset values due to GFC. At some point they will have massive increases in asset values.

Buying now why they are out of favour , have hopefully seen all their write downs may just prove to out do term deposit by a lot ....where as waiting till they are laready returning +10-20% theres a lot of upside already gone....

WDC has proven to be a fantastic long term asset for many investors. Its well managed, has 1st class assets, well diversified. Its just presently in a rut due to GFC.....

Using Buffetology "buy when no one else wants it" assuming its a good stock, which you could do a lot worse.... Now is probably when the smartest investors are grabbing huge chunks of WDC....

 

[Julia]

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

WDC has proven to be a fantastic long term asset for many investors. Its well managed, has 1st class assets, well diversified. Its just presently in a rut due to GFC.....

.

Over what time period do you think WDC has 'proven to be a fantastic long term asset'?

 

[bunyip]

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

bunyip, how do you define outperformance and loss of outperformance?

My software has a number of features that enable it to easily find outperforming and underperforming stocks. These features include......

* Relative Comparison scans, where it will scan the stocks of your choice and give you their percentage gain or loss over whatever time period you nominate.
The All Ords can be included in the scan....makes it quick and easy to see which are the best and worst performers relative to the All Ords, and relative to each other.

* Ability to overlay one chart on top of another, e.g. a stock chart overlaid on an All Ords chart to give you a quick visual reference of the performance of one compared to the other. Also it can overlay sector charts on the All Ords chart to tell you which sectors are performing above or below the general market. This can be a great help in telling you which sectors of the market to focus on. Or it can overlay a stock chart on it's sector chart, to see which are the best or worst performing stocks in that sector.

* ROAR indicator (rate of annual return) and the ability to scan for stocks whose ROAR has just risen above a user-defined figure.

I used all these tools in combination, but I didn't use any particular percentage figure to assess which stocks were outperforming. What I basically did was scan for the outperformers, then look at their charts to see which were in the most sustainable and steady trends. By 'sustainable' I mean a steady slope from bottom left to top right corner of my screen. I wasn't interested in stocks that were outperforming because they'd suddenly shot up 80 or 100% in the last couple of weeks - such stocks have a nasty habit of going down even faster than they went up.

I speak in past tense because I no longer trade stocks.

 

[alphaman]

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

By 'sustainable' I mean a steady slope from bottom left to top right corner of my screen. I wasn't interested in stocks that were outperforming because they'd suddenly shot up 80 or 100% in the last couple of weeks - such stocks have a nasty habit of going down even faster than they went up.

Thanks, that sounds perfectly reasonable to me. I've always wanted to code a relative performance based system, just never get around to it.

 

[bunyip]

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

WDC has proven to be a fantastic long term asset for many investors.

Considering that WDC is worth less now than five years ago, I'm wondering why you think it's been such 'a fantastic long term asset for many investors.'

 

[LaptopPro]

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

I combine both fundamental and technical analysis, at first I choose some stocks with fundamental analysis then with technical analysis decide when trade them.

How do you trade?

Yep thats pretty much my main daily strategy.

 

[bunyip]

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

The video link below might be useful to anyone who recognises the benefit of investing in the strongest stocks in the strongest sectors, rather than tying up their capital for years on end in dogs like WDC whose current price is almost 30% less than its price 5 years ago.

http://www.youtube.com/watch?v=wEypGm5ahCI

 

[Wysiwyg]

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

The video link below might be useful to anyone who recognises the benefit of investing in the strongest stocks in the strongest sectors, rather than tying up their capital for years on end in dogs like WDC whose current price is almost 30% less than its price 5 years ago.

I see Stuart has his own flock at OnlineTradingMastermind but the yard must be full because ---- The OTM Is Currently Closed.

 

[nomore4s]

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

Over what time period do you think WDC has 'proven to be a fantastic long term asset'?

Since March 09:

 

[Julia]

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

Since March 09:

Even in this rally period, it would be hard to term it a fantastic investment, given it was around $10 in March and now is not much more than $12.

If WDC is a fantastic investment, I hate to think what a dog would be.

 

[condog]

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

Over what time period do you think WDC has 'proven to be a fantastic long term asset'?

When you buy a stock like WDC you do not buy it to compare with the likes of JBH, MND, BHP or WOW....

Any property stock will by its very nature carry a higher debt to equity, higher liabilities and lower ROE, ROFE and ROA.

WDC is the world's largest listed retail property group. It has interests in a truly global portfolio of 120 of the worlds absolute best quality regional and suburban shopping centres.
WDC and pre WDC Westfield has a long history of ongoing growth, strongly growing yields and very high occupancy, with high rents and long term leases.....as well as some of the highest % of retained tennants on the planet.

At present WDC on price alone is in the dumps because it has suffered massive statutory accounting write downs in underlying asset values.... In property stocks these appear as reduced earnings / profits and hence reduce SP.

Since the vast majority of WDC assets are in fact commercial property which will inevitably and strongly bounce back, WDC's true worth cannot be judged on todays value....

If you judge WDC based soley on SP today, then it has not performed well at all. But if you consider:
1. that its current share price is massively reduced due to write downs in property values, caused by fire sales in commercial property around the globe
2. Income is reduced due to statutory write downs compounded by rents linked to tennant sales figures
You will quickly recognise that this is a company whos current share price in no way reflects its true value and the incredible quality of its underlying assets and income base....

Even if property prices simply stop reducing you should see an improvement instantly in WDC SP and returns.

As soon as commercial property, lending and retail begin to bounce back in the US and UK , I would expect a massive increase in WDC income and SP which makes todays values seem ridiculous......The growth in property prices whilst compounded by the growth in earnings will highlight the point Im making here....

On this basis given all the forecasters are looking to 2H10 and 1H11 WDC time frame would be 12-18 months minimum....but its true value will most likely be seen in 2014 or so....

Lets just say its a VERY bad time to be selling WDC, while its SP in no way reflects a fraction of its true value...

 

[condog]

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

Considering that WDC is worth less now than five years ago, I'm wondering why you think it's been such 'a fantastic long term asset for many investors.'

See my post above.

It is a dog if your only considering share price...

But consider it had Net profit of 5.58 Billion in 2007 and only 300M in 2009 with negative 2Bn in 2008.... Largely caused by write downs.... caused by fire sales of competitors properties.


When 2009's $300M profit bounces or climbs steadily back to 2007 levels of $5.6 B , this income is an increase of almost 2000%.... over any time frame that will look good.

What do you think the value of the stock might be.....

I agree in the short term its a dog.....but in the long term it would seem likely to be an incredible buy......

If one viewed the property sector as a slow moving titanic compared to the bust and boom of 09 on the equity markets, I think many people will look back and see Late 2009 / early 2010 as the chance of a life time on WDC......

Clearly not all commercial property will be as good.... but with WDC we are talking about many of the best managed centres in the best parts of the world, with the best tennants at unsustainable bargain basement prices....