Re: Which one do you use? Technical or fundamental analysis
Hi Julia,
The term "blue chip" I suppose is a bit open to interpretation and everyone has their own idea. Some people would say maybe the top 10-20 stocks, some might say the top 100 and I have read someone somewhere saying technically it should be anything in the All ords. To me I tend to think of it in terms of the top 20-50 or so.
Well bearing in mind I am a "trader" AND an "investor"..........
With my trading hat on I find that not many of the top 50 trend in a way that suits me -just personal preference. They are just a bit too volatile for my liking and get thrown around like rag dolls half the time according to how the institutions view the nights action overseas. What I term "second tier bluechips" such as a WOR, JBH, BOQ, CTX etc........tend to move in a more predictable fashion, are less at the mercy of the instos and allow me to make clearer decisions. It's really only the top 50 I don't tend to "trade" - anything else is fair game. Having said that I did make an exception and buy BHP last week.
With my investors hat on it's pretty simple. In most cases (ruling out rare events like the current resources boom and related action in BHP,RIO etc...) the larger companies have their biggest growth behind them. Take HVN as an example. Still a great company, well managed etc............but a dinosaur that has a hard time getting up any speed and is trading at less than it was 6 years ago. A rapidly growing company like HVN from 1996 to 2000 is what interests me.............buying tomorrow's blue chips today. Hmmm...........sounds like a good slogan for my managed fund
Once again it comes down to how high you set your sights in terms of expected returns. Blue chips (eg the banks in recent times) can provide more than satisfactory returns for the average Joe that cannot it here all day like I do - even better when combined with margin. If ,however , you're doing it for a living or permanent part-time
and are prepared to scour the small to midcaps accounts for the odd gem (a HVN/FLT in its infancy for example) then "blue chip" returns pale in comparison. Easier said than done ofcourse and some would say more risky ** etc........ but well worth the trouble IMO and also quite enjoyable for someone who likes the research.
Cheers,
Ed
** despite what some would say I would argue that a small-mid cap that is making nice,growing profits without debt is probably safer than holding a "blue chip" like Telstra .........or HIH
A good example in recent years would be COU.
PS I realise HVN has provided nice returns in recent months but I'm talking more in terms of the "life cycle" of a company.