Building a Share Portfolio

[Phaedrus]

Here are a few notes that combine conventional wisdom, market truisms and common sense.
When picking stocks, good tips can come from friends, chat groups, newspaper articles and brokers. It is good to hold a lot of stocks because this makes investing a lot safer. Don't worry about trying to time your purchases - time in the market is what counts and timing the market is impossible in any case. Most people just keep investing money whenever they are able - this is called dollar cost averaging. Look for very cheap shares - this means that you can afford to buy a lot more of them, thus increasing your gains.
Never, ever sell at a loss. This is most important and cannot be emphasised enough. Should you buy a stock and its price fall below what you paid, remember that this is only a paper loss. It is important that you understand this concept. Such losses only exist on paper, and are not realised until you sell. Never forget, you continue to receive the dividends and since they are actually paid to you they are real, whereas paper losses are not. The same principle applies to gains. These are only theoretical gains until you lock them in by selling. That is why it is important to realise any paper profits you make - until you actually sell, until you have the money in your hand, you have made nothing. Never forget, nobody ever went broke taking a profit.
Should you be holding a stock on which you have made a substantial paper loss, it is good to buy more. This is called "averaging down". If you thought a stock was worth buying at $2, at $1 it must be a real bargain. Should it continue to fall, buy still more. This shows that you have confidence in your original decision.
By the end of a year or so, your portfolio will probably be underperforming the market. Do not worry about this - remember that about 85% of managed funds underperform the market, so you are in good company. Remember too that it is impossible to beat the market. Keep your aims and expectations realistic.
By holding on to your bad stocks, selling your good stocks and putting more of your money into your worst performers, you now have a carefully selected portfolio that, unfortunately, will not perform very well at all. There is now nothing you can do but hold on and hope. Remember that over long periods of time, the market always rises. What went down will come up again, and ultimately you will be proved right. You must be patient. Remember that you are in this for the long term. You are an investor, not a speculator.
Should you become too discouraged, it is good to make a fresh start. Take all your losing stocks, put them in your bottom drawer, call them "Long-term Investments" and forget about them. You are now free to begin the process of building a new portfolio.

[Halebop]

LOL! Although at first I laughed nervously...

[drum]

Phaedrus,

I agree with most of what you say, however, are you telling us to sell our good stocks and keep our bad ones? Am I missing the logic? Surely not all stocks recover their price over time? Please excuse my ignorance if I am misunderstanding your basic concepts, as I am an absolute beginner.

[zac]

Here endeth the first lesson. Or should this be in the JOKE thread.

[Halebop]

quote:Originally posted by drum

Phaedrus,

I agree with most of what you say, however, are you telling us to sell our good stocks and keep our bad ones? Am I missing the logic? Surely not all stocks recover their price over time? Please excuse my ignorance if I am misunderstanding your basic concepts, as I am an absolute beginner.


My apologies for answering on your behalf P,

Drum - I believe Phaedrus is having a gentle play with us. Have a read of the Warehouse thread. If you have a lot of time, read the Restaurant Brands thread and previous Warehouse thread. They are packed with "Long Term Investors".

[lucky]

amen

[Halebop]

Six Posts and only 74 reads at the time of this posting. Phaedrus you have missed your calling. Go work in Advertising.

[Capitalist]

quote:Originally posted by Halebop


quote:Originally posted by drum

Phaedrus,

I agree with most of what you say, however, are you telling us to sell our good stocks and keep our bad ones? Am I missing the logic? Surely not all stocks recover their price over time? Please excuse my ignorance if I am misunderstanding your basic concepts, as I am an absolute beginner.


My apologies for answering on your behalf P,

Drum - I believe Phaedrus is having a gentle play with us. Have a read of the Warehouse thread. If you have a lot of time, read the Restaurant Brands thread and previous Warehouse thread. They are packed with "Long Term Investors".


*Snort* About the hits/ replies I have told Phaedrus this! He attracts a lot of traffic here and could charge a subscription at this rate. I was wondering when someone would fall for the gentle satire.

[drum]

Well colour me stupid!

[Halebop]

quote:Originally posted by drum

Well colour me stupid!


Not at all Drum. It was convincingly written. I didn't really laugh until I read it a 2nd time. The first I was saying "What the f....??!! Phaedrus?!"

[Capitalist]

I echo HB, Drum. It takes a while to get to know the on-line personalities. Carry on!!!

BTW Some wit said "You are not really alive unless you make a fool of yourself at least once a day." I agree with that as I usually make a fool of myself at least 6 times a day!!

[duncan macgregor]

PHAEDRUS did SNOOPY brain wash you. Tell me your joking please. Tell me when the auction is on your charting equipment i want to buy it now that you are a FA investor. Hope you get well soon all the best MACDUNK

[whiteheron]

Phaedrus
YOU MUST BE JOKING!!!!!!!!!!!!!!!!!!!!!
If only my losses were imaginery
If by any chance you are serious i suggest a change of occupation before you go broke

[dingdong]

Phaedrus, o Toast of the Zodiac, we are unworthy of your esteemed advice and I shall immediately purge my portfolio of all profitable stocks. Since that will leave me no stocks and only cash I shall distribute this filthy lucre and ill-gotten gains to the needy. Hallelujah brother I have been saved.

[Major von Tempsky]

Problem is it all flies in the face of what Warren Buffett and George Soros advise.
Diversify like mad?
Buffett advises no more than about 6. I currently have 3. By diversifying you are guaranteeing yourself a weighted average mediocrity.
It's impossible to beat the market?
Besides Buffett there's quite a few value investors incl myself who have.
Hold onto your losers?
In the latest book on Soros/Buffett reviewed on ASB/One Business program recently the author said one of the secrets of Soros success was that he realised he was fallible and quickly sold out a loser before it became a bad loser.
I got out of Restaurant Brands for example asap and into something that has a lot more than made my Rest Brds loss up.

[The BOWMAN]

Phaedrus, interesting read of the "conventional wisdom, market truisms and common sense" you have summarised. :D:D duncan macgregor,whiteheron,Abdab, I suggest you guys read it again. It talks about how to successfully turn yourself into a LONG term holder in the stock market and collect all the junk equities with no mistake like a market genius.

After I posted this, noticed I have to add Major von Tempsky to the list.[8D]

[Oracle]

Phaedrus

You mock 80% of the posters on this site, but judging by the replies, you waste your time.

[Lawnmower]

Gee Phaedrus, If you made those comments 10 years ago, I would have agreed with you, but luckily (for me) my strategy/philosophy changed (but only after substantial losses )
I suppose the unfortunate thing is that many newbie investors won't appreciate your wit, untill they too have learned these hard (and costly) lessons.!

I suppose that to sell at a loss is to admit "I stuffed up" , which we all have a inherent reluctance to do. But like life in general, we have to come to terms with our failures, and move on.

The best investment decision I ever made, was to sell my portfolio of "accumulated dogs" (as I had allready realised profits on my well performing shares ) it was like a great burden being lifted from my shoulders.

In retrospect, I still wonder why it took me so long to "twigg" , particularly when I recall being told the old sharemarket adage "Cut your losses, and ride your profits" (or something to that effect)

Loved your comments, Cheers

[Placebo]

Thanks for the advice Phaedrus. Have placed SELL orders on CEN, SKC, WAM and will sink all into WHS, PRG, and BLT.

You are a market genius and I follow your advice without question. I advise all here to do same.

:D:D:D

[Solo]

HAHA -> This is for what Phaedrus wrote.
HAHAHA -> This is for some of the replies.

Funny ;)

[wsheridan]

At first I thought this was very funny Phaedrus ... then I realised you had simply plagerised it from The Beginners Guide to Being and Investment Manager In NZ - Published 1980 by the NZ Financial Planners Association ;):D

THE KING says BGR has bottomed so now is the time to add,
"Oh what a feeling" - BGR. :D

[Leai_Se_Tupe]

Phadreus,

you sound like the first sharebroker I ever bought shares through - you weren't you working as a sharebroker in Napier ten years ago were you? :)

[Major von Tempsky]

Is it possible that he was actually being serious? :-0
TA does funny things to the brain y'know....

[Snoopy]

Now that Phaedrus has had his fun, I think it is time we filled everyone in on the *full* text of the article you picked out (right Phaedrus?)

--------------
Former fund manager Investment head Vague Bozo has been chosen to put together options for taxation of investment income. Bozo is to report back to Revenue Minister Michael Cullen by October. This is the leaked transcript of the preliminary statement as presented by an anonymous Mr B and Mr C to cabinet last week.
-------------

MC Government surpluses, good growth, tax money overflowing., Kiwis not saving as much as they should. The tax base needs protecting. We need some options. I've been reading up on this chap in America, by the name of Buffett. He seems to have a few sensible ideas.

One of his best seems to be to only buy shares in companies that can 'own a piece of your mind'. Those companies that are so well located in the market that their business is almost like a toll bridge. Companies that produce a product or service that will always be needed and where barriers to entry are high.

VB: This is not always practical minister. If we want to deal with the merchant banks that bring new companies to market we have to deal with allcomers. From the low profit commodity businesses that cannot be sold in a trade sale, so must be sold to the general public. To the latest whiz bang software companies that promise the sky and deliver nothing. If the NZ market can’t deliver these businesses to the public, the funds management and broking industries are out of business. If we can get the public to invest in large enough numbers of shares through managed funds these poor performers will be hidden in the march of the market. If we can devise funds that broadly track the market without exactly mimicking it, we won’t get too far away from market benchmark performance
>It is good to hold a lot of stocks because this makes
>investing a lot safer.
for us the investment industry. If unit holders cannot track management’s mistakes, it makes things a lot easier from a PR perspective.

MC: Buffett mentioned something about timing being very important. Specifically how ‘undervalued’ you can buy a share is the most critical ingredient in determining how that investment will ultimately perform.

VB: Completely impractical minister. We are paid by the amount of money under management, so that means investing clients money as soon as we can get it.
>Most people just keep investing money whenever they are able
>- this is called dollar cost averaging.
Having money sitting in a bank account waiting for an opportunity is a complete waste of commissions. Besides we have so much money under management we can’t time the market, because we move the market if we try to do so. We just tell our clients
>Don't worry about trying to time your purchases - time in the market is
>what counts
>Timing the market is impossible in any case.
That last bit is certainly quite true for us!

MC But as a group the funds management industries performance has been dismal, with some 85% of fund managers underperforming index funds! How do you get clients to stay with you under those circumstances?

VB Because most fund manager clients will be looking at substantial losses as a fund is developing, we give our clients the following advice.
>Never, ever sell at a loss. This is most important and cannot be
>emphasized enough. Should you buy a
>stock and its price fall below what you paid, remember that
>this is only a paper loss. It is important that
>you understand this concept. Such losses only exist on
>paper, and are not realized until you sell.
>
>Never forget, you continue to receive the dividends and
>since they are actually paid to you they are real,
>whereas paper losses are not. The same principle applies to gains.
>These are only theoretical gains until you lock them in by selling.
>
>Underperforming the market? Do not worry about

[Phaedrus]

This post was not a joke. In fact it portrayed fairly accurately my level of knowledge and understanding when I first entered the market.
The post cobbled together many quotes from your ShareTrader posts, along with some gems gleaned from books and a little advice from Mary Holm and others. It may have sounded reasonable, but it was all quite misguided.
The message, though, was very simple. If you take your profits early and never sell at a loss, you will automatically and inevitably end up with a portfolio of underperforming stocks. Dogs.
The article was intended to provoke wry smiles of recognition. How many of you continue to hold underperforming stocks that you now consider to be liabilities? How many have "special" long-term portfolios? (Otherwise known as "kennels")
Any post that is totally misunderstood by a large proportion of its target audience is a failure. I guess that the net is a poor vehicle for irony and suchlike. Still, at least some of you got it. You know who you are - Thanks!

[duncan macgregor]

Great to see you cast the bait Pheadrus. I thought TA traders were serious types with little or no sense of humour. One little question you gave out a list of companies that you were holding that was the burley before the bait I thought. I was puzzled by the number and choice and thought thats not right you are having us on with that lot. I was actually going to go through them and have you on then decided you were having us on better shut up.
cheers macdunk

[Phaedrus]

Ah Macdunk, it was the fear of being forced into defending each and every stock I held that made me hesitate before posting the list. I suspect I may well yet regret doing so, but for better or worse, it was all true. Cross my heart.
I know there are too many. I promise to cut the number down. Soon. Ish.
You know I like (need) dividends.
You know I like uptrends.
You should also know that I have no loyalty whatsoever to any of these stocks and so I am extremely unlikely to stoutly defend their presence in my NZ portfolio.
I'm curious though - which 3 would you dump and which 3 do you think should be there but are not?

[Placebo]

OH MY GOD! IT WAS A JOKE???

Now you tell me! I sold out of my loser portfolio, now they've gone up over the weekend and I have to buy them back at a loss. And I thought this site was the font of all great advice. Who can I trust now (said the man with no brain).

:D:D:D:D

[Phaedrus]

Placebo, if they were losers on Friday, they will still be losers on Monday. Don't buy them back.
See this as an opportunity for you to accept that you are not infallible and that occasionally you make bad investment decisions. Accepting a little short-term pain here will mean more long-term gain.
Trust yourself and your decisions, but know that you are fallible and that you will sometimes make mistakes. Aim to recognise mistakes early and accept them early, because only then can you remedy them, take your losses and move on.
I know only too well how easy it is to become attached to dogs, but you must be dispassionate, resolute and hard-headed here.
Courage man!

[Placebo]

http://instagiber.net/smiliesdotcom/contrib/ruinkai/yelcutelaughA.gif

The joker can't spot the joker...

[duncan macgregor]

Hi Pheadrus I am still surprised at you holding sixteen NZ stocks. To me that is the fast way to lose nothing, and gain nothing like betting each way on a track. I would have thought dividends would be one of the lessor things with a TA system. I only hold no more than five companies max at any given time, and back myself to beat the market with dividends only a small consideration. Lets face it by the time the tax comes out, and the share drops in price a dividend is hardly worth the paper its written on. I dont care what the market is today, i work out where it will go tomorrow. I work out the likelyhood of a better result good news in the pipeline, a rise in that sector, regardless of PE, and regardless of what the market thinks. I will only take you to task with your first share AIA. I sold them over six months ago you are still holding, they are going nowhere fast, your money has done nothing for six months i wont tolerate that i get out and move on. The point where we dissagree is if you take the market in total the average investor holds some bad choices and is easy to beat. Your TA system predicts what a lunatic is inclined to do next where my system predicts what the lunatic will do when hit with good news. The three companies in my portfolio are HQP PWC POT when they finish the run they are gone the market is in constant change and i change with it who knows what choices i make tomorrow the homework must go on. CHEERS MACDUNK PS MR market is the lunatic

[thereslifeafter87]

Phaedrus, It seems I'm one of the only people on here who saw the humour in your post. I recognised some of the conventional wisdom I followed when I was first in the market.

Now, I will sell my underperforming losers, but only if the company is underperforming - not just the shareprice.

Remember everyone that much investment success can be attributed to inactivity.

[Ted2]

Phaedrus

Great tale. I can understand how many may have misinterpreted it as real, or a recommendation. I think it clearly shows the regard in which your input is held that many actually believed it must be for real.

Of the roughly 86 points in your story, when I recognized 85 of them as things I've done or obeyed before on a regular basis I knew it had to be a wind-up! No-one could recommend doing the things I've done in the past!!

I don't really need a kennel any more, as all bar one current holdings looking good (or should I be worried about GPG?)

Cheers
Ted

[Phaedrus]

Macdunk, I think you underestimate the importance of dividends to many people. For myself, NZ dividends pay the bills - food, rates, power, entertainment etc. I am way too young to get superannuation and unlike you, do not have any cash income at all. I do not want to be in the situation of having to sell stocks or repatriate money from overseas to buy food or a new dishwasher, for example.
Be careful that you do not fall into the Bongotrap of seizing on three stocks and closing your mind to all else. Your "POT good, AIA bad" stance is very illuminating in this regard. Measured over, say, 5 years, [u]the 2 stocks are practically identical in both yield and performance</u>. You scoff at AIA "they are going nowhere fast, your money has done nothing for six months i wont tolerate that" yet POT has spent 40 of the last 60 months doing just that - going nowhere, doing nothing. At one stage it went sideways for 2 years. I won't tolerate that!
Macdunk, whatever time frame people choose, there are always associated advantages and disadvantages. There is no universal ideal - people choose what suits their aims, objectives and circumstances. You don't seem to have grasped the fact that a well diversified longterm combined growth/yield portfolio is exactly what I want here. I trade more actively in Australia, where I ignore yields. I trade short-term, both long and short, in the USA. Different aims, different tools, different objectives, different expectations. All equally valid.
I'm glad that you have found an approach that suits you, and that you are happy with your current 3 stocks. Just so long as you don't think that your way is the only way!

[KJ]

Macdunk
My circumstances are similar to Phaedrus where I have retired in my mid fifties and rely to a large extent on the stockmarket.
I hold between 15 and 20 NZ stocks.I find this to be about the right number for me.Some folk think that if you hold this number you cannot beat the market-this is quite wrong.

With 90% of the stocks that I hold I have concentrated on small to mid size coys with low PE's,high div yields,sound ROE's,and a history of earnings growth.I limit myself as to how much I invest in any one coy.This has produced well above average returns for yrs.

IMO holding 3 or 4 stocks is a much more high risk strategy.

[duncan macgregor]

PHEADRUS, my old mate I would never expect you to go on the defencive with what shares you hold. The point I tried to make was I had you in the wrong pigeon hole, and was really surprised. The way I had you figured out was, in and out companies as your charts predicted,with very few long term positions. I certainly never thought dividends played much part in your system. SNOOPY and you might have your differences, but you both to a certain extent follow the same path. It seems loud mouth macdunk is on his own, not positioned halfway between the two of you like he thought. As you said, and I do if a share goes no where, why hold it, do a rethink. The one share we discussed AIA i sold it after a great run and continued the run with POT. It wasnt a lucky guess it was a bit of FA, and common sense, that went into that decision, TA i doubt would have predicted it. AIA and POT have similar runs,both solid companies,but predicting the trend is where the money is, not sitting on one stagnating while the other trends. Take a good company and there are a few, then work out if the sector is inclined to rise, then work out what news is inclined to be in the pipe line with a bit of FA. When you have done that use a touch of TA to see where it is coming from and jump in with a half stake and a 5pc stop loss. When it proves it is trending jump in with the other half and play it by ear with your finger positioned over the ejector button. The people that like dividends are the middle of the range investors and should stick with property. The market is like most things some do well others go broke its not hard to beat nothing complicated about it common sense will always win. I used to think charts only showed which way the idiots were running but i now find that i follow them more than ever. I suppose its thanks to you PHEADRUS
cheers macdunk

[KJ]

Duncan MCG
In your last post you write "people that like dividends are the middle of the range investors and should stick with property".

I do not follow this comment-care to elaborate?

[foodee]

DunMac
Like KJ this statement "people that like dividends....." got my attention. I thought I would explore and see what is there to find.
My targets in investment are in the following order:-
[1] provide income to live on
[2] preserve capital
[3] accumulate some 'wealth' if it is there, but I am not after max.

My reading of your strategies suggests that your predominent target in your investment is 'wealth accumulation' and there is nothing wrong with that, in fact that would be the purest and most luxurious aim in investment. I would be interested in what sort of strategies you would use if you were in my situation. I am not too proud to learn something, in fact I want to learn all I can.

With regards to property, I have been there before and the game is getting too hard to get to the next cycle.

I admire your commonsense thinking but like everything in life 'the ideal may not be ideal'.

[duncan macgregor]

KJ If you are happy with 8pc plus a capital gain property is a safer bet. You can lever yourself into a bigger position with very little risk in comparison to shares. Most factory investments show 8pc with the tenant paying outgoings and tied to a lease. Few people borrow to buy shares everyone borrows to buy property. My viewpoint is, if you buy shares for a dividend good luck, you are mediocre and you will make me rich. It took me some time to escape from the rubbish you read about trading, and have the confidence to do it all my way. PHEADRUS and SNOOPY both contributed to what i do now, even although my methods are completely different to both of them. If you do the homework, and stick to well run companies in a rising sector you will find only four or five at any given time, so what is the point in buying into more. The more companies the less risk and the less you earn. I have every confidence that if a crash comes my money will be sitting in the bank. The average investor makes whatever the market rises or falls, plus the average market dividend over a period of time for every dollar above there is one below. If you want to be average buy into the lot,or get the brain going.
cheers macdunk

[stephen]

Macdunk, 4 to 5 shares is definitely riskier than 9 or 10, and by quite a margin. If you think there are only 4 or 5 suitable candidates on the NZX at one time, you can always look at the wider selection offered by the ASX.

Live fast, die young is not a good motto for an investor, I reckon. (Although at 34 I reckon I've got time to go bankrupt at least once...)

I don't propose to prove this mathematically (I could, but I'll leave that to the Dimebags of this world). Instead, you have inspired me to create a wee online simulation. Watch this space: it's my project for the evening.

[KJ]

Macdunk
Some silly comments whick demonstrates that you have learnt very little from Pheadrus and Snoopy.

Your comment-"if you buy shares for a dividend good luck, you are mediocre and you will make me rich---if you want to be average buy into the lot, or get the brain going"

Quite arrogant really.You maybe suffering from over confidence.

A little lesson for you.The dividend yield stocks that I have held over the last 12 mths are: CAV,DPC,GPG,HBY,HQP,MHI,NPX,PWC,RYM,TPW,TUA,&TUR.

These stocks have shown a return of 39% for the yr ended 30 June 2004.Mediocre-perhaps by your high standards.And before you make some other silly comments I have been doing this for some yrs.
Pheadrus tried to point out to you that people have different strategies.There is no one answer.

Do you not realise that that coys that pay high dividends very often have strong share price growth.

I have owned rental properties and recently sold as it fits my goals to now be out of the property market.You do not appear to comprehend my earlier post and your response is well off the mark.

[Risk]

personally I like to hold a max of 7 companies, but I think the number of shares held is not as important to reduce risk as the dollar amount you are risking per trade.

holding 10 shares is not automatically less risky than holding 5...if you start with $100k the person holding 10 companies has $10k per company, and the person holding 5 has $20k per company or $10k per company twice over. :-)

to exaggerate a little bit: if you get rid of your losers quick, then those 5 companies are winners, and because your position size is twice as big, you are making money twice as quick.

if you are after divies, you can have more on the higher divie paying companies.

if you are after capital gain, you can have more in the companies with the strongest trends.

Phaedrus has indicated that his holding of such a large number of companies is not ideal, and I tend to agree. In such a small market as NZ, there is no need to diversify so much.

although most books tend to encourage diversification, I think profit depends on a lot of other more important factors. Youre better off picking only a couple of slow winners than a dozen dogs.

[corwen]

39% is a excellent return KJ. Congrats. Let us face it, both you and Phaedrus are very able investors.

Bill

[Phaedrus]

Macdunk, You don't get it. Selecting stocks that pay reasonable dividends does NOT turn you into a buy and hold fundamentalist, neither does it preclude trading such stocks as frequently or as actively as you like.
Let me spell it out for you :- To get on my NZ short list, stocks should have the following four qualities. They should :-
(1) Be in an uptrend.
(2) Have reasonable fundamentals.
(3) Pay an acceptable sustainable dividend.
(4) Have adequate liquidity.
Stocks passing all these criteria become the universe of NZ stocks that I am allowed to hold and/or trade.
Some stocks lend themselves to trading, for example from the FBU chart I posted :- "Fletcher Building has been in an uptrend for years, has good fundamentals and a good yield, all of which makes it an excellent "buy and hold" candidate. In addition, its secondary trends are very tradeable." I have a "core" holding of stocks like FBU and AIA that I have held for many years. In addition to this, I trade the secondary medium-term trends that make up the long-term uptrends. There are many stocks in this category, stocks that are in good long-term uptrends, but have sufficient volatility to make trading the secondary trends worthwhile.
Other stocks such as WAM, STU, PGG, while they are in long-term uptrends, have insufficient volatility to make trading the secondary trends a viable option. You can try of course, but it is all but impossible to beat buying and holding such stocks - so long as the primary uptrend is intact.
AIA has gone up more than 160% in 4 years - dividends received are over and above this, of course. Only a fool would knock such a stock and classify as "mediocre" those that bought and continue to hold it on the basis of its yield.

[kittydashwood]

That liquidity can be a downer, I remember expressing interest in Broadway at .40 cents in 2002, getting a few and holding for the best real gains of the season despite illiquidity warnings from all. I guess that intangilble, the hunch is something TA and FA don't deliver.

[Lawso]

quote: Case in point ATR and OTI where traders wouldn't go near them and brokers and 99.9% of investors had never heard of them.

I'm one of the 99.9%, cantab. Can you tell us something about ATR and OTI? Thanks.

[duncan macgregor]

PHEADRUS I did not tell you what you are doing is wrong, all i tried to say was I thought you traded the way woody advocated on sharechat. I did think you were a strict TA trader like him with fundamentals not really considered. The only differance between the SNOOPY method and yours is you use a bit of TA to exit and buy in where he is purely fundamental. Every one to their own I suppose I picked up a few pointers from both of you in creating my own system so owe you both a big thank you. Woody is the only pure TA trader I have encountered, you and I are a bit of this, and a bit of that.
Number of companies in a portfolio depends on confidence in ones own ability to come up with the right answer, plus the risk factor. Your first choice is the best one,with lessor choices all the way down.
There for it is obvious the more lessor choices you have, the worse the performance. We will always have people buy in and do well in lots of companies in good times, but in bad times its the homework on the few good companies that come out on top. Having fewer companies I expect them to keep rising so probably do more home work than most before buying. HQP for instance bought the company at the bottom after visiting the sites at Omaha spoke to the hire people discussed with people in the know, realised the share price would double when it all became public. The company was on a downtrend waited at the bottom and bought big for me. TA in those circuimstances is as useless as tits on a bull. TA however is a very important tool in other circumstances. Each to their own we all have to think our way is a good way, never that it is the only or best way. cheers macdunk.

[Placebo]

Funnily enough if you extrapolate MacDunc's argument further you would ultimately end up with one stock only, your `top of the list' candidate.

As much of an issue as how many stocks you favour (why 3? why 7? -- I don't see that there's an ideal number) is the proportion each one has within your portfolio. My view is that you would ideally choose stocks with both yield and price growth, and there are a reasonable number of these about in NZ market. Like Phaedrus I have a couple of cornerstones in my portfolio (AIA and SKC), these have the highest indivual percentages within the portfolio. In addition there are others where I see the opportunity for continuing growth (MHI/WAM). I have one stock I consider high risk -- FTB. My view is that you would this proportion depending on market conditions. For example, if you foresaw a flat patch or downtrend you would opt for a higher proportion of defensive stocks; when things were bubbling along you would take in a greater risk element (while still holding defensives). I don't think you'd go all defensive or all aggressive.

Funnily enough I agree with some of MacDunc's theories, he's acutely aware of opportunity cost and seeking maximum returns, good luck to him. I consider that kind of approach a little too risky.

[KJ]

I think his argument is fine in theory but difficult for mere mortals to implement.

With all the research that I could have done,if I was holding only 3 stocks I would not have had TPW in my top 3-however it is my best performing stock over the last 12 mths.Another is TUA-up over 200% in the last 18mths-would not have been in my top 3.

Placebo-I tend to follow a similar approach with a few cornerstone stocks and limit myself to a maximum % in any one stock (did this after I got a kicking from WHS)

I also look to the future as I am aware that some existing stocks will have to be replaced in time with others that hopefully will give good divs-hence I bought into TWR and HQP.

I do not know what is the right number to hold.I do not think that I would want more than I currently have.For me, as I have put more money in I have tended to increase the number of shares held.

[Placebo]

KJ -- so what would be your percentage limit for any one stock? 40pct? 50pct? 60.... My largest single holding accounts for approx 30pct of the total portfolio by value.

[KJ]

Placebo - My largest is 15%-then 4 others between 8 and 10%.Only one risk stock-FTB which is less than 2%.

[duncan macgregor]

THE BEST THING ABOUT SHARING INFORMATION IS THE DIVERSITY OF SYSTEMS COMPANIES AND IDEAS THAT WE WOULD NEVER HAVE KNOWN ABOUT OTHERWISE. THE WINNERS PICK A BIT UP HERE AND THERE ALONG THE WAY AND THE LOSERS ATTACK THE INDIVIDUAL ON A PERSONAL LEVEL. WHO CARES WHAT THE SYSTEM IS AS LONG AS WE ALL UNDERSTAND WHY YOU THINK THAT WAY. MOST PEOPLE ARE TO SCARED OF BEING RUBBISHED TO REVEAL ALL. THE PEOPLE THAT MATTER IN THIS GAME ARE THE PEOPLE THAT STAND UP SAY WHAT THEY THINK BEFORE THE EVENT RISK GETTING EGG ON THE FACE NOT THE LITTLE KNAFFES SNAPPING AT THEIR HEELS. SOME PEOPLE ONLY FEEL SAFE WITH LOTS OF COMPANIES OTHERS LIKE ME HAVE THE CONFIDENCE WITH ONLY A FEW. IF I WAS IN THIS FOR DIVIDENDS, OR LOOKED AT DIVIDENDS AS A MAJOR ATTRACTION,I WOULD GET BACK INTO PROPERTY. YOUR VERY FIRST CHOICE HAS MORE CHANCE OF BEING CORRECT THAN YOUR SECOND,AND SO ON,SO THE PEOPLE THAT ADVOCATE A LARGE PORTFOLIO HAVE A LOOK IN THE MIRROR IS THIS THE RIGHT GAME FOR YOU?. WE ARE ALL IN THIS TO MAKE MONEY. MOST PEOPLE SEE IT DIFFERENT I DONT EXPECT MANY WILL THINK THE WAY I DO BUT I BET LOTS OF YOU WILL THINK ABOUT IT AND SOME MIGHT EVER SO SLIGHTLY CHANGE BECAUSE OF READING IT THATS WHY ITS IMPORTANT TO SWAP VIEW POINTS.
CHEERS MACDUNK

[Ted2]

There's a major hint of MALCOLM (thought you'd gone for good)in your last reply mcdunk.
[}:)][}:)][}:)]

Either that or you're very ANGRY! :D

[foodee]

MacDunk
Now don't you get upset and go away. I for one enjoy your posts despite note getting a reply for whatever reason. I certainly do not have the luxury you and other investors enjoy. Hell I don't even get the benefit of compunding as most of my div is burnt! But that does not matter as I am enjoying it instead of salting it away. As long as I have enough to live my lifestyle and capital is intact (& growing hopefully) I am happy and my offsprings will/should be happy.:D What more is there in life.;)

cheers

foodee - average punter

[duncan macgregor]

Definately not angry give me heaps i can take it.
in it to win after that i dont care.
go dunk go. the competition is the buzz.

[Shamrock]

MacDunk

There's no need to shout.

Maybe if you weren't you'd be better able to listen to some, like KJ and Phaedrus, who've offered you some very timely advice.

It seems that despite saying that you're keen to learn, you listen to nobody but yourself. Is this because you've convinced yourself that your system is better than everybody else's, and you want us all to validate you?

Your credibility is shaky when you disparage those who invest for yield. What other investing is there? Everything else is speculation in my book.

Mate, nearly everybody has made money over the past year and three months. Do me a favour and tell me how you would protect your capital when the bear starts to roar.

Bulls have a habit of making even idiots look like geniuses. Show me a 15% profit when the market is falling and you'll have my respect.

[duncan macgregor]

quote from winstone churchill about people and advice. He said {only 2 kinds of fools in this world those that give advice and those that take it}. the people mentioned never gave advice.
dont believe me contact a financial advisor you will learn the hard way. all the best macdunk

[KJ]

Macdunk

Unfortunately I have to take you to task on your post (5.07pm)

Your quote "the losers attack the individual on a personal level"

Let me point out to you that you started the personal remarks with your post directed at me when you said-"if you buy shares for a dividend good luck,you are mediocre and you will make me rich--if you want to be average buy into the lot, or get the brain going"

Then you moan about personal attacks.What do you expect?

The rest of the stuff in your post has already been covered by different posters-you just don't get it.

I repeat-Do you not realise that coys that pay high divs very often have strong share price growth? Check the charts for yourself.

[stephen]

As promised yesterday, I hacked up a simple experiment to demonstrate the effect of diversification.

I know this can be proved mathematically but I find it easier to understand through fiddling.

It's here:

http://vital.org.nz/simulation/simulate.html

Like all models, it works on some very simple assumptions ("assume a spherical horse").

You are Stockpicking God. Choose how many stocks to split your $1,000 portfolio into, and trial it. See what adding more stocks does. Note how the average return value is very similar no matter how many stocks you put in your portfolio, but the maximum and minimum change a lot. Notice that the moderating effects of adding more stocks taper off.

(And notice that I can bring your PC to a grinding halt for several seconds if it's elderly, and that this won't work in version 5 browsers or with Javascript turned off).

[stephen]

Won't work in LESS than version 5, I meant.

[skinny]

Nice illustration Stephen - if I understand it right as you add more stocks the realised distribution of returns becomes more narrowly centered on the theoretical averages given by the 3 distributions you set up (steamers, steadies and sinkers). So, if you were to run the simulation over very long horizons there would be absolutely no benefit in diversifying if you knew what category the stocks fell under. But if you didn't, which is more realistic, there is some benefit in diversifying.

With 2 tweaks to your model you would get a stronger case for diversification, even under the situation where you knew before hand what the stock category was, and especially if your investment horizon was shorter:

1) Add a small but non-negligible probability that companies fail (i.e run values go to zero and stay there)

2) Allow for some negative correlation in the share returns

[Phaedrus]

Now here's a funny thing - Mary Holm in todays (Saturday) Herald discusses two things :-
(1) The ideal number of shares in a portfolio.
(2) The characteristics of high-divi stocks.
Could she have been reading this thread? I was naughty enough to quote her as one of the sources of some of the shibboleths featured in the opening post here. As you would expect, we disagree - she thinks it best to hold 20 - 50 shares! Now that's diversification!
I have read a scholarly article that proved the ideal number of stocks in a portfolio was 10 - unfortunately I can't remember where. Silly topic, when you think about it. More stocks = less risk but also the more stocks you hold, the greater the probability that your returns will equal the Index. At 50, you have bought the Index. Where's the sense in that?
http://www.nzherald.co.nz/storydisplay.cfm?thesection=money&thesubsection=&storyID=3578769

[KJ]

Interesting to read that US Research points to historical evidence which strongly suggests that expected future earnings growth is fastest when dividend payouts are high.

Does not surprise me but contrary to a lot of opinions.

[duncan macgregor]

WE ALL DO WHAT WE THINK BEST. THE MORE CONFIDENCE IN YOUR ABILITY TO OUT OUTPERFORM THE MARKET THE LESS COMPANIES IN THE PORTFOLIO. TO SAY THIS IS RIGHT OR WRONG DEPENDS ON THE ABILITY AND CONFIDENCE I WOULD EXPECT OF THE INDIVIDUAL A PERSONS FIRST CHOICE IS OBVIOUSELY MORE INCLINED TO BE RIGHT THAN THEIR LAST CHOICE REGARDLESS OF HOW MANY. THE NUMBER DEPENDS ON HOW MUCH RISK YOU ARE PREPARED TO TAKE ON BOARD. BY HAVING STRATEGIES THAT EXIT A NON PERFORMING SHARE ELIMINATES THE RISK SO WHY BE MEDIOCRE BY HOLDING TO MANY. I NEVER BOTHER TO READ THE BACK PAGE IN THE HERALD THE LADY IN QUESTION AND I ARE POLES APART. I ONLY HAVE FIVE COMPANIES MAX AT ANY GIVEN TIME SOME OTHER PEOPLE MIGHT ARGUE THAT DOUBLE THAT IS BETTER WHO CARES THE EXIT STRATEGY IS WHAT MATTERS WITHOUT THAT IN PLACE YOU WILL BE A LOSER REGARDLES. TIME FOR THE ABS TO PLAY
SEE YA MACDUNK

[stephen]

All other things being equal, 50 stocks would be best - but of course they're not equal. In the NZ market at least, who can name 50 high quality stocks?

Phaedrus, I have an investment management textbook on the bedside table at the moment. It has a lovely sideways J curve showing the risk vs number of stocks. It's based on trading data from the NYSE. The curve drops off sharply from 1 to 5 or so (so yes Macdunk, at least 5 is good). From 10 or so on, the risk drops very slightly with each stock, but not enough to make much of a difference. And that's why the figures you usually hear are between 8-12. 100 stocks are not noticeably less risky than 20. Lord knows where Mary Holm gets her 50 from.

*ahem* you can see this with the simulation I built, crude as it is. The standard deviation drops off as you add more stocks, but past 10 or so, by hardly any.

[KJ]

I think that the main point is being missed in regard to the number.

Quote from Buffett "more critical than determining the exact number is understanding the general concept behind it" (focus investing)

He also says "10 is a good number;more than 20 is asking for trouble.For the average investor, a legitimate case can be made for investing in 10 to 20 companies"

[craic]

I thought the Mary Holmes article was the biggest load of garbage I have seen in ages. And to think that she was paid good money for it.

[duncan macgregor]

Regarding Mary Holmes I think she might be a lovely person that talks a whole heap of rubbish about finance. I moved Into shares approx 4yrs ago doubled my money did It my way etc etc. I baited PHEADRUS about TA SNOOPY about FA asked the questions stood up risked getting egg on the face told everyone what I did. Mary Holm and macdunk are easy to follow everything she says I dissagree with.
Everything she said over the last 4yrs would either have cost me heaps or made me nothing{look It up}. I firmly beleive your first choice must be the best one so therefore to many choices weakens your position. The most Important thing In the macdunk system Is your exit strategy so therefore the macdunk system of holding a maximum of five has no greater risk than holding 10.
cheers macdunk

[warthog]

quote:Originally posted by duncan macgregor

Regarding Mary Holmes I think she might be a lovely person that talks a whole heap of rubbish about finance. I moved Into shares approx 4yrs ago doubled my money did It my way etc etc. I baited PHEADRUS about TA SNOOPY about FA asked the questions stood up risked getting egg on the face told everyone what I did. Mary Holm and macdunk are easy to follow everything she says I dissagree with.
Everything she said over the last 4yrs would either have cost me heaps or made me nothing{look It up}. I firmly beleive your first choice must be the best one so therefore to many choices weakens your position. The most Important thing In the macdunk system Is your exit strategy so therefore the macdunk system of holding a maximum of five has no greater risk than holding 10.
cheers macdunk


Oh Macdunk you're such a drama queen. When will you ever make a posting without going on about how well you've done with your investments and keep to the topic.

Not that I begrudge you your successes. Wonderful! You are to be congratulated, but more on the Macdunk systems and less of the oh-in-the-days-when-i-sold-WRI-and-got-into-POT-instead-made-a-fortune-put-some-people-in-their-places.

[Tinker]

Stephen, Hey great simulation. It showed what I expected. Ta.

What about the premise that if you risk smaller amounts of your capital in each prospect you are more willing to tackle higher return/unit of risk shares, lifting your overall return?

Thus say 10% more steamers and 10% less stinkers? Thus your average goes up with perhaps a similar SD?

I am conscious when I see the comments that the best performers have always concentrated their investments that fewer people say that the worse performers must also have concentrated their investments. But this must be also true mustn't it?

cheers

[stephen]

Thanks, Tinker.

Hmmm.

If you add shares whose individual risk profile is similar to your existing shares, then your average return must stay the same while the variance goes down. Your chances of losing big and of winning big would both decrease. Adding shares with a better risk profile should improve the average return.

WRT to your latter point - these things are true in general. But occasionally, even low risk portfolios must suffer. Someone has to be on the wrong end of the bell curve. Ie, if 100 people have different portfolios, all so good that the risk of wiping out is 1%, we would expect one of those people to wipe out, and that person will beat their breast crying where did I go wrong? Conversely, out of a pack of losers, sooner or later one will win, and the lucky owner will congratulate themselves on their skill. You reduce risk by diversifying, but you can't eliminate it. And also, by diversifying, you limit your upside - all other things being equal.

Also, note the assumption that there's no correlation between one share's risk and another. In reality, this isn't necessarily true. Maybe I can build another simulation to demonstrate the effect of a modest correlation...

[OldRider]

First time I think I have looked at this thread,and then haven't read it all,so hope I am not repeating or missing something.

It seems to me that in measuring risk, and thinking about diversification, the presumption has been made, and used in the calculations that equal amounts are invested into each company.

For myself, I have spent some time lately figuring the size of a position to hold. I maintain holdings probably in more companies than average,and largely switch funds from a poor performer to a better performer amongst the companies I follow, now and then a company is added or dropped from this list.The size of the largest holding can sometimes be ten times that of the smallest.

It is quite normal to only sell a third or half of a position in a switch. Doing things this way
has kept losses rather less than previously,takes not much time and is giving a satisfactory return.

My experience has been that as a portfolio grows in size it is more difficult to get a high return.
There are of course examples where a single small investment has double or tripled over a year or so,to do this with the whole of a reasonable portfolio would be I think next to impossible.

[duncan macgregor]

Oldrider, you rightly point out The more companies you hold the lessor the chance of a big win. It also means less chance perhaps of a big loss. In a big crash the whole lot will drop dramatically so therefore holding lots of companies wont mean safety In numbers. To hold four or five max, with a rigid stop loss Is a safer bet In a crash than holding 10 or 15 without a rigid exit strategy. My way of thinking Is why settle on mediocrecy by having to many when all you have to do Is the proper TA and FA on a lesser ammount of companies. A big crash will catch all the people that dont have a rigid exit strategy regardless. I cant find at any given time on the home market more than four or five real opportunities with something about to trend at any given time. We have lots of good companies that trend In cycles AIA for one POT another knowing when to jump from one to the other and back again Is the art. The warren Buffet types do the homework at the start, but forget times change. Know when to get out, they seem to think I was right at the start,and ride It down to the bottom. My average Is one bad decision In five that I will say Is normal. It Is the other four decisions plus the exit strategy from the bad one that keeps me going. The correct number of companies to hold are the ones you have time to do a complete check up on, and pass your criteria. To make a mistake Is normal, to make It twice Is stupid, to continue bleating on about a share, after a continual dive comes from people that will make us all rich. Cheers Macdunk

[k1w1]

Macdunk,how tall are you ?

You write like a short man ...

[duncan macgregor]

Kiwi you dont sound like a high fligher to me hope Im wrong. Tell us your system If you are big enough I would find It Interesting.
all the best macdunk.

[k1w1]

Tell me how tall you are first.

[OldRider]

DM. There is an advantage for me I think,in managing more than one portfolio,with very different criteria for each. Doing this I am able to compare the results factually.Things could always be done better though,and there is the chance I am better at one style than the other,or possibly not much good at either.

One portfolio invests only in fundamentally sound companies, researches them, then measures & uses the swings to reallocate funds between them. The losses here are small,the profits reasonably steady in comparison to an index.I will always sell at a fixed point. Indeed I remember posting a year or two ago that the losses saved by appropriate exits far exceeded any profits earned that year.

Another searches for promising micro/small caps,and tries to get in early, here the gains are much riskier, indeed I am wrong 60% of the time & success lies for me in broad coverage,and not leaving things to become horribly wrong.

One real winner can cover many small losers.A 200% gaining winner more than covers six 20% losers. I defy anyone to know very early on which one of any ten will be the success in the end. As the journey goes along the ideas firm and one again sells the non performer.

Which portfolio does the best? Percentagewise the small cap,but it takes much more time to run - far more in comparison to the funds used, and is much more inconsistent with its returns. As well,as I posted previously, when more funds were added to it, the return diminished.

There are always winners I don't find early enough, more than those I do, but the sheer time it takes ferreting out information, and the greater difficulty of getting a bigger holding at a still reasonable price limits choices.

[glennj]

Providing you can do the research or interpret someone elses research it is very easy to build a successful share portfolio. My
experience gained over more than a quarter century is shared below.
(Experience also tells me very few people will follow the recipe for success even when the recipe is layed out in front of them)

Regarding the number of stocks in a portfolio I largely ignore portfolio theory and just buy whatever stocks I consider to be best value & sell whatever stocks I consider to be significantly overvalued. This system works well for me with 80%+ of stocks purchased making money. Portfolio IRR's are better than the results I see published for the so called professionals (eg brokers pics)
At any one time I could have between five & fifty or more stocks spread betw one to four markets. I don't bother about having equal weightings in each stock but do sell anything I consider seriously overvalued.

Stock selections are predominantly influenced by FA value selection criteria. So in summary to build a successful portfolio just buy what is best value at the time you have the cash. Theoretically five stocks are better than one but concentrate where the value is any given month and you'll do well. If you can't find any value buys in one market look somewhere else. If you've bought using value criteria you won't have to be monitoring your portfoilio daily or do heaps of buying & selling. Any crash will leave you largely unscathed.
If you reinvest divs & capital gains back into the portfolios the value quickly builds and creates its own momentum. Compounding over time produces awesome results when the annual IRR's are up there toward 20%

[thereslifeafter87]

OldRider,
If you can find a small cap with a low PE and high growth, then you can say in advance that it will outperform most stocks.
Of course if you are talking about highly speculative plays in companies such as biotechs - where success depends not only on their ability to sell a product, but also on the ability to develop a product in the first place, then it is next-to-impossible to predict outcomes.

Thats why I don't speculate. I'm risk averse. That is also a reason I don't diversify extensively - its much harder to know a lot about a lot of companies than it is to know a lot about a few companies.

I have just finished reading a great book on the investment habits and principles of Buffett and Soros. It shows that to be successfull you need to identify high probability events, and bet big.
It also shows that the level of return achieved is not necessarily proportional to the risk involved.

[Titan]

Thats Crazy

Selling good stocks and buying bad stocks - you're kidding right?

You never "average down".

If you buy at $2.00 and the share price hits $1.00, why is this a real bargain? The key here is knowing why the share price went from $2.00 to $1.00 than getting so wound up in a stock and convincing yourself that its a buy, what if its not? Your could be throwing good money after bad.

[duncan macgregor]

I agree never buy down that Is crazy. I buy a half stake and the other half when I know Its right. Run a very strict stop loss at first and play It by ear later. I always sell In one hit.
The people that lose the most regardless of how many companies they are In are the people that dont run a stop loss. Its all very well to think the fundamentals are good hang on, but your money Is not working. Well run companies follow the cycle they are In so pick the cycle first then seek out the company. I tend to work out what the best company Is In a particular field, then work out when It will trend.

[Cooper]

I've averaged down a few times... if you're confident in the stock at the higher price, and nothing changes fundamentally, why would you not be confident for an even better price?
Averaging down has hurt me twice, but given benefits at least five times in the long run...

[Cooper]

Apart from that it sounds like we have similar appoaches Macdunk.... Macro first, then sector, then company, all the time looking for reasons NOT to invest in the company...

[skinny]

quote:Originally posted by thereslifeafter87


I have just finished reading a great book on the investment habits and principles of Buffett and Soros. It shows that to be successfull you need to identify high probability events, and bet big.
It also shows that the level of return achieved is not necessarily proportional to the risk involved.


Agree but easier said then done - such "high probability events" may not come to pass [}:)]

Take the WHS vs. MHI - both companies share prices fell around 40% over the 1st half of 03. Initially you might have thought them both as "Buffett" buy candidates, but the market favoured the WHS which started recovering just a few months later while MHI languished at its lows for over 8 months. We know whats happened since then, but at the time you would have been a really brave soul sticking with MHI over the WHS. (And I certainly wasn't brave enough - I watched both from the sidelines and bought MHI only after the +ve results for Jan 04 were announced.)

One big bet I have taken this year is that oil and gas prices would remain high, so I sunk heaps into US oil and gas stocks. I saw it as a high probability event given the under-estimated strength of world demand and skepticism over OPEC's supply capacities. Until recently the market disagreed and my US energy bets languished. Now they're doing great. Rah, rah, round one to me. I've also got a stake in AJL.AX, a small cap, high growth low p/e company of the sort you like TLA87. It has a consistent history of winning big infastructure development contracts. I'm down 15% on the sucker this year as its failed to win any big ones depsite the sector booming - ex-ante I certainly saw (& still do) it winning further contracts as a high probability event, but so far it hasn't happened. It may not happen at all. Round two to the market so far!!

[k1w1]

Come on MacDunk, how tall are you ? :)

[duncan macgregor]

KIWI, My height would qualify for the NZ police heavon forbid. What about your shares do you have any? cheers macdunk.

[k1w1]

Straight question, straight answer please Macdunk

then I will tell all ....! ;)

[duncan macgregor]

sorry kiwi cant be bothered to childish for me.
all the best macdunk

[k1w1]

Calling me childish is, Macdunk, just namecalling, which is childish - exactly what you say is your reason for not answering. So why not go the whole childish hog and tell us how tall you are.

I take your refusal to give a straight answer to an apparently straight answer as circumstantial proof of my earlier assessment.

However its only a presumption, MacDunk , which you can easily be rebutted by telling me your height - as there is nothing in any of your posts that indicates you are other than an honest man.

I assure you it will remain a secret between you and me ...and the whole of the ST board.:D:D:D

[stormrose]

Skinny said:
[It also shows that the level of return achieved is not necessarily proportional to the risk involved.]

This is very true. Not all portfolios lie on the "Efficient Frontier". Return should represent the time value of money and recompense for risk.

[k1w1]

well I see wee macdunk has been back on the ST site posting on the RBD thread but not here.

In an effort to show sporting I will partially expose my methods to his doubtlessly open minded scrutiny.

Firstly, my biggest investing mistake was RMG options. Classic case of not having stops in place, or as MacDunk would say, having an exit strategy. At one stage I was 100% up on my options but I held on on the basis of Micheal Stiassny's upbeat message to the AGM. His next message was that he was resigning due to work pressures...Sure. Next time I will set stops. Thanks techies for that lesson.I usually get it wrong when I buy options so don't follow me.

Mostly I am in the glennj school of investment in that I am an investor in value. I am agnostic about selling, or not buying a share, simply because I have others - although I can see the maths of it.

In my case, macdunk, my first thought haven't always been my best thought. I have on a number of occasions been wrong about what would succeed and what would not. I am a poor seller, nearly every stock I have sold has increased. I am poor on making further purchases of a stock that I have taken an initial position in. I am still very much a learner.

I believe in research. I started off not knowing much - I haven't made that much progress in the interval but at least I am still in the game. The mistakes I make are the fees I pay for my education . So far they are probably about as much as I would have paid if I put my money in a managed fund. Except I would have missed out on all the enjoyment that I have had from this.

What do I know ? Some areas I know now a bit more about are, new issues,infrastructure ,finance , mining, forestry and agricultural companies, oil and gas, retailing, debt collection, leisure and tourism.


I am always looking to buy a business not a share play - as there are smarter faster players than me at share plays. I believe that in the short term, the market is an opinion poll. In the long term it is an accurate weighing machine. So I look for value stocks, that have not yet been percieved as such by the market, in the hope that in the longer term they will be reweighted. I hold Berkshire Hathaway B shares.

I am an admirer of Warren Buffet, GPG, Platinum,Aspect Huntley, Bryan Gaynor, Frank Pearson , James Cornell and Phaedrus (I hold Zen and the Art of Motorcyle Maintenance ).


I am always interested in small, illiquid stocks as that excludes the broker firms and traders who screen them out. eg I prefer ANC in Australia to MHI- I don't like their NZ situation, ANC is better in Australia than them and there is blue sky on sale in Canada. As MHI have already increased 1000% in price - I am probably wrong again.

Recently I have invested in RPC (see ASX) thread at 27c, IFTWB at 53.5 c average. Finance companies I have holdings in Aust are RCD, MFS ( check out the returns) and MPY (PE of 2) . In NZ Marac thru PGG, Allied Farmers and DFH .


I have yet to lose money on a new float I have subscribed to. I have recently subscribed to - Just Water and Pacific Brands,Open Country Cheeses, CanWest and Delegats,and IFTWB warrants . I have posted on this board in advance about most but not all of these as I am sceptical of people who only post whether they were in or not after the stock has listed.

I post because at its best this site allows peer review of share trading strategies by other practictioners. Plus I like pulling Macdunk's leg and anyone elses I feel like. In return I expect to have to take my lumps. I dish it out so I can't complain if others dish it back.

Macdunk the things you have made me think about are exit strategies and reducing the number of shares in my portfolio. Sincere thanks.

[OldRider]

I have never heard of the person to whom this quote is attributed,but understand his thought.

Picked up from incredible charts in the weekend diary

Sometimes the best trades are not the winning ones that put money in your pocket;
sometimes they are the ones that get you out of the market at the right time.

~ Phil Flynn

[duncan macgregor]

Kiwi, One of the first hard lessons old macdunk learned In life was never pass the ammunition to the enemy. The second lesson was never take anybody to be a fool they might be doing the same to you. Regardless of how good anything Is there Is a better way somewhere. We all learn new ways to Improve, by finding out what the other guy Is up to. You are wrong In one respect, I never condemn the person only the Idea. Your method of Investing might Improve mine ever so slightly thats what Its all about. My height Is 5ft 9 expect a decent punchline to follow. cheers macdunk

[k1w1]

Buy you a beer some time, Macdunk.

[Placebo]

Alert the goons! Peace has broken out!:D:D:D

[Cooper]

quote:Originally posted by duncan macgregor

Kiwi, One of the first hard lessons old macdunk learned In life was never pass the ammunition to the enemy. The second lesson was never take anybody to be a fool they might be doing the same to you. Regardless of how good anything Is there Is a better way somewhere. We all learn new ways to Improve, by finding out what the other guy Is up to. You are wrong In one respect, I never condemn the person only the Idea. Your method of Investing might Improve mine ever so slightly thats what Its all about. My height Is 5ft 9 expect a decent punchline to follow. cheers macdunk


...And that sums up what it's all about well. Good way of looking at it Macdunk, and those are two key life lessons. BTW you're half an inch taller than me...