Why do you buy shares in a company?

[tech/a]

This thats it.

 

[nizar]

Price action?
All i know about a company usually is the 3 letter asx code. I don't care for fundamentals at all.

You and me both.

 

[AlterEgo]

Stock rising on high volume - without knowing anything about a stock, you could have bought into BNB when the hedge funds were covering their shorts.

Not at all. Would never have touched that. I don't buy down-trending stocks. The stock needs to be in a strong upward trend. "The trend is your friend", as they say.

 

[stl_08]

Stocks that are the top of there industry, they must of done something right to get to the top,and sound balance sheets or have high quality assets they can sell if they need to

 

[ceasar73]

I agree stl_08.
Surely accelerated eps..sound cash flow statements etc are reason WHY INVESTORS/TRADERS (yes traders too) buy a company.

 

[beamstas]

I agree stl_08.
Surely accelerated eps..sound cash flow statements etc are reason WHY INVESTORS/TRADERS (yes traders too) buy a company.

Surely?
Surely?
Surely?

You do realise that when you buy a share in a company, someone else is selling at the same time

If everyone traded for the same reason you'd never be able to buy because they would all have the same idea as you

Brad

 

[MS+Tradesim]

I run two trading systems currently. Neither involve trades held for more than 2 days. What exactly will fundamentals add over that time frame? Nothing. It's all sentiment. My bread and butter strategy, in this environment, involves buying momentum driven stocks at or near close and selling the next day at or near open.

Recipe for disaster? Pfft.

Ave Win 1241.52
Ave Loss -413.34
W:L 3
Prob.Win 0.57
Prob.Loss 0.43
Expectancy 523.37

This offers from 0-10 signals a day but I never take more than 5. So yes, if you know what you're doing, even in a bear market, price action is all you need.

And then when extended rallies like this one are around, there are the really nice trades that add chunk to the bottom line.

Caesar, you seem to want fundamentals to be what counts for you. Go for it. But making uninformed comments about what others are doing for a living makes me think that you just want your current beliefs confirmed.

There are lots of ways to take money from the market, and even more ways to lose. There is no right way or wrong way. There are just consistently profitable, inconsistently profitable, and unprofitable methods.

 

[Julia]

Ceasar, have a read of this post by Bunyip a few years ago. Let us know if something falls into place for you.

"Researching stocks takes a lot of time and it prevents me from doing other things."

I agree - researching stocks is time consuming.
But there's a simple solution to your problem.....don't do any research. There's no need to - tens of thousands of traders and investors have already done the research for you, and their findings are reflected in the trend of the stock.

AMP fell from $13 to $3 between March 2002 and August 2003. Shortly after it's downtrend began it was patently obvious, even to someone of little experience in chart reading, that the stock was heading south east on the chart.......a downtrend.
Why was it downtrending? Because traders and investors were quitting the stock en masse.
Why would they do that? Because tens of thousands of them had researched the company and found out that it was in trouble, and it's future prospects were none too bright.
In which case, you could have made money from the AMP downtrend by selling the stock short, or buying put options.
Or if you owned the stock, you could have bailed out long before it's value was decimated.
The point is that you could have got quite an accurate summary of the fundamentals of AMP without spending one minute of your time doing fundamental research. Just look at the chart.....all the information you needed was graphically displayed for you.

Look at the current price action of AMP. Nice uptrend in place, particularly when viewed on the weekly chart.
Why is it uptrending? Because tens of thousands of investors, having done their research, have formed the opinion that the stock has good fundamentals. No need for you to research AMP to profit from it - the research has already been done for you. If an uptrending stock shows temporary weakness by pulling back for a few days as profit takers bail out,
and then the uptrend resumes as buyers come back in, it presents you with an ideal opportunity to hitch a ride on the trend and make some money.

The same sort of simple analysis and trading strategy can be applied to any liquid stock that starts uptrending or downtrending strongly.
WPL is a good example.....uptrend began in early 2003. Three years later, the stock is more than four times it's 2003 value.
Once you saw WPL heading steadily north east on the chart, making higher peaks and higher troughs, did you really need to spend hours or days of your time doing fundamental research on it?
Thousands of investors had already researched it for you and their findings were very positive, otherwise why would they be piling into the stock and pushing it higher week after week?

A common fallacy among stock market players is that if you want to profit from the market, you have to read the financial papers, company reports, brokers newsletters etc to keep yourself up to date with the latest developments in the economy and within individual companies.
Its simply not correct.....I've been trading the markets for 10 years or so and for the last eight of those years I haven't read a financial publication, a brokers newsletter or a company report.
The most reliable information is in the charts. Learn how to interpret them, learn how to identify trends, learn how to recognise retracements, watch for the trend to resume following the retracement.
You won't need to spend your time doing boring company research, and you won't need to hand your hard earned money over to Fat Profits either.

If you want some good books on how to identify trends and how to hitch a ride on them, I'd suggest.....

"Dave Landry On Swing Trading" by Dave Landry

"Secrets For Profiting In Bull And Bear Markets" by Stan Weinstein

The trading methods expoused by both these men are simple to learn, easy to implement, and require very little time input from the trader or investor.

 

[beamstas]

Im not sure who im quoting here, so if anyone knows please tell me, i read alot I believe it was buffet

Price is what you pay
Value is what you get

Lets look at say RIO for example. Was trading this time last year at around $130. Now it is trading at around 1/3rd of that.

That is a 66% discount. Would you buy something for a 66% discount?

What if i told you RIO was only worth (valued) at $45 in the first place, and $130 was just the price. Is it a discount now?

Was it just overpriced to begin with?

How do you determine value?

Im not asking you to answer these questions to me but i'd like you to ponder them. I am not opening up pandoras box of tech analysis vs fundaments, but more-so trying to emphasize there is more to trading shares than balance sheets and cash flows

Thanks
Brad

 

[Sir Osisofliver]

Hmm this thread does sound like it'll turn into a Fundy V Techie battle royale. Might be fun

Me I use both strategies...and here is why.

Lets take a look at that chart (yes I have removed the name and all tech indicators and left you with a simple chart) Looking at it from a technical standpoint there are not great characteristics to this chart. It's too volatile the retracement is ugly, the trend looks sideways, we have the possibility of a third corrective pattern with no obvious breakout features either positive or negative.

Lets look at the date... Well the market is in the process of having a major retracement, overiding emotion in the market is WTF? and panic. Looking at this chart technically doesn't fill me with giddy glee.

HOWEVER - because of what I KNOW fundamentally about this company I purchased shares on the 21st of March.

Was I wise to do so from a technical standpoint? Probably not. Lets see how I did in my next post.

Sir O

 

[So_Cynical]

Would you buy something for a 66% discount?

How do you determine value?

Yep

I love the value in this market....for example i found a little company the other day with
a big, simple, single asset...asset replacement value around 250 million (the asset cost
200 million to build about 10 years ago) the company had a cap of about 45 million with
5 million debt and 14 mill in the bank....makin money, paying divis.

Bargain....sure was, jumped up around 18% the last 3 days.

That's how i determine value.

 

[Sir Osisofliver]

Well I seemed to have covered my brokerage with that transaction, somewhere along that nice rise someone has looked at it technically and gone said, Yep lets ride this sucker hard.

So looking at this chart, what can we see from a a fundamental and technical viewpoint?

Technically we seem to have a nice EW pattern there, if true we should probably look at exiting at this point (which I did).

Fundamental factors said that their was more in it over a lnger term basis, but was hard to value in the short term. With STRONG TECHNICAL features I sold, taking $2.05 in profit or close to 500% return.

Ok so what happened then, was that a good move???

Lets see shall we.

 

[Sir Osisofliver]

OK so now we have some cool technical features to work with, we've got a classic EW feature in the stock with a beautiful third wave retracement and bottoming feature. Fundamentals were also strong, the value that pushed the shares to above 2.90 were still present so looked great having both fundy and techie reasons to jump in. And so I did at $0.85 cents.

Was this a good thing to do, given the date and the market continuing to look awful?

lets find out how it's done in the last few months.

 

[sinner]

I buy shares so nobody else can have those ones that I have...my precious.

 

[Sir Osisofliver]

Once again I think I paid my brokerage, and I finally reveal the stock (I exited at $8.50, quite an improvement from my $0.85 cents purchase)

So all told out of this stock I took almost 1500% return in a little over 12 months, and I'd like to think it was because I looked at it with BOTH technical and fundamental views rather than just a single viewpoint.

Cheers

Sir O

 

[tech/a]

we've got a classic EW feature in the stock with a beautiful third wave retracement and bottoming feature.

Thats a classic.
Particularly the Bottoming feature.

 

[beerwm]

OK so now we have some cool technical features to work with, we've got a classic EW feature in the stock with a beautiful third wave retracement and bottoming feature.

haha, cool technical feature

I know the chart SirO, 4 consecutive takeover offers may have helped with the end 1500% gain :

 

[tech/a]

With STRONG TECHNICAL features I sold, taking $2.05 in profit or close to 500% return.

Fundamentals were also strong, the value that pushed the shares to above 2.90 were still present so looked great having both fundy and techie reasons to jump in. And so I did at $0.85 cents.

Yeh how'd you do that????
It never again traded at 85c
Close but never 85c
And don't tell me you got the EXACT bottom.
And the EXACT top!
Atleast I have the trading statement for the above example you wouldnt have yours there would you?

The perceived grandeur of Financial Planner status seems to have taken its toll.

 

[beerwm]

SirO's chart is abit off,

Stock is PES, bottomed at 40c. around Oct.

I dont think the 'fundamentals' tell you anything the price movement doesnt SirO, maybe just 'reassurance' to buy, and maybe a 'discouragement' to sell.
But many use it to success, so it must have an edge.

 

[tech/a]

Stock is PES, bottomed at 40c. around Oct.

Not on my chart