What are you buying today?

[writser]

It might be useful if you believe in some form of technical analysis / momentum trading (but in that case you should use a stop-limit instead of stop-loss order)

[Olmsted]

The idea of stop loss orders is imo ridiculous to begin with: why would you want to sell when something just became cheaper?

 

This assumes you know everything there is to know about the company.  While we strive to know as much as we can  - that's a strong assumption!  I can recall numerous instances where the stock price started marching steadily down before some bad news, then Boom!  - gap down 20%.  The hard part is discerning whether the "price action" is telling you that you don't know something, or whether the "price action" is wrong, and you should buy more.  I can certainly see the justification behind putting in at least a mental stop loss order as risk management.  Blithely buying more sometimes works, but information asymetry needs to be in your favor.

[John Hjorth]

Averaging down in OAO Gazprom ADR [OGZPY] for the last 5 weeks.

[Guest]

Averaging down in OAO Gazprom ADR [OGZPY] for the last 5 weeks.

 

I know pretty much nothing about Gazprom, but I did watch this the other day.

 

[Hielko]

The idea of stop loss orders is imo ridiculous to begin with: why would you want to sell when something just became cheaper?

 

This assumes you know everything there is to know about the company.  While we strive to know as much as we can  - that's a strong assumption!  I can recall numerous instances where the stock price started marching steadily down before some bad news, then Boom!  - gap down 20%.  The hard part is discerning whether the "price action" is telling you that you don't know something, or whether the "price action" is wrong, and you should buy more.  I can certainly see the justification behind putting in at least a mental stop loss order as risk management.  Blithely buying more sometimes works, but information asymetry needs to be in your favor.

I'am not saying you need to buy more. Maybe the stock does deserve to trade lower: but selling something because it just went lower is the opposite option, and doesn't make a lot of sense from a fundamental investing perspective*. And risk management is imo also a poor excuse. If you have so much exposure that you need a stop loss you should reduce your exposure right now! Not when it's too late.

 

* As part of a momentum trading strategy I can see the rationale for stop loss orders.

[Green King]

Averaging down in OAO Gazprom ADR [OGZPY] for the last 5 weeks.

 

Can you tell us how you know the reserves are real?

[John Hjorth]

Averaging down in OAO Gazprom ADR [OGZPY] for the last 5 weeks.

 

Can you tell us how you know the reserves are real?

No. From my point of view I haven't paid anything for my fraction of the value of the reserves because the discount on the OGZPY ADRs compared to BV/ADR exeeds my fraction of the BV of aquired/paid reserves [bV of Production Licenses/ADR].

[Ross812]

I've bought a bit of Bidvest in the $44-$46 range in the last few days...

[Palantir]

The idea of stop loss orders is imo ridiculous to begin with: why would you want to sell when something just became cheaper?

 

Visit the RIMM thread.

 

Intrinsic value is a moving target, like an ocean wave...

[texual]

I have not purchased any stock besides Microsoft this past year and a half. If I had any desire to average UP, I would buy a lot more MSFT. However I really like the gains and feel like buying here isn't going to work in my favor!

 

MSFT was a good investment in the mid/high 20's and I look forward to the dividend increases. I treat it like BRK.B, its a money market account that just happens to kick ass :)

[Palantir]

I have not purchased any stock besides Microsoft this past year and a half. If I had any desire to average UP, I would buy a lot more MSFT. However I really like the gains and feel like buying here isn't going to work in my favor!

 

MSFT was a good investment in the mid/high 20's and I look forward to the dividend increases. I treat it like BRK.B, its a money market account that just happens to kick ass :)

 

Yep...I wish I had bought more, there is so much potential in this company that is being unlocked. Maybe Steve Ballmer can do a monkey dance and create a buying opportunity.

[writser]

The idea of stop loss orders is imo ridiculous to begin with: why would you want to sell when something just became cheaper?

 

Visit the RIMM thread.

 

Intrinsic value is a moving target, like an ocean wave...

 

What is your point? If RIMM opens 30% lower you want to sell your long-term investment automatically?

[Palantir]

Rimm's "intrinsic value" is likely dropping....why would you buy more? People seem to assume that IV is fixed and certain while price is variable....but IV seems to be pretty variable when it comes to these tech stocks...also, what if you're simply wrong about your IV (sales projections revised, nobody likes BB10 etc)? Should you keep buying more? There is no feedback process...

[ERICOPOLY]

Rimm's "intrinsic value" is likely dropping....why would you buy more? People seem to assume that IV is fixed and certain while price is variable....but IV seems to be pretty variable when it comes to these tech stocks...

 

I disagree.  IV doesn't change.  Your perception of IV changes along the turbulent path of discovery.  You keep trying to predict the unpredictable, and blame it on the IV of the business rapidly changing.  No.

 

To get the IV prediction accurate with a higher batting average, and thus fewer investment mistakes, stick to businesses that are more predictable.  (that's a "Duh" comment).

 

I guess that by definition of the term "predictable business", you then realize that your IV number is a "prediction of the business"... well, more of the obvious.

[Hielko]

I'm going to disagree with both of you.

 

ERICOPOLY: If you throw a die in a completely dark room you don't know what side is up, but just one answer is right and someone with perfect knowledge about everything would be able to give you the right number. Investing in a company that is unpredictable can be similar: you don't know what the IV is, you see a possible range of outcomes, but just one of them is going to materialize.

 

But if you want to bet on what side is up on the die you can only treat it as a random number between one and six, and similarly for the company you should consider a full range of possible outcomes of IV. Now someone might feel one pip on one side of the die and shout it around in the dark room, and you can reduce the probability that number one (and six) are up and increase the probability for the other numbers. Did the IV of the die change? It still have the same side up, but the knowledge about the probabilities has changed. And for a company you might also discover that some possible outcomes should be removed from the probability distribution. The value of the bet has changed even though the (unknowable) true underlying value has stayed the same. It's not perception that is changing here, it's knowledge about the IV estimate.

 

Palantir: sure Rimm’s IV is likely dropping. But is it dropping faster than what the market price implies? Is it dropping slower than what the market price implies? I don’t know, and neither does someone who is using a stop loss order. But if you are long something you presumably think that the market is currently wrong about the value of the business, but then when it’s drops the market is suddenly right (or wrong in the other direction)? Doesn’t make sense.

[Palantir]

Rimm's "intrinsic value" is likely dropping....why would you buy more? People seem to assume that IV is fixed and certain while price is variable....but IV seems to be pretty variable when it comes to these tech stocks...

 

I disagree.  IV doesn't change.  Your perception of IV changes along the turbulent path of discovery.  You keep trying to predict the unpredictable, and blame it on the IV of the business rapidly changing.  No.

 

 

But isn't the concept of intrinsic value a "perception"? It is always an estimate, not a quantifiable, or verifiable property like say mass.

[ERICOPOLY]

Rimm's "intrinsic value" is likely dropping....why would you buy more? People seem to assume that IV is fixed and certain while price is variable....but IV seems to be pretty variable when it comes to these tech stocks...

 

I disagree.  IV doesn't change.  Your perception of IV changes along the turbulent path of discovery.  You keep trying to predict the unpredictable, and blame it on the IV of the business rapidly changing.  No.

 

 

But isn't the concept of intrinsic value a "perception"? It is always an estimate, not a quantifiable, or verifiable property like say mass.

 

There is only one intrinsic value.  Time will reveal it to us.

 

We have only prediction to rely on divining it's value.

 

[JBird]

"Anyone calculating intrinsic value necessarily comes up with a highly subjective figure. This figure will change both as estimates of future cash flows are revised and as interest rates move." - Buffett

 

Eric is right insofar as future cash flows, while having a huge range of possible outcomes, eventually materialize into 1 outcome. The IV change though comes when interest rates change.

[Palantir]

 

 

There is only one intrinsic value.  Time will reveal it to us.

 

We have only prediction to rely on divining it's value.

 

But when? And how will we know when we are at intrinsic value, and that our intrinsic value estimate is the "true" intrinsic value?  :)

[locatevalue]

Back to topic! Today, I bought some SHLD, OIBR and ALSK(thanks to Packer)..I see telecom is very cheap , though i dont like debt and high capex of these companies, Valuations are very compelling, Trying to compile a set of 5 telecom companies as a basket case of max 10% portoflio will make it larger if market dumps them more. So far couldn't find any great business at value prices like 2011 to make it big part. Still waiting !

[John Hjorth]

Off topic:

Ladies and Gentlemen [if there are any ladies posting in this topic within the last posts?],

 

The discussion contained in the last posts in this topic by writser, Palantir, ERICOPOLY, Heilko & Birdman23i is in my opinion certainly worth a separate topic in the General Discussion Forum of its own! I hereby suggest one of you to pick this discussion up buy starting a separate topic in the General Discussion Forum. Personally, I'm sure it will be reading of interest to many board members!

 

-Thanks in advance, because I hope you all pick this suggestion up!

 

[i have also been buying books about roses lately, btw...]

 

-And now back to topic again-again!

[muscleman]

Rimm's "intrinsic value" is likely dropping....why would you buy more? People seem to assume that IV is fixed and certain while price is variable....but IV seems to be pretty variable when it comes to these tech stocks...

 

I disagree.  IV doesn't change.  Your perception of IV changes along the turbulent path of discovery.  You keep trying to predict the unpredictable, and blame it on the IV of the business rapidly changing.  No.

 

To get the IV prediction accurate with a higher batting average, and thus fewer investment mistakes, stick to businesses that are more predictable.  (that's a "Duh" comment).

 

I guess that by definition of the term "predictable business", you then realize that your IV number is a "prediction of the business"... well, more of the obvious.

 

I would say IV changes in some cases and doesn't in other cases.

For example, due to the fact that AMZN is trading at extremely inflated multiples for prolonged time, it is able to issue a small amount of equity to do a lot of things. The IV increase whenever it issues the equity at such extremely inflated multiples. You can run some simple math. Suppose AMZN's book value is $10 per share, and it issues equity at $200 per share and doubles the share count, what is the book value now? It is $105 per share! Who can create value faster than this? Buffet clearly cannot! ;) Then if the market thinks OMG, AMZN is much cheaper now than before, buy a ton! Then the stock price will jump to maybe $400. Then they can do this game again and again and the book value will increase a lot consistently.

 

For other companies, if the stock price is distressed and it gets some liquidity issue and is forced to issue equity, the IV will drop a lot, depending on how dilutive it is.

[Palantir]

Gonna have to add Accenture (ACN) to my watchlist....please go down.

[Valuebo]

Rimm's "intrinsic value" is likely dropping....why would you buy more? People seem to assume that IV is fixed and certain while price is variable....but IV seems to be pretty variable when it comes to these tech stocks...

 

I disagree.  IV doesn't change.  Your perception of IV changes along the turbulent path of discovery.  You keep trying to predict the unpredictable, and blame it on the IV of the business rapidly changing.  No.

 

To get the IV prediction accurate with a higher batting average, and thus fewer investment mistakes, stick to businesses that are more predictable.  (that's a "Duh" comment).

 

I guess that by definition of the term "predictable business", you then realize that your IV number is a "prediction of the business"... well, more of the obvious.

 

I would say IV changes in some cases and doesn't in other cases.

For example, due to the fact that AMZN is trading at extremely inflated multiples for prolonged time, it is able to issue a small amount of equity to do a lot of things. The IV increase whenever it issues the equity at such extremely inflated multiples. You can run some simple math. Suppose AMZN's book value is $10 per share, and it issues equity at $200 per share and doubles the share count, what is the book value now? It is $105 per share! Who can create value faster than this? Buffet clearly cannot! ;) Then if the market thinks OMG, AMZN is much cheaper now than before, buy a ton! Then the stock price will jump to maybe $400.

 

 

Those kind of companies' IV has little to do with BV and thus the effect on IV is much smaller. It's substantial but I don't see how they could exploit this forever. Do you have examples of extreme cases that were able to double share price a few times? I doubt they are out there and if they are it simply won't be for the capital injection but market perception of the company / simple momentum.

 

 

 

OT: Bought some ITM SD leaps.

[SharperDingaan]

We bought in a modest BB position today, & it had zero to do with IV or valuation.

 

Frankly, BB is an investment POS. But we're confident that enough folks got burnt today, to be fairly sure there will be changes before the next quarterly earnings report. Hence, a minimum 10% appreciation between now & the next report seems pretty modest; which is a 40+% annualized compound return. Rain or shine we will be flat by the next report; & if we get to average down, so be it.

 

Sometimes its just nothing more than plain vanilla supply & demand.

 

SD