ATM - A2 Milk Corporation Limited

[Snoopy]

While Couta1's strategy is being labeled as 90% exposure to one stock, would appear to also be arguably investing 90%+ of time/resources into trading one product. Many FX dealers will focus on a narrow set of currency pairs. Many stock market makers (in countries with market makers) will have a limited set of stocks they make the market for. Many sole traders will invest all their time and resources into the company they are building up. Many property investors will focus only one property type in one area. It can increase the risks, but also the rewards - if done well. Many of the very rich have got there by taking big bets on one company/industry, not a wide mix (but often they are influencing or running those companies). Just some thoughts to also consider for anyone reading.

I think there are some tenuous arguments comparing A2 with unrelated investment domains being expressed here. Firstly, my knowledge of Forex would suggest that those dealing in currencies are extremely skilled on TA techniques and discipline. They recognise that they do not hold all the keys to know where a currency is going. If the trend ends they exit. Contrast this to the Couta A2 approach. Couta is happy to discuss support levels, and trading patterns from the previous year. However, when the trend goes against him he then switches to a long term FA mode.

"This company has an incredible growth record. It has been down and bounced back in the past etc etc."

Neither an FA or a TA approach is 'wrong' when dealing with A2. But Couta changes his strategy to fit the belief of where he wants A2 to go. Whereas in my view, if you have a strategy, FA, TA or a combination, you have to trust and respect the independent data inputs that drive that strategy and act on those. IOW you have to be dispassionate and change your mind on A2 if the input parameters that helped form your original view change. Being passionate is generally a good thing, but not with investing as it will lead you down a tunnel of confirmation bias where you only have ears for those who agree with you.

You say many investors concentrate on one share or are very selective and narrow in their property investments. But this is generally because they have widely researched other shares and properties in that investment space and they have a deep understanding of how a market works. IOW their selective investment is the end product of driving down a much wider investment road. A2 is very dependent on the Chinese market. But how much do NZ based investors know about the rather strange interplay between regional and communist party central governments. The changes in sales tax rules that have come in over recent years. The very different characteristics of the coastal Chinese cities and those inland. The difference between the southern Mandarin speaking provinces and the northern Cantonese speaking ones.
What is the interplay between the Daigu distribution channels and the in store distribution channels. OK I admit to being an FA mutt and to traders this kind of thing might not matter. But I expect I know more about these things than 90% of the posters on here, simply because there is so little discussion on these matters on this thread. But do I class myself as an expert on A2? No. But I do know enough to know that I don't know enough. I am working to close my knowledge gap when I get the time. But right now, I don't think I know enough to invest in A2 myself. And I think there is a substantial cohort of A2 investors that are 'investing on the fly' without the background knowledge they need to properly mitigate their investment risk.

If you are running your own company then the investment rules change. You haven't built up your position in the world via an investment forum. The fact that you have got where you are to date means you already have good industry knowledge and experience and you are probably leveraging on your hard earned practical skills and qualifications. Couta has declared a background in healthcare/ elderly care and I have great respect for his insight son those topics. But does he have a diploma on investing in primary products? Has he been in food retailing or distribution? Judging from his posts, I would guess the answer to those questions is 'no'. If food is your new passion, I would suggest the best way to start is by having humble pie for breakfast. That way you can stack the odds on any big(ger) bets you might want to take later on in your investment career.

And I'm not sure on this, but if Couta1 recognised himself that he was trading (not investing) 90% in one stock, that could be a sensible allocation of resources. With where ATM opened on the 18th, and where it had traded by 1pm there was a lot to be made trading. A sell in the morning and a re-buy later is likely to have gained at least 60c and $1/share is entirely possible. Did Couta1 make 1%, 2%, 5% or maybe even more relative to a straight by and hold strategy on that one day? Only he, any accounting support and possibly the tax man will know that. How many times has he made good gains in a similar way - again only he knows. I'd be amazed if the gain relative to a buy and hold that day wasn't a 5-figure sum. A 6-figure gain is within the realms of possibility.

Scrunch, that has to be the worst paragraph you have ever written on sharetrader. Granted that is not much of a criticisim because overall your contributions are very well thought out and of a high standard. But to suggest that mega dollars are available from day trading that would blow ordinary investors away? I think you are underplaying the risks in a reckless way. Even the real T/A gurus on here have very sad stories day trading shares. Can you name one day trader who has survived for more than one stock market cycle, ever in the whole history of investing?

For most people, a high exposure to a single stock is a very bad idea, but it can be the right strategy in certain circumstances.
Disc hold ATM, but only as a modest sub 10% of portfolio holding.

In what circumstances can holding 90% of your wealth in one share be a good idea? I can think of one. If you have founded a company, floated it on the share market and are currently actively engaged in running it then I can see how you might find yourself in this position. But that would be a case of circumstance. To have 90% of your wealth in one investment in which you are not intimately engaged on a day to day basis would suggest to me you are on the road to bankruptcy.

SNOOPY

[winner69]

Nassim Taleb of Black Swan fame once said

Diversification does NOT reduce risks in the financial market; it causes near-certain long term blowups under any leverage.


Whatever that means


But he did have some good risk management ideas here

https://www.moneysense.ca/magazine-a...mbracing-risk/

[Snoopy]

Have locked in 197k profit so far this financial year before fees and losses, steady as she goes for a learner trader.

Not wanting to get at you specifically Seeweed. IIRC, you are one of the few A2 investors who have stalked the supermarket shelves engaged with customer consumers and truly walked the walk not just talked the talk. But to say you have made 197k profit before fees and losses is nonsensical. A profit is what is left over after fees and losses are deducted. You are lying to yourself if you think you can leave those two factors out.

SNOOPY

[Waltzing]

well we found that twice now the GFC and GPD that sector diversification balanced loses and gains and nullified the variances caused by extreme events such as we have just experienced.

China is not a sleeping tiger, its not a democracy and its issuing warnings and looking to bully small players.

[Balance]

Another day of sp going up on NZX and then, getting sold down when ASX opens?

Market manipulation or just Kiwi investors not realising that the stock is now driven out of Australia?

[Balance]

well we found that twice now the GFC and GPD that sector diversification balanced loses and gains and nullified the variances caused by extreme events such as we have just experienced.

China is not a sleeping tiger, its not a democracy and its issuing warnings and looking to bully small players.

Forget about small players - China has comprehensively beaten the US in its trade war.

https://asiatimes.com/2020/10/trump-...g-us-hegemony/

But I guess that’s not hard as they are dealing with a buffoon in the WH.

We better be cautious in NZ in pulling the dragon’s tail - if China decides to retaliate, it will not do so immediately but strategically when it is ready. The impact on NZ’s economic fortune will be devastating.

[Waltzing]

Once a stock reaches a certain size as we all know moving the needle higher takes more effort. Big world yes but china is increasing using it bulk to do its bidding. Im not saying Geo Risk here is high but its not zero and i wonder if the current price trend reflects some caution by the market in relation to short term outlook on growth. Not long till you have your answer with a market update.

[see weed]

Not wanting to get at you specifically Seeweed. IIRC, you are one of the few A2 investors who have stalked the supermarket shelves engaged with customer consumers and truly walked the walk not just talked the talk. But to say you have made 197k profit before fees and losses is nonsensical. A profit is what is left over after fees and losses are deducted. You are lying to yourself if you think you can leave those two factors out.

SNOOPY

Part of that profit was 4000 bought at $7.36 in Oct 2017 and sold for $19.15 in May 2020. You are right. I agree with you. I will try and loose about 80 to 90% of that years profit by financial years end and replace it with divs from other stocks, so as to keep my tax bill down. What ever tax I pay will double because IRD will also make me pay provisional tax on top of normal tax. So far haven't had to fork out any tax for last couple of years but have received refunds.

[winner69]

I think one thing that’s on big investors minds is that A2 are going down the path of being a significant producer (owner of stainless steel) and might not be seen as great marketer.

Great marketers generally valued higher than producers
.

Wouldn’t want to see A2 as a Fonterra would we.

[HKG2301]

... Many of the very rich have got there by taking big bets on one company/industry, not a wide mix (but often they are influencing or running those companies). Just some thoughts to also consider for anyone reading.

Yes, but for every one of the 'very rich' how many lost their shirts, following that same 'big-bet', risk-heavy philosophy...?