muscleman

I continue to see weakness in FNMAS through technical analysis. I am really bullish about the fundamentals, but it is not confirming with my technical analysis, so I am still staying away from it. I am really curious what will happen next. Technical analysis doesn't work in certain cases like MBIA's settlement with BAC back in 2013, but I think for FNMAS, technical will take a lead in giving us a clue, because the reform talk is wide spread among many people. The court ruling may be a surprise, but anything coming out of the admin announcement should not be a technical surprise.

But that's in theory. In practice, I've experienced countless times when I bought a low P/E stock, and stock kept declining, and a few months later the company reports shit earning and suddenly, my P/E is much higher. Company blames it for some one timer events, so I held on, and then another quarter later, the earning is even worse--- It was negative now! So there isn't event a P/E that I could value on, and now management continues to blame some one timer events. Now I am down 50%, with no margin of safety with me. ::)

I am doing some research on broker order execution quality and it was interesting that each broker says it is the best. (Of course, right?) Fidelity: (Click that "price improvement" link) https://www.fidelity.com/trading/execution-quality/overview It says per 100 shares, industry average is 0.27 improvement, while Fido has 2.38 improvement. IBKR: https://www.interactivebrokers.com/en/index.php?f=1340 It says per 100 shares, industry average is 0.06 improvement, while IBKR has 0.58 improvement. The interesting thing is that both brokers said they used "IHS Markit", a 3rd party independent consultant, to do this analysis. Fido's stats are based on October 1st 2017 to November 2018 while IBKR's stats are based on 2nd half of 2018, so there might be some difference based on this. But still, the data seems pretty dramatically different. The other one is TD AM: https://www.tdameritrade.com/tools-and-platforms/order-execution.page It says per 100 shares, it gets 2.4 improvement, though this is done by "S3 Matching Technologies", which is another 3rd party consultant, so results may not be Apple to Apple comparison. My personal experience with TD is that I usually get pretty good improvement on small orders, but rarely got any improvements on larger orders.

DIng, ding, ding. It's surprising that this was not mentioned throughout this whole thread, because the only time I was able to outperform the S&P over the long-term is by (ironically) under-performing in the short-term. My timing is not impeccable and investments that I've thought were cheap become cheaper by more than 15%. In order to compensate for the bad timing and mistakes that the business one's invested in makes, I double down, as long as those mistakes did not affect the intrinsic value of the business. Not that it is a foolproof strategy, as sometimes what you thought was cheap was actually expensive, which was Valeant and HBC for me. However if one is right one out of three times, one will do well over the long-term. I remember in 2008, when purchased BAC @ $7 and it was more than 50% of my portfolio, and even then the stock went to $3, even after news that the US Government was purchasing shares. I reviewed my investment thesis and doubled down, and even though on paper I was underwater for more than a year, it was one of my most profitable investments. In fact, the most profitable investment was when I was underwater for two-to-three years, but kept on doubling down because prices went down on issues where the company made moves that made sense for the long-term, but meant accepting short-term pains. All these years I've learned that outperformance for me is more psychological than analytical, in fact, I do not check my performance every day, much less every year. As weird as it sounds, my mind is focused on owning as many shares in a company as possible, and I am more happy when a stock goes down, rather then up. I realize that this does not align with everyone's investment/retirement goals, but I think it is one of the reasons why value investing is hard. As one has to bet against the consensus, and believe that the stock price is not the per share value of the company. In fact be happy when a stock price goes against you because you are increasing your percentage ownership at a faster rate, then before. Again not foolproof, for example, I've been invested in Hudson's Bay for almost six years, and still underwater, but have not sold because it is a company that I am more than happy to own under $15/share. I am surprised that you said this is mentioned throughout this whole thread, because I've said over and over the whole reason that I gave up value investing is because I simply can't stay emotionally stable with it. I am finally able to after I switch to a technical method. I think there are lots of misunderstandings of why I made this thread and people were just criticizing me for what I said without understanding what I said. One of my major point of this thread is to help people understand that they need to find a method that they can work with naturally and keep emotions stable.

All those tools and analyses focus on strictly informational advantage. What about advantages of time horizon and emotional stability? I think it's John Huber that wrote a nice blog post along those lines... There you go! I think time horizon and emotional stability are one of the key factors that make the difference. I realized this since 2017 and was actively working on it. Eventually this made me to gave up value investing to switch to other methods that make me emotional stable. It is all about finding a method that make you do it naturally, instead of having to force yourself to do things.

I am only up 3% so far, with 70% cash. As I said earlier in this thread, I fully understand the trade offs. By value investing and actively bargain hunting, I'll capture big upside when the market goes up, but I'll also likely get hit big, maybe 50% draw down when I aggressively buy in and the market continues to go down. My personality can't tolerate that. I am totally cool if I am only up 5% while the index and everyone else is up 40%. This won't affect my emotional one iota. Choosing the style of investing is all about trade offs and finding one that fits you. If you want to discredit a method, and cherry-pick the period that doesn't work well, and say, look at this period only, then you can find the argument against any method.

I partially agree and partially disagree. I do have the exact same doubt that while the DCF excel sheet, sum of parts analysis and all those tools are fascinating, everyone else have the same tools, so how could it be possible that only Buffet has beaten the game so far? On the other hand, for technical analysis, don't we have the same problem? All these technical analysis tools are wildly known and there were superstars who talked about how they use these tools in a wide variety of interviews. How come we only have a handful of superstar traders who is pure technical based? What is missing?

No wonder the oil industry is so pissed at Justin Trudeau. This ruling may also have big impact on the nuclear industry as well. Imagine a nuclear reactor blow up and the whole industry responsible for paying for the recovery? I can't even imagine how someone can completely clean up a nuclear blow up.

That could be possible, but the takings claim would be validated right? That's the real danger for common but not for preferreds. However, with 79% warrant for common, I just don't see how Mnuchin can be that stupid to wipe out the common that way. And the courts for Lamberth, 5th circuit are looking promising.

I am completely sold out. As I said in another thread, after all these years' of ups and downs, i no longer believe in value investing. I am reading some concerns through my technical analysis in the last few trading days, so I unloaded. This is extremely puzzling because if I rely 100% on fundamentals, I should have been buying hand over fist right here. Let's see what happens next. Maybe I am missing a large chunk of profits here. ::)

What a disgusting sales pitch. :o I think these billionaires became where they are because of their luck and sales skills, not because of their alpha skills. If he can make money on 2.5b, why is he losing 34% on 4 bn last year? And now that he is open and taking more cash, the 2.5b will quickly go back to 4bn like last year, so does that mean he will be losing again? This is just non sense. GRLE is trading at 0.6 book. He has been an activist for life. Can some other activist take over his portfolio? I wish I have enough money to be an activist and liquidate his entire portfolio and run my own strategy!

-34% is horrendous. I thought a long short fund is supposed to do better in a down year?

I think there are two problems: 1. Sunk cost: The more time I spend researching a stock, the more likely I'll increase my confidence without increasing my batting average. 2. Opportunity cost: The more time i spend researching one stock, the less likely I'll have time to research other stocks and compare to find the best ones. Therefore, I keep a chart of time spent researching stocks and batting average increase and try to find the best balance. Eventually I decide that I should only spend 5 minutes per stock and additional research time isn't useful for me.

People who point to indexing after reading my post didn't get my points. Indexing does not avoid the problem of buying and seeing the portfolio tanking 50%. Considering valuation when buying the index or whatever stock does not solve this problem either. Countless times, I've seen examples like the P/E collapse from 15 to 10, and value guys buy, saying it is a bargain, and then it collapses to 5, more value guys buy in or adding, and then it collapses to 2, and more value guys buy/add. Then the company starts to report massive losses, and now there is no longer a P/E. In other times, the company keeps reporting stronger earnings and stock price quickly rebounded. But it is very hard to tell in real time which one will happen. Hope this clarifies all my points. I don't have anything additional to say.

Wow, how old are you? 33

UNF2007, I don’t buy index funds. I could have easily bought at the 1929 peak and have a 90% drawdown and couldn’t recover for decades. As I said above, 10% is good for reasons I explained above. No matter what % I choose, there are always examples like you choose here that doesn’t work.

I fail all the time, to be honest. I have a mandatory 10% stop loss, so if that is hit, I am automatically sold out by my broker. With this rule, I no longer feel depressed and compelled to check stop quotes every few minutes. The flip side is that often stop goes down to this level, hits my stop, and then goes back up. However, there is no good solution for that. I researched various loss cutting points but I found that no matter what % it is, there will always be stocks that I could have given it 5% more leeway, and it would turn back and go up 100%. Since my personality can't handle it without a hard stop, I just make it simple by the 10% rule. I am aiming for 50% winning ratio, which is very hard. But with a quick loss cutting plan, and aiming for multi-beggars, I can afford to fail a lot of times. When I fail, there are usually two possibilities. 1. I am out of luck. In this case, I'll just find the next bet. 2. The general market is in the 2008-2009 type of nose dive. In that case I would just stay in cash. The flaw of this approach is that I will very likely miss the whole bottom during March 2009, watch the market go up for months while I am holding cash. I know most value guys will not be able to tolerate this, which is why they are value guys. However with my personality, I would totally be able to withstand this type of distress than the type of "buying now and be ok if the stock goes down another 50%" distress that value guys usually endure. To sum up, there are no perfect approach. It is basically an honest conversation with yourself of what the pros and cons each style has, and what you can tolerate. Can you tolerate a lot of realized small losses and still be able to start betting again? Can you tolerate seeing October 2008 to July 2009 when SPX went from 900 to 600 to 900 and be totally fine holding cash in this entire move? If the answers are both no, then value investing may be the style for you. But that means you have to be able to answer yes to the following questions: Can you tolerate large unrealized losses? If some really bad news came out after you already have a 80% unrealized loss, are you able to sell out or are you going to freak out and freeze? Can you watch SPX crash from 1500 to 900, thinking it is already the bottom, go all in 100% invested, and then see SPX going down from 900 to 600 and possibly taking your fully invested portfolio down by 40%, and stay cool? If the answers are not yes for both of the above questions, then value investing may not be right for you either. Then you'll have to find another approach. Keep in mind that no matter what approach you choose, there will ALWAYS be some flaws and your personality has to be cut out to naturally be able to tolerate those flaws EFFORTLESSLY. Also keep in mind that a lot of times, our minds are fooling us when we were just talking instead of playing meaningful amounts of real money. I always thought I could handle 50% unrealized losses on my stocks and be cool, until I actually start to have names that are down 30% and couldn't sleep. So the only way to find out is to try it out with real money. This is the whole reason I opened this thread for discussion. A lot of newbies warship Buffet and took his methods for granted that it has to work and it has to be the best method in the world. I want to bring people to realize that investors can only succeed when they use the methods that naturally suits their DNA.

Media has its own agenda. This news doesn’t help impeach Trump so why waste resources reporting it? They’d rather get high with BuzzFeed’s liar news all day yesterday.

That’s true. I am not blindly taking bets from everything it shows me though. It is only an idea source, as step one, not last step. I’d also guess these models over weighted fundamental numbers, which only reflex the past. On top of that, I focus on technical analysis. I’ll give you two examples. IHC: Tender offer at 20. After the price was locked in around 19.9-20 for a few weeks, one day it went to 20.30 and news that not many shares were tendered. Why does that happen? If informed players are not willing to sell at 20, what’s the right price for it? I immediately started buying, and a few months later it was 40. BXC: Cerberus Capital had a huge 2nd offering to sell all of its 49% stake at 7. Stock plummeted from 10 to 8, but never reached 7. Usually when a 2nd offering came out, the stock would be trading at that price, but this time is unusual. I immediately bought at 8+. A few months later I sold at 35.

Thats great! I`ve built a lot of models on portfolio123, too. But i haven`t found one that beat my NCAV model consistently. I tried to incorporate some of Olikea`s ranking/models with >30% annual returns, but i was not able to trade it profitably, because as soon as the model has a drawdown i questioned the whole model`s approach. That`s probably my own handycap. Do you trade the model directly with the trade interface or do you manually enter trades? I have had the same problem as you. I manually enter trades. The biggest lesson I learned after struggling for a while is that no models can consistently work. It is important to deep dive and understand when your model fails to work, and then stop using it. Switching models is just like switching strategy from value to momo. No single strategy works all the time, and switching after it stopped working for a while is a deadly mistake. The most important thing is to know what suits me, and stick to it, deep dive to understand its strength/weakness, especially when it is likely not going to work well for the next few months, and stop using it and just relax in life.

Surely you mean SHLD. ;) Yes. I owned that name that quickly went underwater, then Baker Street bought a ton and sent out a bullish thesis that bailed me out for a profit. Later Baker Street went totally bankrupt, and I personally know an analyst from Baker Street who had to leave and changed his career and joined MSFT as a program manager.

I am always curious to learn something new, can you point to resources that prove the validity of your approach? (luck vs. skill??) Or is it "just" a momentum approach? How do you find your stocks, how do you determine when to enter/exit? Since value investing is such a broad concept ("pay less than something is worth") i can hardly see how that is not working for anyone. The hard part is figuring out what something is worth, and maybe you were just not that good at it because you probably looked in the wrong places and tried the hard stuff first. If you ever give value investing another try I would focus on NCAV and dividend growth stocks because they are the easiest to value. Regardless, i am bored right now, so please give me something to read regarding your new approach. :) I use portfolio123.com to build my quantitative value model and find the best 50 stocks before doing further research. What I find interesting is that ideas that are either not discussed in any forums, or have only short discussions tend to outperform by a lot. I have stopped discussing stock ideas with anyone, including in this forum, because the moment I start to do that, I am following the crowd, and crowd behavior will inevitably lead to underperformance, including the CoBF crowd.

I now use a technical based method. I am a momo trader now.

That is part of my distress for sure. However The biggest problem/myth I have is that a lot of times the stock goes down first before negative news came out, and by the time the negative news came out, I’m already down 50%. Therefore I really don’t think value investors or anyone could say the market is stupid and I am right, or say if I buy with sufficient margin of safety, I don’t care to be down 50%. A lot of times the margin of safety is just imagination. SHDL for example. After trying really hard for 9 years, I gave up.

I totally agree. I have spent 9 years on value investing and read over 100 books. I gave it a hard try and it wasn't for me. After I switch the method, i no longer feel distressed and compelled to check the stock price every few minutes. That's why I made this post to alert people that there are more methods than value investing, and one can only have superior performance if he finds the method that suits him. Regardless of what method one picks, I believe one has to be open minded in order to succeed. I see a number of folks asserting adamantly value investing is the best, without even having in depth knowledge of other methods. I doubt any of these people are open minded. Being open minded is the first criteria before one can succeed in stocks. Good luck!