frommi
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Posts posted by frommi
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Bought EPA:ALVEL, Netnet with 65% upside to NCAV and active share buybacks
Bought more SRC calls, spinoff is at the end of the month.
Bought a large position in MXP futures in my currency system. (Moves 50% of my foreign currency exposure from USD to MXN)
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My list of netnets has 0 in the us/canadian right now. I am down to 9 globally which look good, that is a new all time low record (min. discount 30%).
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I get where you are coming from, I almost failed a job interview because a psychologist determined I had an 'extreme appetite for risk' and I was 'unsuitable for work in a low-pressure environment'. Fortunately I applied for a trading job and the head trader overruled her, more or less saying: "that's exactly what we need". I'm not sure the assessment was entirely correct (basically when I told her I used to play a lot of poker she had made up her mind) but rest assured that I have made, and will make, stupid trades every now and then.
I think the key to dealing with this problem is to be super honest with yourself: these trades (including your DAX 'hedges') almost certainly have negative expected value, you make them because you are bored and/or tired and you are prone to justfy them after the fact. Design your investing routine in such a way that that you avoid these situations and make sure you document everything you do (especially your mistakes) to keep yourself accountable. I think Walter Schloss once said something along the lines of 'I like owning 50 different stocks - I always have something to do'. That always resonated with me.
Calling playing around with options 'compounding knowledge' doesn't really sound introspective, to say the least. In fact, it sounds more like a way to fool yourself into justifying your gambling habit. So, to answer your question: I'd value it at -2% p.a.
Thanks, i really appreciate your view. Compounding knowledge was also attributed to reading a lot of annual reports, conference call transcripts, quant papers etc. something i probably wouldn`t do as an armchair investor. The DAX hedge has a positive expected value (at least it had one in the past), you can look at my backtest if you like. Of course its just a backtest, but i would even do it with an expected value of zero because it lowers the maximum portfolio drawdown (who wouldn`t buy an insurance that has no cost?).
This was not created with publication in mind, so its probably not that easy to understand: https://docs.google.com/spreadsheets/d/1NeuzDBHovCGqOz0VH0DKVBgUOJRJpB-24c_rgWsTr6U/edit?usp=sharing
Expected value for doing it on the Dow Jones is lower (could maybe even improved using a putspread instead of a 5%OTM put), but even there the expected value was slightly positive. And instead of losing 75-80% in the great depression you would have come out of it without losing a lot of money.
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Still gambling on the ourcome of certain scenarios ? Do these trades generally work out for you. I am curious, if this is truly better time and money spent than being an armchair investor?
My NFLX trade is a gamble, i won`t argue about that and my history with these type of bets is not favorable for me (even though this year i am at +-0 with these type of bets). I still do it from time to time, because i sometimes simply can`t control my gambling habits. But these bets are always very small. I tried to get rid of them by simply having no access to free capital in my brokerage accounts which worked very well in 2016, but since i trade other systems than my NCAV system now (OTC stocks eat all the available margin.) i have to give my gambling habits a little room from time to time. (So i try to control my bad habits by doing them at least half way intelligently.)
Other than that i am trying a lot of different stuff and keep doing what works for me personally, the DAX hedge is something i tested and that worked in the past. But of course you can`t get payoffs of 5:1 or 8:1 and win on every single trade. I try to collect a number of quantitative systems over time that suit me and that simply work. My options system for shorting stocks that i tested from Sep 2017 to last month has not worked for me because trading and implementation costs where a lot higher than simulated and expected. So i stopped doing that, even though it was profitable.
I am just not the guy who can buy an index fund or AMZN/GOOG/NFLX/AAPL/BRK.B and leave it alone. Its not in my DNA. But my performance over the past 5 years was in line with the market and i expect to do a lot better in the future, especially if we finally get a larger market correction. How do you value the knowledge that compounded over this time?
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DAX bear put spread dec 2018, 10000/9400, maxmimum payoff is ~16:1, target is 8:1. For it to reach the payoff the DAX has to fall roughly 20-22% from here and that happens every 4-5 years. This is my "summer" hedge system and has an expected return of 5-7% over time, but the big gain comes from having money to invest after a huge correction. I backtested this for ~100 years and trade it since 2014. In 2015 i did it with normal puts, so the payoff was not that large.
I also bought a very small position of NFLX Jan2019 put spread 200/180, because i think that the market forgot that Disney will pull all Marvel content next year and open its own streaming business which will surely be a dent into NFLX growth rates. The payoff is 10:1, target is 5:1. I think these are very good odds and all that is needed is probably the anouncement of Disney that will show that they are on track with their streaming service. Its unbelievable but just 4 months ago NFLX traded at the level required for such a payoff!
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To get prices you can leave out "price". But i tested both versions and none works. MCX:UPRO is something else and NYSEARCA:UPRO doesn`t work. Maybe it is something with Proshares ETF`s that doesn`t work anymore? I also can`t get prices for the ETF "NOBL".
Looks like it was fixed last night.
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You mean ("UPRO", "price")?
What I usually do is click a link for a known share such as BRK.B then type UPRO in the Search Box at the top. It suggests two different things and includes in capital letters the correct ticker for each (including exchange where necessary).
For UPRO these are:
NYSEARCA: UPRO
MCX: UPRO
To get prices you can leave out "price". But i tested both versions and none works. MCX:UPRO is something else and NYSEARCA:UPRO doesn`t work. Maybe it is something with Proshares ETF`s that doesn`t work anymore? I also can`t get prices for the ETF "NOBL".
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That would be nice, but i doubt it. =GoogleFinance("UPRO") also doesn`t work anymore, any ideas?
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I had the same problems, had to rework all my spreadsheets today. USDUSD doesn`t work anymore and some tickers now need the correct stock exchange prefixed. Until today you could get data with FFH.TO, now you have to use TSE:FFH. And they changed the layout on the GoogleFinance site, so for all tickers that are not available directly with the GoogleFinance API i pulled the data from google.com/finance, that also doesn`t work as before. I now use quote.wsj.com to import japanese and singapor stock prices, but the loading takes forever, i would love to see a better idea to get japanese and singapor stock prices into a spreadsheet.
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Bought MO,WPP,XOM
Covered shorts on HSCG,SPNS,TWLO,IRWD,WAB,RBA.
shorted ZB futures with a tight stop above the daily high to protect some of my REIT/dividend portfolio against further increases in the long term interest rate
Much more long now than at the start of the year, will keep it this way till the end of april where i will do my normal summer hedging with OTM put options on DAX. Learned a lot the last 6 months about shorting, maybe this helps me get better on the long side but shorting the way i did has increased my portfolio volatility a lot more than i thought, so i will reduce this part of the portfolio for now, even though i made a small profit doing it. But it was not very funny overall. (TWLO has gone up 50% in 3 months and has pretty much sucked up all my other short profits.)
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If you include companies with $1 million market caps you will have stuff with almost zero liquidity and super wide bid ask spreads. If your results for example include a company where someone sells 100 shares at $0.0001 and next year there is some random trade at $0.01/share for 100 shares as well it looks like a 10,000% return that will totally skew any result. But even if you managed to get 100% of all traded volume you would have made a profit of less than a dollar. That's why if you want to run a meaningful backtest you have to add liquidity constraints and/or take into account trading inpact, bid/ask spread etc. Otherwise you just filter out this kind of noise that cannot be traded.
Yes, but rukawa is right, 50m is way to high. The average NCAV stock in my portfolio is between 5 and 50 million and i won`t include anything above 150m because these tend to have lower returns. But adding a filter like >10k daily volume and price > 0.1 should help with the noise, at least in my backtests it did.
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Don't know and its fairly difficult for me to answer that so I won't. My screen was from 01/01/2000 to 01/01/2017 so it includes both the years you mentioned. But as far as I can see there are always some monster years. E.g. investing from Dec 31, 1993 to Dec 31, 1996 would result in a 10 bagger based on a conventional NCAV screen. In fact look at this paper it appears that the killer time for net-nets was actually the 1990's (see Exhibit 3). I don't really see the point in excluding years like this.
Thanks for your answers. I asked about the years because i am under the impression that these type of returns come mostly from the years after a larger market correction, so its probably not something to start after an 8 year long bullmarket. Thats the reason i reduced my NCAV portfolio (from 80%->20% of the whole portfolio right now) and put more money into low beta/high dividend stocks. Maybe at the end of the year i will realize that that was a mistake, but i don`t really find a lot of good netnets right now and i really don`t want to hold crappy cash burning companies in a bear market. My plan is to switch gradually back into NCAV stocks when some good ones re-appear on my screens.
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Btw. the 200/100 Jan2020 put spread on TSLA pays 6:1 right now and a 120/100 Jan2020 put spread on QQQ pays 10:1. I can imagine that these are some of the best equity hedges right now. With just 3-4% of portfolio value in these bets you can hedge a whole portfolio for 2 years. I have this little feeling that this year is the year where you want to be protected. ( But i must admit that i had this thought every year for the past 4 years ;D )
Oh and one for the long side: SPG 200/220 jan2020 call spread also pays 10:1.
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Thanks! My observation over the last 2 years has resulted in similar conclusions. A large cash balance and/or share buybacks are the things you want to see in a netnet for huge returns. (Still hold SHOS, but my patience is getting smaller every quarter)
I have some questions:
Was this a backtest with international data?
What was the rebalance timeframe?
Are the results stable when you exclude really low liquidity stocks like price < 0.1 and daily volume < 10k USD?
When you exclude 2009 and 2003 are the returns still that high?
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Thanks for posting, might be a good hedge for a dividend heavy portfolio. The Jan2020 95/93 put spread has a payoff of 10:1, that looks like a really good bet.
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Posted it already in the other thread, but i think it also belongs here.
REITs: STOR / Christopher Volk (http://ir.storecapital.com/interactive/newlookandfeel/4553160/STOR_2017_CEO_Letter.pdf)
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Trying to look at KRG, KIM, BRX, RPT, REG, and STOR this weekend, with a view to tying to figure out who has best combination of shareholder/management alignment of interest, exposure to neighborhood centers and grocers, and lowest leverage.
Read the latest CEO letter from STOR. (link: http://ir.storecapital.com/interactive/newlookandfeel/4553160/STOR_2017_CEO_Letter.pdf) While the others are surely more discounted, i think that STOR might be the best long term play. I choose BRX from the rest of the pack because they are the most discounted and it looks like they are doing the right thing with asset sales and share buybacks. (And their re-lease spreads are high, at least in the presentations.)
*EDIT* And BRX is selling their worst performing locations for a 7.8% caprate but the whole REIT trades at a 8.5% caprate, i think that shows how discounted it is right now.
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Covered short call and short put on DERM with a small profit after all volatility was sucked out of the options. In hindsight it would have been better to just use a bear call spread to short it. But damn that vola looked so good, i had to short it too.
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reduced SRG and SRC positions to 5% and sold TYO:7922 after a nice pop this morning.
bought STOR, SPG, BRX, SOHO, EAT and more WSE:SOL.
Invented new rules for position sizing:
3% position will be standard
5% only when the management is shareholder friendly
>5% only when i find an NCAV stock far below net cash or a diversified holding company like BRK or MKL.
>20% never.
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even after putting in a -20% allocation to cash in the 100% SPY, 20% Chanos scenario to account for the fact that most people would have to commit capital to chanos to get access to his return, the ending NAV and average NAV are higher. The returns are more "robust" and are arguably more likely to sustain the institution and less likely to experience permanent impairment.
There are some problems with the simulation (it assumes constant exposure to each and rebalancing), of course, and thinking about asset allocation this way may seem foreign or stupid or make you gag. But to completely dismiss it, is wrong in my opinion. To think alpha is dumb or that no short sellers and hedge funds add value is, in my opinion, close-minded.
Short selling alpha is hard to find and valuable; I probably haven't convinced any unbelievers though.
I`ve built on your idea and created a test to show myself that the idea to balance longs and shorts based on something like CAPE10 or regression to trendline improves results further. But i did use results from Montiers backtest instead of Chanos returns from his 2008 paper http://www.designs.valueinvestorinsight.com/bonus/bonuscontent/docs/Montier-Shorting.pdf. For the long side i used the results from the dividend aristrocats, but with SPY returns are similar.
https://docs.google.com/spreadsheets/d/1jyYcfKdzxg-Pm1Uc4W57QdlXoXdCUfvh08o8PL6QpAg/edit?usp=sharing
So in essence with a static 130%/80% long/short allocation you could have reached 17.8% returns while 100% SPY or NOBL reached a 10% return over that timeframe. But with a variable allocation depending on the current valuation of the market you can reach 20% returns with lower overall drawdowns. And this is without any alpha on the long side!
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I think retail is a tough business - and strangely enough , I even see softness in e-commerce retail. ALL retail, including e-commerce, seems to suffer from the same defects, namely very commoditized markets with just massive inventory and no distinctions. There's no loyalty online, offline, there is almost nowhere to hide.
I see it the same, but i also think that retail real estate is a different animal. If in doubt they can redevelop the properties to other uses. Look what SRG is doing with the old Sears boxes, at least if they own good locations. And i can`t imagine a world where everybody sits at home ordering stuff without going out. That will probably never happen.
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NOI trends have been down and they had to keep their occupancy up by getting into a bunch of short term leases. This is not an indication of strength. If you look at liquidation value, I think KIM and SRG (which you also own, I think) are better plays and they also have better NOI trends.
The outlet malls tenants compete price and choice and price sensitive customers tend to go more and more online for bargains. Their outlets are very heavily into clothing, which helps regarding to online competition, but also gets less wallet share over time.
I think KIM and SRG have better opportunities to develop their existing retail for high returns nd trade equally cheap.
I have decided to exit this sector except a LT microcap holding, because I believe these are mostly melting ice cube cases.
Thanks. I will look into KIM, it looks like i was too lazy to do that until now. I have nothing against melting ice cubes, i learned with netnets that these are sometimes the best investments.
*EDIT* If i have the numbers correct than KIM trades just at a discount of 30% to NAV if i use the same caprate as for SKT and KIM has a higher debt/NOI ratio. SKT and SRC have to go up by 50% to reach fair value/NAV. Btw. my position sizing is 16% SRG, 10% SRC and 4% SKT, so i wouldn`t see SKT as my absolute favorite.
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If you have a 30% allocation to retail REIT’s, would you call that a Graham type portfolio or a concentrated sector bet? I think it is an easy trap to fall into to convince yourself you are doing the first while actually doing the second. Not implying you do so :)
Maybe you are right, but thinking about it, isn`t it possible that this is both at the same time? :)
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Not sure how SKT fits as a Graham stock. Quality does matter as it affects liquidation value. I see too many outlet malls as losing value by the day. Less consumer appeal. Lower quality leases. Too much debt.
Tanger guided for flat NOI/AFFO for 2018, that is enough for me to conclude that the value is stable. Your opinion is the consensus and the reason i can buy at a discount.
*EDIT* It is maybe not in the original "Graham" sense (Price to book) to buy REIT`s below NAV, but why not? Since real estate is at least as liquid as inventory and has a private market with a private market price i see no reason not to. With a large enough margin of safety this should work equally good. And if the company sells assets and buys its own stock it widens this margin further.
What are you buying today?
in General Discussion
Posted
I don`t know. But i know that investing in netnets works and that netnets with buybacks work even better.