Being contrarian can be very lucrative

[frankbaozhu]

Its only cheap --- relative to the current information.
Often cheap is what its worth to the market and as price drops cheap becomes cheaper and can and often does find its REAL value at the "Cheap" level.
Ducati a poster here did a 2 yrs challenge on the "Value" investing theme. He's no Fundamental slouch.
Went broke in that time. The very lengthy thread is here somewhere on the forum.



I Dont know I saw another --- they worked damned SMART!

I still do not get it. Let's say you go into the supermarket and buy yogurt for 1 dollar. You have been buying this for a long time and today it is selling for 70c. If what you said is true, then this 70c is not cheap. It has to go down further and get even cheaper. Let's say the price is now 50c. But the thing is that, you still do not think 50c is cheap unless the price starts going up.

For all the successful people I know in this business, they worked very hard. I am not sure if we meant the same, but work smart alone does not guarantee a successful career.

I am kind of lost in this discussion. Maybe I should stay in HotCopper.

[nomore4s]

Second, when something is cheap, it is cheap. Whether it goes up or down after your purchase does not change this fact. So if you buy cheap enough, why should you bother to worry if it will go down another 20%?

Because 20% cheaper is 20% that could have been in your pocket when it is all said and done, and that is not even considering things like opportunity cost by having your money tied up in a losing stock.

I still do not get it. Let's say you go into the supermarket and buy yogurt for 1 dollar. You have been buying this for a long time and today it is selling for 70c. If what you said is true, then this 70c is not cheap. It has to go down further and get even cheaper. Let's say the price is now 50c. But the thing is that, you still do not think 50c is cheap unless the price starts going up.

It is only cheap if you can re-sell it for more then 50c, if you can only sell it for 40c then it is not so cheap.

For all the successful people I know in this business, they worked very hard. I am not sure if we meant the same, but work smart alone does not guarantee a successful career.

And hard work alone does not guarantee a successful career.

[tech/a]

I still do not get it. Let's say you go into the supermarket and buy yogurt for 1 dollar. You have been buying this for a long time and today it is selling for 70c. If what you said is true, then this 70c is not cheap. It has to go down further and get even cheaper. Let's say the price is now 50c. But the thing is that, you still do not think 50c is cheap unless the price starts going up.

Exactly.
Using your analogy after a while the Yogurt would be worth Zero! But in a Company situation unless investors agree and start to buy at higher prices then your "cheap" valuation is entirely yours.

For all the successful people I know in this business, they worked very hard. I am not sure if we meant the same, but work smart alone does not guarantee a successful career.

After 17 yrs I know the effort.
But it is in itself effortless in that its a joy to spend the time.
The money comes through understanding "What Makes the money" and importantly having a capital base which is comensurate with a business.
Making a Couple of K a day is vastly different to a couple of Hundered---More to the point is how you handle a drawdown of Thousands not hundereds.

I am kind of lost in this discussion. Maybe I should stay in HotCopper.

You could and if you did you'd learn bugger all.

[robusta]

Brilliantly explained, motorway.

In another forum, we have a young whippersnipper, who refers to WB to justify just about any funnymental nonsense he tries to emulate. And scoffs at any experienced trader that uses Analysis techniques - be they technical or fundaments - to try and read, then follow the Market Makers.

Don't we all use analysis techniques? I am just not entirely sure the best results are to be achieved by following the market (crowd) but I would be interested to learn.

I don't want to send him here - not sure either Forum Admin would appreciate that; nor do we have the need for a disrespectful loudmouth in this place.
But if you don't mind, may I quote you next time he compares himself to WB?

Thanks heaps, Pixel.

Just having a little trouble identifying the disrespectful loudmouth.

[Tysonboss1]

It all comes back to what I was saying about there is more than just number crunching, you have to have a good understanding of business and economy etc.

it's not somthing that is quickly learned.

As I said most people that have an opinion on Value investing don't actually have a good understanding of it.

It not about buying somthing that has gone down in value,

It's about buying good business at sensible prices. The fact is that if you own a portfoilio of good businesses that you have bought at sensible prices over time you will do well.

Granhams teachings in no way say that it is easy to become a successful value investor, In fact alot of his teaching are styled as warnings to people who are going to try and beat the market, he recomends 90% of investors limit them selves to index funds type investments.

[KurwaJegoMac]

Don't we all use analysis techniques? I am just not entirely sure the best results are to be achieved by following the market (crowd) but I would be interested to learn.

You can have really good results following the market (crowd as you put it) - after all, what causes the SP to move? At a very basic level, if the market wants your stock then it will go up. If they don't want your stock it'll go down. Regardless of how cheap you perceive a stock to be or how great it's earnings potential is, at the end of the day it'll all come down to who wants it and how much they're willing to pay.

This applies not only to stock, but commodities, real estate, metals, etc - any asset you can think of. Therefore you can exploit supply/demand by following the market. Most people try and buy low and sell high - but there's nothing wrong with buying high and selling higher. 'The trend is your friend' and all that sort of jazz.

[Tysonboss1]

Granhams teachings in no way say that it is easy to become a successful value investor, In fact alot of his teaching are styled as warnings to people who are going to try and beat the market, he recomends 90% of investors limit them selves to index funds type investments.

He does however believe that those that do have a good understanding of business and the right emotional attitudes to fluctuations and who dedicate time to correct security analysis can generate gains higher than the market average overtime while also taking less risk.

And this has been true for (real) value investors accross the world,

[KurwaJegoMac]

He does however believe that those that do have a good understanding of business and the right emotional attitudes to fluctuations and who dedicate time to correct security analysis can generate gains higher than the market average overtime while also taking less risk.

And this has been true for (real) value investors accross the world,

Quite right. Most of the people that get involved in investing have neither the time nor the inclination to properly educate themselves before risking their $$. Most people are just after a get rich quick scheme. They learn the hard way pretty soon

[Tysonboss1]

Quite right. Most of the people that get involved in investing have neither the time nor the inclination to properly educate themselves before risking their $$. Most people are just after a get rich quick scheme. They learn the hard way pretty soon

Yeah, and to these people a defensive approach of dollar cost averaging into an index fund and maybe buying their own home will still see a decent return over time.

If they try to time the market or any other number of silly mistakes without the correct understanding over time they will be sure to have worse performance than those simply taking a defensive approach.

[tech/a]

Quite right. Most of the people that get involved in investing have neither the time nor the inclination to properly educate themselves before risking their $$. Most people are just after a get rich quick scheme. They learn the hard way pretty soon

Hang on you guys.
Theres far more than one way to skin a cat!
We dont have to Buffettologists!

Case 1
30 min last night --$1400 the average guys wage!

Fact. 1.gif

Fact 2
I have no idea what these companies do.
Todays P&L $3022.

Sure not in Buffetts League

If you think these are flukes
Think again!

Fact.gif

Takes an hr a day and I wouldnt know what their balance sheets
had in them.

[Tysonboss1]

Hang on you guys.
Theres far more than one way to skin a cat!
We dont have to Buffettologists!

Case 1
30 min last night --$1400 the average guys wage!

Fact. 1.gif

Fact 2
I have no idea what these companies do.
Todays P&L $3022.

Sure not in Buffetts League

If you think these are flukes
Think again!

Fact.gif

Takes an hr a day and I wouldnt know what their balance sheets
had in them.

Know doubt there is more than one way to skin a cat. I am not saying you can't make money in other ways than valur investing.

But in my opinion, and it is just an opinion.

You don't have to trade to make money. You can Invest and if the policy in which guides your investing is sound you can have a results that are as good or better than even the best Traders over time, while taking less risk and spending less time glued to the computer screen making daily trades.

But as was said earlier we are all different, I for one certainly don't have the apptitude for trading.

[KurwaJegoMac]

Hang on you guys.
Theres far more than one way to skin a cat!
We dont have to Buffettologists!

Case 1
30 min last night --$1400 the average guys wage!

Fact. 1.gif

Fact 2
I have no idea what these companies do.
Todays P&L $3022.

Sure not in Buffetts League

If you think these are flukes
Think again!

Fact.gif

Takes an hr a day and I wouldnt know what their balance sheets
had in them.

Sorry Tech/a you might have misunderstood me - when I was referring to not taking the time to educate yourself I wasn't talking about Buffetology specifically. More around educating yourself in your chosen analysis or investment vehicle first.

I.e. to be the trader you are, you had to educate yourself first. Most people just want to dish out money like you do, yet don't bother to learn skills like risk and money management, entry and exit techniques, etc.

That's what i'm referring to when I mean educating yourself.

(Personally im a TA too and don't subscribe to the Buffetology way - each to their own )

[tech/a]

Education is fine but EDUCATION IN WHAT?

How many 1000s think Fundamental or Technical analysis will bring you success?

How many study and implement EITHER and fail never to return again?

How many Dont have a clue what will guarantee them success in the long term regardless of method used.

How many study for years "stuff" which has no/little bearing the end result.

[Tysonboss1]

Education is fine but EDUCATION IN WHAT?

How many 1000s think Fundamental or Technical analysis will bring you success?

How many study and implement EITHER and fail never to return again?

How many Dont have a clue what will guarantee them success in the long term regardless of method used.

How many study for years "stuff" which has no/little bearing the end result.

As i said for 90% of people a defensive stratergy involving index funds with dollar cost averaging is fine.

the other 10% can do what ever they want, for we it is a value based stratery.

What education?- Books- Intelligent investor, security analysis, Every warren buffett letter since the early 70's,

Plus business experiance and gerally economy litereature adam smiths "the wealth of nations" is good.

[robusta]

You can have really good results following the market (crowd as you put it) - after all, what causes the SP to move? At a very basic level, if the market wants your stock then it will go up. If they don't want your stock it'll go down. Regardless of how cheap you perceive a stock to be or how great it's earnings potential is, at the end of the day it'll all come down to who wants it and how much they're willing to pay.

Just occasionally the market will not want the stock in a excellent company and this is where IMO the best buying opportinities are. I make no effort to work out what the sp will do in the short term but believe that sooner or later the market will see the earnings growth and capital gains will follow.

This applies not only to stock, but commodities, real estate, metals, etc - any asset you can think of. Therefore you can exploit supply/demand by following the market. Most people try and buy low and sell high - but there's nothing wrong with buying high and selling higher. 'The trend is your friend' and all that sort of jazz.

No argument here. This is also a valid investment technique, just not the one I use.

Hang on you guys.
Theres far more than one way to skin a cat!
We dont have to Buffettologists!

Case 1
30 min last night --$1400 the average guys wage!

Fact. 1.gif

Fact 2
I have no idea what these companies do.
Todays P&L $3022.

Sure not in Buffetts League

If you think these are flukes
Think again!

Fact.gif

Takes an hr a day and I wouldnt know what their balance sheets
had in them.

Not trying to change anyone's investment philosophies, just trying to refine mine. Best of luck to you tech/a.

[tech/a]

Not trying to change anyone's investment philosophies, just trying to refine mine. Best of luck to you tech/a.

Well

Maybe its time to come over to the dark side?

[johnnyg]

$1400 the average guys wage!

Looking for workers?

[robusta]

Well

Maybe its time to come over to the dark side?

It would take a lot of convincing. I am very happy with my returns so far.

[Julia]

[

You can have really good results following the market (crowd as you put it) - after all, what causes the SP to move? At a very basic level, if the market wants your stock then it will go up. If they don't want your stock it'll go down. Regardless of how cheap you perceive a stock to be or how great it's earnings potential is, at the end of the day it'll all come down to who wants it and how much they're willing to pay.

This says it all imo.

This applies not only to stock, but commodities, real estate, metals, etc - any asset you can think of. Therefore you can exploit supply/demand by following the market. Most people try and buy low and sell high - but there's nothing wrong with buying high and selling higher. 'The trend is your friend' and all that sort of jazz.

Again, agree entirely.

Just occasionally the market will not want the stock in a excellent company and this is where IMO the best buying opportinities are. I make no effort to work out what the sp will do in the short term but believe that sooner or later the market will see the earnings growth and capital gains will follow.

And this is essentially where the difference lies between the two approaches, i.e. time frame. Trend followers will make the most of a rising SP rather than wait for months/years until the market eventually recognises the magnificent value of your fundamentally brilliant company.

I do, however, really respect those people who are prepared to put so much thought into analysing what they term value companies.

And Tech/A: I well remember that fascinating thread with Ducati.

[pixel]

Don't we all use analysis techniques? I am just not entirely sure the best results are to be achieved by following the market (crowd) but I would be interested to learn.

Hi robusta,
I said I'd try and follow the Market Makers - definitely NOT the crowd.
For example, my trading method begins with evidence that some "deep pockets" hold the price down low while accumulating. That is usually a coordinated effort and definitely not random crowd behaviour.
Another way of separating actions by the Makers from those of the crowd is what's called a BMI, or "Big Money Indicator".
Once I detect such "purposeful" activity, I look for evidence that they're all but finished and about to let the sp snap back up; initially, in the breakout from that accumulation range, they're taking out all and any half-undecided sellers that may have kept their sell orders a little above the price action. And that accounts for the high volume that we often observe on the day of the breakout.

I reckon that makes it obvious that this kind of activity is initiated by the Big Money leading as buyers; the retail masses are selling like good sheeple are expected to do. Then, when the breakout has occurred, the followers will start buying again - and complain about how fickle the Markets are and it's just not fair that they were made to sell low when they were so sure they should've held. ..... and then they start to buy again when the Big Money and its followers take part profit to finance the initial "price management."

All of that is quite transparent - and as legal as Sunday School,