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duncan macgregor
28-08-2006, 09:30 AM
I am finding it increasingly difficult to have a buy and hold long term portfolio. I am now at the stage where i think it better to go the whole hog, other than a couple of exceptions in a trading account.
I am starting to think its better to pay tax on investments than cross the fingers, then pray they wont downtrend any further. Two shining examples in recent weeks are POT, and PGW. With PGW my trading account got me out near the top, and back in near the bottom. My buy and hold watched the sp drop leaving me with the quandry of getting out or holding on.
My trading account shows a great profit against a much lesser profit in my long term account. When you know you should sell, then hold because of tax reasons. I am starting to find is not worth the trouble. I think that i might give up any ideas about long term and do what i do best, and only trade. How do others feel about this are you happy watching the sp fall short term for a long term gain?.
MACDUNK

whiteheron
28-08-2006, 10:06 AM
macdunk

These thoughts have been exercising my mind for at least the last couple of years

Presently I have a foot in both camps, running two separate accounts, a Trading account and an Investment (long term portfolio) account

Presently I am doing better with my long term Portfolio account than I am with my Trading account, but this fluctuates over time

A lot more work is required for trading, but this is not a problem for me as I enjoy the challenge
I stick pretty much with Australian resource and mining stocks and subscribe to the "stronger for longer" brigade

I especially like silver (but not many stocks to choose from) copper, nickel, oil and gas, gold to a lesser extent

I keep away from start up / exploration companies without significant proven reserves as too risky and too long to point of production, preferring companies that are producing or very near producing, especially those with low relative costs

I agree that it is painful having to sit and watch a share price fall, not being able to sell because of tax considerations

All in all a big but usually rewarding challenge

Snow Leopard
28-08-2006, 10:47 AM
I have always assumed that given your total pre-occupation with the share-price, 20% plus pa timelines and your attacks on Snoopy for holding that you are purley a trader.

Remember in theory whether your gains are taxable depends upon your reasons for purchase not the amount of time you hold them.

If you bought PGW for income then the question you need to be asking at the current moment. "Is this company going to be able to at least maintain it's profits over the coming years. Yes - keep them, No - a sell could be justified.
Selling purely because the SP is stagnant or falling smacks of trading to me.

I both invest and trade, I held FTX for about seven months and have held traders for over a year.

I take buying a stock for income very seriously and only buy when I am sure that the foreseeable future is up on the income front and that the buy price represents good value for money.
Once bought although it is great when the SP rises I am interested in the continued ability of the company to grow it's profits long term.

shasta
28-08-2006, 12:05 PM
I sold up all securities between 1 Jan 06 & 31 March 06, and decided to refocus solely on my trading portfolio, & have found this hard of late & am only holding/trading two stocks at present.

The market is too unpredictable for me to hold anything long at the moment.

For me to buy stocks for my long term portfolio, would require a greater "margin of safety" for the companies i do like, as they seem to be rather "fully priced" & due for a correction.

I'm with you macdunk, for me its trading only at the mo, with a close on eye on the market for any "short term" plays.

duncan macgregor
28-08-2006, 12:24 PM
PAPER TIGER, That is exactly what i am saying that it is extremely difficult to hold stocks long term. There are very few stocks that dont take big hits on the way up. I have been in both camps with PGW, NZO, POA, POT, TPW, HQP,to name a few. Trading at the top and bottom, have by far exceeded holding long term. I have reached the conclusion that the TA by far exceeds the FA method.
The SNOOPY method of mathematically going through a companies records to come up with an answer simply does not work. We have had some excellant analysis from SNOOPY, much better than most of us could ever do which is absolutely worthless when it comes to results.
Take a look at some of the most predictable safe companies like POT for instance, whose sp rides at a two year low. I have made a lot of money trading it in that time, or HQP where i doubled my money.
I have reached the stage where i have had a lot of success reading the market, which will cast me in the traders camp full time.
I have come to the conclusion that FA means just that, [if you get my drift]. Its the perception of the market and how it will react to foreseeable events that counts. MACDUNK

Mick100
28-08-2006, 07:12 PM
Like PT I always assumed you were only trading macdunk - what's the longest time that you have held a share continuously. I understand that you jump in and out of the same small number of companies all the time. I know you have been in and out of WRI/PGW on a number of occasions as you continously remind us.

I'll give you an example of a long term hold
Lets say you bought WRI in yr 2000 for 50c.
At todays price you would have had cap gains of 280% in 6.5 yrs - that's 43% per yr. Add to that 10% per yr for dividends - that gets you over 50% per yr return - not bad.

I don't think you realise what "holding long term" really means macdunk because you never have held a share long term.
.

Snoopy
28-08-2006, 08:40 PM
quote:Originally posted by duncan macgregor

PAPER TIGER, That is exactly what i am saying that it is extremely difficult to hold stocks long term.


You do have a funny idea about what the long term is Macdunk. I look back on my share portfolio and feel kind of shocked that I had to sell out of the Warehouse investment I made in mid 2003 in June this year. That three year 'entry to exit' investment is the shortest I have made in my entire adult life. It was only so short because of extraordinary circumstances. Namely that I bought assuming the growth strategy into Australia was a winner and that it would form a core part of a self designed superannuation scheme for me whereby aussies would buy stuff to feed me a growing dividend stream. I only sold because of a complete U turn on that strategy by management, and an opportune offer price.


quote:
The SNOOPY method of mathematically going through a companies records to come up with an answer simply does not work. We have had some excellant analysis from SNOOPY, much better than most of us could ever do which is absolutely worthless when it comes to results.


You are wrong on both counts there Macdunk. The work I do here is not the preserve of the mathematically superior. Anyone with a four function calculator and the most rudimentary accounting knowledge could do what I do. The trick is that you need quite a bit of discipline, not to go off on tangents, and the patience to read through what might at first seem an endlessly long series of boring company reports. I would say 80% of the people on this forum could do what I do tomorrow - if they applied themselves.

As for 'results', I have had five straight years of earning double the bank return on my conservative income portfolio. There have also been some great growth stories for me over the last three years. I think of BRY and CAH in particular which most people seemed to think were dogs. These were legacy holdings for me. On a ten year timeframe BRY and CAH were dogs, but I am certainly glad I didn't sell out three years ago. Every dog has its day!

Granted this year probably won't be so good. But it is also providing me with a fantastic opportunity to pick up some SCT, TEL and TUA shares at prices I would hardly have believed possible. But don't expect any immediate reward if you follow me into these shares. They are long term plays - which I know is a phrase you do not understand.


quote:
Take a look at some of the most predictable safe companies like POT for instance, whose sp rides at a two year low.
I have come to the conclusion that FA means just that, [if you get my drift].


Great company POT Macdunk, but it has been expensive for a long time.
Perhaps you need to learn a little more F/A so you can see that.

SNOOPY

Snow Leopard
29-08-2006, 07:59 AM
quote:Originally posted by Mick100

I'll give you an example of a long term hold
Lets say you bought WRI in yr 2000 for 50c.
At todays price you would have had cap gains of 280% in 6.5 yrs - that's 43% per yr. Add to that 10% per yr for dividends - that gets you over 50% per yr return - not bad.


Mick100, I hope you don't mind if I correct you here, but your 43% pa is, I believe, essential misleading.

If something is worth 3.8 times what it was 6.5 years then the annual capital growth is actually 1.228 or 22.8% which is still a very good figure.

You need to remember that per annum rates are compounded

<pre id="code">
Year 23%pa 43%pa
==== ====== ======
0 1.000 1.000
1 1.230 1.430
2 1.513 2.045
3 1.861 2.924
4 2.289 4.182
5 2.815 5.980
6 3.463 8.551
6.5 3.840 10.225
7 4.259 12.228
</pre id="code">

To calculate the pa growth in excel you use =power(growth,1/years) in this case =power(3.8,1/6.5)

Snow Leopard
29-08-2006, 08:15 AM
MacDunk, you are a trader, your reply to my post screams trader who fundamentally fails to understand fundamental analysis ([:0]).
Some of us are perfectly happy to watch the price of our income/buy&hold/long-termers wander up and down whilst the underlying company is in good shape. Once bought the lottery that is the current market price is essential unimportant to us.

Has I have said I buy to both hold and trade.
the reasons I buy shares to trade are many but revolve around shares which I believe the market will re-price upwards in some short or medium time frame then I go with the flow on them.

At this moment in time it is more difficult to find shares to buy for either category, however I have a few potential candidates for each.

regards

Paper Tiger

duncan macgregor
29-08-2006, 08:25 AM
MICK100& SNOOPY, You both seem to miss the point completely so lets compare what i did with what SNOOPY did now that we have the benefit of hindesight.
Since my first purchase of WRI was at 86c we will take it from that point, even although SNOOPY started earlier. We wont count the chicken feed [dividends] as i suspect we made about similar ammounts. Since my first buy was 10000 at 86c we will both start there for an easy comparison.
Snoopy has 10000 at 86c todays price lets say $1-86 to make it easy comes to round figures of $10000 profit, plus chicken feed.
Macdunk bought 10000 at 86c sold at $1-30 = $13000 bought HQP at 67c=
19402 shares sold at the magic figure of $1-30=$25223-00 then bought PGG at $1-74=14496 shares. PGG then had a one in eight special which added another 1812 shares to the total plus a special divi which we dont count. I ended up with a total of 16308 which i sold for $2-27 which equals $37019-00 and bought back at $1-94 which totals 19082 shares. Thats what i did the point you miss is when i bought back the last time, i used my trading account. The above figures are rounded off to the nearest average.
SNOOPY started with ten thousand shares, and finished with ten thousand I started with ten thousand and finished with nineteen thousand and eighty two. If you want to see real trading look up the POT threads at what can be done in a company whose sp is what it was two years ago. I think i almost bested SNOOPY with pot over PGW in that two year time frame with trading. When you get a company like POT which is a good safe bet you then have to understand when it becomes to cheap against when it is overpriced the PE is nothing.
What i am finding that my trading ability by far outweighs buy and hold so other than TPW i think it will be all trading from now on. MACDUNK

Snow Leopard
29-08-2006, 09:19 AM
So lets run those figures again assuming that MacDunk actually paid the tax he should have on the profits from these trades.

WRI Buy 10000 @ 0.86, Sell 10000 @ 1.30: Net proceeds $11548 (Tax on $4400 = $1452)
HQP Buy 17235 @ 0.67, Sell 17235 @ 1.30: Net proceeds $18822 (Tax $3583)
PGG Buy 10817 @ 1.74, Sell 12169 @ 2.27: Net proceeds $24719 (Tax 2904)

So MacDunk has multiplied his initial $8600 2.875 times to $24719.

Seeing has we can pick our own comparisons: MFT. Bought at an average of $1.92, current value $6.23 a multiplier of 3.245, and in less time.

OldRider
29-08-2006, 09:52 AM
PaperTiger:
I have used the IRR function within excel for some time, though not perfect, it gives a satisfactory result as I don't chop and change a lot, so dates and times are of lower importance.Checking using the formula you have suggested gives nearly identical values to mine using IRR.

I haved toyed around with XIRR, but to date have not got it to work.

I think many do as Mick, so after several years the results get well astray from reality

Mick100
29-08-2006, 11:04 AM
I thought that I might get pulled up on the math - that's why I didn't use the word "annualised" in the post. However, I apologise for the over simplification

The point is that you could have had 280% cap gains in 6.5 yrs.
.

duncan macgregor
29-08-2006, 12:06 PM
quote:Originally posted by Mick100


I thought that I might get pulled up on the math - that's why I didn't use the word "annualised" in the post. However, I apologise for the over simplification

The point is that you could have had 280% cap gains in 6.5 yrs.
.
You dont have to be good at maths MICK as long as you understand that one and one makes two, or sometimes eleven, depending on your luck. I was only giving an honest comparison of a share that SNOOPY and i hold to show the different styles. Paper tiger we can all have a POISIDEN at the extreme profit end, or your instance of MFT or even TPW as a long term hold of mine, but that is changing the subject. POISIDEN roared up from a fifty cent share to over $230-00 and back to a few dollars in a couple of years so beat that PT with your MFT if you want to change the subject. Think of the poor buggers that bought at the top with no stop loss system in place, if you really want to see fundamental analysis at its worst. macdunk

Phaedrus
29-08-2006, 12:18 PM
Some people seem to want to define themselves as either "traders" or "investors" and are looking for stocks that fit within a very specific predefined approach. I see no need for such a rigid and restrictive attitude.
As a trend-follower, I prefer to let the stock itself define and control the approach. For example, I bought FBU in 2001 because it had begun an uptrend, the intention being to sell when this ended. 5 years later the uptrend is still intact and I am still holding. Other stocks bought at around the same time for the same reason have been sold if, when and as their uptrends ended - whatever the holding period - sometimes short, sometimes long. When you buy into an uptrend, you have no way of knowing how long it will continue, or even if it will continue. There will always be some stocks that "fail to thrive" regardless of your initial hopes and you will always have failures, whatever your methodology. How can you hope to accurately predetermine your holding time?
I see no advantage in defining yourself as either a "technical" or "fundamental" analyst either, and consider anyone totally rejecting either FA or TA to be very foolish indeed.

There are stocks that are best traded.
There are stocks that are best held longterm.
There are stocks that are best avoided.

The situation is dynamic in that at any given time the relative proportions of each category will be determined by overall market conditions.

To maximise profits, you need to be able to tailor your approach to different stocks, different markets and different market conditions.

Be flexible, adapt, or underperform!

duncan macgregor
29-08-2006, 12:48 PM
PHAEDRUS, My initial buy of WRI was intended as long term, followed by HQP, then PGG all long term intentional holds that i sold over a longish period of time. However when i sold PGW then bought back in a few months later i decided that in all honesty my buy back in was a trade, to be treated as such in my traders portfolio. How do you treat this rather grey area if you dont have completely sep accounts?. I hold long term with only a very few stocks, TPW being the one you had me on about if you remember when you asked why are you still holding?. The reason for this thread is i find it very difficult to find long term stocks to hold. What happens when you get sell signals on an intended long term hold, surely you must act.
I have no problem being a trader, look out for HQP which is take over material, and POT when the shipping news gets out, all coming up in the next few weeks. I would be interested in how you treat this problem, and what percentage you have long term against trades. macdunk

Snow Leopard
29-08-2006, 04:00 PM
Oh yes,
the POSEIDON ADVENTURE
gasp as your world is turned upside down by a giant wave of speculation.

MacDunk I was only giving an honest example of the different styles. ;)

You are a trader through and through. Go for it.

But increasingly difficult to hold? For me no. I do not have a single share bought for the long term that I feel the need to sell and has I have said I see one or candidates to add to that porfolio.

Phaedrus, you as a trend follower are a trader.

Phaedrus
31-08-2006, 11:55 AM
Since the stockmarket has been my sole source of income for many years, I think I would have trouble convincing the IRD that I am not doing this for money!
I pay tax on all my income and am very happy to pay more when/if/as I earn more.

peat
31-08-2006, 12:23 PM
Dont all stocks get hard to hold during a bear market though? To me this thread just merely raises the issues associated with a possible market reversal.

duncan macgregor
31-08-2006, 12:42 PM
quote:Originally posted by peat

Dont all stocks get hard to hold during a bear market though? To me this thread just merely raises the issues associated with a possible market reversal.

That is the reason for this thread in the first place. I have two sep accounts, one investing and one trading. It makes it simple to draw a line for tax reasons. I prefer to err on the safe side, with my investing account. It might be that we are coming into a bear market which makes it difficult to find new long term holds. There will always be opportunities in the trading account for short term gains. I have been thinking that i might as well be a full time trader, and treat it as a business, like owning rental properties, rather than get into this grey area. macdunk

Halebop
31-08-2006, 12:57 PM
quote:Originally posted by peat

Dont all stocks get hard to hold during a bear market though? To me this thread just merely raises the issues associated with a possible market reversal.

Agreed. "Getting harder" just means share prices stopped rising. So maybe it isn't our individual brilliance that makes money after all?! For me the cleverest strategy has been to mostly be out of the sharemarket (except more recently AED, thanks AED!). Thought the NZ$ would crash down past AU$0.80, it so far hasn't complied :( Have owned mostly $A for years so makes no difference in the long run, but thought it might help my illusionary NZ$ numbers this financial year.