Snoopy cf The Index

[Phaedrus]

These 2 guys could hardly be more different. They disagree on nearly everything. They both appear to be rational, sane, reasonably intelligent people - so how come their investment views are so diametrically opposed? This post is an attempt to find underlying reasons that might help us understand how two such totally different investment styles came about. It is NOT an attempt to prove one approach "right" and the other "wrong". A possible explanation for such fundamental differences is presented.

Snoopy’s posts document his fundamental approach to investing. They emphasize the long-term and usually advocate buying and/or holding specific stocks. Posts advocating selling are rare. He places a very heavy emphasis on dividends. He cares little about general market sentiment and appears to be unconcerned by large drops in the shareprice of stocks that he holds. He has no exit strategy and tells us that he has a 'buy and buy'(rather than ‘buy and hold’)approach. The longer a share continues to underperform, the better it looks to Snoopy - which is why he keeps buying. He can watch a stock he holds halve in value and not turn a hair. His aim is to beat the bank rate.

Phaedrus places heavy emphasis on market sentiment. While he seeks dividend income, he regards capital gain as being more important. He makes strenuous efforts to time entries/exits and limit losses, using an array of technical indicators in an attempt to maximise his investment returns. He avoids underperforming shares, prefering to invest in those that are in uptrends, which he holds only so long as the uptrend continues. Having been badly hurt by market reversals in the past, he is now acutely conscious of the need to closely monitor the market in general and trends in particular. His aim is to beat the Index.

[u]Discussion</u>. We can see from the LPC chart posted by Snoopy on 13/5/06 that he is a surprisingly active buyer. For example, with TEL alone, since his initial purchase, Snoopy has added to his holdings at least nine times. Snoopy tells us that he does not like holding cash, which he sees as risky. Since there is no evidence of any selling, we are forced therefore to conclude that most if not all of this heavy buying activity is funded from income. Snoopy appears to have a fairly regular, fairly substantial income. I suspect that he is also a superannuant.
Phaedrus tells us that his entire income is solely from dividends and capital gains, and that he is too young to get the pension. Could this be the core fundamental reason that lies behind the two very different attitudes? Phaedrus is very tightly focussed on profits because he has to be - they constitute his only income. With a separate income stream, Snoopy perhaps feels that he need not worry about losses. So he doesn’t.

[Mick100]

There's one important difference that you have not mentioned Phaedrus;
Snoopy in an investor while you are a trader
I assume that you pay income tax on your trading profits Phaedrus but I have come to the conclusion that alot of the contributers on this site, who are themselves traders, do not pay their taxes. I have come to this conclusion simply because of the fact that noone ever mentions that at least one third of their profits are going straight to the govt. Investors such as snoopy do not have a tax liability on cap gains from their investing activities - surely this advantage should be taken into account when making comparrisons

Another thing which you allude to in your post is the age and stage in life of the investor/trader. I tend to agree with your assumption that snoopy is 60 plus yrs old.
This goes along way to explain why he is more concerned with income from his investments rather than capital gain. This would also explain why he probably does not sit in front of his computer all day watching every minor movement in share pices like alot of traders appear to do. Some people value a balanced lifestyle more than others and in my opinion alot of traders are no better off, in this regard, than someone woking a 9 to 5 job.

I'm not saying that I agree with the way snoopy approaches investing but I think you should compare apples with apples.
.

[duncan macgregor]

PHAEDRUS, If it were not for people that invest like SNOOPY your system or my system would not work. SNOOPY is convinced that he is right, nothing will change that. I gave him heaps over the years which he takes in a good natured manner. He has a flawed practical outlook that i find hard to understand, coming from a man of his obvious intelligence. I nagged him about RBD for years, but he still buys more. We both told him about TEL but he still will average down.
On top of all that i admire the way he comes out with fundamental analysis with deep insights to companies, and tax positions. I felt like i was the parrot sitting on his shoulder or perhaps the wife back seat driving him. On top of that he is a man that has a good sense of humour, never gets nasty, and gives more than he takes.
I find it difficult to understand his outlook, but respect his right to do it his way. WE ALL LUV YA SNOOPY EVEN ALTHOUGH YOU ARE A BIT OF A WORRY. macdunk

[lanenz]

Another big thing in my view is the time frame. anyone could have made a sizable profit since 2000. I am wondering if Phaedrus was a trader for the last 20 years. If so then he has my fullest admiration if he is able to achieve an 8 or 10% gain on average for that time period. Phaedrus, could you shed some light on how long you have been a trader and what sort of numbers we are talking about? It could also be interesting comparing a proerty investor over the same time period.

However, I think that Phaedrus seems to keep his emotions in check and trust his system and if it works consistently then he must be doing something right.

i agree with the Micksta and we are not comparing apples with apples.

[Westie]

quote:i agree with the Micksta and we are not comparing apples with apples.


I think Phaedrus is aware of that. His post appears to be trying to find out what are the motivations/circumstances behind the investing approaches to determine [u]why</u> the two are not comparable apples, not whether the two can or should be compared.

[Placebo]

The answer is simple. Do you ever see Phaedrus and Snoopy posting at the same time? No. Ever wonder why? It's because they have a Secret

Snoopy and Phaedrus are in fact two sides of the same coin.

They are the same person, arguing with themselves.

And what's more, they are both women, pretending to be men.

[Dimebag]

I think the key difference is focusing on the share price as the unit of return against focusing on the underlying earnings of the company as the unit of return.

A fundamentalist might buy a stock for $1.00 that is earning $0.10 per share. As far as the fundamentalist is concerned, that equates to a 10% return. That return may come in the form of dividends, or a proportion of the profits that is reinvested to increase future corporate profits (which will translate into higher future dividends), but that return is essentially independent of the price.

One who 'buys to keep' doesn't need to worry so much about the resale value of their asset as much as how much ongoing value they can extract from the investment via the underlying profits. It's much like holding a very long-term bond. Interest rates might go up and bond prices fall, but for a long-term owner, at the end of the day, that doesn't change the actual interest dollars that will accrue to the holder.

The very essence of value investing is the notion that an investor ought focus on underlying 'value' rather than price. That is a value investor's point of difference. If one is convinced that the $0.10 will continue to accrue to shareholder pa, a fall to $0.80 or $0.70 really isn't that bigger deal, and is, to the contrary, seen as an opportunity to pick up more shares at a much higher prospective return. $0.10/$0.70 = 14.3% -decidedly more attractive than 10%.

The trader, on the other hand, is solely concerned with price movements as the unit of returns, the underlying profit of the company mererly being one indicator of prospective movements. As such, the resale value is everything. Movements in share price are 'market-to-market' and perceived immediately to be returns/losses attributable to that investment.

Dimebag

[duncan macgregor]

quote:Originally posted by Placebo

The answer is simple. Do you ever see Phaedrus and Snoopy posting at the same time? No. Ever wonder why? It's because they have a Secret

Snoopy and Phaedrus are in fact two sides of the same coin.

They are the same person, arguing with themselves.

And what's more, they are both women, pretending to be men.
PLACEBO, Trust you to work it out. You reckon she is a queer with a split personality. Perhaps snoopy dousnt realize that he sorry she is really PHAEDRUS in drag. macdunk

[Dimebag]

The very essence of value investing is the notion that an investor ought focus on underlying 'value' rather than price. That is a value investor's point of difference. If one is convinced that the $0.10 will continue to accrue to shareholder pa, a fall to $0.80 or $0.70 really isn't that bigger deal, and is, to the contrary, seen as an opportunity to pick up more shares at a much higher prospective return. $0.10/$0.70 = 14.3% -decidedly more attractive than 10%.

Of course, as most fundamentalists quickly learn, things are seldom this straight forward. Shares do, on occasion, fall 30% on no good reason, but more cases than not there are very good fundamental reasons for the shift in sentiment -many of which may not be readily apparent to the small-time punter at the time.

The logic works until you realise that the underlying earnings are now only going to be $0.07. With the stock at $0.70, its then too late to do anything and the money is essentially lost.

This is, unfortunately, what has happened to Snoopy with TEL, WHS, RBD, and others. This is not a criticism. I believe value investing is a fundamentally sound way to invest but it is not an easy discipline - especially in the large-cap domain. You can get absolutely crucified as a value investor if you're wrong, and being wrong isn't that hard.

The discipline relies on supreme self-confidence in one's views, yet the humility and capacity for self-reflection to acknowledge when you have called it wrong and get out. A rare combination of traits indeed.

Dimebag

[Halebop]

...once again people don't get the difference between FA/TA and Trading/Investing. I can use FA to trade or invest, I can use TA to trade or invest. In fact I use both to do both.

There is nothing inherent in TA that means "trading". There is nothing inherent in FA that means "investing". If you are thinking either of these things you are missing out.

[Dimebag]

Halebop,

Yes, there are many 'hybrid' investment strategies that sit between these two extremes. However, in the case of Snoopy vs Phaedrus, I believe that this point of difference is the key philosophical differing perspective.

But I do agree with you to an extent. Every experienced fundamental analyst eventually learns to treat large abnormal share price falls (ie not driven by market wide forces) with caution.

That doesn't mean reacting to them. Sometime they are completely unfounded. But it should set off alarm bells. Almost universally, when I have found my understanding of the company to be out of line with its share price performance, subsequent events have proven my initial judgement to have been excessively optimistic/pessimistic (as the case may be).

It does take a number of years and losses for such excessive optimism & sense of one's ability to wear off, but, nonetheless, value investing is still potentially a very profitable and time-efficient way to invest. Just like with trading (fortunately), you don't have to be right every time, or even close to every time.

Personally, I have found charts an unwelcome distraction. I do pay attention to large share price falls/lack of performance and now resort to calling the company to check 'everything is in line' when this is the case. But some more active investors might find them useful.

Also, as Mick raising, the point of capital gains tax & not wanting to trade actively is a very important one.

[BRICKS]

BRICKS says this is a compleate waste of TIME.. [8D]

[thereslifeafter87]

quote:Originally posted by Dimebag
You can get absolutely crucified as a value investor if you're wrong, and being wrong isn't that hard.

The discipline relies on supreme self-confidence in one's views, yet the humility and capacity for self-reflection to acknowledge when you have called it wrong and get out. A rare combination of traits indeed.

Dimebag


The important part of that post is where you say "when you have called it wrong ...get out".

Too many "fundamental" investors believe they are right and everyone else is wrong. This may be the case on occasion, but not always. When it becomes apparent you are wrong, you need to cut your losses. Preservation of capital is paramount.

[Mick100]

quote:Originally posted by Halebop

...once again people don't get the difference between FA/TA and Trading/Investing. I can use FA to trade or invest, I can use TA to trade or invest. In fact I use both to do both.

There is nothing inherent in TA that means "trading". There is nothing inherent in FA that means "investing". If you are thinking either of these things you are missing out.


Halebop, I disagree
If you buy a share that's in an uptrend, then sell on the trend break, then watch the downtrend and then buy back again when the downtrend breaks and a new uptrend resumes, which is what phaedrus is doing, you could not call that anything but trading IMO - and I would like to see you convince the IRD that this practice is anything but trading.
,

[Dimebag]

Yeah the whole thing is semantics.

My personal definition of an investor is somebody who buys and sells on the basis of their opinion as to the underlying economic value of the asset, while a trader/speculator is someone who buys and sells on the basis of their opinion as to the likely price develoment of the relevant assets. And on these definitions there is not really any middle ground here.

Sure, you may use FA and TA to make you decisions, but if so you are not really an investor, but a trader who uses fundamental 'indicators'.

Others have more liberal definitions of what constitutes an 'investor' or 'trader', so obviously opinions will vary on this subject matter.

[777]

To quote Dimebag..

"My personal definition of an investor is somebody who buys and sells on the basis of their opinion as to the underlying economic value of the asset, while a trader/speculator is someone who buys and sells on the basis of their opinion as to the likely price develoment of the relevant assets. And on these definitions there is not really any middle ground here."

Except that traders have to pay tax, investors don't.

[Halebop]

quote:Originally posted by Mick100

Halebop, I disagree
If you buy a share that's in an uptrend, then sell on the trend break, then watch the downtrend and then buy back again when the downtrend breaks and a new uptrend resumes, which is what phaedrus is doing, you could not call that anything but trading IMO - and I would like to see you convince the IRD that this practice is anything but trading.

Have a look at the FBU chart. If you are following a long term trendline you could have bought years ago and not have sold once. Selling now on a technical signal would not incur tax in New Zealand.

Your argument implies TA can only be used on short term signals. This is not the case. TA can be used however you choose to use it.

Taxation is an interesting argument. I never invest on the basis of tax. It leads to dumb decisions. Were I left holding TEL the notion of tax would probably be a moot point.

[Dimebag]

Tax is worth thinking about when formulating a strategy, but not when executing one.

To not invest with tax in mind is perhaps failing to consider a very significant factor in ultimate after-tax returns.

[rmbbrave]

quote:Originally posted by Placebo

The answer is simple. Do you ever see Phaedrus and Snoopy posting at the same time? No. Ever wonder why? It's because they have a Secret

Snoopy and Phaedrus are in fact two sides of the same coin.

They are the same person, arguing with themselves.

And what's more, they are both women, pretending to be men.


I'm sure that those of you who have read "Zen and the art of motorcycle maintanence" will remember that the character Phaedrus did have a split personality disorder of some discription.

If you haven't read it don't bother. "Sophie's World" is similar and a far superior introduction to philosphy.

[Gryffyn]

quote:Originally posted by rmbbrave


quote:Originally posted by Placebo

The answer is simple. Do you ever see Phaedrus and Snoopy posting at the same time? No. Ever wonder why? It's because they have a Secret

Snoopy and Phaedrus are in fact two sides of the same coin.

They are the same person, arguing with themselves.

And what's more, they are both women, pretending to be men.


I'm sure that those of you who have read "Zen and the art of motorcycle maintanence" will remember that the character Phaedrus did have a split personality disorder of some discription.

If you haven't read it don't bother. "Sophie's World" is similar and a far superior introduction to philosphy.

RMB - they are very different books - I have them both and have enjoyed them both.

I find Zen the perfect companion for introspective trips away. It is not an intro to Philosphy at all but a personal perspective on certain values that the author believes in.

[warthog]

quote:Originally posted by Westie


quote:i agree with the Micksta and we are not comparing apples with apples.


I think Phaedrus is aware of that. His post appears to be trying to find out what are the motivations/circumstances behind the investing approaches to determine [u]why</u> the two are not comparable apples, not whether the two can or should be compared.


The comparison comes when your look at performance.

[warthog]

quote:Originally posted by rmbbrave

I'm sure that those of you who have read "Zen and the art of motorcycle maintanence" will remember that the character Phaedrus did have a split personality disorder of some discription.

If you haven't read it don't bother. "Sophie's World" is similar and a far superior introduction to philosphy.


The warthog says you could just as well read them both.

They are different books - as different as Snoopy and Phraedrus.

[Phaedrus]

Many of you seem to think that there is a black/white distinction between traders and investers. There isn't. There are a million intermediate shades of grey. In this case, Snoopy appears to be far more active than me on the local market. Quite apart from that, I believe that I have held some stocks for longer than he has held any of the 3 we have been discussing. (TEL, RBD, LPC)

Snoopy more than a year ago :- "I am supremely confident about my purchase of more Telecom shares over the last month." When does confidence become arrogance? Possibly when it is accompanied by a refusal to recognise the reality of the market, when it becomes an inability to see when you get it wrong, perhaps.

Despite the thread title, this is not about Snoopy versus Phaedrus. It is not about trading versus investing. It is not about TA versus FA. It is not about dividends, brokerage, taxation status, trading frequency, methodology, or lifestyle. Where Snoopy and I really differ is our response to the question "How much should market sentiment influence your investment decisions and their timing?"

Dimebag and I have very different approaches to the market, but I totally agree with him when he says "Almost universally, when I have found my understanding of the company to be out of line with its share price performance, subsequent events have proven my initial judgement to have been excessively optimistic/pessimistic". Did you get that? DIMEBAG LISTENS WHEN THE MARKET TELLS HIM HE IS WRONG.
Snoopy doesn't.

[Snoopy]

quote:Originally posted by Phaedrus


Snoopy’s posts document his fundamental approach to investing. They emphasize the long-term and usually advocate buying and/or holding specific stocks. Posts advocating selling are rare. He places a very heavy emphasis on dividends. He cares little about general market sentiment and appears to be unconcerned by large drops in the shareprice of stocks that he holds. He has no exit strategy and tells us that he has a 'buy and buy'(rather than ‘buy and hold’) approach. The longer a share continues to underperform, the better it looks to Snoopy - which is why he keeps buying. He can watch a stock he holds halve in value and not turn a hair. His aim is to beat the bank rate.


That kind of sums up the Snoopy 'income' portfolio strategy. Except Snoopy aims to get twice the bank rate, not just beat it. Admittedly this is much easier when interest rates are 5.5% instead of 7.5%!

Snoopy has achieved this goal over the last five years. However, it doesn't look good for Snoopy achieving the target this year - with the Telecom share price slump. Yet there is more than half the year to go, so we shall see. Nevertheless with investing in shares you have to accept risk. And just because one leg looks to be going wrong in the moment, that doesn't mean the overall portfolio strategy *is* wrong.

Snoopy may see a share held halve in price. But that doesn't mean that same share has halved in value. The share has only halved in value if you are forced to trade with Mr Market on the day. Snoopy makes sure that any trading with Mr Market is optional, and on beagle terms.

Snoopy also has a 'growth' portfolio, where the investment sums tend to be smaller. For a growth investment Snoopy wouldn't invest unless a 40% gain is on the cards (spread over a few years). For these investments the retained earnings and what the company can do with them, are what to primarily look for, although dividends come into the equation too.

As an overarching point, the reason that Snoopy is keen on dividends is that they can't be fudged. Cash in the bank is cash in the bank.


quote:
[u]Discussion</u>. We can see from the LPC chart posted by Snoopy on 13/5/06 that he is a surprisingly active buyer. For example, with TEL alone, since his initial purchase, Snoopy has added to his holdings at least nine times. Snoopy tells us that he does not like holding cash, which he sees as risky. Since there is no evidence of any selling, we are forced therefore to conclude that most if not all of this heavy buying activity is funded from income. Snoopy appears to have a fairly regular, fairly substantial income.


Imagine putting most of your net worth into some sort of imaginary capital stable bond that yields 12% pa. Readers may be surprised what sort of income they potentially could have! That is what Snoopy has done with the high income share portfolio strategy.

Phaedrus observes that Snoopy never sells much. But if you are investing in high yield shares you are effectively selling 10% of your portfolio every year, by just doing nothing! The other thing that tends to happen to 'value investors' like Snoopy is that their companies have a tendency to get 'taken over' when the value is noticed by a big player. Thus, there is no real need to consciously sell. It 'kind of just happens to you' without trying!

Snoopy intends going on a sharemarket spending spree this year courtesy of the Carter Holt cash. Snoopy also sold a few Sky City shares earlier this year. But not because faith in SKC was lost (although that doen't mean it wasn't tested). The sale was mainly a rebalancing exercise

[rmbbrave]

quote:Originally posted by Gryffyn


quote:Originally posted by rmbbrave


quote:Originally posted by Placebo

The answer is simple. Do you ever see Phaedrus and Snoopy posting at the same time? No. Ever wonder why? It's because they have a Secret

Snoopy and Phaedrus are in fact two sides of the same coin.

They are the same person, arguing with themselves.

And what's more, they are both women, pretending to be men.


I'm sure that those of you who have read "Zen and the art of motorcycle maintanence" will remember that the character Phaedrus did have a split personality disorder of some discription.

If you haven't read it don't bother. "Sophie's World" is similar and a far superior introduction to philosphy.

RMB - they are very different books - I have them both and have enjoyed them both.

I find Zen the perfect companion for introspective trips away. It is not an intro to Philosphy at all but a personal perspective on certain values that the author believes in.


"It is not an intro to Philosphy at all"

Are you sure about that Gryffyn?

Here is what Amazon.com had to say about the book...

"Arguably one of the most profoundly important essays ever written on the nature and significance of "quality" and definitely a necessary anodyne to the consequences of a modern world pathologically obsessed with quantity. Although set as a story of a cross-country trip on a motorcycle by a father and son, it is more nearly a journey through 2,000 years of Western philosophy. For some people, this has been a truly life-changing book."

http://www.amazon.com/gp/product/0553277472/sr=8-1/qid=1147695557/ref=pd_bbs_1/002-2785215-1470449?%5Fencoding=UTF8

I can understand your confusion though, as it is not a very good introduction to philosophy.

[duncan macgregor]

What most of you miss in this Is how unfair PHAEDRUS is to SNOOPY.
SNOOPY my good self and others come out and say, I bought this or that, and sold this or that. We can then all be the judge of performance. I asked PHAEDRUS a few years ago about what he holds in his hand only to be told it was none of my business. I know what SNOOPY holds, he knows what I hold, but nobody knows what PHAEDRUS holds. He had a go at me with my timeline with trust power, Iwould like him to be big enough to show us what shares he has had for the great number of years like he said, then we can all tell him when he should have sold.
PHAEDRUS never predicts, never enters a competition not even the traders competition, never lets it be known what company he has invested in. How can a person like that start up a new thread to tell some other poster how silly they are, holding this or doing that.
Tell SNOOPY what shares you think that you bought before his lot as you stated, and allow him with his system to have a fair go.
LET IT BE AN EQUAL CONTEST NOT A ONE SIDED I AM RIGHT YOU ARE WRONG.
my system is derived from both of you which suits me just fine.
MACDUNK

[Phaedrus]

Snoopy simply needs to exercise some control over his Beagle.

Unchecked, it has the unfortunate and embarrassing habit of sniffing out local dogs!

http://img.photobucket.com/albums/v418/789456/COMP516001.gif

[Gryffyn]

RMB - it's a very selective but nevertheless enjoyable journey but I don't like Amazon's description - perhaps you should start a philosphy thread so we can leave the others to their bun fight. Read much of Alain de Botton? How about Eco?

[Snoopy]

quote:Originally posted by Phaedrus

Snoopy simply needs to exercise some control over his Beagle.

Unchecked, it has the unfortunate and embarrassing habit of sniffing out local dogs!


The implication that I should instead be in Infratil, Fletcher Building and Trustpower?

Actually I have quite a bit of respect for those three companies, even though I don't hold them. Probably my biggest 'mistake' is not holding Fletcher Building. It is clearly a well run company, that has managed the expansion into Australia successfully. Thus not only does it have good capital growth prospects but over the years it has paid handsome dividends as well.

However, I do manage my investments from an overall portfolio perspective, and I should declare that I am a foundation shareholder in Rinker Group (RIN), listed on the ASX. Rinker is also in the building industry, and is deriving its growth from the east coast of the United States. There aren't many shares that have outperformed Fletcher Building over the years, but Rinker *has* done just that. Overall I don't feel as though I have missed out by not holding Fletcher Building.

Turning to Trustpower and Infratil, one has to be careful here from a portfolio perspective as Infratil is a shareholder in Trustpower so the two cannot be regarded as independent investments. I like Trustpower, but I like Contact Energy better. Mainly this is because Contact is the larger comnpany and has more 'market power' than Trustpower. Phaedrus berated me for not recommending selling shares. Actually I did recommend selling Contact Energy last year about the same time he recommended doing the same. However, I didn't take my own advice, because I didn't want to unplug myself from the power industry entirely. Perhaps what I should have done is shifted across to Trustpower at that time? Despite what the charts said, I don't think that would have been a good move for the fundamental reason I have just discussed. So no sleep lost by not holding Trustpower.

What about Infratil? It is almost an infrastructure unit trust. I don't like the idea of the extra layer of management scooping off a layer of profits before the returns eventually get back to the shareholders. If you like Infratil, why not buy Trustpower and Port of Tauranga directly? Certainly if Infratil had held onto what is now Toll Rail, you could argue that they would be substantially better off than the chosen exit postion of selling out to Toll Australia. So how much value is this extra layer of management really adding?

Nevertheless, it is difficult to argue that the Infratil management haven't earned their money. One can't argue with the way the share price has performed. Or can you? Does anyone remember when Infratil started, the 'other' Infratils?

My memory tells me that there was an 'Australian' focussed 'Infratil B' and a 'globally' focussed 'Infratil C'. Time has dimmed my memory as to what happened to 'Infratil B' and 'Infratil C'. But my memory is that they were not a success. Is this a case of 'survivorship bias' flattering the performance of the Infratil management team? Perhaps someone with a more detailed memory than mine would like to comment.

Whatever, I'm not going to argue that investing in 'Infratil A', the New Zealand based Infratil, has been dumb. But given the surviving Infratil seems now focussed on acquiring overseas airports I would argue that the Infratil of the future is not the Infratil existing shareholders have come to know and love. There is always a risk when a company changes direction like this. Is that risk built into the Infratil share price?

SNOOPY

[Placebo]

This thread is getting spooky.

First we have the main protagonists referring to themselves in the third person. Now we have a parallel debate on Zen and introductory philosophy.

Somebody pinch me I'm having a Sharetrader meets Alice in Wonderland nightmare!![:0][:0]

[BRICKS]

DEAR NZ what you lot should be saying to each other we have NO money to spend on the NZX so we will talk unmong ourselfs about nothing and two funny people at least they write something but it as been sergested could be the same person but mean while here in USA the wealth is mind bogerling [is that the word] but back in NZ its S&P what a send UP..

YOU all have a good TIME.. [8D]

[Snoopy]

quote:Originally posted by Placebo

This thread is getting spooky.

First we have the main protagonists referring to themselves in the third person.


I think this is because Phaedrus wants to play the ball, not the man (or dog in this instance).

Very easy to get personal when you are discussing disparate views, and perhaps Phaedrus feels, quite rightly if I read his thoughts correctly, that discussing the topic in the third person is the best way to keep personalities out of it.

SNOOPY

[BRICKS]

quote:Originally posted by Snoopy


quote:Originally posted by Placebo

This thread is getting spooky.

First we have the main protagonists referring to themselves in the third person.


I think this is because Phaedrus wants to play the ball, not the man (or dog in this instance).

Very easy to get personal when you are discussing disparate views, and perhaps Phaedrus feels, quite rightly if I read his thoughts correctly, that discussing the topic in the third person is the best way to keep personalities out of it.

SNOOPY





THE nz S&P index the world is watching for the next move up or down take your PICK.. [8D]

[Dimebag]

I too agree that it is out of line to berate Snoopy for some of his investment mistakes.

I have a strategy that is in many ways very similar to Snoopy's, and I can sympathise with many of his views. Being a fundamentalist is not easy and mistakes are inevitably made - that is part of the process.

I've certainly made many mistakes but I've still managed to earn decent profits. By the sounds of it, so has Snoopy. And ultimately this is what is important. Snoopy sticks his neck out on many occasions and should be commended for doing so. And someone who adopts his style of investing will inevitably be quite inflexible in their views as this is a necessary trait to have to successfully execute a fundamental based strategy.

I do think though, as a persoanl view, and as Phaedrus has alerted to, a wise investor does not consider abnormal price weakness to be wholly irrelevant. To do so assumes investors are stupid and sell for no reason, which is not accurate. They often overreact and/or sell for reasons that aren't wholly justified, but this is quite different from saying it is irrelevant. As I've said, experience has taught me that in most cases my views were too optimistic/pessimistic, either by way of overrating growth potential and/or underappreciating important risk factors.

I would also note that strong fundamental cases could have been made for IFT, TPW, and FBU prior to these ascents, and were by many fundamentalists, who ahve done quite well. So it is not so really a criticism of the underlying investment approach rather than the application in this instance.

Dimebag

[Snow Leopard]

Friends, posters and BRICKS, lend me your <s>ears</s> <s>wallets</s> eyes.

The world is full of individuals, which is generally regarded as a good thing. Here we have two individuals, I discount the split poster hypothesis, who have in common a desire to make money out of equities.
So their approaches are as different as plain english and a BRICKS post, that is what comes of individuality.

If the two of them are happy with their performances then that is fine by me.
Personally I neither totally agree or disagree with either of them but then I am yet another individual. I strive to improve my performance and learn from all of you. As far as I am concerned the biggest crime we can make is to become complacent or arrogant and not be open to new ideas and be willing to revisit old ones.

regards

Paper Tiger

[lanenz]

Phaedrus.

The last couple of days we have seen some selling pressure. which of your stocks have had the stop loss kicked in or are you absorbing the loss at present?

Cheers. I am always willing to listen to people with more knowledge than myself.

[Phaedrus]

Lanenz,
No sell signals yet. A few are getting very close to their trendlines though. (eg IBA:AX)
You have to give some stocks plenty of room to breathe. For example, FBU would need to drop to maybe $8.60 to break its longterm trendline.
Some, I had already begun selling down (eg NPX). POT appears to have struck resistance and is looking a bit toppy - but still no sell signals yet.
CAV is a bit tricky - well above the trendline, but the OBV is starting to look a bit weak. One to watch carefully, I think.
Most of my other holdings are going reasonably well, with no sell signals imminent, or even close to it.
So, up till now, I have been absorbing any losses occasioned by the current (short-term?) market weakness.

I am still some way off being in "Caution" mode.

[k1w1]

MacDunk is a spilt personality - which is how he meets so many tea ladies.

[lanenz]

Phaedrus. Thanks for that & I appreciate your comments.

You may have read previous comments about trying to keep emotions in check when under pressure. Having systems in place is irrelevant if you are influenced by your emotion. That is why I consider you to be far more professional that most other traders.

However even the best may be influenced by difficult periods. The only ones I see exempt from this are the ones that money doesnt matter. That would be less than 0.1% (1 in a 1000)of traders.

Over a period of 8 years watching the behviour patterns of gamblers at the casino (40 hours a week) it was clear that there was not 1 person that I witnessed that wasnt affected by pressure and let their emotions take over logic. Even the punters worth over $1b were still affected.

IE. without trying to pee in your pocket you come across as the most likely person to keep to your systems when under pressure. That is a fine gift and a very profitable one.

Another most important aspect of investing/gambling is "money management". Im sure yo ualreay know that but to others no matter how good your system is if you dont have good money management then you will come a gustsa.

[BRICKS]

WHAT has the S&P index run out of PUFF.. [8D]

[Snoopy]

quote:Originally posted by Phaedrus

With a separate income stream, Snoopy perhaps feels that he need not worry about losses. So he doesn’t.


I think it would be insightful to explain a bit more about the Snoopy income investment strategy. If only to dispel a couple of myths that are pervasive in this thread, but have been summarized succinctly by Phaedrus in the above sentences.

Here is a thousand word essay on the subject.

http://img.villagephotos.com/p/2005-3/963787/IncPfo0206.gif

Well, they do say a picture is worth a thousand words don't they?

SNOOPY

[Halebop]

If your shares all fall by half your chart will look even better. Not sure what thousand words you are trying to share but I could probably write a few on benchmarking.

[Snoopy]

quote:Originally posted by Snoopy


Well, they do say a picture is worth a thousand words don't they?


If all you short attention span visual types can bare a few more written characters, I think a bit more explanation might prove useful.

The above diagram is not exactly representative of what has happened to my income share portfolio over the last five years. But it is sufficiently close to explain the general thrust of the strategy. The diagram starts on 1st April 2002 with the purchase of five high income shares in equal $10,000 amounts. I'm using $10,000 as a round figure here. Depending on the amount of money you have available for investment the real starting point might be $5,000 or $100,000 or even $1,000,000 in each share. You have to imagine everything scaled accordingly according to your own circumstances. But for explanatory purposes, $10,000 in each share will do.

The selection of shares is important in that not only are they high income, the most important characteristic, but they are also not well correlated in terms of business characteristic likeness. We have a mixture of domestic trade and international trade shares. Shares that cover both consumer and industrial interests. Companies that depend on the service economy and companies dependent on manufacturing in the broadest sense. All in all, a really good mixture. That is important when we are looking at stability of capital from a portfolio perspective.

Companies that pay out most of their earnings as dividends, like these ones, tend to be 'Low Beta'. That means they tend to go up and down less than the rest of the market. However, there is no absolute guarantee of this as we shall see later. In fact there are no absolute guarantees in this investment game at all. That is why a certain amount of what I call 'focussed diversification' is desirable.

The portfolio starts with equal amounts of cash invested in each share. In theory, because growth will be limited in these shares (it cannot be any other way if nearly all your profits are paid out as dividends) you would expect the relative value of each shareholding not to change much over the years. The reality is a little different if you fast forward to 1st April 2006.

It is very obvious that Restaurant Brands has become under- represented in the portfolio. Meanwhile Pyne Gould Wrightson's (formerly Wrightsons) and Sky City Entertainment (formerly Sky City Casino) are 'overweight'. The way to stop this imbalance is to pull money out of PGW and SKC and reinvest it in RBD. This is a 'sell high' and 'buy low' startegy, which if you think about it, is the only way to go forwards. However, I do not advocate mass buying and selling to even up the share balance each year.

If you observe the dotted line extension to each investment column, this represents the net income available from all five investments. One way to save is to use this amount to rebalance the relative size of the coloured company rectangles each year. Imagine cutting that dotted rectangle out with scissors. Each year you could use your cutting to increase the size of the smallest company colour each year. Can you now see how such a rebalancing system could work?

Things don't work out quite as simply as this in practice. In reality I have had to sell some SKC (10% of my holding) just a few months ago to avoid that shareholding getting 'out of hand' in size. And I have avoided having to sell PGW because my holding there was smaller than the others to start with. Thus for me the growth in the PGW share price has actually evened things up nicely.

The net result is that my total turnover of shares in this portfolio, including shares bought from previous annual dividends (if you want to think of it that way) is 50% over four years or around 12% per year. Given that half of thi

[Snoopy]

quote:Originally posted by Halebop

If your shares all fall by half your chart will look even better.


If you have a look at the interim 2007 bar chart Halebop, you will see a tiny drop in the height of the bar. This is the result of the Telecom share price crash that you think is so important.

OK in reality, I have rebalanced my share portfolio by buying lots of Telecom shares over the last few months. That is where the second column of graphs come in. Note that once agian the size of each colour is equal, to signify the rebalancing. I have changed the colour of the Telecom bit of the bar from dark violet to dark green to distinguish the two. Even then, the 20% fall in the Telecom share price shows up as a similar sized drop to the 2002 and 2003 blip. And of course the 2007 year is not even half way over yet.

Even considering the 'with hindsight', unfortunate timing of my recent TEL share purchases I still expect to be ahead on a portfoilo basis by the end of the year. My strategy has not been derailed. Indeed if you take the portfolio view you can see that it is all tracking according to plan.

So let's end part two of the myth of this thread. I don't need a 'large external income' to support my losses, because *I haven't made any losses*! I am well in the black with my strategy - despite Telecom. And I have no intention of making changes to a strategy that is working well in accordance with my plans.

Finally I am certainly well ahead of any term deposits you have in the bank Halebop. Granted I am taking greater risks than you. But on a portfolio basis, my strategy is not as risky as you might think.

SNOOPY

[rmbbrave]

After looking at your graph I have concluded that the total value of your example portfolio has gone up from $50,000 to about $65,000 in 4.5 years.

Please tell me this isn't true.

[duncan macgregor]

SNOOPY, One thing about you mate you stick to your guns. Most of your critics [other than my good self], Wont tell you what companies they hold or when they buy or sell, then hide who they really are.
Its pointless me telling you that you are wrong. MARY HOME from the HERALD might have done better with her five bob each way on everything in some stupid fund.
Your big mistake is to defend yourself instead of attacking ask them what they hold, give yourself some ammunition then attack. I think you are a great guy whose system sucks. macdunk

[Halebop]

quote:Originally posted by duncan macgregor

I think you are a great guy whose system sucks

Stop sweet talking him Duncan.

[Gryffyn]

At least he's made money - look at the capital Bongo has destroyed, RBD, WHS ...

[Snoopy]

quote:Originally posted by rmbbrave

After looking at your graph I have concluded that the total value of your example portfolio has gone up from $50,000 to about $65,000 in 4.5 years.

Please tell me this isn't true.


A $15,000 gain on $50,000 in 4.5 years? That is probably about right. Plus about $25,000 worth of dividends, probably a bit more. But dividends don't count on this forum do they? Put the two together and extrapolate for 10 years and you can expect the total value of the portfolio (including dividends) to double. Over the whole business cycle that is about what you can expect the index to do. So the result isn't out of the ball park.

Nevertheless income type shares tend to underperform in a bull market. So my guess is that this portfolio has not matched the index over the 4.5 years shown. However, for *this* portfolio I am not trying to beat the index. I am trying to get about double the bond rate of return. And this is something I have achieved.

I boosted my income to the maximum by dividend harvesting. My prospective averaged gross yields for the portfolio for the years shown above were as follows:

2002: 9.3%
2003: 11.4%
2004: 10.5%
2005: 10.2%
2006: 10.2%

Add to that the average 2.5% p.a. 'value appreciation' I have attained and you have the equivalent of a capital stable high yield bond adjusted for inflation. For income investors it doesn't get much better than this.

Also keep in mind that this return has been achieved for significantly lower risk than investing in the index. A check on company debt in relation to earnings has sealed that. Also my success does not rely on employees meeting some puffed up business plan. The whole portfolio has been designed around 'no to low' growth shares. That means all the employees of these companies have to do is turn up to work and be very average. I will still get my return.

What if instead some of these employees decide to pull finger? Then, I not only get the upside of their work. I also get the double whammy effect of the market realising that there might be some growth in these shares after all. So we have a low risk of limited downside and a low risk of some upside with the most likely scenario that returns are flat. All in all that makes a low risk picture.

Actually I may have done a little better than this 10+2%pa return. I didn't own LPC at all until late 2002. So I bought a good whack of my LPC shares at rock bottom prices.

The chart shows my average 'buy in' price for RBD as $2.10. Actually it is something like $1.28, as I did most of my RBD buying during the 2004-2005 low price period.

Thirdly, to be fair, I haven't made as much money on PGW as shown. Because I held below a representative number of shares during the high growth period.

Finally I have made changes to my income portfolio over the years, which I haven't included in the diagram. I think I've had SCT and CEN in my income portfolio at times. So all in all, yes I think that I have made a little more than the diagram shows. But not hugely more. That's why I said that I thought the diagram was representative.

SNOOPY

[warthog]

quote:Originally posted by duncan macgregor

SNOOPY, One thing about you mate you stick to your guns. Most of your critics [other than my good self], Wont tell you what companies they hold or when they buy or sell, then hide who they really are.
Its pointless me telling you that you are wrong. MARY HOME from the HERALD might have done better with her five bob each way on everything in some stupid fund.
Your big mistake is to defend yourself instead of attacking ask them what they hold, give yourself some ammunition then attack. I think you are a great guy whose system sucks. macdunk


Groupie.

[duncan macgregor]

quote:Originally posted by warthog


quote:Originally posted by duncan macgregor

SNOOPY, One thing about you mate you stick to your guns. Most of your critics [other than my good self], Wont tell you what companies they hold or when they buy or sell, then hide who they really are.
Its pointless me telling you that you are wrong. MARY HOME from the HERALD might have done better with her five bob each way on everything in some stupid fund.
Your big mistake is to defend yourself instead of attacking ask them what they hold, give yourself some ammunition then attack. I think you are a great guy whose system sucks. macdunk

Groupie.
WARTHOG MY SMELLY FRIEND,
Let me explain a few simple facts to you, then you tell me that i am wrong. I learn more by observing other peoples mistakes, than i learn from them trying to indoctrinate a system.
PHAEDRUS is harder to follow, he never lets us see when he ends up with egg on his face. We all make mistakes PHAEDRUS never shows his hand, but berates SNOOPY for his.
When a person is big enough to give out warts [sorrywarty]and all, we can copy what they do right, and avoid the bad bits. I am a much wiser investor thanks to SNOOPY, and to a lessor extent PHAEDRUS who only lets us see the good bits. macdunk

[Westie]

quote:PHAEDRUS is harder to follow, he never lets us see when he ends up with egg on his face

None of us are immune to suffering an occassional bout of Gallus domesticus ovum to the facial area.

Check the pvo thread for a prime example of egg foo yong.

[Placebo]

quote:they do say a picture is worth a thousand words don't they

Snoopy, I have a question. If a picture paints a thousand words, does that mean that if you have something to say in less than a thousand words, that you have to actually USE words? In other words, can a picture paint LESS than a thousand words? What if it's 1001 words -- do you need more than one picture? Or do you just make the picture that you were drawing slightly bigger?

And is this a precise currency? For example, should we begin referring to a word as a millipicture? And 100 words is a centipicture?

So many questions, so much confusion :(

[duncan macgregor]

quote:Originally posted by Placebo


quote:they do say a picture is worth a thousand words don't they

Snoopy, I have a question. If a picture paints a thousand words, does that mean that if you have something to say in less than a thousand words, that you have to actually USE words? In other words, can a picture paint LESS than a thousand words? What if it's 1001 words -- do you need more than one picture? Or do you just make the picture that you were drawing slightly bigger?

And is this a precise currency? For example, should we begin referring to a word as a millipicture? And 100 words is a centipicture?

So many questions, so much confusion :(

SILLY BOY, a milli picture is a bloody stamp.
A centi picture is the one in the middle.
A picture cant paint a thousand words
Hope this puts you in the picture placebo macdunk

[Halebop]

quote:Originally posted by duncan macgregor

...We all make mistakes PHAEDRUS never shows his hand...
...I am a much wiser investor thanks to SNOOPY, and to a lessor extent PHAEDRUS who only lets us see the good bits...

Turn it up Duncan.

How would we ever confirm what a person owns or not? The truth of your contention is unprovable and the value unquantifiable.

Let's say I share the entire contents of my portfolio but I've got life savings of $10,000 and a historical track record of earning 6% per annum. Most would surmise my thoughts on an investment may not have much of a pedigree and they would probably be wise to do so. But equally I might have one brilliant idea that goes begging because of my dodgy public record.

What is the purpose of this forum? I wasn't aware it was a public asset disclosure regime? If you want a public registrar of interests, start a thread on one. How anyone can vouchsafe the contents of any disclosures is beyond me anyway. The government can't even get it right with defined disclosure rules for MPs.

I'll use the forum for what it's meant for. Discussion and debate (and entertainment). Personally I think if someone has any currency in terms of their views here, it can be a better public service keeping council to themselves on the makeup of their portfolio. While immitation might be flattering, there are numerous reasons why the structure of person A's portfolio might not be not suitable for person B.

[stephen]

I read this today, and I immediately thought of Snoopy.

(Source here http://www.marxists.org/reference/subject/economics/keynes/general-theory/ch12.htm)

If the reader interjects that there must surely be large profits to be gained from the other players in the long run by a skilled individual who, unperturbed by the prevailing pastime, continues to purchase investments on the best genuine long-term expectations he can frame, he must be answered, first of all, that there are, indeed, such serious-minded individuals and that it makes a vast difference to an investment market whether or not they predominate in their influence over the game-players. But we must also add that there are several factors which jeopardise the predominance of such individuals in modern investment markets. Investment based on genuine long-term expectation is so difficult to-day as to be scarcely practicable. He who attempts it must surely lead much more laborious days and run greater risks than he who tries to guess better than the crowd how the crowd will behave; and, given equal intelligence, he may make more disastrous mistakes. There is no clear evidence from experience that the investment policy which is socially advantageous coincides with that which is most profitable. It needs more intelligence to defeat the forces of time and our ignorance of the future than to beat the gun. Moreover, life is not long enough; — human nature desires quick results, there is a peculiar zest in making money quickly, and remoter gains are discounted by the average man at a very high rate. The game of professional investment is intolerably boring and over-exacting to anyone who is entirely exempt from the gambling instinct; whilst he who has it must pay to this propensity the appropriate toll. Furthermore, an investor who proposes to ignore near-term market fluctuations needs greater resources for safety and must not operate on so large a scale, if at all, with borrowed money — a further reason for the higher return from the pastime to a given stock of intelligence and resources. Finally it is the long-term investor, he who most promotes the public interest, who will in practice come in for most criticism, wherever investment funds are managed by committees or boards or banks.[4] For it is in the essence of his behaviour that he should be eccentric, unconventional and rash in the eyes of average opinion. If he is successful, that will only confirm the general belief in his rashness; and if in the short run he is unsuccessful, which is very likely, he will not receive much mercy. Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.

[Snoopy]

quote:Originally posted by bongo66

I would have to agree with the Snoopmiester.

You have a plan, you stick to it and only vary if something goes horribly wrong.

That hasn't happened to his clutch of companies though.

One thing i would have to disagree with though is why do a Mary Homo and rebalance. If you have so much faith in the company you bought, just let it ride and do its long term thing.


Bong, you speak as though the faith I have in these five companies is either on or off. My investment faith is actually a matter of degree.

Take RBD for starters. I have been disappointed with the investment performance over the last 4.5 years. However, rather than sell the share I simply choose to move my buy point lower. The investment may not be as good as I thought but because I am resolved to pay less for it that doesn't matter. The value of the investment concept is preserved if I can buy at a lower price. Thus I have revised my 'buy' target down from $1.25 to $1.20 to preserve my faith in the RBD concept.

I am currently going through the same process with Telecom. Clearly unbundling will effect the value, but by how much? My hunch is TEL is oversold. But until I do the numbers, which may take some time, I can't be sure.

PGW is clearly a different animal now, with the supercharged Craig Norgate at the helm (in effect). So my faith has gone up there.

LPC is also in a new paradigm, as it appears to be the first port in NZ to have two seafronts (if LPC and POL combine). How all this affects dividends in the medium term remains to be seen. I may have to replace it in my income portfolio and decide if the new busines outlook justifies me holding it as a growth share on its own merits.
My faith is in danger of slipping sideways into a separate category here.

SKC is walking a bit of a tight rope. There has been huge borrowings to purchase Australian assets that are returning, well, not much really. Counter that with the quality of the downtown Auckland asset which overall seems brilliantly run and is a legally registered monopoly. My instinct is that this is the riskiest holding of the five. Nevertheless I think that since 31st March this is the share that has gone up in price the most. So what do I know?

I was considering selling out of SKC completely and putting all that money into TEL, before the Cullen crash. Logic tells me I should have done it, but my 'spread the risk' philosophy prevented me from doing it.

I guess my lesson here is not to assume that I am too smart, and know all the answers. Sometimes the markets can teach you an unforecastable lesson and you have to plan your strategy accordingly.

To summarize Bog, I have kept my faith but it has been 'reshaped a bit'. The malleable portfolio has been adjusted accordingly.

SNOOPY

PS It is very rare that my faith deteriorates to the point that I decide to totally sell out. Although it did with Air New Zealand around the time of the government bail out :-(

[Snoopy]

quote:Originally posted by Placebo



Snoopy, I have a question. If a picture paints a thousand words, does that mean that if you have something to say in less than a thousand words, that you have to actually USE words? In other words, can a picture paint LESS than a thousand words? What if it's 1001 words -- do you need more than one picture? Or do you just make the picture that you were drawing slightly bigger?

And is this a precise currency? For example, should we begin referring to a word as a millipicture? And 100 words is a centipicture?

So many questions, so much confusion :(


:-)

SNOOPY

[warthog]

quote:Originally posted by duncan macgregor

WARTHOG MY SMELLY FRIEND,
Let me explain a few simple facts to you, then you tell me that i am wrong. I learn more by observing other peoples mistakes, than i learn from them trying to indoctrinate a system.
PHAEDRUS is harder to follow, he never lets us see when he ends up with egg on his face. We all make mistakes PHAEDRUS never shows his hand, but berates SNOOPY for his.
When a person is big enough to give out warts [sorrywarty]and all, we can copy what they do right, and avoid the bad bits. I am a much wiser investor thanks to SNOOPY, and to a lessor extent PHAEDRUS who only lets us see the good bits. macdunk


I think that the market always has room for different strategies, and Phaedrus and Snoopy are well-focused examples of two quite different approaches. If you have a plan but you're always chopping and changing then - in general - your plan may not be given the light of day it needs to produce results. So both players have plans with buffer zones that allow deviation from what they expect to happen, while still holding their focus steady. The big difference - obvious TA/FA issues aside - as I see it is that Phaedrus listens to the market more and employs more sensitive buffers, whereas Snoopy keeps his head down and trusts his judgment, even if the market is giving him a hard time (I am somewhat reminded of the Hunt brothers*).

On disclosure, if I recall correctly, Phaedrus does not disclose any holdings whereas Snoopy does. I am okay with this as I don't think it would add anything to Phaedrus' postings other than to excite MacDunk and one or two others.

No need to apologise about the warts MacDunk - in a manner of speaking, we all have a few. ;)

* http://en.wikipedia.org/wiki/Nelson_Bunker_Hunt

[Phaedrus]

Over the last 3 years or so, Snoopy's 'income portfolio strategy' has given a return of about 12% pa. On the face of it this does not appear to be too shabby - until you realise that over the same period the market as a whole has been rising at about 23% pa.

How has this system managed to underperform the market average by such a large margin?

I believe that Snoopy's stock selection skills are as good as anyone elses. This means that sometimes he chooses poorly, makes mistakes or runs foul of the fickle finger of fate. Happens to us all. I believe it is what Snoopy does/doesn't do from then on that makes all the difference. It seems to me that he makes three simple mistakes :-

(1) Holding on to underperforming stocks.
(2) Selling down his best-performing stocks.
(3) Buying more of his worst performing stocks.

Snoopy calls this process "Rebalancing". To me it flies in the face of some very basic rules :-

(1) Cut your losers.
(2) Let your winners run.
(3) Don't throw good money after bad.

I have come to the conclusion that the major difference between Snoopy and myself is not so much how we initially select our stocks, but rather, what we do from then on. How we handle out mistakes.

[beacon]

I don't know about Snoopy, but has certainly been true for me Phaedrus. Averaging down did save me on Air NZ and FOR, but not on ABI, ASC, TEL and Kachingo.

Also, averaging down is easier and lazier, as you have already done the legwork. What was value at $X is better value at $0.9X, even better value at $0.8X, a bargain at $0.7X, a steal at $0.5X. Funnily though, it gets nto shaky ground if it becomes "even better value" after that.

Still finding it hard to dump TEL completely, even after so many lessons. All that red on paper is not just ink, it is the colour of my blood and hard long toil. So much of it has flown, yet it pains every time it flows. Did feel like slapping those who laughed at the time, but the fact remains that I should have been more circumspect...

Dis. Still disposing TEL

[warthog]

quote:Originally posted by beacon

I don't know about Snoopy, but has certainly been true for me Phaedrus. Averaging down did save me on Air NZ and FOR, but not on ABI, ASC, TEL and Kachingo.

Also, averaging down is easier and lazier, as you have already done the legwork. What was value at $X is better value at $0.9X, even better value at $0.8X, a bargain at $0.7X, a steal at $0.5X. Funnily though, it gets nto shaky ground if it becomes "even better value" after that.

Still finding it hard to dump TEL completely, even after so many lessons. All that red on paper is not just ink, it is the colour of my blood and hard long toil. So much of it has flown, yet it pains every time it flows. Did feel like slapping those who laughed at the time, but the fact remains that I should have been more circumspect...

Dis. Still disposing TEL


The warthog observes that in the midst of your circumspection, you could do worse than to examine how you react when the market moves against you: which strategies have assisted you and which strategies have let you down. It appears that averaging down/rebalancing/whatever hasn't - on average - been anything but a liability for you. Of course, I'm assuming equal weighting amongst your investments, but that's probably not the case.

[Phaedrus]

Averaging down is tricky. It is one of those "mistakes" that can sometimes pay off. That is why it is so insidious.
Everyone has their own favourite story of how it worked for them when..... followed by an heroic tale of unshakeable confidence and steadfast resolution in the face of uncertainty when all around were crumbling. How, through sheer guts, determination, tenacity and perseverance, they eventually fought their way back into profit.
Fact is, most of the time you would have been better off selling the lot as soon as it became apparent that the market was against you, and buying back in again when the tide had turned.
Averaging down can be a process undertaken when you can't quite believe, accept or acknowledge that you got your timing wrong. It offers vindication.
That's the big attraction.

[Halebop]

quote:Originally posted by Phaedrus

...Everyone has their own favourite story of how it worked for them when..... followed by an heroic tale of unshakeable confidence and steadfast resolution in the face of uncertainty when all around were crumbling. How, through sheer guts, determination, tenacity and perseverance, they eventually fought their way back into profit.

Ooooh, Tell us more exciting bedtime tales of investment Papa P! :D

I've averaged down before and the strategy has lost me money and made me money. I agree its more about the "average downer's" disconnect than the market's.

By averaging down you are drastically increasing the chances of buying into a perennial non performer or even a future bankruptcy - because these types of companies spend the most time trending down or going nowhere (for obvious reasons).

If I trend a share price I will alost never buy it at its lowest (OK maybe on an oscilating indicator I might). But I don't see any chance that averaging down will achieve this either. So if my "cheap share" is $2.00, drifts all the way down to $1.00 on nothing but evil "sentiment" rather than "solid fundamentals", whats so bad about waiting for the reversal and buying in at $1.15 or $1.25? Gotta beat buying at $1.80, $1.60, $1.40 etc. Even more true if you factor the time values and economic cost of not being invested somewhere profitably.

[beacon]

And that is where the problem lies Phaedrus. Because it is not easy to see/acknowledge that "I was wrong" quickly enough, or that "the tide has turned" until it is terribly late and much of the damage has been done. Getting increasingly interested in exit strategies and T/A. Thanks.

Quite right Warthog, my portfolio does not look as cleanly organised or "balanced" as Snoopy's. But I live. And learn.

[warthog]

If you can stomach another warthog observation, it would be that - apparently - a lot of independent investors are keen to ensure that their equity activities are not considered by the relevant tax authorities as "trading" - and in doing so not risk their tax-free gains. There is, therefore, a widespread bias against selling out and buying back in too often, if at all, in order to minimise loss (or maximise profit if you like), even if the tax-paid result might be better than the alternative!

Coupled with the commonly held premise that Good Things happen to investors who are patient and hold their investments long-term, and the fact that many investors believe - whatever the reality - that they don't have time to actively practice loss minimisation - and suddenly averaging down starts to look like a good fit to many people (again, regardless of the actual situation).

[Halebop]

I see comments from sources like forums to sources like Buffett that indicates they made a dumb choice because they focused on the tax ramifications instead of the investment. Technical indicators can also be set to your time frame. You can follow long term trendlines rather than secondary+ ones for example. I'm not convinced that a TA need be a trader. I am convinced I'd rather pay tax in Australia say, than hold on to an imploding share because I'm just 1 month off the 12 month threshold.

Good things do happen to patient investors. Irrespective of average performance, good performance and maybe even bad performance, they saved some money and didn't spend it. Many fans of property never stop to work how how much money they sunk into it but they have a big asset at the end and figure it was a good deal. Irrespective of that, it was probably the "only deal" they had going. Most people fail to adequately benchmark. So while having a $300,000 house in 20 years time or a $250,000 income portfolio would be a "good thing", it might not be the most effective thing they could have done for similar effort.

[beacon]

Correct again Warthog. Tax implication certainly weighs heavily on my decision making, but has always take second place to core capital related objectives. It has to, because of the numbers involved. Selling is certainly not done nor achieved easily... But I agree, I need to review that again to see if it has not handicapped my thoughts on the core investment. Thanks

Halebop, property example is not an apples to apples compaison in New Zealand. Gearing for property can be much easier and more comprehensive when coupled with property than on shares. Finance sector in NZ does not easily allow total gearing on shares. Margin lending, and equity derivatives are still niche operations in NZ, apart from various other constraints. Further, the loss is never as total on property, as it can be in shares. Effectivity, therefore, appears to be constrained by allowable groundrules in NZ.

Snoopy, RBD appears very expensive to me now even at $1.20, with what I have learned from the TEL experience. Good luck

[Snoopy]

quote:Originally posted by Phaedrus


I believe that Snoopy's stock selection skills are as good as anyone elses. This means that sometimes he chooses poorly,


Yes. I would say my greatest poor choice of recent times was choosing WHS as a beach-head into the Australian retail scene. The purchase didn't look quite so smart when WHS pulled the plug on their Australian expansion. Was the failure in Australia always inevitable? Looking back on it, the strategy of having medium sized destination stores away from malls, but not as convenient as strip shop 'five and dime' stores did look a little dodgey. Less choice than a big discount store but less convenience than a small one was certianly a 'unique niche'. But was it ever going to be a profitable one?

Nevertheless WHS still holds a sweet position on this side of the tasman. My calcs show WHS as a 'hold' at today's prices. That means a little better than putting money in the bank but with a trade off of some risk. So holding is what I am doing. Meanwhile that shareholders discount day was sure useful just before last Christmas.
I don't have a conscience about hanging onto my WHS shares.


quote:
makes mistakes


I take this to mean not going through my selection/deselection procedures rigorously. I don't think I am guilty of this.


quote:
or runs foul of the fickle finger of fate.


This is unavoidable. I use diversification so that if one of my five fickle fingers gets its top knocked off it doesn't really matter. Others might believe that selling their shares is the way to safety, but I don't. IMO you should only sell your shares if any fall in share price under-represents the decline in underlying value. Because the sharemarket tends to overreact, this is very rarely the case. That means when in doubt - hold.


quote:
I believe it is what Snoopy does/doesn't do from then on that makes all the difference. It seems to me that he makes three simple mistakes :-

(1) Holding on to underperforming stocks.


If a share price performs so well that the yield reduces significantly, I do tend to hold yes. I'll plead guilty to that.


quote:
(2) Selling down his best-performing stocks.


I'll plead guilty again here. If you go back a page to my bar graph you will see that the share I sold down (SKC) has increased in size (share value) but gone down in yield. This means only one thing. The market perception of the share has improved while the operational performance has not. That in turn means the risk of holding this share has increased. The reason why I sell down my best performing shares is that I do not expect them to continue to outperform. It is a sell 'high' strategy that I make no apologies for.


quote:
(3) Buying more of his worst performing stocks.


This is called 'buying low'. Not a good single rule strategy. But if you use it only in relat

[Placebo]

I think this discussion was summed up nicely by Rudyard Kipling in the Ballad of East and West:


quote:Oh, East is East, and West is West, and never the twain shall meet,
Till Earth and Sky stand presently at God's great Judgment Seat;
But there is neither East nor West, Border, nor Breed, nor Birth,
When two strong men stand face to face,
tho' they come from the ends of the earth!

[Snoopy]

quote:Originally posted by beacon


Snoopy, RBD appears very expensive to me now even at $1.20, with what I have learned from the TEL experience. Good luck


There is no connection between selling fast food and managing a telecommunications network Beacon. A rather obvious point but one that I think is worth noting. This is what 'uncorrelated' means.

If you think you have 'learned something' you are seeing a pattern that your mind has made up. If RBD suddenly plunges in price your 'learning' will have been vindicated. If RBD rises in price you will consider that I have been lucky.

The truth is that whatever happens you have been fooled - by randomness.

SNOOPY

[stevieb]

quote:Originally posted by Phaedrus

Over the last 3 years or so, Snoopy's 'income portfolio strategy' has given a return of about 12% pa. On the face of it this does not appear to be too shabby - until you realise that over the same period the market as a whole has been rising at about 23% pa.

How has this system managed to underperform the market average by such a large margin?


Phaedrus raises the suggestion that this is due to stock selection skills (and not saying this may not have been part of the cause) but isn't the real main reason that this is an "income" portfolio measured over a "growth" market phase. There has been plenty of research on managed funds which suggests that growth funds do better when the market is booming whereas value funds tend to out perform when it is not. Snoopy's system is not a "value" system as such but it terms of performance over a growth phase would appear to offer similar chracteristics?

[beacon]

The connection is in quantification of risk, and in not underestimating the impact of a potential future development.

The learning is in the application of transferable skills applied in creating or valuing a portfolio - "balanced" or otherwise, that spans a cross-section of diverse industries. I know of no one yet, who can profess to be an expert in all the industries they transct shares in, themselves. And yet, they compositely constitute what we call "the market". Also my learning on this forum and in the market hopefullymakes me more mature, and a more well-rounded decision maker.

The "Good luck" was a gesture of comradeship and goodwill towards you, as well as an appreciation of the effort you spend sharing your thoughts on this forum, rather than a vindication of any learning based on any future development. It was worth clarifying this once.

[Snoopy]

quote:Originally posted by stevieb

#
Phaedrus raises the suggestion that this is due to stock selection skills (and not saying this may not have been part of the cause) but isn't the real main reason that this is an "income" portfolio measured over a "growth" market phase. There has been plenty of research on managed funds which suggests that growth funds do better when the market is booming whereas value funds tend to out perform when it is not. Snoopy's system is not a "value" system as such but it terms of performance over a growth phase would appear to offer similar chracteristics?


TEL, RBD, LPC, SKC, PGW not a value selection? Based on NTA considerations that is true (except perhaps for LPC which is trading quite close to asset backing). But I would argue this *is* a value selection based on dividend yield. There is more than one scale on which to measure value.

SNOOPY

[warthog]

quote:Originally posted by Snoopy

TEL, RBD, LPC, SKC, PGW not a value selection? Based on NTA considerations that is true (except perhaps for LPC which is trading quite close to asset backing). But I would argue this *is* a value selection based on dividend yield. There is more than one scale on which to measure value.

SNOOPY


The warthog seconds that - certainly looks like a value selection based on income. What's your definition of "value" in this context StevieB?

If it looks like a duck*, sounds like a duck ... ;)

(*MacDunk would be less charitable!)

[Snoopy]

quote:Originally posted by beacon


The "Good luck" was a gesture of comradeship and goodwill towards you, as well as an appreciation of the effort you spend sharing your thoughts on this forum, rather than a vindication of any learning based on any future development. It was worth clarifying this once.


Ah O.K., thanks Beacon.


quote:
The connection is in quantification of risk, and in not underestimating the impact of a potential future development.

The learning is in the application of transferable skills applied in creating or valuing a portfolio - "balanced" or otherwise, that spans a cross-section of diverse industries. I know of no one yet, who can profess to be an expert in all the industries they transct shares in, themselves. And yet, they compositely constitute what we call "the market". Also my learning on this forum and in the market hopefullymakes me more mature, and a more well-rounded decision maker.


There is a certain truth in what you say here Beacon. Although given my propensity to enter a share when it is in trouble, I find that working *through* the trouble with the directors (albeit passively in my case) does tend to give you a better insight of a particular industry than just reading the press releases. IOW long term shareholders tend to be better experts in their industries than short termers.

However - one thing is certainly true. If TEL are forced by regulation to charge below replacement prices for local loop rental, if Red Rooster and Big Poppa start to takeover the fast food market, if the government decides to grant more casino licences in Auckland, our rural producers hit rock bottom AND the Lyttelton Port is 'hollowed out' by losing most of its cargo to South Canterbury.....

If all of these things happen at the same time, then I'm screwed. Maybe I can convince Halebop to design me an insurance policy against that eventuality, 'just in case'?

SNOOPY

[duncan macgregor]

SNOOPY, For heavens sake sell the lot. Surely you can come up with a better hand than that.
macdunk

[BRICKS]

DEAR Snoppy most of the people that write and talk [endless] do not not have $60,000 invested in the market any where so MATE you are really on your own so enjoy YOURSELF.. [8D]

[stevieb]

quote:Originally posted by warthog


quote:Originally posted by Snoopy

TEL, RBD, LPC, SKC, PGW not a value selection? Based on NTA considerations that is true (except perhaps for LPC which is trading quite close to asset backing). But I would argue this *is* a value selection based on dividend yield. There is more than one scale on which to measure value.

SNOOPY


The warthog seconds that - certainly looks like a value selection based on income. What's your definition of "value" in this context StevieB?

If it looks like a duck*, sounds like a duck ... ;)

(*MacDunk would be less charitable!)

While there are similarities in investing based on yield and value there are subtle differences. A stock may have a high dividend but not necessarily be sustainable and/or have no growth prospects. For me value investing covers both yield and growth, i.e. one whose current share prices undervalues it, it doesn't have to be high yield to put it into this category, through undoubtedly this helps.

[Dimebag]

Snoopy,

You state:

"This is called 'buying low'. Not a good single rule strategy. But if you use it only in relation to sound shares that have been 'sold down' it is the easiest way to outperform the market over the medium term. This is not a mistake. It is the biggest single key to my success."

This line of reasoning of course assumes that shares often get 'sold down' without due cause. Sometimes that is the case. Market-wide corrections are perhaps the best opportunity, when panick-stricten investors want to get out and share prices are often more a function of liquidity than discriminating quality. Sometimes there is good opportunity in the exaggeration of short-term problems as well.

However, most often, the selling has some useful foundation - possibly not widely apparent at the time which can make it seem, to the uninformed, like a random sell-down offering an obvious opportunity. WHS is a great case in point. For a long time $5.50 looked cheap, yet those that paid that will probably never get it back bar decades of dividend accumulation. This is not the stuff great fortunes are made of.

I am not advocating technical analysis or trend following. But the almost complete disregard for the market's opinion strikes me as a little naive. If you've got the results to prove it, that's ok; if you're happy with the results you're getting, that's fine too.

If you look at the really good buys Buffett & co have made, very seldom are they simply relying on well known information gleened from annual reports. There is some deeper investment thesis that has been formed, not from inside information, but from intimate knowledge of the industry, the company, and/or the people behind the vehicle, that allows them to identify a case where a widespread perception is at odds with the underlying reality.

Very seldom is it simple deductive logic from obvious facts. Without having this level of knowledge, it is impossible to conclusively determine whether, say, the market's perception of WHS's potential in Australia is correct or not, given our imperfect ability to predict the future and strong arguments either way. Through contacts, experience, and knowlegde, occasionally 'perfect storm' opportunities are thrown up and they bet big. THEN, market prices can be disregarded because one is betting against the market thesis and one has good grounds to believe themselves to have a definite edge.

Bar this level of knowledge, such a purist approcah is dangerous, IMO. The obvious question is, well what does one do if one doesn't wish to trend follow. I would start by saying be very, very cautious about loading up down low until you obtain further verification that you're investment thesis is correct.

Dimebag

[warthog]

quote:Originally posted by stevieb

While there are similarities in investing based on yield and value there are subtle differences. A stock may have a high dividend but not necessarily be sustainable and/or have no growth prospects. For me value investing covers both yield and growth, i.e. one whose current share prices undervalues it, it doesn't have to be high yield to put it into this category, through undoubtedly this helps.


I think you hit it on the head - "for you" - and therefore a relative notion.

Your position seems like a fair middle-road view I guess ... ;)

[stevieb]

quote:Originally posted by warthog


quote:Originally posted by stevieb

While there are similarities in investing based on yield and value there are subtle differences. A stock may have a high dividend but not necessarily be sustainable and/or have no growth prospects. For me value investing covers both yield and growth, i.e. one whose current share prices undervalues it, it doesn't have to be high yield to put it into this category, through undoubtedly this helps.


I think you hit it on the head - "for you" - and therefore a relative notion.

Your position seems like a fair middle-road view I guess ... ;)

Well it's a pretty middle of the road view for a reason. I'm a bit surprised to get a question of the "definition" of value after all, there are plenty around and they are all fairly consistent about the sp undervaluing the "intrinsic" value or similar. None I have read mention high yield as part of the "definition".

How you assess value is quite clearly another thing and yes, would seem to have to be relative. The only way a share can be value is if you have a different assessment to the market. If your assessment of the value is the same as the market it would not be regarded as a "value" stock. But is this not stating the obvious.

[BRICKS]

THE S&P index nill all that`s because we RUN out words.. [8D]

[Phaedrus]

Very good point Bricks. I think. I must admit I hadn't considered the problem from that perspective.

[warthog]

quote:Originally posted by stevieb

Well it's a pretty middle of the road view for a reason. I'm a bit surprised to get a question of the "definition" of value after all, there are plenty around and they are all fairly consistent about the sp undervaluing the "intrinsic" value or similar. None I have read mention high yield as part of the "definition".


Not that Wikipedia is the be all and end all, but ...

"Value investing is a style of investment strategy. Followers of this style, known as value investors, generally buy companies whose shares appear underpriced by some forms of fundamental analysis; these may include shares that are trading at, for example, high dividend yields or low price-to-earning or price-to-book ratios, and so on."

ref: http://en.wikipedia.org/wiki/Value_investing

This would seem to be a fairly reasonable definition to me, as it covers a range of underpricing yardsticks, all on a fundamental basis.

[BRICKS]

HOW much money yer got,, Warthog [8D]

[duncan macgregor]

quote:Originally posted by BRICKS

HOW much money yer got,, Warthog [8D]

Enough to keep him in swill and mud baths thick one.
Sticking up for you again warty your old mate macdunk.

[BRICKS]

quote:Originally posted by duncan macgregor


quote:Originally posted by BRICKS

HOW much money yer got,, Warthog [8D]

Enough to keep him in swill and mud baths thick one.
Sticking up for you again warty your old mate macdunk.


EVEN a scot`s person needs to make FRIENDS.. [8D]

[lanenz]

quote:Originally posted by BRICKS

HOW much money yer got,, Warthog [8D]
I got the feeling that its quite a bit more than you.

Bricks. Out of curiousity what is your profession?

ps. I know I wont get a sarcastic answer.

Getting back to Snoppy and P. My opinion is that you can almost tell a persons character, age, financial position to a certain degree by their investment stratergies.

This might sound presumptious which it is to a certain extent but the persons position etc detemines their stratergies as well. Of course this is an indication only and their will always be exceptions.


Eg.

[GuzzBear]

Long time listener, first time caller.

This is a message primarily for Snoopy.

Snoopy - my man - you may be well aware of this, but if you aren't you will no doubt be interested to learn that the UK Motley Fool site has a community of Fools who are rededicated to following a high yield strategy similar to what you have described here.

Follow this link:

http://www.fool.co.uk/specials/2006/specials060208.htm

and away you go.

I'd heartedly recommend the High Yield discussion board as a place to share, learn and occasionally be amused. You will have to register for the UK discussion boards but it's free (the US boards cost a bit of money but I think they're well worth it also). I've found the Motley Fool discussion boards to be an amazing place full of helpful people and with minimal "noise". I'm a kiwi living in London and I invest in UK and US equities for the most part so a lot of the individual companies that get discussed over there may not be as relevant for you if you are focussed on NZ - but I think you will find the overall approach and philosophy interesting.

The HYP strategy was started in 2000 and there are now three different portfolios and lots of interesting discussion. I have a small but growing part of my overall portfolio dedicated to a high yield approach (just added some Royal Bank of Scotland last week and Lloyds will be the next to go in with a yield now approaching 7%).

The only significant difference between your strategy and the High Yield Portfolio (HYP) advocated by TMF is in the number of holdings in the HYP - they favour a minimum of about 15 holdings for reasons that they discuss.

Just thought you'd be interested.

Guzz

[Snoopy]

quote:Originally posted by Dimebag



Snoopy,
You state:

"This is called 'buying low'. Not a good single rule strategy. But if you use it only in relation to sound shares that have been 'sold down' it is the easiest way to outperform the market over the medium term. This is not a mistake. It is the biggest single key to my success."

This line of reasoning of course assumes that shares often get 'sold down' without due cause. Sometimes that is the case. Market-wide corrections are perhaps the best opportunity, when panic-stricken investors want to get out and share prices are often more a function of liquidity than discriminating quality.


Hence by qualification of buying low in relation to *sound* shares.
I meant to emphasize that you should buy sound shares when the price is low. Not buy shares when the price is low and *assume* they are sound!

Because of the weighting of TEL in the NZ index, IMO there isn't too much difference between a 'market-wide' correction and a 'Telecom correction'.


quote:
However, most often, the selling has some useful foundation - possibly not widely apparent at the time which can make it seem, to the uninformed, like a random sell-down offering an obvious opportunity. WHS is a great case in point. For a long time $5.50 looked cheap, yet those that paid that will probably never get it back bar decades of dividend accumulation. This is not the stuff great fortunes are made of.


It is only with the benefit of hindsight that you know the WHS foray into Australia was a failure Dimebag. The WHS fall from $7 to $5.50 was perhaps an indication that success in Australia was no longer certain, that's true. But I would argue it wasn't a portent of certain doom.

I present to you 'scenario 1'.

With WHS at $5.50, and a five year target of say $15 (not unreasonable if Tindall had got traction in Australia), the expected capital gain per share would be:

($15-$5.50)= $9.50 per share

Assume dividends of 15c/year for five years. That gives a compounding rate of return of:

($5.50)(1+i)^5=([$5.50+$9.50]+5x15c)

I get a compounding rate of return of 23%.

Now I present 'Scenario 2'. WHS fails in Australia and maxes out in NZ as it meets market saturation. The share price drifts down to $5 and dividends are increased to 25cps, as WHS becomes a 'dividend' share.

($5.50)(1+i)^5=([$5.50-$0.50]+5x25c).

I get a compound rate of return of 3%

Assuming, 'Scenario 1' and 'Scenario 2' each have a 50% probability of playing out.

Our 'expected return' is then 0.5(23%)+0.5(3%)= 13% compounding.

Now, forgetting the benefit of hindsight, can you say that $5.50 WHS market price out of line?


quote:
I am not advocating technical analysis or trend following. But the almost complete disregard for the market's opinion strikes me as a little naive.


I think there is a difference between the WHS share price fall from $7.00 to $5.50 and the TEL share price fall from $6.00 to $4.50. In the first case the business plan remained intact. In the second it has changed. I could imagine myself buying WHS at $5.50 back then, although in practice I wanted a bigger margin of safety so refused to buy until the price was lower ($4.30).

With TEL at $4.50 I don't know if it's a buy, because I haven't re-evaluated the business case. But I do know that the share price of TEL gets pushed around for reasons unrelated to company performance (because it is used as a proxy for the $NZ).

[duncan macgregor]

SNOOPY, Risk is what we all take on board with a share the moment we buy it. My risk is less than your risk, even although you go to great lengths beyond what i would do at selecting the share.
my methods against yours to have an assessment of risk. We all know your methods so no point repeating here.
1, I only buy into a sector on the rise.
2, company must be in profit with good prospects.
3, I know that i am not 100pc infallable so i stick a 5pc stop loss on the buy and set my 20pc timeline from my stop loss level. When in profit i ease my stop loss level and time line lower to let it run.
4, if the sp remains static my timeline will catch up to the price and tells me.
5,It is the market that tells me that i am right or wrong
6,I dont need to go into great detail, into company books, and prefer talking to the people on the shop floor to get a practical view.
7,I never buy a share in a downtrend, only in an uptrend.
8, The market is always right, i never argue with it.
9 It is my timeline that lets me know at a glance if a share is worth holding, or not i let the system tell me to sell.
10, The sector first, the company second,sell system level in place then buy.
That SNOOPY is a much less risky way of investing than yours. macdunk

[Snow Leopard]

I am sure we are all fascinated to hear the latest enunciation of the "Macdunk Way to Millions (tm)".
I am also sure that Snoopy is perfectly happy with his approach to making money and smiles in bemusement at the great efforts being expended to point out to him that he is in fact utterly and totally wrong.

It would seem that my approach is also utterly and totally wrong given that I take a lot more risk than macdunk and buy on very different conditions having done very different research.
But I am as happy as a tiger with nice stripes can be, especially as at the end of the day I seem to make money out of it all.

I am sure that others have different succesful but wrong ways of achieving affluence.
;)

[airedale]

Have I ever mentioned my favourite bumper sticker caption.
"It is hard to be humble when you are Scottish".:D:D:D

[warthog]

quote:Originally posted by airedale

Have I ever mentioned my favourite bumper sticker caption.
"It is hard to be humble when you are Scottish".:D:D:D


It is interesting to note that even in modern Scotland, being humble is an unspoken rule of society. In reality, pretending to be humble is the overwhelming behaviour for the vast majority of Scots.

[Snoopy]

quote:Originally posted by GuzzBear



This is a message primarily for Snoopy.

Snoopy - my man - you may be well aware of this, but if you aren't you will no doubt be interested to learn that the UK Motley Fool site has a community of Fools who are rededicated to following a high yield strategy similar to what you have described here.

Follow this link:

http://www.fool.co.uk/specials/2006/specials060208.htm

and away you go.


Welcome to the 'contribution' side of the forum Guzz. I wasn't aware of that 'high yield' discission group, so thanks for the link.


quote:
I think you will find the overall approach and philosophy interesting.

The HYP strategy was started in 2000 and there are now three different portfolios and lots of interesting discussion. I have a small but growing part of my overall portfolio dedicated to a high yield approach (just added some Royal Bank of Scotland last week and Lloyds will be the next to go in with a yield now approaching 7%).

The only significant difference between your strategy and the High Yield Portfolio (HYP) advocated by TMF is in the number of holdings in the HYP - they favour a minimum of about 15 holdings for reasons that they discuss.

Just thought you'd be interested.


Yes, thanks. In fact the article on the 'High Yield Portfolio Light' is even closer to what I am doing. I reproduce an edited version of it here:

-------------

A concept I've aired on more than one occasion in the past is the HYPLite. This is a (very) slimmed down version of my normal high yield portfolio (HYP). I would normally construct an HYP to contain around fifteen shares depending upon prevailing market conditions and the availability of suitable selections. The Lite version though is just a five share job.

Sector diversification, so critical for risk reduction in the full HYP, becomes even more so for a Lite. The money is being concentrated into only five shares so these really do need to be from completely different sectors.

There's no magic about the number five, any HYP with a severely reduced number of shares over the usual size could be called a Lite. I choose five because that is the absolute minimum number of shares I see as acceptable for anyone willing to take the higher risks of a much smaller HYP. I don't think it acceptable to have any fewer shares in the portfolio.

One point on this. I don't believe that HYPers at the stage of investing for income should go the Lite route. The risks are not worth it, even with the higher income trade off. I put the idea forward purely for those at the stage of accumulating capital by reinvesting dividends. Most of them will find the risks too high as well so I see this as apposite for only for a small number of people willing to take the chance of higher rewards with the increased risks.

The higher return comes in the form of increased income. By choosing a small number of the very highest yielders in the FTSE100, a yield well above the normal full HYP yield can be obtained. On the capital side though, there is no reason to believe that the Lite will perform any better, or worse, than the full HYP. However it will be more volatile and thus riskier by virtue of that fact alone.

Here are my selections. Yields are derived from consensus forecasts of the dividends payable in the next financial year of each company.

Share price Dividend yield
Lloyds (LSE: LLOY) 446p 7.7%
United Utilities (LSE: UU.) 622p 7.0%
DSGI (LSE: DSGI) 142p 5.9%
BT (LSE: BT.A) 212p 5.3%
Compass (LSE: CPG) 187p 5.2%
Average 6.2%

As usual with my H

[duncan macgregor]

What a topic, I end up with a tiger then a dog followed by a pig all telling me how humble I am.
I feel like doctor Doolittle. macdunk

[warthog]

quote:Originally posted by duncan macgregor

What a topic, I end up with a tiger then a dog followed by a pig all telling me how humble I am.
I feel like doctor Doolittle. macdunk


You always did like a bit of push-me-pull-you didn't you MacDunk. ;)

[duncan macgregor]

It would definately beat 20 years at 5pc or 6.2pc like SNOOPY. I think Mary Holm in the Herald would be more fun with five bob each way on everything running everywhere. macdunk

[Snoopy]

quote:Originally posted by Snoopy



Yes, thanks. In fact the article on the 'High Yield Portfolio Light' is even closer to what I am doing. I reproduce an edited version of it here:


Just a few comments on the Motley Fool 'HYPL' article.

I find it interesting that the author observes:

"I see this as apposite for only for a small number of people willing to take the chance of higher rewards with the increased risks."

I feel as though I am regarded as one of the more 'conservative investors' on this forum. So it is kind of interesting that half a world away my strategy is described as only suitable for those in the highest risk taking category!

Another quote

"Here are my selections. Yields are derived from consensus forecasts of the dividends payable in the next financial year of each company.

Share price Dividend yield
Lloyds (LSE: LLOY) 446p 7.7%
United Utilities (LSE: UU.) 622p 7.0%
DSGI (LSE: DSGI) 142p 5.9%
BT (LSE: BT.A) 212p 5.3%
Compass (LSE: CPG) 187p 5.2%
Average 6.2%"

To that selection, I say 'Say whaaat?' My own high yield portfolio is earning close to double that! I don't think those English guys know what 'high yield' means. I guess having the luxury of accessing really high yielding shares is something New Zealanders take for granted.

"On the capital side though, there is no reason to believe that the Lite will perform any better, or worse, than the full HYP. However it will be more volatile and thus riskier by virtue of that fact alone."

In my experience my own high yield portfolio has *not* been overly volatile. However, a small sample of one does not prove anything. Nevertheless my theory is that the high yield shares in New Zealand are so astonishingly cheap, that the downside risk is lower here than in the UK. Also the upside risk is lower because so many shares here are 'captive' in their own South Pacific island market. The problems many shares experience when such a company attempts to expand into Australia are testament to this! With lower upside and downside potential, it stands to reason that NZ high yield shares are less volatile than their UK counterparts.

"As usual with my HYP strategies, strategic ignorance rules. The less I know the more I know. Thus I have made no attempt to guess the distant future for these sectors or these shares. Imagining that I have the power to do so, or listening to those who think they do, weakens the strategy."

All I can say is 'yes'. I agree there is no point in picking winners if that means sacrificing yield significantly. It is probably more important not to choose companies that are liable to have problems servicing their debts (lest the dividend might be cut). That is a numerical check I always do.

"Very clearly though, there are far higher risks to both the income and capital with a Lite than a full HYP. If one share went bust, the effect on a fifteen-share portfolio would not be that great. On a five share though, it would be traumatic. Going bust is perhaps not that likely. What will certainly happen though from time to time with any HYP, whatever its size, are dividend cuts by a large number of leading companies which will drop the portfolio income for a period."

This is the only reference that I have seen to the need to have 15 shares in your portfolio to minimize bankruptcy risk. I'm not sure you could keep a really good handle on fifteen shares at once without it being a full time occupation! Lacking the time slot to fully do justice to your portfolio is a risk in itself. However, one key difference between my own portfolio and those UK ones (apart from holding fewer companies) is that I tend to be a bit more active, bringing 'new' income shares into my portfolio when yield on other

[Snoopy]

quote:Originally posted by duncan macgregor

SNOOPY, Risk is what we all take on board with a share the moment we buy it. My risk is less than your risk, even although you go to great lengths beyond what i would do at selecting the share.


At the risk (sic) of repeating myself, I have to say 'So what'. What is the point of assessing 'risk' if you do not in the same breath assess 'reward'?

Ultimately what we are trying to optimize here is payoff, or
'risk x reward'. Or am I wrong?

Halebop thinks that by just assessing risk you can save time and weed out potentially poor investments if the risk looks too high. Personally I think he is reducing his returns by taking this approach though.

SNOOPY

[lanenz]

McDunk. I dont want to crap on your system as in principle it may well be good. But in order to have a good system you first must be disciplined in following it or are there exceptions to the rule?;)
To be Frank (not my real name) I used to watch gamblers every day having their own systems. Less than 1 in a thousand had a winning one and even then, under pressure they would deviate from it.



quote:Originally posted by duncan macgregor

SNOOPY, Risk is what we all take on board with a share the moment we buy it. My risk is less than your risk, even although you go to great lengths beyond what i would do at selecting the share.
my methods against yours to have an assessment of risk. We all know your methods so no point repeating here.
1, I only buy into a sector on the rise.
2, company must be in profit with good prospects. NZO didnt.
3, I know that i am not 100pc infallable so i stick a 5pc stop loss on the buy and set my 20pc timeline from my stop loss level. When in profit i ease my stop loss level and time line lower to let it run. You didnt with NZO.
4, if the sp remains static my timeline will catch up to the price and tells me. Did your timeline also kick in with NZO?
5,It is the market that tells me that i am right or wrong. All this time I thought MD was never wrong ;)
6,I dont need to go into great detail, into company books, and prefer talking to the people on the shop floor to get a practical view. Was it the bloody tea lady at NZO that put you crook?
7,I never buy a share in a downtrend, only in an uptrend.
8, The market is always right, i never argue with it.
9 It is my timeline that lets me know at a glance if a share is worth holding, or not i let the system tell me to sellYou sure you are sticking to your system?.
10, The sector first, the company second,sell system level in place then buy. You left out the "sell sysytem with NZO here.
That SNOOPY is a much less risky way of investing than yours. macdunk Due to a lack of eveidence I am not going to argue with that one.


You add good value to this forum MD. I also know for someone like you that its very hard to be humble...especially when you are perfect in everrryy way.

[ananda77]

lanenz:

...a trading system (and Duncan claims to have one which is fail prove) is only reliable if it is rigourosly backtested, then rigourosly applied (without exemption) in the real market (under any market conditions) and by the end of the day delivers AT LEAST an average of 6 positives out of ten

...the first thing Duncan would experience when going out into the real trading world is a ****load of bricks on his head...

Kind Regards

[Halebop]

quote:Originally posted by Snoopy

Halebop thinks that by just assessing risk you can save time and weed out potentially poor investments if the risk looks too high. Personally I think he is reducing his returns by taking this approach though.

Snoopy thanks for attributing risk management principals to me but unfortunately I'm not that good. Buffett, the risk management industry, Business Excellence and six sigma all point to the same process as a method of increasing returns by reducing losses and/or errors. I strongly suggest you read up on risk management because you just don't get it. There is rarely a fair trade between value and risk. It's why most insurers refuse to insure a poor risk rather than charge a higher premium and excess. They know from bitter experience the trade off rarely works out.

My historical rate of return over the last 21+ years is slightly north 25% pa. My returns for the last 3 years were 137%, 96% and 35% respectively. While this may seem a lot I just rode an obvious bull market. Those hefty results make only a modest mark on a 21 year time series so they are hardly the reason for outperformance. My returns YTD (from April) have been less than 1% (100% cash).

I'd happily concede many of my profits are due to luck but it's an absense of large or consistant losses that make the results stand out. Risk management has nothing to do with luck or even "taking risks". Its all about being systematic, consistant, vigilent for points of failure and honest (sometimes brutally) in appraisal. Once you work hard at cutting out the mistakes and points of failure, funny how "lucky" you become.

[duncan macgregor]

LANENZ, I sometimes buy a lotto ticket not often but sometimes. I also visit the TAB once a year to back a horse in the Melbourne Cup.
I like to have a flutter on the share market, not often, only to see if i can outsmart the herd. Most of the time I invest in my own way to a very strict system. NZO I have traded twice for a good return bought back in to high, sold the options bought PPP with that money which has done really well.
That is my little gamble share, which i buy and sell on impulse.
I am in profit with it its been fun I still pick it as an uptrending share with little risk of downside in the short term.
My little gamble share has made me more profit since I started than RBD, LPC, TEL,in the same time frame to name some of SNOOPIES.
I used to run crown and anchor schools in the hydro camps in my dark past, yet have only been to the cassino twice, so allow me a little lattitude with my gold rush share. There is A MUCKDUNK GOT IT WRONG THREAD which you might find handy in the future. macdunk

[Snow Leopard]

quote:Originally posted by ananda77


...a trading system (and Duncan claims to have one which is fail prove[?]) is only reliable if it is rigourosly backtested, then rigourosly applied (without exemption) in the real market (under any market conditions) and by the end of the day delivers AT LEAST an average of 6 positives out of ten

...the first thing Duncan would experience when going out into the real trading world is a ****load of bricks on his head...

Kind Regards

I very sweeping statement and one which you I presume you utterly believe.

So here is my very sweeping statement: "Load of rubbish"

Will some of you never get it into your narrow minded thick heads that there is more than one way of doing things and that any other approach than your own is not necessarily wrong.

It's people like you wot causes unrest.

regards

Paper Tiger :D

[Placebo]

I'm showing you blokes the yellow card. MacDunk as he points out has his very own thread. This is a Snoopy vs Phaedrus. Not Snoopy vs Phaedrus and Macdunk is better than the lot.

Stick to the knitting boys!:(

[ananda77]

Paper Tiger:

...very well, that's what you had to say...

Kind Regards

[lanenz]

Placebo. I didnt like being wacked in the sin bin for 10 minutes. You have dented my otherwise impecible clean record.

This is whats the topic is about. S v P. The thread is based on the system that both people uses and the potential flaws in Snoppys system and anybody eleses for that matter.

In response the MD post he raised the issue with how great his system was. The system that people use is really another branch of the topic between S & P.

Snoppy has exposed himself for others to pick his system and potential flaws to pieces. P on the other hand appears to have a much more systematic approach which in principle I believe is good. My view is that I have yet to be convinved that P or anyone has a system that will stand the test of time. IE. if P system brings a return of 7 % over 40 years and the index is 8% then clearly this hasnt stood the test of time.

PT. Yes there Are many ways to skin a cat. And i guess the way to stand the test of time is the time from wwhen you start investing till the time you stop. Thats what really matters.

For any of you that experienced the hype leading to the crash of 87 and leading. Also up to the big correction of the NZ market about 2 years prior will be aware of some of the following.

Any Tom Dick and Harry believed they were an expert in the sharemarket. You could literally invest in and company and make some handsome returns. Reading some of the different chat sites you can start to see it happening in Aus. If the stock had a "U" in it then people would jump on it without having any idea on the value of the stock. To me it shows the signs that NZ experienced in the mid 80's. Simply put, the bigger the rise the bigger the fall. Most of these investors will claim to have a system. Works but now but will it stand the test of time.

Even back to P. I would be interested to she how long he/she has invested in the stock markets. I would also be interested to see how many people earned an average of 8 % or more from 87 till 2000.

My view, Snoppys system has merit in a bear market and P system is far better than most. But even with a stop loss in place it doesnt guarentee that you will exit at the price where your stop loss is.

[Phaedrus]

Snoopy and I have been discussing matters like this for many years. We have managed to remain reasonably civil in spite of our obvious differences of opinion. The trick is to criticise the system, not the person. In a belated attempt to depersonalise this discussion even further, I am going to change the thread title from 'Snoopy vs Phaedrus' to 'Snoopy cf The Index'. My aim was to point out that over the last 3 years or so, the Beagle system has given returns of about half the market average.

[Snow Leopard]

I guess whatever you wish to vs or cf Snoopy against is unimportant to Snoopy.

[lanenz]

P.

I agree with your view with regards to returns over the last years years with Snoppy. This is one of the reasons that i believe it is more apppropriate for a bear market. Snoppy's investment by his own admission is conservative. A conservative approach will most likely net you less returns on a bull market. Without even trying to compare the figures my views are that from 1988 till 2000 I am sure that Snoppys investments would have out performed most other investors picks.

[Bobby_Fischer]

quote:Originally posted by Phaedrus

the Beagle system has given returns of about half the market average.


But even so, he has, doubtless, slept more peacefully in (or on) his kennel and had more leisure time for burying the odd bone?

[Placebo]

Lanenz you're being shown a second yellow for continual use of "Snoppy" rather than the more conventional (and accurate) "Snoopy".
What is it with you man? Can you not type two "oo's" together??

It's "Snoopy" man, "Snoopy" -- "Snoopy" "Snoopy"

"Snoopy!!!!!!!"

:(:(:(:(:(:(

[Snow Leopard]

There is nothing like pouring oil on troubled waters and then setting light to it is there Placebo?

Can I just borrow you red card for a moment?
Thanks.
Now, off you go.

:D

[warthog]

quote:Originally posted by Snoopy

I don't think those English guys know what 'high yield' means. I guess having the luxury of accessing really high yielding shares is something New Zealanders take for granted.

It's all relative Snoopy. Our UK mortgage rate was linked to the BoE base rate ("tracker"/"variable"), and on average worked out around 3.8% or something. Borrowing is pretty cheap in Europe in general compared with NZ. Floating morgages/"flexi" are stupidly expensive at 9%+, with the sheeple here shunning risk and going fixed en masse.

And in Japan, it's another story altogether ...

[warthog]

quote:Originally posted by ananda77

...the first thing Duncan would experience when going out into the real trading world is a ****load of bricks on his head...


Actually, the MacDunk Approach™ has so many fuzzy bits that it would be impossible to round up enough tea-ladies to accurately test anyway.

I can't even make a good guess at what ***** means in your post - most of the words I could imagine sounding plausible there have only four letters. ;)

[Snoopy]

quote:Originally posted by Phaedrus

Snoopy and I have been discussing matters like this for many years. We have managed to remain reasonably civil in spite of our obvious differences of opinion. The trick is to criticise the system, not the person. In a belated attempt to depersonalise this discussion even further, I am going to change the thread title from 'Snoopy vs Phaedrus' to 'Snoopy cf The Index'. My aim was to point out that over the last 3 years or so, the Beagle system has given returns of about half the market average.


I don't know what the NZX index has done over the last three years because I don't follow it. The NZX50 makes comparison's difficult because they include (and I think compound?) dividends. My system for this income portfolio has returned 12.7% pa (made up from 10.2% dividends (not compounded) and 2.5% capital appreciation (compounded). That is about twice the bond rate which was my goal.

It is well known that a strategy like this will tend to underpeform in a bull market. I knew that before I went into it. I didn't know there was going to be a bull market for three years though. My equivalent compounding rate of return over three years is a total of 43%. The fact that this figure has underperformed in a bull market is simply a 'straw man'. No such claim was ever made or implied that 'the market' would be outperformed by me using this strategy! I do know that I have got a lot more cashflow from this strategy than the market would have given me though.

SNOOPY

[Deev8]

quote:Originally posted by Snoopy
[brJust a few comments on the Motley Fool 'HYPL' article.

I find it interesting that the author observes:

"I see this as apposite for only for a small number of people willing to take the chance of higher rewards with the increased risks."

I feel as though I am regarded as one of the more 'conservative investors' on this forum. So it is kind of interesting that half a world away my strategy is described as only suitable for those in the highest risk taking category!

Snoopy, I believe that you may have misinterpreted the comment in that article on risk. In fact it refers to the increased risk of a portfolio of five high-yield shares compared to a portfolio of around 15 high-yield shares. Neither are exactly high risk, so "less conservative" might have been a better description.

[Deev8]

quote:Originally posted by Snoopy

Another quote [from the Motley Fool UK]

"Here are my selections. Yields are derived from consensus forecasts of the dividends payable in the next financial year of each company.

Share price Dividend yield
Lloyds (LSE: LLOY) 446p 7.7%
United Utilities (LSE: UU.) 622p 7.0%
DSGI (LSE: DSGI) 142p 5.9%
BT (LSE: BT.A) 212p 5.3%
Compass (LSE: CPG) 187p 5.2%
Average 6.2%"

To that selection, I say 'Say whaaat?' My own high yield portfolio is earning close to double that! I don't think those English guys know what 'high yield' means. I guess having the luxury of accessing really high yielding shares is something New Zealanders take for granted.

The payout ratio does tend to be significantly lower in the UK, even for high yielders, but the capital performance can be better. That portfolio of 5 shares (disclosure: I happen to have held all 5 for some time), has appreciated by 18% since the article was published in October 2005 even though the UK market has declined somewhat over the past few weeks.

[Snoopy]

quote:Originally posted by Snoopy


I don't know what the NZX index has done over the last three years because I don't follow it. The NZX50 makes comparison's difficult because they include (and I think compound?) dividends. My system for this income portfolio has returned 12.7% pa (made up from 10.2% dividends (not compounded) and 2.5% capital appreciation (compounded). That is about twice the bond rate which was my goal.

The fact that this figure has underperformed in a bull market is simply a 'straw man'. No such claim was ever made or implied that 'the market' would be outperformed by me using this strategy! I do know that I have got a lot more cashflow from this strategy than the market would have given me though.


'Straw Man' or not, just for those who are interested -given the new title of this thread- I have just been to the NZX website. The NZX10 has achieved growth of 12.83% pa over the last three years. I suspected that I had underperformed the index, but my underperformance was a mere 0.13% pa. That means I have achieved 99% of the index performance which is rather higher than the 50% figure being bandied about by Phaedrus. Who would have guessed that?

SNOOPY

[duncan macgregor]

I will give you my opinion as honestly as I can. SNOOPY is a good honest investor, that gives out his buys, and sells shows people his way rightly or wrongly, never abuses always polite. PHAEDRUS always is helpfull to other people with charts, goes out his way to explain and assist.
One gives out what he is holding, the other never divulges, with both giving advice on systems of buying or selling. One starts a thread telling the other how silly their system is without telling all and sundry what they hold, or when they bought, so that we can have a fair contest.
The one that never divulges then changes the name of the thread so that the average non thinking knumbskull can pick on the weakest link. I look on you PHAEDRUS as a bully, that starts picking on someone, getting everyone on side, then sitting back and scoffing.
That is how i see it guys got to say what i think. macdunk

[Snow Leopard]

Snoopy, how did you get the information for the last three years for the NZX10 off the NZX website? I thought you could only get the last 31 days for indices
A link would be nice, please.

[Snoopy]

quote:Originally posted by Halebop


Snoopy thanks for attributing risk management principals to me but unfortunately I'm not that good. Buffett, the risk management industry, Business Excellence and six sigma all point to the same process as a method of increasing returns by reducing losses and/or errors. I strongly suggest you read up on risk management because you just don't get it.


I completely understand that risk is one multiplier in the payoff equation.


quote:
There is rarely a fair trade between value and risk.


You are right. It is that rare exception that I seek though.


quote:
It's why most insurers refuse to insure a poor risk rather than charge a higher premium and excess. They know from bitter experience the trade off rarely works out.


Exactly, and therein lies the error in your thought process Halebop. You are thinking like an insurer.

The job of an insurer is to build an 'event model' based on the universe of all possible adverse events. Insurer's know, for example, the statistical likelihood of a house blowing down. They know how many figurative 'big bad wolves' that are out there. Last time I insured my house I didn't have to take in an engineers certificate to show it would stand up to a certain wind loading. The insurance company doesn't care about that because my 'wind payoff', should I ever be unfortunate enough to collect it, would be regarded by them as a rare event. Imagine the cost of insurance if every homeowner had to get their house 'wind certified'. Probably most owners would just throw their hands up in horror, and not bother with insurance. Insurance companies know that most houses can withstand most winds and they don't need to know any more.

As a 'focus investor' my position is completely the opposite of myself as 'the homeowner'. Rather than seeking to mirror some index (the average - in the case of my house remember I want the average. I want it to be still standing after that big bad wolf blows through!) now as an investor I am *seeking* the rare event. 'The index' or 'the average' are no longer on my desirability horizon. I'm looking for those outlier investments that will have a return 'all of their own'. You rightly say that risk is generally correlated with return. But as a focus investor, I am deliberately searching for shares where this is *not* the case. One example being the rule 'only purchase when the so called margin of safety' (as Buffet would put it) is there. Because risk does not correlate with return in these instances, it becomes necessary to focus on the other multiplier in the payoff equation - namely return. Risk is not disregraded. It merely takes up the (rightful) role of being the other multiplier in the payoff equation.

This is the exact opposite situation to insurance management where outlier returns are largely irrelevent because they are so rare. With investment, outlier returns are sought, and indeed are the key to success. That's why an insurance like risk based assessment just isn't good enough for my style of investing.

SNOOPY

PS Don't tell my insurance company my house is built out of straw, will you?

[Snoopy]

quote:Originally posted by Paper Tiger

Snoopy, how did you get the information for the last three years for the NZX10 off the NZX website? I thought you could only get the last 31 days for indices
A link would be nice, please.


http://www.smartshares.nzx.com/investment_strategies/saving_goal

SNOOPY

[Snow Leopard]

quote:Originally posted by Snoopy


quote:Originally posted by Paper Tiger

Snoopy, how did you get the information for the last three years for the NZX10 off the NZX website? I thought you could only get the last 31 days for indices
A link would be nice, please.


http://www.smartshares.nzx.com/investment_strategies/saving_goal

SNOOPY



many thanks

[winner69]

http://www.nzx.com/market/monthly_stat/2003/may_2003

NZX10 at end May 2003 was Gross 2410/Capital 950

Three years on today close at 3740 and 1213

Snoopy .... my calculator has that at 15.8% pa for the Gross Index and 8.5% pa for the Capital Index (assuming we are close enough to the end of the month to call it 3 years)

Have u got different figures?

PS must say that NZX website is pretty crappy

[winner69]

Snoopy ... I see the 12.83% ..... but what does all the gibberish mean?

[GuzzBear]

Snoopy,

The timezone is conspiring against me. A couple of final thoughts on the Motley Fool stuff and then I'll leave you to your many various battles here (by the way, I think you're definitely ahead on points).

You obviously got right to the nub of the differences with your approach and the approach that Stephen talks about his articles (Lite version or otherwise).

You're dead right about the yields in the UK not being as attractive as in NZ. Today's Financial Times tells me that the FTSE 100 yields around 3.5%. As has been pointed out by another poster, it might be said that there is greater potential for capital gain from the higher yielding UK companies due to their greater potential for international exposure. But NZ is definitely ripe for high yield approach along the lines you are employing. My only concern in NZ is that many of the yeilders don't have the longevity of many UK companies and therefore may require more ongoing attention.

Re the 15 shares - the approach advocated by the hard-core HYPers on the Motley Fool boards is to find companies that have a high yield, have a history of increasing dividends and have good prospects. Then you buy them, forget about them and rub your hands together in glee when the dividend checks come rolling in. The idea is not to get to know all 15 of these companies intimately (as you would want to for other companies NOT in your HYP). All you care about is the yield and whether they will be around to pay that yield over the next 20 years. Lloyds is a classic example - it's been around in one form or another for about 250 years and has weathered all sorts of financial turbulence. I think that it's pretty likely to be around for the next 20-30 years. That's the approach that Stephen advocates anyway - I think the reality is that most of us hold more/less than 15 companies, do check in on the progress of companies and "tinker" with the holdings.

Anyway - best of luck to you and it would be great to see you on the Motley Fool boards if this place ever wears you down.

Guzz

[BRICKS]

THE S&P index is DEAD in NZ like always CONFUSED.. [8D]

[lanenz]

Due to a lack of editing and sloppyness, I was oblivious to the mispelling on Snoopy. Snoopy, please accept my apologies.

I will appeal the red card for compasionate reasons.

[Phaedrus]

Snoopy, All my charts, figures and commentary refer to the NZSX50 "Headline Index".

Why do you think the NZSX10 Index has performed poorly relative to other indices? Because it is about 40% Telecom!!! The abysmal performance of TEL over the last few years has dragged the NZSX10 down even more than it has dragged your performance figures down. This is why your results are comparable to the NZSX10.
The poor performance of TEL has of course impacted on other indices as well, but because they all have a much lower TEL loading than that of the NZSX10, the negative effect has not been as marked.

[duncan macgregor]

quote:Originally posted by ananda77

lanenz:

...a trading system (and Duncan claims to have one which is fail prove) is only reliable if it is rigourosly backtested, then rigourosly applied (without exemption) in the real market (under any market conditions) and by the end of the day delivers AT LEAST an average of 6 positives out of ten

...the first thing Duncan would experience when going out into the real trading world is a ****load of bricks on his head...

Kind Regards
It is good to have someone to keep you on your toes like this but a question if i may. Why is it that ANANDA 77 is running at 83rd and minus 13.7 pc in the AUSSIE share comp?. ANANDA never chuck stones if you are standing in a glass house. macdunk

[ananda77]

Duncan:

...don't know the results for the NZX competition, but think I am doing well there

...don't do well on the ASX as you have rightly pointed out

...as a matter of fact, I do not hold any of the shares neither have I traded any of the shares (with the exeption of arq) on the two indices. I entered the competition for fun

...the reason is that ~8 months ago I decided to be a trader (for me this means creating a minimum income of NZD15000.-/annum just to survive) within a two year period. The funds I set aside to achieve this goal were AUD 4500.- I started trading indesx-cfd's and concentrated mainly on indices (US30/ASX200).

...after being down AUD1500.- very, very quickly!!! I found that the system I used for the last ten years that earned me an average of ~20%/annum was completely unreliable and full of flaws.

...as a result, I have developed a trading system for the last 8 months which I rigouosly index-tested (real trades) and which has allowed me to recover my loss. During that time I index-traded buying and selling 1 unit at a time.

...last week, I started to do bigger trades (2 to three units at a time) and out of 16 trades, 12 returned positive.

...Now that's very encouraging and for the first time I am actually confident that I will achieve my target, since I no longer think I am fishing in muddy waters

...mind you...even the best possible system will not return positive results unless a person overcomes fears, self-doubts, indecision...in my view the most undermining factors for success...

Kind Regards

[duncan macgregor]

GOOD on you thats what its all about. A little bit of faith in what you are doing, plus being big enough to broadcast it when you go wrong.
MACDUNK

[Snoopy]

quote:Originally posted by Phaedrus

Snoopy, All my charts, figures and commentary refer to the NZSX50 "Headline Index".

Why do you think the NZSX10 Index has performed poorly relative to other indices? Because it is about 40% Telecom!!! The abysmal performance of TEL over the last few years has dragged the NZSX10 down even more than it has dragged your performance figures down. This is why your results are comparable to the NZSX10.
The poor performance of TEL has of course impacted on other indices as well, but because they all have a much lower TEL loading than that of the NZSX10, the negative effect has not been as marked.


So the principal thrust of your thesis Phaedrus is that Telecom has been my greatest investment mistake, and indeed by association with the indices, the greatest folly of most NZ investors?

Interestingly the principal advocate of 'my strategy' on the Motley fool UK site has suggested, two to three years ago, that people do not invest in telecommunications companies.

Why? Because technology is changing so fast and the the result of regulation is so unpredictable that the business case for telecommunications companies is 'all over the place'. However, despite this, our Uk based income investor's latest declared purchase in October 2005 was BT.A (British Telecom). Make of that what you will!

IIRC Phaedrus, you don't invest in Telecom either, although for other reasons. Principally the failure to design a profitable trading system that can be back tested. IIRC it was you who proposed that this might be because Telecom acts as a proxy for investment in New Zealand in general. That means there is a dollar direction and interest rate effect that is constantly overlaid on the Telecom share price.

Personally I think this explanation for the behaviour of the Telecom share price has merit. That is why I wasn't concerned when I saw the Telecom share price fall with the NZ dollar's fall. I'm not going to go over the chart ground again that we have already covered. Except I will note that because Telecom was not in a clear uptrend someone like yourself wouldn't be holding any TEL shares anyway, so any decision to sell would be moot.

So why should *I* hold Telecom shares now? Well, despite the LLU naked DSL government regulatory decisions, there has not yet been any revised profit guidance downwards to the market. The dividend has not been cut, and there is no confirmation that it will be. Personally I think that profits *may* fall in a couple of years. But in the meantime competitor Telstra is in a bitter network investment dispute with their own majority owners, the Australian government. The parent company of competition Ihug currently has its shares suspended in Australia, pending some kind of negative financial announcement. In short, despite the competitive noises, there is no-one lining up the money to take advantage of the new NZ regulatory regime. If the reason is that it is not profitable to do so, then you have to question by how much Telecom's profits will really reduce.

It is early days and I could be proved wrong. But my hunch is that the intrinsic value of Telecom has not been reduced in value by anything like the 20% that the market is picking. That means it is very hard to draw up a case for selling Telecom at the $4.50 price point. From a yield prespective Telecom is not only cheap. It is not only the cheapest share on the NZ market. It is the cheapest share on any listed market in the developed world period. The company debt levels are the most under control they have been in five years, and the debt is low for a utility. Whatever happens Telecom will remain a substantial player in the NZ market.

If I was forced to sell off all my shares one by one, I think Telecom NZ would be the last share that would go.

SNOOPY

[duncan macgregor]

SNOOPY, That is your biggest mistake of all. You continue to make excuses for a company on a downtrend whose prospects are worse than they were when the downtrend started. That is the recipe for disaster, regardless of your buy and hold at all costs approach.
Who cares about their debt level, or profit margins of the past, that means nothing now, its today looking forward that counts.
TEL are in a bad position with very little public sympathy because of their arrogance. Most people in my circle would change companies if they could, TEL are on the ropes.
TEL to come good need to clear the deck starting at the top, [even the tea lady hates their guts]. This company will continue to downtrend, your bank balance with it, unless you wake up to yourself. macdunk

[Capitalist]

Actually Snoopy's comments echo a couple a very big offshore corporates ;)

I'm just saying.

[BRICKS]

quote:Originally posted by duncan macgregor

SNOOPY, That is your biggest mistake of all. You continue to make excuses for a company on a downtrend whose prospects are worse than they were when the downtrend started. That is the recipe for disaster, regardless of your buy and hold at all costs approach.
Who cares about their debt level, or profit margins of the past, that means nothing now, its today looking forward that counts.
TEL are in a bad position with very little public sympathy because of their arrogance. Most people in my circle would change companies if they could, TEL are on the ropes.
TEL to come good need to clear the deck starting at the top, [even the tea lady hates their guts]. This company will continue to downtrend, your bank balance with it, unless you wake up to yourself. macdunk


DEAR Scotts person you TALK to MUCH.. [8D]

[Snow Leopard]

quote:Originally posted by BRICKS


DEAR Scotts person you TALK to MUCH.. [8D]

...first remove the plank from thine own eye

[Dimebag]

Duncan says:

"Who cares about their debt level, or profit margins of the past, that means nothing now, its today looking forward that counts."

With full respect Snoopy, I think one of your key investment fallacies is placing too much emphasis on past numbers and not enough emphasis on the qualitative drivers of the business and its future prospects.

You're living in a dream world if you think LLU etc is not going to have a material impact on TEL's profitability. Like Duncan, to me this reasoning smacks of the 'backward rationalisations' that behavioural financial theorists warn us about. Is your view being coloured by your large present commitment to TEL?

Rememeber, a 11% gross yield may look good currently, but focusing in this is surely completely missing the point.

[Dimebag]

SNOOPY,

Regarding your previous post:

quote:
--------------------------------------------------------------------------------
Originally posted by Dimebag



Snoopy,
You state:

"This is called 'buying low'. Not a good single rule strategy. But if you use it only in relation to sound shares that have been 'sold down' it is the easiest way to outperform the market over the medium term. This is not a mistake. It is the biggest single key to my success."

This line of reasoning of course assumes that shares often get 'sold down' without due cause. Sometimes that is the case. Market-wide corrections are perhaps the best opportunity, when panic-stricken investors want to get out and share prices are often more a function of liquidity than discriminating quality.



--------------------------------------------------------------------------------


Hence by qualification of buying low in relation to *sound* shares.
I meant to emphasize that you should buy sound shares when the price is low. Not buy shares when the price is low and *assume* they are sound!

My point is simply that what might appear, ex ante, as an irrational selldown of a fundamentally sound stock, very often turns out, ex post with the course of time, to have been a underlying reaction to a deterioration in the 'soundness' of the underlying company.

Merely looking at public information and assuming that, since no formal announcements have been made, things are still intact, is thoroughly naive and heavily underestimates the ability one's investment competitors.


Because of the weighting of TEL in the NZ index, IMO there isn't too much difference between a 'market-wide' correction and a 'Telecom correction'.

My point was that occasionally, sell downs are driven by events extraneous to the business fundamentals of the stock in question. These types of circumstances do give rise to opportunities for the value buyer who is not fully invested.


quote:
--------------------------------------------------------------------------------

However, most often, the selling has some useful foundation - possibly not widely apparent at the time which can make it seem, to the uninformed, like a random sell-down offering an obvious opportunity. WHS is a great case in point. For a long time $5.50 looked cheap, yet those that paid that will probably never get it back bar decades of dividend accumulation. This is not the stuff great fortunes are made of.

--------------------------------------------------------------------------------


It is only with the benefit of hindsight that you know the WHS foray into Australia was a failure Dimebag. The WHS fall from $7 to $5.50 was perhaps an indication that success in Australia was no longer certain, that's true. But I would argue it wasn't a portent of certain doom.

See, my argument is that the sell down from $7.00 to $5.50 was no coincidence and, to the contrary, indicated that savvy investors knew of the signs coming out of that market long before it was widely publicly known.

I do accept your point, though, that a solitary ex post example such as the WHS overlooks the possibility of an unfavourable outcome of an expected event. However, in general, the point I am making is that very often, sell downs are followed by the unravelling of bad news and this tendancy ought not be ignored.

quote:
--------------------------------------------------------------------------------

I am not advocating technical analysis or trend following. But the almost complete disregard for the market's opinion strikes me as a little naive.



quote:
--------------------------------------------------------------------------------

If you look at the really good buys Buffett & co have made, very seldom are they simply relying on well known information gleened from annual reports. There is some deeper investment thesis that has been formed,

[Phaedrus]

Snoopy, It is interesting that you are so confident about TEL. My criticism has always been over your timing and trade management, rather than your choice of stock(s). In fact, I really like it when I find myself holding the same stocks as staunch fundamentalists such as yourself. We were co-holders of SCT for quite a while there.
I am reading a good book at the moment - "The Winning Investment Habits of Warren Buffett and George Soros" by Mark Tier. As you would expect, I identify with Soros rather than Buffett. While commenting on the marked differences between the two approaches, the main emphasis of the book is on the very many similarities.
This book has been good for me. I have resolved to criticise you (your system) a lot less. I've even put TEL on my watch list. How's that for a compliment!

This little quote from Chapter 19 (Entitled "Keep Your Mouth Shut") made me laugh and think of Duncan.....
TV interviewer: "What are your favourite stocks?"
George Soros: "I'm not going to tell you."

[Snow Leopard]

quote:Originally posted by Phaedrus

This book has been good for me. I have resolved to criticise you (your system) a lot less. I've even put TEL on my watch list. How's that for a compliment!


quote:Originally posted by Phaedrus (http://www.sharetrader.co.nz/topic.asp?TOPIC_ID=23302)
When I found myself in agreement with others here that FPH was looking a bit overvalued, I tightened the stop yet again to 10%.


This is all very worrying

[duncan macgregor]

quote:Originally posted by BRICKS
DEAR Scotts person you TALK to MUCH.. [8D]

You got it dead right there BRICKS. I posted a change in the trader contest early and some rotten bugger has just lifted the price 20pc.
It wasnt you thick one trying to look after me was it. Incidentely no such thing as a SCOTTS person, [thought you would like to know that]. MACDUNK
discl the share was SPY

[BRICKS]

quote:Originally posted by Paper Tiger


quote:Originally posted by BRICKS


DEAR Scotts person you TALK to MUCH.. [8D]

...first remove the plank from thine own eye


YOU talk more than your WORTH paper Sh*t.. [8D]

[Snow Leopard]

quote:Originally posted by BRICKS


quote:Originally posted by Paper Tiger


quote:Originally posted by BRICKS


DEAR Scotts person you TALK to MUCH.. [8D]

...first remove the plank from thine own eye


YOU talk more than your WORTH paper Sh*t.. [8D]

both planks, from both eyes.

[BRICKS]

quote:Originally posted by Paper Tiger


quote:Originally posted by BRICKS


quote:Originally posted by Paper Tiger


quote:Originally posted by BRICKS


DEAR Scotts person you TALK to MUCH.. [8D]

...first remove the plank from thine own eye


YOU talk more than your WORTH paper Sh*t.. [8D]

both planks, from both eyes.

[BRICKS]

PAPER Sh*T .. that repeats the same KIWI answers when cant think thats why the country is the last BUS stop in the WORLD.. [8D]

[BRICKS]

good bye GLS .. [8D]

[duncan macgregor]

quote:Originally posted by BRICKS

PAPER Sh*T .. that repeats the same KIWI answers when cant think thats why the country is the last BUS stop in the WORLD.. [8D]

I take it then thick one you are not a kiwi. You are not SCOTTISH we all know that there is only one t in SCOTS. Besides we are better mannered. It brings us back to the topic in hand, if have anything worthwhile to say i would be more than interested. If you want a sh*t fight on sunday in the cow shed then i am the man.
YOUR OLD MATE MACDUNK

[BRICKS]

quote:Originally posted by duncan macgregor


quote:Originally posted by BRICKS

PAPER Sh*T .. that repeats the same KIWI answers when cant think thats why the country is the last BUS stop in the WORLD.. [8D]

I take it then thick one you are not a kiwi. You are not SCOTTISH we all know that there is only one t in SCOTS. Besides we are better mannered. It brings us back to the topic in hand, if have anything worthwhile to say i would be more than interested. If you want a sh*t fight on sunday in the cow shed then i am the man.
YOUR OLD MATE MACDUNK


STILL talking to much thats life with YOU .. [8D]

[warthog]

quote:Originally posted by BRICKS


quote:Originally posted by Paper Tiger


quote:Originally posted by BRICKS


DEAR Scotts person you TALK to MUCH.. [8D]

...first remove the plank from thine own eye


YOU talk more than your WORTH paper Sh*t.. [8D]


I would like to suggest a new award called the Da Vinci Code special contribution award.

The Da Vinci Code award recognises outstanding contributions to the world of vague and meaningless statements, cryptic to all but their author and inner circle. Like most cyphers, this material might one day be cracked and meaning revealed for all to see. However, given that it is likely that there is absolutely no meaning at all behind the words, how would one know whether the code has been cracked? This reduces the chances of a successful break to near zero.

I would like to nominate BRICKS as the first ever recipient, and am looking for votes to make this inaugural award a reality.

[BRICKS]

quote:Originally posted by warthog


quote:Originally posted by BRICKS


quote:Originally posted by Paper Tiger


quote:Originally posted by BRICKS


DEAR Scotts person you TALK to MUCH.. [8D]

...first remove the plank from thine own eye


YOU talk more than your WORTH paper Sh*t.. [8D]


I would like to suggest a new award called the Da Vinci Code special contribution award.

The Da Vinci Code award recognises outstanding contributions to the world of vague and meaningless statements, cryptic to all but their author and inner circle. Like most cyphers, this material might one day be broken and meaning revealed for all to see. However, given that it is likely that there is absolutely no meaning at all behind the words, how would one know whether the code has been cracked? This reduced the chances of a successful break to near zero.

I would like to nominate BRICKS as the first ever recipient, and am looking for votes to make this inaugural award a reality.


YOUR right KIWI muddy & smelly.. [8D]

[BRICKS]

LIKE the REST your a wast of TIME as WELL.. GOD BLESS NZ.. he MADE a MISTAKE.. [8D]

[warthog]

quote:Originally posted by BRICKS


quote:Originally posted by warthog

I would like to suggest a new award called the Da Vinci Code special contribution award.

The Da Vinci Code award recognises outstanding contributions to the world of vague and meaningless statements, cryptic to all but their author and inner circle. Like most cyphers, this material might one day be broken and meaning revealed for all to see. However, given that it is likely that there is absolutely no meaning at all behind the words, how would one know whether the code has been cracked? This reduced the chances of a successful break to near zero.

I would like to nominate BRICKS as the first ever recipient, and am looking for votes to make this inaugural award a reality.


YOUR right KIWI muddy & smelly.. [8D]


This vote has been cancelled on account of the voting paper being spoilt. It is a great pity that this voter's intentions will never be known. ;)

[BRICKS]

quote:Originally posted by BRICKS

LIKE the REST your a wast of TIME as WELL.. GOD BLESS NZ.. he MADE a MISTAKE.. [8D]


NOW confirmed Mr MUD.. [8D]

[duncan macgregor]

quote:Originally posted by Phaedrus
This little quote from Chapter 19 (Entitled "Keep Your Mouth Shut") made me laugh and think of Duncan.....
TV interviewer: "What are your favourite stocks?"
George Soros: "I'm not going to tell you."

Its all your fault PHAEDRUS look what you started.
macdunk

[BRICKS]

quote:Originally posted by duncan macgregor


quote:Originally posted by Phaedrus
This little quote from Chapter 19 (Entitled "Keep Your Mouth Shut") made me laugh and think of Duncan.....
TV interviewer: "What are your favourite stocks?"
George Soros: "I'm not going to tell you."

Its all your fault PHAEDRUS look what you started.
macdunk


Mr P was RIGHT its all the MUGS around that sound OFF.. [8D]

[Snoopy]

quote:Originally posted by Dimebag

Duncan says:

"Who cares about their debt level, or profit margins of the past, that means nothing now, its today looking forward that counts."

With full respect Snoopy, I think one of your key investment fallacies is placing too much emphasis on past numbers

You're living in a dream world if you think LLU etc is not going to have a material impact on TEL's profitability. Like Duncan, to me this reasoning smacks of the 'backward rationalisations' that behavioural financial theorists warn us about. Is your view being coloured by your large present commitment to TEL?


My commitment to Telecom is substantial, but not excessive. When compared to any NZX index, I'm still underweight. Always have been and I intend to remain so.


quote:
Remember, a 11% gross yield may look good currently, but focusing in this is surely completely missing the point.


You are right. I'll focus on my bank account instead, where yet another TEL dividend is about to hit ;).

Dimebag, I'm not buying any more TEL at the moment because I haven't figured out what the regulatory effects will mean- financially. I'm not sure if Theresa has either, so I guess I'm in good company.

However, I would only consider selling if 'LLU/naked DSL' means that prospects for the company have diminished by over 20% (in profitability terms) and there is no hope of recovery. IOW the prospects have deteriorated more than the share price decline.

To sell now, in the absence of any sort of earnings guidance, would be a huge gamble to take IMO.


quote:
and not enough emphasis on the qualitative drivers of the business and its future prospects.


So you'd be selling (hypothetically speaking if you held) on the downtrend then? Too risky a strategy for me I'm afraid.

SNOOPY

[Snoopy]

quote:Originally posted by Dimebag


What might appear, ex ante, as an irrational selldown of a fundamentally sound stock, very often turns out, ex post with the course of time, to have been a underlying reaction to a deterioration in the 'soundness' of the underlying company.

Merely looking at public information and assuming that, since no formal announcements have been made, things are still intact, is thoroughly naive and heavily underestimates the ability one's investment competitors.


This all sounds like you are getting those tap shoes on, and are preparing to dance with 'Mr Market' Dimebag.

'very often turns out' and 'with the course of time'?

How often? And over what time period?

I don't think that if a market price falls you can even reasonably say that the full extent of such a fall is rational. I was gambling, in my most recent Telecom purchase, that the main reason for the share price fall from $6 to $5.50 was NZ currency related (speculators using TEL as a proxy for the weakening $NZ and selling out). If I was solely right, this would have been a good gamble. I still believe I *was* right. But the government regulatory announcement has added another stirrer to the TEL share price pot.

NZ companies are *required* to keep the NZX informed of any substantive change of prospects. TEL have said they will give such guidance at the time of their full year results. But what they haven't done (you would say -yet) is issue a profit downgrade. The market reaction to the coming regulation must be an uninformed gamble at this time. Granted most of the people making the institutional buy and sell calls are probably telecommunications experts, maybe even full time analysts of Telecom, in their own right. But even they don't have the information to plug into their sophisticated computer models yet. GIGO.

As for underestimating my 'competitors', I don't consider that I have any. I certainly don't worry about what they are doing. Unless these competitors get 'manic depressive'. Which is why I keep my own dancing shoes handy. But I don't wear 'em all the time.


quote:
My point was that occasionally, sell downs are driven by events extraneous to the business fundamentals of the stock in question. These types of circumstances do give rise to opportunities for the value buyer who is not fully invested.


Like TEL going down on currency related selling?


quote:
In general, the point I am making is that very often, sell downs are followed by the unravelling of bad news and this tendancy ought not be ignored.


If I sold TEL now, I would be effectively saying that regulation had reduced profitability prospects by 20% and there was no hope of recovery. I'm not disagreeing that in the medium term the government's regulatory announcement was bad for TEL shareholders. But I need to know *how bad* before I can make by decision to exit, hold or buy more. I don't think Mr Market knows how bad or good the situation is.

[quote]quote:
Snoopy wrote:

"In times of major uncertainty, I think you have to look at

1/firm possible scenarios then
2/assign some probability of those scenarios occuring"

Again, you are assuming that the market's opinion is entirely independent of the probabilities of the events occuring which I argue is naive and false.
<hr height="1" noshade id="qu

[warthog]

quote:Originally posted by Snoopy

I'm not buying any more TEL at the moment because I haven't figured out what the regulatory effects will mean- financially.

How does this reconcile with your position after the LLU announcement but before the market opened the next day when you said - in effect - that any unannounced LLU/regulatory changes had already been priced into TEL's shareprice and therefore you weren't expecting much of a correction?

Maybe I got the wrong end of the stick there Snoopy?

[Dimebag]

Snoopy,

I understand where you're coming from. My biggest investment influence has far and away been Warren Buffett, and I am thoroughly acquainted with his Mr Market sermonising.

BUT, empirically and anecdotally, looking back objectively over my long-term investment results, I have found that almost universally, share price movements have been followed by the revelation of either good or bad news that surpassed my expectation.

I challenge you to go back and look over your own results to see whether share price action was completely unrelated to subsequent events.

If you conclude, as I suspect you might, that the investments which initially performed poorly were subsequently revealed to have ultimate fundamentals much less favourable than you had originally concluded, and vice versa, then you cannot conclude share price movements are entirely irrelevant.

Don't get me wrong. I 'dollar cost average' all the time, where I think it is appropriate. Nor am I advocating trend following. But I am advocating a more realistic assessment of your abilities. The Mr Market analogue pays other market participants absolutely no respect, which is sometimes deserved and sometimes not. If you are dealing in small caps, or are remarkably astute, that is probably fair, but in well researched large-caps you are playing with fire.

You state that you have no competitors in the market. This is rediculous. Every other buyer and seller is likewise trying to make money. A proportion of traders do deal for reasons unrelated to their view of the relative attractiveness of a stock, but they are the vast minority. Anyone who has worked in the financial industry will tell you that there is an incredible amount of competition, and it is smart and well informed competition at that.

Again, I challenge you to objectively examine your own record. You may be surprised.

Dimebag

[Dimebag]

The following is a list of stocks in which I have invested where subsequent price action has, at some point, proven to have been a precursor to revealed analytical inaccuracies.

Some of this was simply poor analysis on my part. Many of these stocks were owned years ago when I was still a new analyst. Still, they reveal a telling pattern - most of my losses have consisted of the following process:

(1) the stock looks good - go long
(2) the stock goes down - looks even more attractive - possibly by more
(3) news comes out that makes the stock look less attractive
(4) either sell, reduce, or buy more if I think the bad news has been excessively discounted in the price; if the latter, circle back to 3.

Here is a list. I am sure there are more which I can't recall at the moment. Not all of these stocks led to losses. In fact, I made quite good profits on some of them, and still own ATR and are quite bullish as to its long-term outlook. Nonetheless, the price action was revealing.


ION Ion (ASX)
HOM Homeloans (ASX)
CGF Challenger Financial Services Group (formerly CLI & then CFG) (ASX)
VTL Vending Technologies
PRG Pacific Retail Group
CLH Collection House (ASX)
OTI Oriential Technologies (ASX)
ATR Astron (ATR - more recently - overestimated its near-term growth potential; however, the price action 2002-2003 was clearly a false precursor).
CIY City Pacific (ASX -overestimated growth potential)
Securenet (SNX)
Bridgecorp (BHL)
ASC Adultshop.com (ASX)
FLT Flight Centre (ASX)

Here are a list of companies where short-term price action was clearly wrong
Credit Corp 2002 (CCP) [however, I would note that there were considerable industry risks in 2002, and, subsequently, CCP's share price performance vastly exceeded my upside assessments and was subsequently validated by the underlying fundamental company performance)
Astron (2002-2003) (ATR)
Dorchester Pacific (DPC)

The respective lists are quite telling.

Regards,
Dimebag

[Dimebag]

Snoopy,

I think part of it is you attributing subsequent negative events as being 'bad luck'. You see a stock, it looks cheap, you buy it, bad news comes out, the stock goes down, and then you use the expectancy math in your WHS example to say, well, I just got unlucky.

What I am arguing is that, more likely, the stock looked cheap to you because you didn't fully appreciate the business risks at the time that subsequently lead to its fall. Had you done so, the stock might not have looked so cheap. This is a trap I have fallen into many times.

Sometimes, things play out well. The risks don't materialise, the stock goes up, and naturally, you attribute this to your own analytical skill and the folly of Mr Market. However, just as likely, you have been blissfully ignorant of true business risks and have again, just got lucky.

I am not an efficient market theorist by any stretch. But, in assessing your own performance objectively, the proof is ultimately in the pudding. If you have consistenly outperformed over 5-10 years, then obviously all this discussion is invalidated. However, if you haven't (and it doesn't appear that you have outperformed), then you have to take a step back and ask yourself some tough questions.

Personally ,I have outperformed, but all this outperformance is attributable to a few successful small caps which are much easier to pick. My track record in large caps to date is mediocre, and my respect for the market in this space has increased vastly with the passage of years, notwithstanding my almost religious adoption of Warren Buffett's ideologies.

My lack of performance in this space simply necessitated this view. As I have matured as an analyst, my performance has improved, but I am still no where near the point where I can simply disregard the market as a perenially foolish manic-depressive as you seem disposed to do.

Dimebag

[Placebo]

That's the spirit, well done boys. If someone goes off and creates a new sandpit for MacDunk and Bricks to toss their toys about, that'd be grand.

In fact, off to do it now...

[Westie]

quote:Lyttelton Port cans dividend after failed takeover

The Lyttelton Port Company board has punished Port of Otago for stymying the plan to sell out to Hong Kong giant Hutchison Port Holdings, by canning its December half year dividend



oops, there goes the lpc dividend snoopy. prepare those floppy ears for another round of bashing

[Snoopy]

quote:Originally posted by Dimebag


Empirically and anecdotally, looking back objectively over my long-term investment results, I have found that almost universally, share price movements have been followed by the revelation of either good or bad news that surpassed my expectation.

I challenge you to go back and look over your own results to see whether share price action was completely unrelated to subsequent events.

Dimebag


I accept your challenge Dimebag. Let's go through the income portfolio.

LPC

Purchased shares in October 2002 at $1.45 and February 2004 at $1.64, both at the height of labour disputes. Share price drop on both occasions did not reflect any long term value drop. Latest purchase was at $2.04, following the withdrawal of the CCHL takeover offer. The jury is still out on that one. Hindsight rating of purchasing in the dips 2/2 with one unresolved (I'll count that as a neutral).

WRI/PGW

Purchased shares in June/July 2002 for $1.04, following a 20% fall in share price. The MD at the time said the explanation for the share price fall was

"a casualty of pessimism about agriculture which managing director Allan Freeth says is at odds with rural New Zealand's views."

Freeth (and I) were proved right.

In December 2002 I purchased some more shares at $1.14 after another share price retreat from around $1.40, as expectations of an RD1 takeover evaporated. The share price subsequently fell another 10% but subsequently bounced right back with the Craig Norgate takeover in 2004. I'll count that as a positive.

I subsequently 'averaged down' and bought some more shares for $1.01 in March 2003.

Finally I bought some more shares in July 2004 for $1.38 again during the downtrend after the Norgate takeover had closed and the heat had gone out of the market for WRI shares (apparently).

I'll score myself 4/4 for that effort.

RBD

Some bad results here. I swallowed the expansion story into Australia and bought some shares at $2.08 in March 2002. Another bad decison was averaging down at $1.71 in July 2002. Another bad decision was buying shares on the decline at $1.60 during a takeover offer in July 2005 (or was it, see my explanation at the time). During the last five years I made several neutral purchases between $1.25 and $1.30 or about the share price today in September 2003, September 2004, December 2004 and October 2005. I'll score that as three failures and four neutrals.

SKC

No purchases made in the last five years.

TEL

Bought in August 2004 for $5.97, April 2005 for $6.05, May 2005 for $5.95, February 2006 for $5.60 and April 2006 for $5.45. All bought on the downtrend of course. That makes 5/5 losers -ouch!

So here is the final scoreboard:

Winners: 6
Neutral: 5
Failures: 8

How is that for honesty? So as a paid fund manager under your stewardship Dimebag are you going to sack me on these results? Allow me to put up the case for my continued employment.

As my 'boss' Dimebag, I think it is unfair to judge my income portfolio against a standard to which it was never meant to match up.

The purpose of this income portfolio was/is to produce income, and this is exactly what it has done. I would argue that if you add my 'neutral' total to the 'winners' total I get a favourable 11:8 result. That is a success record which is comparable to Phaedrus's trades, I think.

The other reason why this exercise doesn't prove much is that I am only considering five shares. That means the result can be skewed easily by one unfavourable event. Without LLU for instance, and the subsequent collapse in the Telecom share price, my five Telecom 'losers' could very well have become 'neutrals', which would tip the scales in my favour 16:3. I would argue that it is unreasonable to expect one of your analysts to predict such a one

[Snoopy]

quote:Originally posted by Westie


quote:Lyttelton Port cans dividend after failed takeover

The Lyttelton Port Company board has punished Port of Otago for stymying the plan to sell out to Hong Kong giant Hutchison Port Holdings, by canning its December half year dividend

oops, there goes the lpc dividend snoopy. prepare those floppy ears for another round of bashing


This refers to the dividend that is normally paid in March 2006 for the December 2005 half year Westie. You are right in that if dividends do not resume I may have to shunt this share across to my 'growth' portfolio. But LPC is at the moment a 'situational share'.
We will have to see what deal they come to with POL.

There has been no reduction in the intrinsic value of LPC in this announcement. So I am not concerned. Indeed if the decision is retain these earnings to grow the business I will support the boards decision. And, if this action loosens the grip on some of Mum and Dad's shares, I will look at buying - at the right price of course.

SNOOPY

[Snow Leopard]

Every cloud has a sliver lining, Snoopy :)

[Dimebag]

SNOOPY,

Fair enough mate. As I said, it's all a matter of results; if you're happy with the results you're getting, don't take anything I say to heart.

A question can be raised, of course, as to whether a 'neutral' is a neutral or a negative. I guess that one depends on our ambitions at the time of purchase. Personally, I buy stocks to go up, not so they can sit around at acquisition cost. However, unlikely yourself, I am not buying primarily for yield.

As I mentioned, in many of the stocks I listed, I didn't necessarily lose money. I just often found myself buying stocks on the cheap, only to discover further down the track that that was actually about a fair value and often selling for about the same level (on the averaged down portion). So certain 'neutrals' strike as a negative in these examples.

All in all though, that is not a bad result. Well done with the results - if you can accomplish you're investment objectives then I congratulate you.

Thanks for the thoughts- always appreciate your comments, even if I don't agree. Its nice to have a posters writing logical and well written pieces.

Best regards,
Dimebag

[Dimebag]

PS

I would like to emphasise that I am not being critical of your value-based application. As mentioned, value investing is a difficult discipline and few people have made as many mistakes as I have. I've been proven catestrophically wrong over and over again. It's more a philosophical discussion.

Cheers,
Dimebag

PPS
I didn't see any WHS in there though?

[Snoopy]

quote:Originally posted by Dimebag



PPS
I didn't see any WHS in there though?


WHS isn't part of my income investment strategy, so I didn't mention it. Neither is CEN, SCT or CAH (RIP) WPT(RIP), even though I hold (or used to hold in the case of CAH) all of them.

So I'll 'complete the picture' so that you can see that I'm not fudging things by exclusion.

CAH

No purchases in the last 5 years, so no 'score'. Appreciated from $1.70 to $2.75 over that time, with some dividend income. Taken out by Graeme Hart earlier this year.

CEN

No purchases in the last five years, so no 'score'. Share price appreciation has been from around $3 to $7.70 over that time, accompanied by a consummate increase in dividends.

SCT

Bought shares in June 2001 for $1.11 equivalent, following a slump in share price due to a collapse in US orders. Bought shares in December 2005 for $1.91 and February 2006 at $1.86 following most recent downtrend after profit warning due to higher than anticipated subcontarcting costs. Current price around $2.20. Score 3/3

WHS

Bought May/June 2003 for $4.30 average, following a profit downgrade caused by the Australian operation. With hindsight this has proved my only poor bet in the growth portfolio. Dividends have been maintained though. Score 0/1

WPT

No purchases over the last five years. Share price rose from $10 to $19 over that time with good dividends along the way. Now converted to WBC shares in Australia.

I haven't been very active with my 'growth' portfolio, as you can see having made only four purcahases in the last five years. However the results of 'buying in downtrends' indicate.

Success: 3
Failure: 1

So I can't complain too much. For this growth portfolio I think comparison with the NZX50 is appropriate. I haven't run the figures myself (must pay more attention to my growth portfolio this year), but I'll stick my neck out and say that I'm ahead!

SNOOPY

[Snoopy]

quote:Originally posted by Dimebag

Snoopy,

I think part of it is you attributing subsequent negative events as being 'bad luck'. You see a stock, it looks cheap, you buy it, bad news comes out, the stock goes down, and then you use the expectancy math in your WHS example to say, well, I just got unlucky.

What I am arguing is that, more likely, the stock looked cheap to you because you didn't fully appreciate the business risks at the time that subsequently lead to its fall. Had you done so, the stock might not have looked so cheap. This is a trap I have fallen into many times.

Sometimes, things play out well. The risks don't materialise, the stock goes up, and naturally, you attribute this to your own analytical skill and the folly of Mr Market. However, just as likely, you have been blissfully ignorant of true business risks and have again, just got lucky.


It is only in very recent years that I have come to acknowledge the role of luck in my investment decisions Dimebag. So to come to this conclusion yourself relatively early in your investment career speaks volumes for your investor persona maturity. Your post is absolutely right in general thrust. It is sobering but nevertheless realistic to acknowledge that many of my own greatest investment successes have 'just been luck'.

There was a study on Warren Buffet done, quite recently, to find out if his success could just be attributed to being 'the lucky guy on the spot'. The surprising result was that in statistical terms, the author could not rule out the possibility that Warren had just been lucky. However, what finally swung the author in favour of Warren was the magnitude of his market outperformance. This could not have been attributable to luck, by any reasonable statistical test.

As for my own investment in the Warehouse, I have to say that I was happy with the way things panned out. Perhaps you find that statement surprising when you consider that I 'lost'. But investment is an uncertain process, and that leads to a surprising conclusion. You cannot judge your investment success based only on the final result! Because to do so, means that you do not acknowledge that the initial investment uncertainty existed.

I think that taking a bet that Stephen Tindall would be able to sort out the Australian operations was a good bet to make. For only hindsight provided the certainty that it was a loser. ST does (or did before the Australian fiasco) have a superlative record in retail. I know that Australia created a hurdle, but I don't think you can say it was unjumpable to ST, without the benefit of hindsight. Imagine where the WHS share price would be now if ST had succeeded in Australia? Given that potential, I think that I have got off lightly with making a 15% loss on the deal.

SNOOPY

[duncan macgregor]

SNOOPY, Dont wish to be a pain in the butt but you miss some of the most important things in your recap.
1, How much has the share market in general gone up in the given times.
2, Inflation raises your entry price, ex five bucks was worth more five years ago take that higher level into account.
3 The average investor with nothing up top invested in all the companies. In other words did your system increase as much as the market.
4, Have you worked out if your system got in front of the MARY HOME stick them under the bed wonders.
5, Allow 4 or 5pc average div, then what the market increased, then i think you would qualify for a col in the back of the sat herald.
Your old pal having a go at you. macdunk

[Deev8]

quote:Originally posted by Dimebag

My biggest investment influence has far and away been Warren Buffett, and I am thoroughly acquainted with his Mr Market sermonising.

It was actually Benjamin Graham who originally talked and wrote about his bipolar partner Mr Market. Buffett, being a student, employee and friend of Graham's later adopted the character.

[Dimebag]

Deev8

Yes - correct! Buffett is, however, well known for quoting that allegory, but well spotted.

Cheers,
Dimebag

[Snoopy]

quote:Originally posted by duncan macgregor

SNOOPY, Dont wish to be a pain in the butt but you miss some of the most important things in your recap.


You are a hard man Macdunk


quote:
1, How much has the share market in general gone up in the given times.


Couldn't find that information on the NZX website (!)

However, after a web search I found a Fisher Funds report that suggests the NZX50 has gone up by 87% in the last five years.

That is a compounding rate of return of 13.3% per annum


quote:
2, Inflation raises your entry price, ex five bucks was worth more five years ago take that higher level into account.


True, but this is the same for both the index and my own results, and has an equally detrimental effect on each. So no need to consider inflation for comparative purposes


quote:
3 The average investor with nothing up top invested in all the companies. In other words did your system increase as much as the market.


I took my growth portfolio of CAH, CEN, SCT, WHS and WPT and assumed that $10,000 was invested in each for the five year period from 31st March 2001 and 31st March 2006, including dividends. There were two exceptions to this.

1/ I didn't start my investment in WHS until June 2003, because that is when I bought the shares.

2/ My investment in WPT terminated on 11th July 2005 because that is when that company was delisted.

My overall return was 84.5% over five years, which works out at 13.0%pa, or 0.3% behind the NZX50. I'm a wee bit surprised I didn't do better. But on closer inspection I did. My result was obtained using less capital than the NZX50 because of my late buying of WHS and early selling of WPT. Adjust for that and my comparable return jumps to 14.4% pa. Also my investment in the five companies was not equal with the worst performing investment, WHS, making up a much lesser part of my portfolio than the model suggests. Taking that into account I think my real return is closer to 14.8% compounding.

A 1.5% margin over the index may not sound like a lot. But given the performance of the NZX50 is exaggerated by assuming all dividends are immediately reinvested (I did not assume that for dividends derived by me), I think my margin above the 'real' 'NZSE40 plus dividends' index (sustained for 5 years remember) is around 2%pa.

If you allow me the luxury of blowing my own trumpet here, I think that is quite an impressive result. That should easily put me in the top 10% of investors, if you accept the long term view that 90% of investors fail to match the index over the long term.


quote:
4, Have you worked out if your system got in front of the MARY HOME stick them under the bed wonders.


Against my 'under the bed system' you mean? I didn't do any trading of my own portfolio over the five year time frame.

[quote]quote:
5, Allow 4 or 5pc average div, then what the market increased, then i think you would qualify for a col in the back of the sat herald.
<hr height="1"

[Phaedrus]

Snoopy, the NZSX50 didn't exist 5 years ago. It has gone up 87% since its inception in early 2003.

[Snoopy]

quote:Originally posted by Phaedrus

Snoopy, the NZSX50 didn't exist 5 years ago. It has gone up 87% since its inception in early 2003.


Oh great so we can't use the NZX50 then :-(.

Perhaps all is not lost. Maybe we could use two years performance of the NZSE40 for FY2002 and FY2003, and add on the NZX50 performance for FY2004, FY2005 and FY2006?

Of course you would have to adjust the NZX50 to be compatible with the NZSE40. Let's say the weighted dividend yield on the top 50 was 6% (a guess). With imputation credits that turns into 9%. The NZX50 reinvests imputed dividends, as far as I can tell. So assuming this was done once per year (I think the reinvestment is continuous as dividends are paid, but this will at least give us a lower bound correction figure) the cumulative increased investment from dividends amounts to:

1.09 x 1.09 x 1.09= 1.3

Thus over a three year period, the NZX50 index is at least 30% overvalued on a capital basis. The real three year caital gain is 87%/1.3=67%. That is quite a difference and the reason that even medium term, I think the NZX50 is not a good comparative yardstick.

Now does anyone have the NZSE40 figures for FY2002 and FY2001?

SNOOPY

[duncan macgregor]

SNOOPY, WHO cares about the NZSE40 for 2002-2003 all that represents is the monkey throwing a dart. The NX50 represents the monkey throwing some more darts. The monkey throwing the darts will win 50pc of the time. Mary Home from the Herald thinks that paying the monkey to throw the dart instead of doing it yourself is a great idea. I look at my results then compare them with the monkey and feel very clever at beating the average dart throwing monkey by a country mile. You on the other hand SNOOP MY OLD MATE are racing the monkey neck and neck. You come out with beating the bank as a yardstick, [THE BLOODY MONKEY BEATS THE BANK]. Not trying to make a monkey out of you but a decent stop loss system will save you from going under one day. macdunk
DISCL my dawg is beating me in the investor competition.

[Halebop]

The NZX50 involves no dart throwing Duncan. Mary's Monkies are given a dart for each company in the index and not even asked to throw it. Darts are pushed firmly into each value on the board.

...could any portfolio / index investor really think (the illusion of) diversification is achieved by matching their investments to index weightings? In NZ this is simply a proxy for owning a lot of a single Telco company and to a lessor extent a building supply / construction company, a casino company, a healthcare hardware manufacturer and an airport. There is not much diversification in index matching and this plan that has a good chance of achieving the worst of both worlds. The worst sorts of companies are those that keep asking you for money or (same thing in a different name) issuing shares for acquisitions. But if I keep asking you for money I'll rise up the index benchmarks because I'll be both bigger and have more diverse ownership (because current owners can't keep up with my appetite for issuing equity). So index investing ensures you have to follow the spectacular duds - companies growing for growth's sake and companies without much scope for growth. And if you have to follow the spectacular duds you can't remove the negative influences that lets a portfolio of picked winners win.

[Dimebag]

Coming back to the original thrust of this thread - what are the key philosophical differences separating a "Snoopy" type investor from a "Phaedrus" type one - I think one key aspect is one's philosophical views as to how one should view and interact with the "market".

A value investor (aka Snoopy) typically see themselves as being 'smarter' than the market. The market is seen as aberrational, irrational, and often wrong. One is therefore free to disregard market movements and invest in accordance with one's own views as to appropriate prices, of which 'underlying value' form the basis. Certainly one does not use market prices as a guide to appropriate behaviour, and in fact, value investors will often act contrary to prevailing views. Contrarianism is seen as an important aspect of success.

On the other hand, Phaedrus type investors (who might loosely be categorised as "momentum" investors) see the market as being smarter themselves. They may have an opinion as to value, but ultimately, they see it wise to defer to the market and futile to fight against it. They therefore use market prices as a guide to appropriate behaviour. If money is flowing into a particular market/sector/stock, the perception is that there is good reason for this, and one should go along for the ride until market prices dictate otherwise.

An important adjunct to this is the belief that market prices move in 'trends'. This is important, because it is often said that 'you should buy strength and sell weakness'. "Why would you buy a stock that is going down when you can buy one that is going up." Such statements would be nonsensical without the underlying belief that past price movements are an important guide to future movements.

Value investors typically either (1) do not believe prices move in trends (past movements are of no predictive value, or (2) have no opinion as to whether they in fact move in trends, seeing it as largely irrelevant to the value investing process, or (3) think that such trends do exist, but that trading in accordance with them is futile, difficult, too risky, or simply out of line with core value philosophies, of which have proven successful over many generations. Why compromise a winning formula?

Personally, I've been in the value camp for virtually all my investing career, and still invest virtually exclusively in accordance with these doctrines. However, recent reading has helped me appreciate how contrary ideologies could be formed and potentially used with great success.

The fact is, prices do move in trends. I have largely sat out of the commodities boom cycle because I wasn't paying enough attention early enough, and ultimately didn't feel well enough qualified to value many commodity producers. As a result, I've missed out on some phenominal profits. Value investors would say so what. I'm up 27%pa compound over the last two and a half years (although only 12.1%pa compound over the last one and a half). Best to stick with what you know. But that doesn't change the fact that big profits have been missed.

A trend follower would have spotted the movement of money into commodities early and hopped on the gravy train. One's lack of predictive ability, or ability to comprehensively value or fortell future events is no obstacle. All one needed to do was identify that money in fact was moving into commodities, and invest on this basis, and in doing so, very large profits would have been made. Same goes with technology last 90s.

My only remaining hesitation at this point in seeing this as a comprehensive & viable investment ideology is its ability to get you out near enough to the top, without false triggers too early, to make it all worthwhile. Many momentum investors were crucified in the aftermath of the 2000 tech bubble, and one wonders why the end of the trend was not identified by investors whose identification of momentum and money flows is their bread and butter. However, I certainly see potential for a viable investment thesis.

Thoughts?

[Mick100]

quote:Originally posted by Dimebag

Coming back to the original thrust of this thread - what are the key philosophical differences separating a "Snoopy" type investor from a "Phaedrus" type one - I think one key aspect is one's philosophical views as to how one should view and interact with the "market".

A value investor (aka Snoopy) typically see themselves as being 'smarter' than the market. The market is seen as aberrational, irrational, and often wrong. One is therefore free to disregard market movements and invest in accordance with one's own views as to appropriate prices, of which 'underlying value' form the basis. Certainly one does not use market prices as a guide to appropriate behaviour, and in fact, value investors will often act contrary to prevailing views. Contrarianism is seen as an important aspect of success.

On the other hand, Phaedrus type investors (who might loosely be categorised as "momentum" investors) see the market as being smarter themselves. They may have an opinion as to value, but ultimately, they see it wise to defer to the market and futile to fight against it. They therefore use market prices as a guide to appropriate behaviour. If money is flowing into a particular market/sector/stock, the perception is that there is good reason for this, and one should go along for the ride until market prices dictate otherwise.


I think you have summerised the differences between Snoopy's and Pheadrus's approaches to investing well Dimebag

.

quote:Originally posted by Dimebag
The fact is, prices do move in trends. I have largely sat out of the commodities boom cycle because I wasn't paying enough attention early enough, and ultimately didn't feel well enough qualified to value many commodity producers. As a result, I've missed out on some phenominal profits. Value investors would say so what. I'm up 27%pa compound over the last two and a half years (although only 12.1%pa compound over the last one and a half). Best to stick with what you know. But that doesn't change the fact that big profits have been missed.



A trend follower would have spotted the movement of money into commodities early and hopped on the gravy train. One's lack of predictive ability, or ability to comprehensively value or fortell future events is no obstacle. All one needed to do was identify that money in fact was moving into commodities, and invest on this basis, and in doing so, very large profits would have been made. Same goes with technology last 90s.



When I moved into commodities in 02-03 it was very much a contrarian move. It was not a "follow the money move" because back in 2002 there was not alot of money flowing into commodities. There were only a couple of old hands such as Jim rogers and Marc Faber calling a new bull market in commodities.
Personnally, I think a good contrarian investor will out perform a good value investor by a long way. When all the money is flowing into one sector such as technology in the 90's other sectors are neglected and "capital starved" such as commodities in the 90's
In 10 yrs time when all the money is flowing into commodities another sector(s) will be "capital starved". This may become apparent before the bull market in commodities ends giving the contrarians time to get into position

[Heavy Metal]

quote:Originally posted by Snoopy



Of course you would have to adjust the NZX50 to be compatible with the NZSE40. Let's say the weighted dividend yield on the top 50 was 6% (a guess). With imputation credits that turns into 9%. The NZX50 reinvests imputed dividends, as far as I can tell. So assuming this was done once per year (I think the reinvestment is continuous as dividends are paid, but this will at least give us a lower bound correction figure) the cumulative increased investment from dividends amounts to:

1.09 x 1.09 x 1.09= 1.3

Thus over a three year period, the NZX50 index is at least 30% overvalued on a capital basis. The real three year caital gain is 87%/1.3=67%. That is quite a difference and the reason that even medium term, I think the NZX50 is not a good comparative yardstick.




If you use the comparison in NZX ALL capital and gross indices, the NZX50 index is 31% overvalued and the real index would be about 2772 at the moment. The difference between gross and capital is worse then you think Snoopy: 1.87/1.31 = 1.43. Thus the capital index has only gone up about 43% since early 2003. This means three things:

1. More than half of the rise in the Index since 2003 has been illusory.
2. Passive funds and highly diversified portfolios (a la Mary Holm) simply cannot match the index.
3. Snoopy has done better than those on this site give him credit for.

[duncan macgregor]

quote:Originally posted by Mick100
When I moved into commodities in 02-03 it was very much a contrarian move. It was not a "follow the money move" because back in 2002 there was not alot of money flowing into commodities. There were only a couple of old hands such as Jim rogers and Marc Faber calling a new bull market in commodities.
Personnally, I think a good contrarian investor will out perform a good value investor by a long way. When all the money is flowing into one sector such as technology in the 90's other sectors are neglected and "capital starved" such as commodities in the 90's
In 10 yrs time when all the money is flowing into commodities another sector(s) will be "capital starved". This may become apparent before the bull market in commodities ends giving the contrarians time to get into position

It is not being contrarian to see that a sector will move into favour, and beat the herd to it. It is not being contrarian to understand how the herd will react to a change in the market place. This is what is called the common sense approach to investing. The only thing that counts is tomorrows price.
Its common sense in predicting the sectors that rise first, the companies second, then have the tools in place to pull the pin.
Nobody is right all the time, the answer is have systems in place to get you out when you make a wrong move. Stick with oil and power companies that are in profit in the short term. Manufacturing is a no no with china taking over, and i think your mining companies in general cant go wrong. What do you call common sense investing?. I hardly think its contrarian. macdunk

[Dimebag]

Mick,

That is very well done. I'm certainly not suggesting that astute value investors such as yourself could not have picked the coming resource boom before it happened. What I am suggesting is that as a momentum investor, you don't really need to. The two methods are, in some respects, different roads to the same destination. Which method one prefers will probably be a matter of personality.

Personally, I don't think I could handle the stress of being a momentum investor. I enjoy the ability to shut myself off from the market and rest peacefully in the knowledge that if I wake up tomorrow and the market is down 10%, it won't really make a shread of difference to my long-term wealth.

I also aren't yet convinced that a momentum strategy could outperform a value strategy consistently with less risk. Value investing is tried and true, and relatively low risk.

Finally, value investing is what I have more experience and, I hope, slightly more skill in, and I enjoy the intellectual stimulation that comes with trying to value companies and predict events.

But, as always, its horses for courses.

Thanks for you comments,
Regards,
Dimebag

[Mick100]

quote:Originally posted by duncan macgregor

It is not being contrarian to see that a sector will move into favour, and beat the herd to it.


So what's your definition of contrarian investing Macdunk

Don't tell me your going to rename "contrarian investing" as "common sense investing" and then claim it as one of your new theories
,

[Mick100]

quote:Originally posted by Dimebag

Mick,

That is very well done. I'm certainly not suggesting that astute value investors such as yourself could not have picked the coming resource boom before it happened. What I am suggesting is that as a momentum investor, you don't really need to. The two methods are, in some respects, different roads to the same destination. Which method one prefers will probably be a matter of personality.

Personally, I don't think I could handle the stress of being a momentum investor. I enjoy the ability to shut myself off from the market and rest peacefully in the knowledge that if I wake up tomorrow and the market is down 10%, it won't really make a shread of difference to my long-term wealth.

I also aren't yet convinced that a momentum strategy could outperform a value strategy consistently with less risk. Value investing is tried and true, and relatively low risk.

Finally, value investing is what I have more experience and, I hope, slightly more skill in, and I enjoy the intellectual stimulation that comes with trying to value companies and predict events.

But, as always, its horses for courses.

Thanks for you comments,
Regards,
Dimebag


I agree with your comments Dimebag

The CRB index turned up out of a 20 yr downtrend in 2001 and I started moving into commodities one yr later so some may argue that it was momentum investing - I certainly didn't feel as though I was momentum investing at the time. Those people who have got on board in the last 12 months could be classed as momentum investors.
So the momentum investors have joined the contrarians in commodities and it's the momentum investors who are driving this bull market.

As a contrarian I am still looking for overlooked, undervalued sectors within the commodities bull. While oil, precious metals, base metals,iron ore, coal etc have all had huge increases in prices over the past few yrs, the agricultural commodities have been overlooked by the market. In the last few months I have bought two agricultural based companies and I'm looking at a third company.
I'm expecting agricultrural commodities to be the nex big movers within the commodities bull market.
.

[Phaedrus]

Dimebag, I thought that was a nice even-handed summary. Well done. One minor quibble with regard to your statement "My only remaining hesitation at this point in seeing this as a comprehensive & viable investment ideology is its ability to get you out near enough to the top, without false triggers too early....." The aim is not to get out at (or even near) the top but rather when the uptrend has clearly weakened - or ended. Once you accept the impossibility of buying at the bottom and selling at the top, life becomes much easier.

Heavy Metal, Discussions of Capital vs Gross indices are made very difficult because the NZX does not supply NZSX50 Cap index data. Swine. I am not at all sure, though, how valid it is to compare NZX ALL Cap index with the NZSX50 Gross index as you have done. Over the last 3 years, the NZSX50 has risen at the rate of 20.4% pa while the NZX All Cap has risen at 11% pa. Theoretically this should mean that the dividend yield on the NZX50 is about 9.4%. It simply can't be that high. I have tried to calculate NZSX50 div yield and got about 3.8%. Does anyone know what the "official" figure is?

Regardless of all this discussion, I still consider that the NZSE50 Gross Index provides a realistic and attainable yardstick against which to measure your own performance. Dimebag beats it, Halebop beats it, I beat it, plenty of posters here beat it. Consistently. Aiming too high can result in inferior performance - but so can aiming too low.

Duncan, It is interesting that the NZSX50 average rise of 20% is exactly the figure that you use for the slope of your "timelines". I have never been a fan of your system, but at the very least it would give an indication as to whether any stock that you hold is beating the market average or not.

I have trouble understanding why many people become so fixated on Warren Buffett's methods - often to the total exclusion of all else. Buffett makes around 23% pa on average. Plenty of more active investors have way surpassed his returns. For example, $1 in WB's Berkshire Hathaway in 1969 had become $67 by 1988 but $1 in Soros' Quantum Fund became $227 over the same period. Peter Lynch's Magellan Fund averaged over 29% pa. from 1977 - 1990.
Buffett and his methods are NOT infallible!

[Heavy Metal]

quote:Originally posted by Phaedrus

Heavy Metal, Discussions of Capital vs Gross indices are made very difficult because the NZX does not supply NZSX50 Cap index data. Swine. I am not at all sure, though, how valid it is to compare NZX ALL Cap index with the NZSX50 Gross index as you have done. Over the last 3 years, the NZSX50 has risen at the rate of 20.4% pa while the NZX All Cap has risen at 11% pa. Theoretically this should mean that the dividend yield on the NZX50 is about 9.4%. It simply can't be that high. I have tried to calculate NZSX50 div yield and got about 3.8%. Does anyone know what the "official" figure is?


Phaedrus, the NZX deliberately does not provide a NZX50 capital index because they know full well that fund managers would ditch the overinflated Gross Index for the capital index if was ever provided again. The cap index provides a fair comparison to international sharemarkets and a realistic yardstick for passive funds.

Actually the NZX All Gross and the NZX50 Gross have performed very similarly to each other over the past 3 years and are still at similar values. Since 30/4/03 the NZX All Gross has gone up 78% while the NZX50 Gross has gone up 79%. The market cap of both indices are also similar. Thus the theoretical NZX50 Capital index is likely to be performing the same as the NZX All Cap index.

The (gross) div yield of 9.4% for the NZX50 sounds plausible given Telecom dominates the weighted index and pays a high yield.

[Halebop]

quote:Originally posted by Phaedrus

I have trouble understanding why many people become so fixated on Warren Buffett's methods - often to the total exclusion of all else. Buffett makes around 23% pa on average. Plenty of more active investors have way surpassed his returns. For example, $1 in WB's Berkshire Hathaway in 1969 had become $67 by 1988 but $1 in Soros' Quantum Fund became $227 over the same period. Peter Lynch's Magellan Fund averaged over 29% pa. from 1977 - 1990.

Buffett and his methods are NOT infallible!


Buffett's BUY methodologies reduce risk, they don't add a lot to profits results. Anyone following a short cutted Buffett valuation technique that ignores the qualitative factors should really only earn something aproximating market averages, particuarly if they follow a portfolio approach as well. Buffett has stated most of his profits are from a dozen or so investments (most notably Geico and at least back when he said it Coca Cola). So anyone single mindedly investing for such a long period of time could create a similar amount of "luck".

The real trick is that most investors would probably become bored of 40+ years of the same old same old. I know in my case I have some clear goals about how much money I want to make and how quickly I want to make it. Once I'm there I suspect you won't see me for dust and a portion of future returns will be gladly sacrificed for travel, hobbies and sharing with others.

Buffett's reputation is partly a result of being in the public domain so long. What I suspect most Buffett watchers fail to factor is the huge fees Buffett enjoyed early on from his management of the original partnerships. While he made great returns for investors back then, his profit share was massive by even todays standards (and Buffett is now quite disparaging of managers siphoning investor wealth). He's had 30+ years to compound those fat pay days as well.

[Mick100]

quote:Originally posted by Phaedrus
[

I have trouble understanding why many people become so fixated on Warren Buffett's methods - often to the total exclusion of all else. Buffett makes around 23% pa on average. Plenty of more active investors have way surpassed his returns. For example, $1 in WB's Berkshire Hathaway in 1969 had become $67 by 1988 but $1 in Soros' Quantum Fund became $227 over the same period. Peter Lynch's Magellan Fund averaged over 29% pa. from 1977 - 1990.
Buffett and his methods are NOT infallible!


I'v read 3 or 4 Buffet books
The most recent one was "The new Buffettology" (2002)
Chapter 5 is titled "The hidden danger: The type of business Warren fears and avoids"

quote
"warren does not want to invest in price competitive, 'sick', commodity-type business"

After reading that chapter I realised that this had to be the best contrarian indicator that I had ever seen in my short investing life.
So I don't regret reading the Buffett books but I won't bother reading any more of them unless the man writes a book himself - that I would read.
.

[duncan macgregor]

quote:Originally posted by Mick100
So what's your definition of contrarian investing Macdunk

Don't tell me your going to rename "contrarian investing" as "common sense investing" and then claim it as one of your new theories
,
I never claim anything as my own in the investing world unless i own it outright.
I think you have the wrong meaning of contrarian. SNOOPY is more contrarian than you or I, he holds a share regardless of the downtrend and buys more. PHAEDRUS is the extreme opposite, he gets out a share when the market tells him.
You my friend have more in common with my investment style than you care to admit. We look for trends in the future. We work out the influences that will giude the market, [sign posts at the side of the road] then try and beat the herd there. SNOOPY is to caught up with his arithmetic, and PHAEDRUS waits until the herd runs before joining them to take advantage.
We are inclined to work out what the next rising sector will be first, then look for the company second. I have a start up for you to check out, which is SPY. Its a penny dreadfull, start with a five bob stake, then average up when the sp rises. I think it might be a good outsider. You and i both know that agriculture [dont forget forestry]is the next thing to take off. macdunk

[Mick100]

Macdunk, I don't agree with your definition of "contrarian investor". Buying shares which are in a downtrend is simply averaging down. As a contrarian I tend to buy shares that have been trendless over a long period of time - not in a downtrend.

I tend to agree with your point that it is more important to be in the right sector at the right time than to be in the right company.
I think one or two contributers are guity of foccussing too much on company specifics and losing sight of the big picture. I know that I'm not the best company analyst around - snoopy and Dimebag are far more thorough in their analysis than I am. The point is, that you don't have to be a top analyst to make money in the markets.
.

[duncan macgregor]

MICK100& PHAEDRUS, We all want to be carefull here. SNOOPY averaged down on WHS whose price shot up 30pc overnight. He has since sold out or so he says. It only goes to show that nobody in this game backs a certainty. Its a well done from me, what about you lot?. It would be nice to get a pat on the back from your critics even although it was a complete fluke. Now that was a complete contrarian play mick if ever i saw one on SNOOPIES part. macdunk

[Westie]

quote:It would be nice to get a pat on the back from your critics even although it was a complete fluke

Corporate activity in Carter Holt, LPC, & now WHS. Snoopy is getting luckier by the day eh MacDunk. Perhaps he should be buying lotto tickets instead?

[Snoopy]

quote:Originally posted by Phaedrus


I still consider that the NZSE50 Gross Index provides a realistic and attainable yardstick against which to measure your own performance. Dimebag beats it, Halebop beats it, I beat it, plenty of posters here beat it. Consistently. Aiming too high can result in inferior performance - but so can aiming too low.


In the past I have adopted the Warren Buffett approach to the index. Namely I pay little attention to it because I invest in individual shares. Whether all shares added together make some kind of average index return doesn't matter to me. Because I don't invest in 'all shares'. Nevertheless out of interest I have been thinking about some kind of equivalent measuring stick to the NZX50 so that I can better measure my own performance. For my income portfolio I work with 5 shares so I shall call it the 'SNP5'.

I considered taking my gross dividend from each share and reinvesting that gross dividend in the share that produced it on the 'ex-dividend date'. That is fine, and equates to the idea of the NZX50 where gross dividends are reinvested. Except that the shares that paid bigger dividends would increase faster in size compared to those that paid lesser dividends using this method. Thus over time the shares that paid bigger dividends would overwhelm the others in my supposedly equal slice SNP5 pie.

A better approximation would be to take each dividend and invest it across all five shares in the SNP5 at the same time. That way the relative slice of each share in the SNP5 five pie would not be distorted by dividend payments. However, to do this I now need the price of all 5 shares that make up the SNP5 on the day that every dividend from every company goes 'ex'. Assume I have 5 shares in my portfolio that pay two dividends annually. That means I now need 5x2x5=50 pieces of data, plus the years opening and closing prices (another 10) to calculate my SNP5 index each year. That is do-able. But it still requires 6 times as many data points compared to the number needed to calculate the non-accumulation index which is only 10 per year (the year opening and year closing price of each share).

Transferring this calculation logic to the NZX50, you actually need 50x2x50= 5000 data points just to calculate the NZX50 during one year. Also because each dividend has to be invested across 50 shares, to preserve proportionality, the trading fees that are not included at all in the NZX50 would start to be significant. I think you can see what I am leading up to here.

I don't regard the NZX50 is a practical yardstick because:

1/ It requires the reinvestment of the gross dividend, when in reality everyone has to pay tax so, at best, only the net dividend is available for reinvestment.
2/ It requires fifty times the amount of data just to calculate it, compared to the non accumulation index equivalent.
3/ It ignores the stock exchange trading fees that are incurred in the 50 transactions that occur each and every time a dividend of any size is paid.


Furthermore the error induced because of 1/ and 3/ is cumulative as the NZX50 index compounds from year to year. The error may be only 2% (a guess) in any given year, which doesn't sound too bad. However, if you compound this error over say 20 years the error jumps to 50% of the total (=1.02^20).

That means I consider Phaedrus's statement that the:

"NZSE50 Gross Index provides a realistic and attainable yardstick"

is at best incomplete. Phaedrus has not put a reference time limit on his statement. That means he is saying that any error due to the complete disregard of trading costs and tax is acceptable. I put it to Phaedrus that an error of 2% might be acceptable in a yardstick. But an error of 50% certainly would not be.

I also take issue with the comment that Hale

[lanenz]

P and others have made a comparision to their portfolio compared to the top 10 or the top 50 stocks in NZ. Depending on what you have invested in it can give you a biased outcome. If you have invested in each of the stocks and invested according to their weighting then as long as you didnt invest into Telecom the last few years you would have far exceeded the index. Or to put it in another light, it should be fair to say that at least 80% of investors who are investing in the top 10 or top 50 stocks (excluding Telecom) will be ahead of the index. Does that make the suposed smart money not so smart by investing in our biggest listed company. Or should they have listened to the likes the novice investors who dont want the so called boring stocks like Telecom. For the likes of Snoopy or longer term holders then to compare apples with apples you need to look over a longer time period.

BHP which did nothing for years went from around $8 to $30 in the space of 3 years. Unless you are investing short term then i dont see anything wrong with Snoppys system.

Some will say that Snoppy was lucky with WHS. Again what a load of bollocks. As long as he is holding these stocks that have performed poorly of late then sooner or later the bargain hunters, opportunist, takeovers etc will spring board these stocks from time to time. Over time, luck will have nothing to do with it, the law of averages will take care of that.

The Warren Buffet followers should take note and see how he does from year 2005 to 2020. See if he can still average over 20% return.
After a while the law of averages kick in even for the expert. The only difference with him is that he will contiune to out perform most other investors over time.

[Snow Leopard]

RE: Point 1.

quote:NZX: Index calculation (http://www.nzx.com/nzxmarket/indices/index_calculation)
Dividends


For the NZX Gross Indices, the dividend figure used is the net dividend, exclusive of imputation credits, but without deduction of any withholding tax. This methodology has been in place since 1 October 2005. Prior to that date, the NZX Gross Indices used the full dividend amount, including imputation credits.



RE: Point 2.
The NZX very kindly does this calculation for you.

RE: Point 3.
Very valid.

The calculation of 'personal' indices is a very personal thing, and one that I have considered at some length of late, mainly because I have been trying quantify my own performance.
Accurate calculations of your own prowess would need to take into account the amount of monies added or removed from your portfolio and the dates on which these events happened, basically you would be doing unit price calculations as the funds do.

However for your SNP5 if you want to keep things nice and simple then the capital value change plus the simple addition of the dividends over a period of up to twelve months is not going to vary significantly from a more complex formula. For periods over twelve months you can multiply the previous complete twelve month performances and the current period up.

However how do you handle the situation of selling out of a share (the SNP4) or buying a new share (the SNP6) during the course of the year?
Fun eh!

[duncan macgregor]

quote:Originally posted by Phaedrus
Duncan, It is interesting that the NZSX50 average rise of 20% is exactly the figure that you use for the slope of your "timelines". I have never been a fan of your system, but at the very least it would give an indication as to whether any stock that you hold is beating the market average or not.

I see that you are starting to wake up to what a time line is all about. It is not a where all end all investing system, it only is a easy to see guide of where my investment should be at any given time in the future. I have shares in companies at completely different prices. I can compare at a glance one against the other plus my position against the average investor.
My 20pc time line is only a rough indication of the markets performance by the average investor over recent periods. I never get to involved working out the fundamentals, its pointless it is much better to have a strict set of rules before you buy.
I much prefer to devote my energies to selecting the sector in the market that will rise then select the company second. I seem to be one of the few that gives out what and when they buy so you can judge my systems on that. macdunk

[Snoopy]

quote:Originally posted by Paper Tiger

RE: Point 1.
NZX: Index calculation

Dividends

For the NZX Gross Indices, the dividend figure used is the net dividend, exclusive of imputation credits, but without deduction of any withholding tax. This methodology has been in place since 1 October 2005. Prior to that date, the NZX Gross Indices used the full dividend amount, including imputation credits.


So NZX have changed the rules quite recently on this?

Do you have a web reference PT? I went to the NZX site and clicked the link on how they calculate the NZX50. There was no mention of any of this. I wonder if the NZX have back adjusted their calculations for the NZX50 for the 3rd March 2003 to 1st October 2005 period of existance, in recognition of their revised calculation rules?


quote:
RE: Point 2.
The NZX very kindly does this calculation for you.


Yes that is true but it isn't the point I was trying to make. If you want to compare your performance with the NZX50, then you have to be able to calculate your own 'index' according to similar rules to what the NZX50 uses. I don't doubt the ability of the NZX to calculate the NZX50. But IMO it is a meaningless standard unless you can easily calculate your own index, in my case the SNP5, using the same methods for comparison purposes.


quote:
RE: Point 3.
Very valid.


OK


quote:
The calculation of 'personal' indices is a very personal thing, and one that I have considered at some length of late, mainly because I have been trying quantify my own performance.
Accurate calculations of your own prowess would need to take into account the amount of monies added or removed from your portfolio and the dates on which these events happened, basically you would be doing unit price calculations as the funds do.

However for your SNP5 if you want to keep things nice and simple then the capital value change plus the simple addition of the dividends over a period of up to twelve months is not going to vary significantly from a more complex formula. For periods over twelve months you can multiply the previous complete twelve month performances and the current period up.


As a practical exercise using the NZX50 as an 'annual' index, then resetting your calculations at the start of each financial year has some appeal!


quote:
However how do you handle the situation of selling out of a share (the SNP4) or buying a new share (the SNP6) during the course of the year?
Fun eh!


In my case, because I change shares so infrequently, this doesn't matter. I keep the original SNP5 for the whole financial year, then come the new year I make the changes. This system will be inaccurate in that it ignores shares dealings over a few months. But in my case, because I make so few wholesale changes, it is close enough.

SNOOPY

[Snow Leopard]

quote:Originally posted by Snoopy

So NZX have changed the rules quite recently on this?

Do you have a web reference PT? I went to the NZX site and clicked the link on how they calculate the NZX50. There was no mention of any of this. I wonder if the NZX have back adjusted their calculations for the NZX50 for the 3rd March 2003 to 1st October 2005 period of existance, in recognition of their revised calculation rules?


Reference for quote is http://www.nzx.com/nzxmarket/indices/index_calculation and I have amended my earlier post to contain it.
If you are wanting a link to the document about the changes I can not find it, sorry.

As far as I recall they have not revised the NZX50 values from before Oct 2005 to conform to the new rules. Those numbers are set in stone.

[Heavy Metal]

quote:Originally posted by Snoopy



So NZX have changed the rules quite recently on this?

Do you have a web reference PT? I went to the NZX site and clicked the link on how they calculate the NZX50. There was no mention of any of this. I wonder if the NZX have back adjusted their calculations for the NZX50 for the 3rd March 2003 to 1st October 2005 period of existance, in recognition of their revised calculation rules?


http://www.nzx.com/nzxmarket/indices/index_calculation/view

Seems that Weldon caved in to all the criticism of his gross dividend index. However the change has not been backdated to 3 March 2003 so the index in its current format includes a mixture of gross and net dividends, thus providing no meaningful comparison to NZ stockmarket performance before 1 October 2005. The index is a joke.

[winner69]

Prob misunderstood what this is all about whats the point of creating a SNP5 as a benchmark .... benchmarking against yourself doesn't seem to make sense

[Heavy Metal]

quote:Originally posted by Paper Tiger

As far as I recall they have not revised the NZX50 values from before Oct 2005 to conform to the new rules. Those numbers are set in stone.

The numbers are only set in stone while million dollar man Weldon heads the NZX. Once he goes I reckon these silly indices will go and the capital indices reinstated (and recalculated through the dark years of Weldon's reign).

[Snow Leopard]

quote:Orginally posted by Snoopy

I have been thinking about some kind of equivalent measuring stick to the NZX50

Phaedrus has been beating up Snoopy with the NZX50
So Snoopy has decided to get his own stick to poke Phaedrus in the eye with.

[duncan macgregor]

Shame on you paper boy we can do without one eyed posts coming from PHAEDRUS?.

[Snoopy]

quote:Originally posted by winner69

Prob misunderstood what this is all about whats the point of creating a SNP5 as a benchmark .... benchmarking against yourself doesn't seem to make sense


Cold snap frozen the brain this afternoon Winner?

I do my own benchmarking against the bond rate (or twice the bond rate to be more particular). The challenge was thrown out by Phaedrus to benchmark against the NZX50. The SNP5 was my attempt to do that. But now the dreadful distortionary concoction that is the NZX50 has been exposed for what it really is, trying to replicate this index over a mere 5 shares for the SNP5 appears to be not as easy. I am quite happy to do without the SNP5 myself.

SNOOPY

[winner69]

Snoopy ... As a 'fund manager' of your own funds you are an 'active' manager ... no index hugging for you is there.

You say you have an income and a growth component to your portfolio. You also also invest in NZ and Australia shares.

Similar to many real NZ fund managers and there is a tendency by them to treat the Aust and NZ as one and call the asset class 'Trans-Tasman Equities' but use the NZX50 as a benchmark. The Aust opportunities being seen as a means to add value.

So you are just like them ... so the NZX50 seems to be a good benchmark for you ... for all your equity investments

However having your own target (or benchmark) of twice the bond rate is commendable and as such is what your 'benchmark' should be .... or are you selling yourselve short? .. shortchanging yourself?

Over the last 5 years the NZ Govt Bond Index (NZGS) has returned 6.3% while the NZX50 (and its equivalent prior to formation) has returned 15.2% ..... so essentially your benchmark is less than if you had invested in the market. For the last 3 years the numbers are NZXGS 6.0% and NZX50 24.6%.

Point being is that achieving your benchmark/target of twice bond rates is not giving you the rewards that you as an active manager should expect .... maybe you need to raise your target/benchmark or just invest in the index.

Or putting it another way if that was you were offering as a return I wouldn't hire you as a fund manager to look after my money

[duncan macgregor]

What is the point of arguing about the height of a benchmark who cares?. My yardstick is 20pc, under that i do something about it, above that i let things run. I dont go into great mathematical drivel, or do i get into a zombie state of mind and allow the TA to press the buttons for me. When we look at a companies records for instance for the previous year its no better than looking at a TA chart. Its tomorrow that counts devise the system for tomorrows results.
Tomorrows results are influenced by external influences getting to understand those is more to the point than working out last years charts or fundamentals. We have a dropping dollar, we have china undercutting our manufacturers, we have an election looming next year with a give away budget. Our power supply is in a state of crisis, our phone systems are due for radical change.
That is a few of the things to work out before you get to involved in companies records or charts. When you look at the big picture first, it is easier to paint yourself into the little picture.
TA and FA are both usefull tools if you use them to your advantage.
macdunk

[Snoopy]

quote:Originally posted by winner69

Snoopy ... As a 'fund manager' of your own funds you are an 'active' manager ... no index hugging for you is there.


I agree. As I have said many times I take no real interest in 'the index' as such. I do acknowledge its role as a benchmark though. Even if I don't agree that every investment portfolio should be benchmarked against it.


quote:
You say you have an income and a growth component to your portfolio.


I prefer to think of them as two separate income and growth portfolios. But I feel as though I need to rewind things a bit to explain that statement.

Orthodox investment practice is that you should split your assets, across different asset classes. Generally that means property, shares and bonds. For the average homeowner, the value of their house means that property is taken care of. So it makes sense to me to focus on shares and bonds.

While evaluating several bond investments, I became aware that the yield on many of these was less than the dividend yield of many high yielding shares on the NZ share market. Furthermore many of these were the *same* companies: e.g. Sky City Shares vs Sky City Notes, Telecom shares vs Telecom notes. Conventional wisdom is that noteholders are further up the security chain, and the lower returns from notes are a reflection of this greater security. The problem with this is that when an NZ company has got into trouble in the past IME *without exception* the noteholders do not get off scott free. Noteholders almost always lose interest due to them, and mostly they lose capital as well. What capital that remains can be tied up for years and sometimes they lose everything.

IOW as a bondholder you trade off a small premium in interest rate return for a significant downside risk and no capital upside risk. Personally I don't like that 'risk return' equation. IMO it makes greater sense to grab a much greater income (with admittedly greater downside capital risk), but also a significant upside capital risk to balance that. Thus the idea of my 'income' share portfolio was born.

That is why I see my income portfolio as an alternative to bond investment that should not be compared with a share index. Stacking up the SNP5 returns against NZ bonds is the more appropriate benchmark.


quote:
You also also invest in NZ and Australia shares.

Similar to many real NZ fund managers and there is a tendency by them to treat the Aust and NZ as one and call the asset class 'Trans-Tasman Equities' but use the NZX50 as a benchmark. The Aust opportunities being seen as a means to add value.

So you are just like them ... so the NZX50 seems to be a good benchmark for you ... for all your equity investments


No I don't see myself as being like a fund manager in that way.

Many NZ fund managers diversify into Australia because the size of their total funds under management mean that *they have to*. The size of the funds under management mean that they cannot invest in NZ companies outside the NZX50 because:

1/ These managers would 'move the market' in making and withdrawing their investment, thus destroying most of the profit margins inherent in moving positions in a share.
2/ Investing in smaller companies isn't justified anyway because even if a 'huge punt' came off, it would be so small a gain in relation to the overall size of their portfolio it would hardly make a difference to any annual result.

I do not suffer

[duncan macgregor]

SNOOPY, Instead of getting bogged down with more and more about less and less get back to the reason we are in this game. We are in it to make money. If your system is no bloody good change it. If you made 20pc on your money last year you are average if not change it. If you made over 20pc last year you are above average change nothing it aint broke. YOUR OLD MATE MACDUNK ON YOUR SIDE AS USUAL.

[winner69]

Snoopy ... you will find this interesting .... almost like it was written by you

The Perfect Value Investor
http://www.investorsinsight.com/otb.aspx

[winner69]

many seem to rubbish you Snoopy .... but generally your expectations (target) and no doubt performance is far better than hedge funds

Trillions of dollars in hedge funds / highly leveraged and all they aim to do (and don't appear to be doing so over periods of time) is to achieve consistent absolute returns of about 6-7%

[Snoopy]

I think the key difference is focusing on the share price as the unit of return against focusing on the underlying earnings of the company as the unit of return.

A fundamentalist might buy a stock for $1.00 that is earning $0.10 per share. As far as the fundamentalist is concerned, that equates to a 10% return. That return may come in the form of dividends, or a proportion of the profits that is reinvested to increase future corporate profits (which will translate into higher future dividends), but that return is essentially independent of the price.

One who 'buys to keep' doesn't need to worry so much about the resale value of their asset as much as how much ongoing value they can extract from the investment via the underlying profits. It's much like holding a very long-term bond. Interest rates might go up and bond prices fall, but for a long-term owner, at the end of the day, that doesn't change the actual interest dollars that will accrue to the holder.

The very essence of value investing is the notion that an investor ought focus on underlying 'value' rather than price. That is a value investor's point of difference.
If one is convinced that the $0.10 will continue to accrue to shareholder pa, a fall to $0.80 or $0.70 really isn't that bigger deal, and is, to the contrary, seen as an opportunity to pick up more shares at a much higher prospective return. $0.10/$0.70 = 14.3% -decidedly more attractive than 10%.


Around five years ago this thread appeared and I thought readers might be interested to know what was the result of my strategy five years on

3074

As Dimebag noted, the primary objective was to create an 'income generating' portfolio, with any particular linkage to the NZX50 Index being a side issue.
The five shares that were selected for this portfolio have performed rather differently. Anyone following this forum for some time will know that I made a packet out of Restaurant Brands. However, one swan does not make a summer. I ostensibly used the same strategy to pick those other four shares. The question is was my good decision in backing Restaurant Brands outweighed by bad decisions picking other shares ostensibly using the same decision making process?

For comparative purposes I normalised all the share price movements of my portfolio. Each of my investments on 30th September 2005 was assigned a value '1' and all subsequent share price movements shown in relation to that. I then assumed an equal 20% weighting in each of my five holdings at the commencement date and so was able to come up with a combined picture of what my five shares did over the subsequent five years. This was represented in the second graph where I compared by 'combined return' with what happened to the NZX50 index over that same five year period. And yes the NZX50 is a cumulative index that accumulates dividends, so I have done the same. The result shows that after four years of cumulative underperformance, my portfolio startegy has now outperformed the index my a significant margin! Very interesting I thought considering I wasn't really even trying to do that!

SNOOPY

[Snoopy]

The result shows that after four years of cumulative underperformance, my portfolio startegy has now outperformed the index my a significant margin! Very interesting I thought considering I wasn't really even trying to do that!


I have a confession to make. Despite my 'strategy' being to hold these shares in equal amounts for five years, that isn't what I ended up doing. Much of this portfolio has been built over the last five years.

In the extreme case TUA, I owned no shares at all in five years ago. TUA is now a core piece of my income portfolio so it would be disingenuous to leave it out! So I accounted for this by assuming the money I invested in TUA was in cash five years ago (true) and that I earned a net 3.5% on that money over the preceeding twelve months (also true). I then discounted my initial investment in TUA by 3.5% over one year to produce my initial TUA data investment point.

The other problem with my analysis is that I did subsequently purchase shares in all of those companies over that five year period. So my analysis is not a reflection of my actual returns. However, the analysis does answer one philosophical question.

If one has a five year time horizon, is it even sensible to look at picking a five share portfolio, then lock it away in the bottom drawerwithout touching it? The alternative might be to put the money in an index fund. Clearly buy and hold stock picking over a five year period can provide significantly better returns than buying an holding an index fund.

SNOOPY

[Snoopy]

The question is was my good decision in backing Restaurant Brands outweighed by bad decisions picking other shares ostensibly using the same decision making process?


My critics might point out that if it wasn't for Restaurant Brands doing so well, my strategy would not be looking so flash. This is true, and without that 'sudden acceleration' in RBD investment performance over the last year things might look very different, and that really my investment performance is based around a 'one hit wonder'.

Those who think that way might care to reflect that I held RBD for 8 years before committing it into this portfolio, and have travelled overseas to benchmark their performance so that I was absolutely sure about the prospects of my RBD investment. The numbers may show a one hit wonder effect. But this one hit wonder took 13 years of back room portfolio work to nurture!

SNOOPY

[Snoopy]

Snoopy aims to get twice the bank rate, not just beat it. Admittedly this is much easier when interest rates are 5.5% instead of 7.5%!

Snoopy has achieved this goal over the last five years. However, it doesn't look good for Snoopy achieving the target this year - with the Telecom share price slump. Yet there is more than half the year to go, so we shall see. Nevertheless with investing in shares you have to accept risk. And just because one leg looks to be going wrong in the moment, that doesn't mean the overall portfolio strategy *is* wrong.


So how did the income strategy pan out? If I invested a hypothetical $10,000 in each of my five income shares on 30th September 2005, the cashflow I received in the 5 subsequent years is as follows, with net (after tax) return on original capital in brackets:

2006: $2504.68 (5.0%)
2007: $3400.39 (6.8%)
2008: $2372.73 (4.75%)
2009: $2691.43 (5.4%)
2010: $2253.13 (4.5%)

That high cashflow in 2007 was because of the Telecom capital return. The lowest cashflow in 2010 was affected by PGW ceasing to pay dividends in that year. Strictly speaking you could say that cashflow was negative in 2010 if you take the $2344- required for the November 2009 PGW rights issue and $1100- of shares offered in the SKC pseudo rights issue are taken into account. In the former case you could have at least sold the rights on market if you didn't have the capital to take those rights up. In the latter case not taking up your 'rights' means your effective share of SCT is diluted forever after. Fortunately I had plently of capital available from the Lion Nathan takeover and the repatriation of a UK term deposit I had. So in reality I increased my respective share of both SKC and PGW over the period.

The portfolio strategy does highlight the risk of a company overextending themselves and ceasing dividend payments completely (PGW). In my reality I run a parallel growth portfolio that is materially smaller, which nevertheless has not done so well over the GFC. So I have the ability to swap the troubled PGW out of my income portfolio and replace it with SCT (at no cost) which has just started paying good dividends again. This is probably one indication that if you are solely reliant on an income portfolio for 'income', then 5 shares are not enough to balance the ups and downs of the business cycles.

Compared to my target of doubling the bank rate return, the strategy has failed. But it certainly has delivered a consistent 2% above bank rates over the period. And compared to the 'returns' experienced by some of those finance company investors these results are stellar.

SNOOPY

P.S. To help clear up any further mystery of where I source capital from, I should also note that over the 5 years 26.4% of the original invested income portfolio capital has been returned to me in dividends and cash payments. Those that ignore dividends think they are negligible and shouldn't be counted. My bank account says otherwise.

[Snoopy]

For comparative purposes I normalised all the share price movements of my portfolio. Each of my investments on 30th September 2005 was assigned a value '1' and all subsequent share price movements shown in relation to that. I then assumed an equal 20% weighting in each of my five holdings at the commencement date and so was able to come up with a combined picture of what my five shares did over the subsequent five years. The NZX50 is a cumulative index that accumulates dividends, so I have done the same. The result shows that after four years of cumulative underperformance, my portfolio startegy has now outperformed the index my a significant margin! Very interesting I thought considering I wasn't really even trying to do that!


My 'income portfolio strategy' is based around buy and hold. Regular readers however, will know that I took the opportunity over this five years to return some capital to New Zealand. This capital was used to boost all of these 5 income portfolio holdings to a certain degree. The question is were those purchase decisions collectively any good? Did those purchases add any value to my portfolio above buy and hold?

To answer this question I needed to split up the capital I had in each of those companies into a 'buy and hold' component (for the shares I held all the way through) and a 'new net purchases component' to take account of my single sale transaction over that period (some SKC), netted off against any new investment. The weighting between the 'buy and hold component' and the 'new net purchases component' was made corresponding to the actual capital invested in each component. The results are in the chart below:

3116

What I call the Inc + Inc results (which represents the income portfolio together with the incremental purchases) shows an overall gain of 31% over the five year study period, which translates to a 38% better result that just buying and holding the index!

Now some traders may sneer at what amounts to a 6% after tax return per year. I would say those traders are in dreamland if they reckoned they could do better over the whole period of the global financial crisis. That is a 6% after tax return, so for comparison purposes you would need a 9% fixed interest return to match it. For a single year that 6% net 9% gross doesn't sound that impressive. Plenty of sharemarket investors would back themselves to do better, me included, on an annual basis. But over a 5 year period I think what I have achieved is a stunning result. I reckon I have beaten every fund manager in the country, and I mean everyone who has been managing an NZX portfolio over that time. I also consider myself to be in the top 5% of all NZX investors with that result. And I have done this all with NZX top 50 companies, nothing obscure.

I need to add here that the market volatility over the investment period I am considering very much suits my value investment style. I may have outperformed the market by nearly 8% per year over the last five years. I almost certainly will not do so over the next five years. During this point I expect a new wave of critics to surface and call me old fashioned, conservative and out of touch with the current trends. Readers might like to ponder that the most vocal group that thought that prior to 2005 were largely wiped out when the GFC hit.

SNOOPY

[Snoopy]

What I call the Inc + Inc results (which represents the income portfolio together with the incremental purchases) shows an overall gain of 31% over the five year study period


One more point to note. The NZX50 is an accumulation index, which means dividends are absorbed forever into the index number. My indices are also accumulation indicies, to make the comparison fair. So although I am showing a 31% return on capital, that includes 26% worth of dividends which I syphoned off over those 5 years. That means the total capital gain on my portfolio was only 5%. Investing, value style, while very rewarding is not a get rich quick scheme. But it is very good at preserving your capital in extreme market situations. Ask those Pike River investors how well their alternative stop loss methods were able to save their capital!

SNOOPY

[Snoopy]

The very essence of value investing is the notion that an investor ought focus on underlying 'value' rather than price. That is a value investor's point of difference. If one is convinced that the $0.10 will continue to accrue to shareholder pa, a fall to $0.80 or $0.70 really isn't that bigger deal, and is, to the contrary, seen as an opportunity to pick up more shares at a much higher prospective return. $0.10/$0.70 = 14.3% -decidedly more attractive than 10%.

Of course, as most fundamentalists quickly learn, things are seldom this straight forward. Shares do, on occasion, fall 30% on no good reason, but more cases than not there are very good fundamental reasons for the shift in sentiment -many of which may not be readily apparent to the small-time punter at the time.

The logic works until you realise that the underlying earnings are now only going to be $0.07. With the stock at $0.70, its then too late to do anything and the money is essentially lost.

This is, unfortunately, what has happened to Snoopy with TEL, WHS, RBD, and others. This is not a criticism. I believe value investing is a fundamentally sound way to invest but it is not an easy discipline - especially in the large-cap domain. You can get absolutely crucified as a value investor if you're wrong, and being wrong isn't that hard.

The discipline relies on supreme self-confidence in one's views, yet the humility and capacity for self-reflection to acknowledge when you have called it wrong and get out. A rare combination of traits indeed.


This share price movement describes what happened to RBD to a Tee. The share price fell even lower than that 70c, yet now the share trades north of $2.50. Warehouse I sold out of at a good profit to Foodstuffs when the takeover activity started. So despite what the respected Dimebag thought at the time, my capital was not lost at all. In the case I Telecom I have (probably) lost capital, but I am far from worried about it. TEL is very much a work in progress, and a bit of age and wisdom is doing this investment no harm. I had quite a good year in Telecom in 2010, managing to increase my shareholding at those low low prices.

This share investing is all about perspective and timeframes. To a trader who thinks in terms of trends anything other than buying at the start of a trends and selling out when it ends appears to be madness. But if you have a longer than business cycle investment perspective, then buying a share while it is on the way up or down makes not one jot of difference, as in my case.

SNOOPY

[Snoopy]

This share investing is all about perspective and timeframes. To a trader who thinks in terms of trends anything other than buying at the start of a trends and selling out when it ends appears to be madness. But if you have a longer than business cycle investment perspective, then buying a share while it is on the way up or down makes not one jot of difference, as in my case.


Unlike some, my investments in the stock picking competition represent my actual portfolio. Despite the fact that I will not finish in the top 10% of competitors this time (I do not hold FPA), I am going to be more than pleased if I can finish the year up anywhere near 38.41%. My actual return will not quite match this as the other NZX shares I hold (CEN, LPC, NZS, PGW, CNU) have not done so well. Even if I should note that my positions in these 'not so well performed 5' are materially smaller than my 'top 5'.

Nevertheless I do expect to outperform the market by more than 6% yet again in 2012, making it the fifth consecutive year I have done so. All these outperformances are compounding, unlike share traders whose returns are only as good as the last trade. While I have adjusted some market positions I do not trade. In fact the last year I made a 'new' investment was in 2006. This shows you do not need to trade shares to significantly outperform the market.

However in 2013 I am not expecting to do so well. Statistically it is impossible to keep outperforming the market the way I have. Notwithstanding the statisticians though, I do intend to try!

SNOOPY

[BIRMANBOY]

Wow theres some history in that thread..Snoopy still here..going strong...many posters (including Phaedrus) have long gone. Glad to see you doing the "right thing" Snoopy. All about doing whats right for you and your circumstances regardless of the occasional post questioning your mental stability. I'm with you buddy ..there are some like minds here among the traders which does make their life more interesting I'm sure. I must admit to having a secret yearning to drop 40 years and be a day trader on Wall St. however:). Maybe in my next re-incarnation.
Unlike some, my investments in the stock picking competition represent my actual portfolio. Despite the fact that I will not finish in the top 10% of competitors this time (I do not hold FPA), I am going to be more than pleased if I can finish the year up anywhere near 38.41%. My actual return will not quite match this as the other NZX shares I hold (CEN, LPC, NZS, PGW, CNU) have not done so well. Even if I should note that my positions in these 'not so well performed 5' are materially smaller than my 'top 5'.

Nevertheless I do expect to outperform the market by more than 6% yet again in 2012, making it the fifth consecutive year I have done so. All these outperformances are compounding, unlike share traders whose returns are only as good as the last trade. While I have adjusted some market positions I do not trade. In fact the last year I made a 'new' investment was in 2006. This shows you do not need to trade shares to significantly outperform the market.

However in 2013 I am not expecting to do so well. Statistically it is impossible to keep outperforming the market the way I have. Notwithstanding the statisticians though, I do intend to try!

SNOOPY

[winner69]

Snoopy says All these outperformances are compounding, unlike share traders whose returns are only as good as the last trade .....the traders would say they make bigger trades as their wins accumulate .... componding in other words

[BIRMANBOY]

If you assume every trade is good ..yes but inherent problem is what % of trades are profitable as opposed to trading out ata loss to minimize losses... Theory as opposed to reality. I'm surmising that as a trader every now and then there will be a "bad" outcome. If you buy and hold...first thing is you allow the share to breathe and give it time to recover(since remember we are buying value), if it happens to go down. And then when its looking particularly oversold we buy in again. So the result is over a period of time you accumulate a larger portfolio at a lower price...thereby increasing the %dividend return on capital outlaid. Side benefits of this include being able to drip-feed your investment depending on your cashflow(assuming you have some income coming in). Also dividends being good can be re-invested in more shares (our form of compounding). As the years go by the capital gain becomes larger. I'm sure money can be made by trading ...possibly very good money, but that requires time, a lot of study and a set of iron clad testicles. I like the no-stress, no study silk undies approach myself.
Snoopy says All these outperformances are compounding, unlike share traders whose returns are only as good as the last trade .....the traders would say they make bigger trades as their wins accumulate .... componding in other words

[Halebop]

Snoopy says All these outperformances are compounding, unlike share traders whose returns are only as good as the last trade .....the traders would say they make bigger trades as their wins accumulate .... componding in other words

I agree, any series of profits or losses compound, irrespective of how they are sourced.

[winner69]

I agree, any series of profits or losses compound, irrespective of how they are sourced.

I agree with you Halebop

Birmanboys rave on dollar cost averaging (or something similar) had me conjuring up images of Mary Holm giving Birman a big hug and saying well done my boy .... at least somebody believes what i rave about

She's a guru that Mary .... so by association Birman is a guru as well ,,,, hows that for logic

[Halebop]

If you assume every trade is good ..yes but inherent problem is what % of trades are profitable as opposed to trading out ata loss to minimize losses... Theory as opposed to reality. I'm surmising that as a trader every now and then there will be a "bad" outcome. If you buy and hold...first thing is you allow the share to breathe and give it time to recover(since remember we are buying value), if it happens to go down. And then when its looking particularly oversold we buy in again. So the result is over a period of time you accumulate a larger portfolio at a lower price...thereby increasing the %dividend return on capital outlaid. Side benefits of this include being able to drip-feed your investment depending on your cashflow(assuming you have some income coming in). Also dividends being good can be re-invested in more shares (our form of compounding). As the years go by the capital gain becomes larger. I'm sure money can be made by trading ...possibly very good money, but that requires time, a lot of study and a set of iron clad testicles. I like the no-stress, no study silk undies approach myself.

For a trader money can be made even at a 50/50 win loss rate. This comes down to cutting loss makers and letting profits run.

The challenge with a long term approach (and Letting 'em breathe) is the flip side of an active approach and just as complex. Did investors regret the breathing room given to long term holdings in Enron, ION, Equiticorp etc? Even the bluest of chips like Coca Cola hasn't quite yet regained the peaks of 14 years ago, a long time to wait (Prompting Buffett to muse that his ability to do nothing does not always pay).

[BIRMANBOY]

I agree....somewhat... but I have 24 +/- shares/bonds in my portfolio so assume that there will be one or two that are duds. The others more than compensate for the "bad boys". Also I have to say that (so far) even most of the bad boys that I despaired of at one point have redeemed themselves...Thanks to a rising market. And to add insult to injury....one that I had owned for several years finally came back up to my original buy price and I was so anxious to get out of it I sold it at a tiny profit to rebalance whereupon it continued up and would now be showing me $3000 cap gain if I had stuck to my plan. No-one gets it right all the time even Buffett and especially me so biggest factor for me anyway is getting a diverse portfolio.
For a trader money can be made even at a 50/50 win loss rate. This comes down to cutting loss makers and letting profits run.

The challenge with a long term approach (and Letting 'em breathe) is the flip side of an active approach and just as complex. Did investors regret the breathing room given to long term holdings in Enron, ION, Equiticorp etc? Even the bluest of chips like Coca Cola hasn't quite yet regained the peaks of 14 years ago, a long time to wait (Prompting Buffett to muse that his ability to do nothing does not always pay).

[BIRMANBOY]

Not sure who Mary Holm is but if she wants to give me a hug..I'm happy to oblige...are you setting us up Winner. Perhaps we should have you as a chaperone so we dont get too carried away with mutual admiration stuff. Most women find Birmans very cuddly I might add. Winner probably shares his office with a couple of Rottweilers. "Mary mary is quite contrary" to what W 69 perceives as being the "ultimate" investment strategy. Heres a hint... its not actually a competition and the goal is not achieving "guru" status unless somehow you define self worth as being predicated on someone elses opinion of you. Logical enough?
I agree with you Halebop

Birmanboys rave on dollar cost averaging (or something similar) had me conjuring up images of Mary Holm giving Birman a big hug and saying well done my boy .... at least somebody believes what i rave about

She's a guru that Mary .... so by association Birman is a guru as well ,,,, hows that for logic

[Hoop]

Everyone is an individual with differing mental makeups....however we tend to ally ourselves into groups and into investment strategy groups that best suit or have a lot in common with our makeups. This behaviour is evident on this thread..

Our mental makeups are all different, one investment strategy which may work well for one person could be a poor performing strategy for someone else.

We all have a choice to find our Niche (sweet spot) to make our investment money whether its from the extremes of the investment spectrum such as long term investing using pure FA,,, though to the other end of the spectrum.... the day or minute traders using pure online super-fast TA with computerized automated buy/sell triggers........ or somewhere in the range in-between the two extremes.

Unfortunately, many "come and go" investors never find their niche, they "borrow" strategies from others, they rave about it and they flip flop around various strategies and logic dictated by their emotion of the "now"... they don't apply their self-discipline and they exit the investment world as a failed investor blaming the irrational Market and its traders, their bad luck, or any body else, except themselves..

I admire Snoopy's thread, I'm envious of his dedicated discipline to his investment strategy...It's the discipline that often makes a successful investor.... Snoopy has made his strategy work for what he wants....but not without anguish from some others (ST Posters) watching his holding pattern strategy either during severe downturns or during periods of lost opportunities when the portfoio lags the market index .....As investing in the theoretical Snoopy index?? ....Not for me either.
I personally couldn't stick to his discipline as my mental makeup would fail to allow me....

We all hear about Buffets strategies which lean towards Snoopy's end of the investment spectrum ....

If that end of the spectrum is not for you...then who else is there that leans towards the middle area of the spectrum??

We hear bugger all about Julian Robertson....who's he you may ask????? Birmanboy if you don't know Mary then you won't know Julian Robertson.

The difference between Mary and Julian is about $3 billion. That's how much Julian has earnt though investment and that would classify him as a successful investor and would qualify for any of us to listen or read about what he says....

Interviews with Julian Robertson & Jim Chanos: Columbia Business School Newsletter (http://www.marketfolly.com/2012/05/interviews-with-julian-robertson-jim.html)




Buffet and Robinson investment strategies are different but both strategies have seen successful Management Funds results.

.....Did you know Julian Robertson is a self confessed Part-Kiwi and is ranked Number 4 on the NZ top 10 Rich List..... (http://www.nbr.co.nz/rich-list-2012/top-10-richest)

[BIRMANBOY]

Yes ..you nailed it there Hoop... Most important is for each investor to find their sweet spot. I do find it a little surprising that some posts are so singularly focussed on the "rightness" of their particular philosophy they seem to find it hard to accept that any other possibility is even remotely viable. I have actually just recalled the name Mary Holm..writes occasional newspaper articles re investing from my memory and Julian Robertson is wealthy US guy with some big properties in NZ. I'm probably what you would call a "lazy" investor...I dont really need to make a heap of dough.. (made enough in my business) just want to protect what I have from inflation erosion. Consequently cant really be bothered following succesfull (or non-successfull) investors...as you say...their success is theirs and my or yours situation and circumstances is probably different so not really that relevant. You do bring up a very interesting point regards the "come and go" investors. These are the ones I would worry about...those that need to ask what "you" would invest in or what "you" would do in a particular situation. Confused by reading 40 different investment books and dithering between guru #1 and guru #2. Still, I suppose that resolves in time or the task becomes too difficult and is rejected as being impossible. However I must say I do enjoy the occasional battle of wits and in the process we all find some enjoyment I'm sure. As I mentioned before wish I had started a lot earlier...Always enjoyed the challenge of how best to make money
Everyone is an individual with differing mental makeups....however we tend to ally ourselves into groups and into investment strategy groups that best suit or have a lot in common with our makeups. This behaviour is evident on this thread..

Our mental makeups are all different, one investment strategy which may work well for one person could be a poor performing strategy for someone else.

We all have a choice to find our Niche (sweet spot) to make our investment money whether its from the extremes of the investment spectrum such as long term investing using pure FA,,, though to the other end of the spectrum.... the day or minute traders using pure online super-fast TA with computerized automated buy/sell triggers........ or somewhere in the range in-between the two extremes.

Unfortunately, many "come and go" investors never find their niche, they "borrow" strategies from others, they rave about it and they flip flop around various strategies and logic dictated by their emotion of the "now"... they don't apply their self-discipline and they exit the investment world as a failed investor blaming the irrational Market and its traders, their bad luck, or any body else, except themselves..

I admire Snoopy's thread, I'm envious of his dedicated discipline to his investment strategy...It's the discipline that often makes a successful investor.... Snoopy has made his strategy work for what he wants....but not without anguish from some others (ST Posters) watching his holding pattern strategy either during severe downturns or during periods of lost opportunities when the portfoio lags the market index .....As investing in the theoretical Snoopy index?? ....Not for me either.
I personally couldn't stick to his discipline as my mental makeup would fail to allow me....

We all hear about Buffets strategies which lean towards Snoopy's end of the investment spectrum ....

If that end of the spectrum is not for you...then who else is there that leans towards the middle area of the spectrum??

We hear bugger all about Julian Robertson....who's he you may ask????? Birmanboy if you don't know Mary then you won't know Julian Robertson.

The difference between Mary and Julian is about $3 billion. That's how much Julian has earnt though investment and that would classify him as a successful investor and would qualify for any of us to listen or read about what he says....

Interviews with Julian Robertson & Jim Chanos: Columbia Business School Newsletter (http://www.marketfolly.com/2012/05/interviews-with-julian-robertson-jim.html)




Buffet and Robinson investment strategies are different but both strategies have seen successful Management Funds results.

.....Did you know Julian Robertson is a self confessed Part-Kiwi and is ranked Number 4 on the NZ top 10 Rich List..... (http://www.nbr.co.nz/rich-list-2012/top-10-richest)

[Snoopy]

I agree, any series of profits or losses compound, irrespective of how they are sourced.


Yes but as an investor who has made no 'new' investments since 2006, where does that put me? There is no 'series' of events. Not even a single 'event'! Yes we all tend to measure how we did 'this year'. But to me it would be just as valid to measure what my two year return was, or what my five year return was.

By contrast every trade is an 'event', and the ultimate value of whatever you make will transfer to another 'event' - the next trade. Eventually you will have trade that doesn't go according to plan. You might lose 20% of your wealth. But what you have lost is 20% of your compounding wealth from all previous trades that you have ever made in your life. That is why losses through trading can be so devastating.

I eliminate this trading loss risk completely, by not trading at all. Which is part of the reason for me still being here.

SNOOPY

[Snoopy]

Bong, you speak as though the faith I have in these five companies is either on or off. My investment faith is actually a matter of degree.

Take RBD for starters. I have been disappointed with the investment performance over the last 4.5 years. However, rather than sell the share I simply choose to move my buy point lower. The investment may not be as good as I thought but because I am resolved to pay less for it that doesn't matter. The value of the investment concept is preserved if I can buy at a lower price. Thus I have revised my 'buy' target down from $1.25 to $1.20 to preserve my faith in the RBD concept.

I am currently going through the same process with Telecom. Clearly unbundling will effect the value, but by how much? My hunch is TEL is oversold. But until I do the numbers, which may take some time, I can't be sure.

PGW is clearly a different animal now, with the supercharged Craig Norgate at the helm (in effect). So my faith has gone up there.

LPC is also in a new paradigm, as it appears to be the first port in NZ to have two seafronts (if LPC and POL combine). How all this affects dividends in the medium term remains to be seen. I may have to replace it in my income portfolio and decide if the new busines outlook justifies me holding it as a growth share on its own merits.
My faith is in danger of slipping sideways into a separate category here.

SKC is walking a bit of a tight rope. There has been huge borrowings to purchase Australian assets that are returning, well, not much really. Counter that with the quality of the downtown Auckland asset which overall seems brilliantly run and is a legally registered monopoly. My instinct is that this is the riskiest holding of the five. Nevertheless I think that since 31st March this is the share that has gone up in price the most. So what do I know?

I was considering selling out of SKC completely and putting all that money into TEL, before the Cullen crash. Logic tells me I should have done it, but my 'spread the risk' philosophy prevented me from doing it.

I guess my lesson here is not to assume that I am too smart, and know all the answers. Sometimes the markets can teach you an unforecastable lesson and you have to plan your strategy accordingly.

To summarize Bog, I have kept my faith but it has been 'reshaped a bit'. The malleable portfolio has been adjusted accordingly.

SNOOPY

PS It is very rare that my faith deteriorates to the point that I decide to totally sell out. Although it did with Air New Zealand around the time of the government bail out :-(

Brain, you asked about my portfolio on the Heartland thread. To avoid going 'off topic', I hope you don't mind if I answer here.

As you can see from my quote from 2006, I don't change my shares much. Apart from Lyttelton Port of Christchurch, which got taken over, I still hold all of the shares that I was talking about ten years ago!

I use the 'Stocktastic' competition as a proxy for how well I am doing. I like to invest in 'clusters' of two. This means I have two parallel investments in the same sector which I think helps keep me honest about what is happening. As you can see, not all of my investments are in 'clusteres of two'. So this is more a 'goal' than a firm rule. My current 'Stocktastic' portfolio is as follows:

CEN
RBD
SKC
SKL
SPK

My actual portfolio looks like this:

CEN, GNE, MCY
RBD
SKC
SKL, SCT, PGW
SPK, CNU
AWF
TNR TNRHB

My aim is to have the top five clusters totalling about the same dollar value, in the interests of holding a 'balanced portfolio'. In practice this hasn't happened, although if I rustle up my 'allowable error of 100%' rule I can squint and say it 'looks about right'.

AWF and TNR are recent additions that don't fit within my 'cluster of 5' model. AWF I acquired because my broker rang me and said "we have a big holder who wants out, do you want some?." TNR was acquired because I used to hold TUA, and got some TNR shares and bonds in exchange. These are both smaller investments though. So not too much is lost by not having them represented in my Stocktastic entry.

GNE and MCY were acquired courtesy of the government sell down. CNU was acquired when TEL split into what would later become Spark and Chorus. I am telling you all this because I don't consider that all of my picks have been selected according to my 'best practice' of using all my investment rules. But having said that, I am not unhappy at how the portfolio has worked out.

SNOOPY

[Brain]

Thanks Snoopy you are a gentleman (or should I say gentledog) I will read the thread when I have time.

[Snoopy]

Brain, you asked about my portfolio on the Heartland thread. To avoid going 'off topic', I hope you don't mind if I answer here.

As you can see from my quote from 2006, I don't change my shares much. Apart from Lyttelton Port of Christchurch, which got taken over, I still hold all of the shares that I was talking about ten years ago!

I use the 'Stocktastic' competition as a proxy for how well I am doing. I like to invest in 'clusters' of two. This means I have two parallel investments in the same sector which I think helps keep me honest about what is happening. As you can see, not all of my investments are in 'clusteres of two'. So this is more a 'goal' than a firm rule. My current 'Stocktastic' portfolio is as follows:

CEN
RBD
SKC
SKL
SPK

My actual portfolio looks like this:

CEN, GNE, MCY
RBD
SKC
SKL, SCT, PGW
SPK, CNU
AWF
TNR TNRHB

My aim is to have the top five clusters totalling about the same dollar value, in the interests of holding a 'balanced portfolio'. In practice this hasn't happened, although if I rustle up my 'allowable error of 100%' rule I can squint and say it 'looks about right'.

AWF and TNR are recent additions that don't fit within my 'cluster of 5' model. AWF I acquired because my broker rang me and said "we have a big holder who wants out, do you want some?." TNR was acquired because I used to hold TUA, and got some TNR shares and bonds in exchange. These are both smaller investments though. So not too much is lost by not having them represented in my Stocktastic entry.

GNE and MCY were acquired courtesy of the government sell down. CNU was acquired when TEL split into what would later become Spark and Chorus. I am telling you all this because I don't consider that all of my picks have been selected according to my 'best practice' of using all my investment rules. But having said that, I am not unhappy at how the portfolio has worked out.


I was just doing a nine monthly review of my portfolio, so I thought it could be of interest to others from a 'portfolio balance' perspective. As you will see, very little has changed from four years ago. I have sold Genesis Energy and reinvested that cash in to Contact Energy. AWF Madison has been renamed Accordant group. I have converted my 'Turners Bonds' into 'Turners Shares'. The only 'new kid on the block' in my portfolio is 'Heartland Group Holdings'.

My aim is to invest in shares 'in pairs'. This will stop me getting too tunnel visioned about any particular shareholding I have, as I will always be forced to read a 'competitors take' on the same market. My other aim is to keep my holdings of shares outside of the NZX50 as modest. That means less than 5% of my NZX portfolio for each such share. This is nominally for 'liquidity reasons'. A couple of companies in particular that I hold shares in (Scott Technology and Accordant Group) sometimes only trade a few hundred shares a day. I couldn't sell out completely of these two in a hurry. But I feel as though I am unlikely to want to, as I was very thorough with my due diligence buying process. Generally there is enough 'liquidity' there to allow me to re-balance holdings within a few days, which is actually all the liquidity I need. Shares inside the NZX50 I aim for about a 10% portfolio holding. Nevertheless, I am not too rigid regarding these portfolio constituent rules.

The total number of shares in my portfolio is 12 which seems about right. If anything I struggle to keep real tabs on that many which tends to stop me buying and selling too frequently. I like to have a good understanding of the fundamentals of why I should reduce or accumulate before I do so. If 12 sounds a lot, the reality is, because my shares are 'paired' that twelve behaves more like I have 6. So it is not quite the 'index tracker' that a portfolio of a dozen shares might suggest. Another rule is that I generally only buy shares that pay a dividend. The one outlier in my portfolio that doesn't is Restaurant Brands. But it was a good dividend payer when I invested in it. And there is a vague promise that once the pacific rim growth phase is completed, dividends might return. I don't consider that I should 'sell out' of RBD just because dividends are not being paid at the moment.

So what does my NZX portfolio look like by value percentage at 30th September? If you think I am likely one of the most boring investors on the forum, here is the proof:



Domestic/Export
Sector
Sector Percentage
Company
Income/Growth
Company Percentage


EManufacturing Export23.3%SkellerupG16.2%


Scott TechnologyG7.1%


DPower Gentailers18.2%ContactI9.3%


MercuryI8.9%


DFinance Companies16.5%Turners Automotive GroupG9.2%


Heartland Group HoldingsI7.3%


DTelecommunications9.9%SparkI7.9%


ChorusI2.0%


DEFood10.8%Restaurant BrandsG10.8%


EAgriculture8.0%PGG WrightsonI8.0%


DETourism8.9%Sky City GroupG8.9%


DJob Recruitment4.4%AccordantG4.4%




Notes

1/ That adds up to 41% 'Export Focus' and 59% 'Domestic Focus' (about the balance I seek).
2/ I have somewhat arbitrarily classified my shares into 'growth' and 'income' shares. When an 'income' share stops paying a dividend, it becomes a 'growth' share ;-). O.K. that is a little bit cynical. But I do have an expectation that my income shares are primarily there to generate income with no particular share price growth expectations above inflation. My current breakdown is 43% 'income' 57% 'growth'.
3/ I would class the 2nd to 5th categories as 'non cyclical' and 'utility like' (the kind of bills that have to be paid whatever the economy is doing). This gives the portfolio a 'utility type' content of 55%. It is therefore not really what you would call a 'traders portfolio', which suits me because I am not a trader.

With such a big 'utility type base' you would not expect such a portfolio to outperform the NZX50 in years of high growth. Sure enough I have generally recorded overall portfolio growth that is a point or two shy of what the NZX50 did in recent years. However, the flip-side of not having such a 'growth focus' in your portfolio is that when growth is not so good, you tend to outperform the index. So far this year I am up more that eleven percentage points on what has been a largely flat NZX50 performance. That is a massive out performance over FY2021 so far, that has more than made up for any under performance of the portfolio in the 'growth years'. This was really my objective. By constructing my portfolio in such a defensive way, I don't have to guess what the NXZ50 is going to do. I expect to slightly under-perform the NZX50 in high growth years and massively outperform it in low growth years - which is exactly what has happened. So I am getting close to NZX50 performance over several years, (perhaps a bit higher), but I am taking a lower risk in getting that performance. This is an investment strategy that works for me.

SNOOPY

[RupertBear]

Awesome Snoopy thanks for posting :)

[Biscuit]

I was just doing a six monthly review of my portfolio, so I thought it could be of interest to others from a 'portfolio balance' perspective. ....

SNOOPY

Snoopy, do you balance your investments between shares and other assets or just shares? I remember Lizard years ago saying her approach was to have a flexible balance between shares and bonds and to adjust that balance depending on where we were in the business cycle. That sounded to me like a good approach, though these days its hard to have significant holdings in cash assets as there is no yield and there is an interest rate rise risk with bonds.

[Snoopy]

Snoopy, do you balance your investments between shares and other assets or just shares? I remember Lizard years ago saying her approach was to have a flexible balance between shares and bonds and to adjust that balance depending on where we were in the business cycle. That sounded to me like a good approach, though these days its hard to have significant holdings in cash assets as there is no yield and there is an interest rate rise risk with bonds.


I guess the problem with that approach is that you have to know where you are in the business cycle. For example, when Covid-19 hit, many thought we were in for a huge downturn. If you thought, that then according to the 'Lizard; strategy, you should have cashed out of shares and piled into bonds. Yet six months on from the first lock-down, can you say that was the right thing to do?

I guess the one weak link in my portfolio that hasn't recovered from the Covid-19 hit is Sky City. However, even there I was able to participate in the cash issue at $2.50 which was done to bail out the company. So actually I have dome O.K. with my Sky City holding.

I have never been a big fan of bonds as so often what I see is that you must take the equivalent of an equity risk to gain a bond return. I say this because if an NZX listed company with bonds and shares gets into trouble, invariably both the bondholders and the shareholders take a haircut. The only bonds I have bought were 'Turners Automotive Group' bonds and 'St Lukes Bonds' (I think St Lukes got absorbed into Westfield many years ago). These both had interest rates above 7% when I held them. That seemed O.K. for the risk taken at the time. But investing in a bond to gain a 1-3% return? I can't make that add up. Having said this, I currently have some bank term deposits earning a miserable return, which total in value some 25% of my NZX equity portfolio. This is the result of most of my Restaurant Brand shares being sold to the Mexicans a couple of years back. However, it is my intention to redeploy into the market with most of this capital. But I won't redeploy just on principle. The investment case for shares that I choose has to add up. And it is not easy to do that on the NZX these days!

The one advantage of holding cash / shortly maturing term deposits, is that you can take advantage of 'market events', such as eh re-capitalisation of Sky City that I have already mentioned. So unlike some on this forum, I am OK with holding money in bank term deposits at a time of low interest rates, as I don't believe any of our banks are 'at risk' at this time. I do keep a bit of an eye on the Auckland property market where TSB (I have most of my bank term deposits with them) seems to have directing a lot of their new lending though!

SNOOPY

[baaantom]

Excellent Saturday morning read. Thank you Snoopy.

[Grimy]

Thanks Snoopy. I always enjoy your posts and reasonings. I learn a lot too.

[Beagle]

"If you think I am likely one of the most boring investors on the forum, here is the proof"
Proved beyond any reasonable doubt lol

[Norwest]

I would say it is a fantastic long term, high conviction portfolio. This includes great dividend payers and includes a lot of "best of the best" NZX companies.

If you had to choose NZX stocks for the next 5 years and forget about them, I would be very happy with SNOOPY's portfolio to be in my bottom drawer.

Thanks very much for sharing.

[Waltzing]

NZX Only? Retail? Freights?, no FPH? when at 2 dollars?

World Technology? Future tech such as the storm that Quantum Computing might bring?

ETF for Tech?

certainly low risk.

Avoided the ATM Wreck.

[Snoopy]

Some good questions here...



NZX Only?


I live in NZ. So it makes sense to base my portfolio around the NZX. The imputation credit system is a big help here, as traditionally NZ companies have been big on paying dividends. I like dividends! It gives me income which I can then choose to reallocate or re-balance my portfolio without lots of selling of shares. I do have some overseas investments that I regard as complimentary to my NZX portfolio. These are generally in industries not represented on the NZX. But being an exporting country, I find it quite hard to find investments on the NZX that do not have an export component in them. From an industry perspective, I think you can get good 'global exposure' through just investing on the NZX.



Retail? Freights?,


I didn't classify them as such but I do have some retail. You may have noticed that 'Turners Automotive Group' retail a few cars around the country. Some might say that the financing of these car sales is where the real profit is. But I am happy to clip both the 'retail ticket' and the 'finance ticket' in these transactions. Then we have PGW as the leading retailer for farm supplies around the country. I class both of these as less fickle than consumer retailing. Of course, Restaurant Brands is a consumer food retailer. Even in tough times people will shout themselves to a fast food treat. Just look at what happened to celebrate the end of Level 4 lock-downs, even as some long standing traditional retailers tumbled!

I know that retail is offering up some spectacular yields. But I get the feeling you really need to be 'on the ball' for when the retail tide turns. I did hold WHS years ago and sold out IIRC when Foodstuffs bought in. Once again IIRC it was at a higher price than WHS trades at today! That is a lot of years of no progress. Maybe consumer retail isn't really part of the buy and hold investors menu?

Freight, I will give you probably should be in my portfolio. I guess I have been waiting for Freightways or Mainfreight to make a strategic mistake to bring their share price down to a bargain level. So far it hasn't happened! For me it is a question of price, not unwillingness to invest in the industry per se.



no FPH? when at 2 dollars?


Was the FPH price ever that low? I seem to remember the shares price stagnated at around $4 - $5 for a long time. I guess I missed the take off on that one? I think I just wasn't familiar enough with the medical equipment supplies industry to 'take the gamble'. I think at that point Scott Technology was the core of my 'High tech' investment space. HTS-110 anyone?



World Technology? Future tech such as the storm that Quantum Computing might bring?

ETF for Tech?


I actually enquired about the 'Smartshares' BOT fund in June. I asked Smartshares to explain to me how a fund run from Ireland investing in global robotics companies was seemingly generating NZ imputation credits. After putting my question in writing I never heard back though. Such 'responsiveness' doesn't give me a huge amount of confidence in what they are doing. I will just have to stick to my SCT, which is a global robotics company anyway, I suppose.



Avoided the ATM Wreck.


I also avoided ATM on the way up of course, which was a key reason for me slightly under performing the NZX50 over those ATM golden years. Never had anything against the ATM product. Just the price of the shares which to me always looked like it was overhyped given the sales and profits. I haven't ruled out investing in ATM one day. But I really want to understand that Chinese market better. I suspect many of those shareholders who 'took the big ride then the big slide' post Covid-19 now feel the same!

SNOOPY

[Snoopy]

2/ I have somewhat arbitrarily classified my shares into 'growth' and 'income' shares. When an 'income' share stops paying a dividend, it becomes a 'growth' share ;-). O.K. that is a little bit cynical. But I do have an expectation that my income shares are primarily there to generate income with no particular share price growth expectations above inflation. My current breakdown is 43% 'income' 57% 'growth'.


With the collapse in interest rates and the hike in share prices (reducing yield), I got to wondering what a reasonable yield expectation is for an 'income investor' in this ultra low interest rate environment? The following dividend yields are historical.



Domestic/Export
Sector
Company Percentage
Company
Income/Growth
Gross Dividend Yield

D
Power Gentailers
21.4%
ContactI
5.20%




20.5%
Mercury
I
3.63%


D
Finance
16.8%
Heartland Group Holdings
I
6.35%


D
Telecommunications
18.2%
Spark
I
6.58%




4.6%
Chorus
I
5.15%


E
Agriculture
18.4%
PGG Wrightson
I
8.73%






Average Yield
5.94%



6% (round figures) sounds quite reasonable. Taking account of the percentage of my individual holdings my 'weighted average gross interest rate' is 5.97%. Much more attractive than a corporate bond rate of some 2-3%. I think for an 'income investor' 6%, on a 'reasonably stable capital base', is -still- something worth aiming for. The proviso in there is a 'reasonably stable capital base'. But I would argue that with a rising interest rate environment coming, the capital value of corporate bonds is just as likely to be impacted.

SNOOPY

[Valuegrowth]

What would be fundementally sound companies with low-debt or no debt to buy right now?

[forest]

I would put SKL into that category.
Dept to Equity last year 26%.

[iceman]

What would be fundementally sound companies with low-debt or no debt to buy right now?

Hard to go past MFT in my view