What criteria must be met before you buy a stock?

I'd chip in and reiterate motorway's point in being able to define and detect:

1) Structure in financial time series:
Whether it is mean reverting, stochastic trend, or random

2) Regime Shifts
E.g. from mean reverting to trending regime

This is applicable to shorter term trading rather than longer term horizons.

Aussiest said:

Sorry to OP for being off topic.

.

Click to expand...

With apologies for what is probably woeful ignorance, what does 'OP' stand for?

prawn_86 said:

I hope they dont mind me singling them out, but people like ROE, Kennas, Julia etc all use some form of fundamental 'intrinsic valuation' (either solely or in conjunction with other ideas) and they seem to have done well for themselves.

Click to expand...

Prawn, sorry, but I've largely moved away from concerning myself with any sort of intrinsic valuation basis in favour of simply buying well known companies that are showing a solid uptrend, holding as long as they continue this, and selling when this turns around.
However, I'm still going to be aware of such companies' place in the overall macro situation.
What I simply don't do is buy dogs. Quite possibly miss out on some good turnaround profits with this rule so good luck to anyone who is happy to take this sort of risk.

Or you can simply say stocks make you the owner of part of a business and if you could, would you buy that business and not make any changes to it? If yes, then buy some shares.

Click to expand...

Yes, remember Realist? This was his approach. He bought companies with the intention of holding them forever. I can't think of too many companies to which I'd apply such a 'set and forget' approach.

tech/a said:

And as such there isnt a person on this forum who can trade like Buffett.
Ducati ran an exercise in this futility not long ago. (Attempting to find "Value" stocks and trading them to a profit.)

Click to expand...

Ah yes, what an interesting thread that was. Might be a good one for the instigator of this thread to read. Do you remember what it was called, Tech? Have a link to it? Did Duc eventually concede defeat?

op = original poster

nunthewiser said:

op = original poster

Click to expand...

Oh, of course. Thank you, nun.

Re my earlier reference to the 'competition' between Tech/a and Ducati, here is some of it:

https://www.aussiestockforums.com/f...ghlight=technical+fundamental+analysis&page=4

I'm not sure why you need to be the next Buffett to use 'value investing'.

Why do you need to be the next Soros to use 'global macro'?

Or the next Paul Tudor Jones to use 'technical analysis'?

ROE is one guy who uses this 'value investing' approach as a stand alone tool and proof is in the pudding. You can check his posts yourself and see his results and how aweful his 'averaging down into a sold company' strategy is........

It's his style, it works for him. It has risk, he may blow up 20% of his account if the stock goes to 0, but any strategy in a bad period could do the same.

As for value investing, I would say another good proof is simple long/short equity hedge funds, many will use this sort of approach and many perform consistently with great results (as far as I am aware they are one of the best performing 'styles' in the hedge fund industry).

Stupid debate anyways, market goes up, market goes down, market moves sideways. It's not exactly hard to work out how you want to exploit that, just look at different methods and work out what you think works. Then do it.

Julia.

It wasnt a competition as such but more a point Duc was attempting to make that he could return 30% compounding as Techtrader had for a few years at the time by simply value investing. Duc wasnt a technical trading buff and didnt believe in systems---or anything technical really.

His plan was to buy these low risk stocks which were grossly undervalued (By his valuation) and when they rose 30% or so sell them out while holding those which didnt reach 30% profit until they did. The reasoning was that as they were such amazing value fundamentally there was no way they wouldnt eventually increase 30% or more.

Here are the results.

https://www.aussiestockforums.com/forums/showthread.php?t=2829

tech/a said:

Julia.

It wasnt a competition as such but more a point Duc was attempting to make that he could return 30% compounding as Techtrader had for a few years at the time by simply value investing. Duc wasnt a technical trading buff and didnt believe in systems---or anything technical really.

His plan was to buy these low risk stocks which were grossly undervalued (By his valuation) and when they rose 30% or so sell them out while holding those which didnt reach 30% profit until they did. The reasoning was that as they were such amazing value fundamentally there was no way they wouldnt eventually increase 30% or more.

Here are the results.

https://www.aussiestockforums.com/forums/showthread.php?t=2829

Click to expand...

To apply a "Buffet" or "Fisher" or even a "Graham"
or any "Thematic" Type "Investing" can certainly be made to work for any
"Investor" of any Size..

& Buffet does apply a type of Black Swan type method
He is prepared to stick in a stock for a long time making nothing or even small losses.. So that he can make large profits..

TALEB principle of BLEED vs BLOW-UP

HOWEVER there is one reason ( maybe more )that BUFFET succeeded and DUC didn't..

Buffet no matter how attractive a situation IS
never buys unless He knows there is going to be Significant ACCUMULATION

IE his TIMING is VERY GOOD ( FOR HIS TIME HORIZON )

In a previous post in the thread I said "Buffet Knows something"
a particular something..


OK for You to be a BUFFET or a GREENBLAT

you have to be more like a William O'NEIL ( or the Original RD WYCKOFF )

You CAN NOT MAKE IT HAPPEN
You NEED TIME & TIDE WITH YOU

YOU have to be a "HITCHHIKER" (RDW)

When Buffet buys
HE makes it happen
He is ACCUMULTION on the way down , in the range & on the way up

Mr onlybuying1000shares

Is not going to make it happen maybe never in his lifetime
If he is the only one seeing it ( BUFFET realized this when he was a smaller player too )

You buy and it just keeps on going down
or a whole year passes and everything else but your play takes OFF..

KEY you need to be working with the Composite MAN
you need to learn HOW to see
ACCUMULATION
whether on the way down, in the range or on the way UP
and then when the 'TRAIN is at the station' AFTER IT HAS REVEALED a TREND ( some variations to timing of course particulars etc )

JUMP on for the RIDE...
( remember the Levy FLIGHTS it is all FLIGHTS & "JUMPS" so forget tools designed for WALKS ( most TA & a lot of FA )

TIMING MATTERS

DUC maybe proved it
He would run out of money before he found a positive black swan
( pure comment on just that thread not on DUC in general )


So more William O'NEIL ( CANSLIM ) '" How To make money in Stocks"

or an ORINGINAL ( & VERY GOOD BOOK ) from 1926/28

How I Trade and Invest in Stocks and Bonds
Methods Evolved and Adapted During My Thirty-Three Years Experience in Wall Street
by Richard Wyckoff

Both CHEAP

Don't fade the crowd ( be contrary for the sake )
Don't follow the crowd ( over cliffs esp )

But harmonize with the COMPOSITE MAN/OPERATOR

BULL MARKETS & BEAR MARKETS
really do exist at ALL SCALES

ACCUMULATION is what happens before stocks are in a BULL MARKET
it is eg TALEB principle of focusing on preparation

it is not Mr XYZ buying all the shares ( though at times it could be )

It is the building of the jump off points of regime changes...


motorway