sharetrader
Page 3 of 7 FirstFirst 1234567 LastLast
Results 21 to 30 of 70
  1. #21
    Member
    Join Date
    Mar 2009
    Location
    Upper Hutt, Wellington, NZ
    Posts
    219

    Default

    Quote Originally Posted by shasta View Post
    Whilst Buffett might buy whole businesses & not just a few shares in them, it's the psychological thinking which is the difference.

    He thinks of buying & owning a business forever (& he's a big proponent of the "allocation of capital"), which is the complete opposite of TA, which only trades based on volume & technical indicators - to a chartist what the business does is irrelevant

    In more simple terms, if you find a stock you like on the NZX/ASX, & it has a pathway to production say in 3 - 5 years, has a big resource which will be in demand, you buy & hold the stock.

    Warren has made some of his biggest purchases following a big correction/drop in the market, so using the fear in the market to your advantage is a Buffett style trait. (I guess it's part of averaging down, which TA frowns upon!)
    Surely FA and TA can be compatible though, for example using FA to select a company and TA to time entry and/or exit? I was planning on using both of them this way, or if Im picking stocks using TA, and come to a bit of a stalemate between two or three stocks, FA could be used to make the difference.

    Just a thought.

  2. #22
    Member ENP's Avatar
    Join Date
    Jan 2010
    Posts
    451

    Default

    Ahh I see, so you aren't really fussed about looking into for example, how much the business spends on it's advertising.
    You just want to know if it's undervalued and by how much?

    I'll run through the Buffettology one briefly, it's from the book.

    - get the last 10 years of annual reports. (I choose 5 for NZ and AUS stocks)
    - get the earnings per share (EPS) for all those years too.
    - figure out on average in the 5 or 10 years the earnings have been growing each year. e.g. if it was 100 cents last year and 110 cents this year, it's an increase of 10% earnings
    - if it's 10% then next year it should theoretically be 121 cents. (110 plus 10%)
    - compare that 121 cents to the current share price to get a P\E ratio. For example, if the share is currently $20, then the theoretical P/E ratio for the upcoming year will be 16.53 ($20 divided by $1.21)
    - the 16.53 P/E ratio gives a yield of 6.05% (100 divided by 16.53 to get a yield)
    - Buffett then compares this to the AAA rated USA government bond yield. Say the government bonds can be bought today for 6% then it's undervalued
    - in NZ, I compare it to the NZ government bond. These are both roughly 5.8% so the stock is undervalued because it's 6.05%
    - therefore, the theoreticaly price I'd consider than stock would be worth would be $20.86 ($1.21 earnings divided by 5.8%)

    Please someone correct me if I'm wrong, I read the book about 3 months ago.
    Last edited by ENP; 27-05-2010 at 01:57 PM.

  3. #23
    Legend peat's Avatar
    Join Date
    Aug 2004
    Location
    Whanganui, New Zealand.
    Posts
    6,435

    Default

    Quote Originally Posted by ENP View Post
    A- Buffett then compares this to the AAA rated USA government bond yield. Say the government bonds can be bought today for 6% then it's undervalued
    - in NZ, I compare it to the NZ government bond.
    its called the risk free rate of return
    (on the assumption that there is no risk lending to the govt)
    [which with sovereign debt risk raising its ugly head must now be at least a little questionable] ;+)

    and it is used to calculate your required rated of return by adding on a margin for the risk you're accepting by buying an equity cf a govt bond.
    For clarity, nothing I say is advice....

  4. #24
    Legend shasta's Avatar
    Join Date
    Sep 2004
    Location
    Wellington
    Posts
    5,914

    Default

    Quote Originally Posted by wbosher View Post
    Surely FA and TA can be compatible though, for example using FA to select a company and TA to time entry and/or exit? I was planning on using both of them this way, or if Im picking stocks using TA, and come to a bit of a stalemate between two or three stocks, FA could be used to make the difference.

    Just a thought.
    Absolutely, your best returns will come from using TA & FA, it's not what Warren Buffett uses, that all.

    I suggested "The agressive investor" book because it has blow by blow examples of how the author uses both, thers a CD on there which shows his FA & TA filters used & everything

  5. #25
    Member
    Join Date
    Mar 2009
    Location
    Upper Hutt, Wellington, NZ
    Posts
    219

    Default

    Quote Originally Posted by shasta View Post
    Absolutely, your best returns will come from using TA & FA, it's not what Warren Buffett uses, that all.

    I suggested "The agressive investor" book because it has blow by blow examples of how the author uses both, thers a CD on there which shows his FA & TA filters used & everything
    That sounds like it's exactly what I'm looking for. Is this primarily for investing or trading? Or both?

  6. #26
    Member
    Join Date
    Mar 2009
    Location
    Upper Hutt, Wellington, NZ
    Posts
    219

    Default

    Bugger, the book appears to be out of print.

  7. #27
    Member
    Join Date
    Sep 2009
    Posts
    72

    Default

    FYI ... ' The Agressive investor' has been replaced by 'Building Wealth in the Stockmarket' . It was released this month. Basically refines his methods etc and has more finacial ratios.

    4be

  8. #28
    Member
    Join Date
    Mar 2009
    Location
    Upper Hutt, Wellington, NZ
    Posts
    219

    Default

    Quote Originally Posted by 4be View Post
    FYI ... ' The Agressive investor' has been replaced by 'Building Wealth in the Stockmarket' . It was released this month. Basically refines his methods etc and has more finacial ratios.

    4be
    I had a look on his website http://www.bwts.com.au/ where he is explaining the book, one line in particular caught my eye - If you are a private investor with a significant sum of money to invest safely in the stock market, here is a complete plan, proven through bull and bear markets.

    Oh well, I better start saving...

  9. #29
    Legend shasta's Avatar
    Join Date
    Sep 2004
    Location
    Wellington
    Posts
    5,914

    Default

    Quote Originally Posted by wbosher View Post
    I had a look on his website http://www.bwts.com.au/ where he is explaining the book, one line in particular caught my eye - If you are a private investor with a significant sum of money to invest safely in the stock market, here is a complete plan, proven through bull and bear markets.

    Oh well, I better start saving...
    Thanks for the update 4be

    wbosher, dont worry about the amounts involved it's the principles he uses that you can use yourself.

    Down the track you will find your own style, but that book is good for mid term trading/investing, he isnt a day trader.

  10. #30
    percy
    Join Date
    Oct 2009
    Location
    christchurch
    Posts
    17,222

    Default

    wbosher,
    try your local library,business section.peter lynch and jim slater have also written good books on the market.I found The Zulu Principal by jim slater excellent.If they do not have it they may get it from another library for you.All the Buffet books are good.

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •