SCT for Active Investors.
Quote:
Originally Posted by
Snoopy
With even the shortest of SCT projects taking something like two years between when an order is received, I would argue the 20 day MA is meaningless. My guess is that in the case of SCT the 20 day MA can only give false signals to traders.
Good guess Snoopy. Anyone using such a super-fast moving average on SCT over the last 12 years would have had 142 trades signalled comprising 30 wins and 112 losses. An initial investment of $10,000, compounded, would be down to just $258!
Quote:
Originally Posted by
Snoopy
IMO a 120day MA would be much better.
Right again, Snoopy - a 120 day ma IS much better. Over 12 years it would have triggered 66 trades comprising 6 wins and 60 losses. An initial investment of $10,000, compounded, would be down to $1285. Still lousy performance though eh?
Quote:
Originally Posted by
Snoopy
The problem is that such a 120MA signal would probably fire off buy and sell signals at a rate that is too low to profit from.
Not so - in fact the problem is quite the reverse. A 120ma is firing off way too many signals - and what's worse, the vast majority are losing trades.
Quote:
Originally Posted by
Snoopy
That leads to my overall conclusion. You are probably best off not using any MA - or Trend Analysis in its entirety for that matter - at all when evaluating SCT.
You are quite wrong there, Snoopy - and you were doing so well up until you said that!
Stand back and take a dispassionate look at SCT. Anyone "investing" $10,000 in SCT 12 years ago would be down to just 40% of their initial capital. In 12 years, SCT has had just 2 "longterm" uptrends. The first lasted 2 years and the second lasted 3 years. Moving average or indeed any trend analysis pays off handsomely with stocks like this, where, while they have gone absolutely nowhere but down in the long term, still have clearly defined longterm uptrends that last for years at a time. Ideally, you therefore want just 2 trades (totaling 5 years) out of the last 12 years. You need to use a very slow moving average and indicators with long time periods. Now, these are trend indicators and you must understand that when trend indicators are applied to stocks that are NOT trending, they generate a string of useless, meaningless and conflicting signals. In 12 years, SCT has had 2 such periods and the trading ranges they encompass are ringed with dotted blue circles. Any signals generated from trend indicators while SCT was in a trading range should be ignored. There are 4 indicators featured on this chart - A long-term moving average, trendlines and 2 oscillators. As you can see, these very different indicators all trigger Buy or Sell signals reasonably close to each other. A $10,000 initial investment would have compounded into $28,000 over 5 years. Knocks the socks off buying and holding doesn't it!
Snoopy, it should be easy for you to see why I think your statement "You are probably best off not using any MA or Trend Analysis when evaluating SCT". is totally, completely and utterly wrong.
http://h1.ripway.com/78963/SCT47.gif
Someones hacked into Duncan Macgregors ID
I cant believe this is coming from you Duncan. Buying on a downtrend? All this time you been giving Snoop Dog heaps by ignoring the TA. You also said you were going to stay out of the market as the recession is bringing too much uncertainty. Your breaking your rules by buying illiquid stocks. It just keeps getting worse. This is not your wife positing is it?
Duncan my dear friend. Either your telling porkies or someone has hacked your login ID.
Are you now... forget "TA" it doesnt work for me but "FA" is where its at?
Great to have you back posting but you have blown me away by your about turn.
Nita.. keeping it real as always
Interim Profit 2010 Update
Quote:
Originally Posted by
Snoopy
There has been a lot of emphasis on company turnover by SCT when quoting jobs in the pipeline. $40m of orders going through each year for SCT does look doable going forwards, even if they don't quite make $40m for FY2010. If we look back to the last time turnover was that high, in FY2003 and FY2004, $40m turnover equated to profits of some $4.7m (around 20cps in those days).
But there have been significant changes to the cost structure since Rocklabs became part of the SCT group. An extra 35 skilled staff will not come cheaply. If we say that each of those workers costs $100,000 to house, equip and pay on average that means an extra $3.5m is now built into the SCT cost structure. And that means for equivalent turnover our long term net profit achievable may be only:
$4.7m-$3.5m=$1.2m
Based on the now 28.5m SCT shares on issue, that means earnings per share could be around 4.2c. At up to $1.40, where SCT has been trading over the last few days, that equates to a PE of 33. That is pretty rich, even for a company with the potential of SCT, I would have to say. I would want to see some more SCT profit results on the table before I was prepared to buy a whole lot more SCT shares at these levels.
A 'pre interim result' announcement made to the market today gives us a cryptic preview of the first half year. The 1:10 tax free bonus issue, ex March 26th is kind of quaint. But the kiwi punters seem to like this kind of thing, so I guess the directors know what they are doing. And more shares on issue should help liquidity in the long term.
SCT don't normally pay out more than they earn as dividends. But in down cycles, they tend to pay out all that they have earned to keep faith with the long suffering shareholders. The 1.25c interim dividend on the increased share capital equates to a half year profit of around $400,000. That is nearly a $1m turnaround from the $470,000 loss incurred in HY2009. So given the second half year for FY2009 realised a profit of $735,000, it looks like we could see an FY2010 profit of:
$400,000 + $735,000 = $1.14m
That figure is in the ballpark of what I forecast in my 11th December 2009 post. On that basis, I wouldn't expect much of a reaction in the share price once the market digests the interim result. Looks like 'steady as she goes' for SCT.
SNOOPY