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A new user of this sites strategy

Stocks and Shares ISA , Choosing funds for ISA's, risk factors for funds etc
Investment strategy discussions not dealt with elsewhere.
GeoffF100
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Re: A new user of this sites strategy

#121619

Postby GeoffF100 » March 2nd, 2018, 12:46 pm

Here is some rudimentary data from HL:

Company    EPIC   Sector     Paid    Percent  P/E    Yield   Cap
Petrofac PFC Oil Serv 24075 24.26% 6.27 6.23 1.52
Dignity DTY Funeral 11042 11.13% 6.78 1.92 0.41
IDOX IDOX IT 9335 9.41% 11.28 2.85 0.15
OPHIR OPHR Oil & Gas 13700 13.81% N/A N/A 0.37
Provident PFG Financial 13690 13.80% 5.52 13.8 1.45
Inmarsat ISAT Comms 13697 13.80% 10.12 8.72 2.17
Mitie MTO Support 13699 3.80% N/A 2.51 0.58


Oil and Gas makes up a whopping 38% of this eight share portfolio. These companies are all quite small, and their share prices have recently fallen steeply. This is clearly a very high risk portfolio. If this £100K investment is part of a £1 million equity portfolio, with as much in bonds, fair enough, but I will still be shaking my head.

The top ten shareholders of IDOX (the smallest company) are institutions holding 59% of the shares. The broker finnCap has recently reported on this company. Clearly, any private investor is in competition with professionals here, to say nothing of people who are close to the company. Even if the OP was only in competition with other private investors, he still has to ask himself what is his edge? Is he a qualified accountant? Does he have an MBA? Has he worked as private client broker? Why does he believe that he will be a winner here?

The most important lesson that we can all learn about investment is that we are investment idiots, and plan accordingly. Inefficient markets increase the chances that smart investors will benefit from our stupidity. Spreading our risk limits the impact of our stupid mistakes. Every time we trade, we risk making a blunder. The less we trade, the fewer mistakes we will make, and the smaller their impact will be over time.

TUK020
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Re: A new user of this sites strategy

#121797

Postby TUK020 » March 3rd, 2018, 7:30 am

Clitheroekid wrote:It's based on the principle that the market often over-reacts to bad news, pushing the SP down much further than is warranted.


A much more measured and systematic way to capitalise on the market's tendency to overshoot (good and bad news), keep trading costs to a minimum, and stay invested in 'safer' companies is TJH's approach of top slicing/topping up.
This is much more risk averse than a loose trading approach, but gains some of the benefit.
It is also much more systematic, removing much of the emotion from the process

tuk020

IanSmithISA
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Re: A new user of this sites strategy

#121820

Postby IanSmithISA » March 3rd, 2018, 10:22 am

Good morning,

I don't think you Grok what I have been trying to say, so you are looking at measures that are key to you but I regard as not critical. :-)

For example;

GeoffF100 wrote:The top ten shareholders of IDOX (the smallest company) are institutions holding 59% of the shares. The broker finnCap has recently reported on this company. Clearly, any private investor is in competition with professionals here, to say nothing of people who are close to the company. Even if the OP was only in competition with other private investors, he still has to ask himself what is his edge? Is he a qualified accountant? Does he have an MBA? Has he worked as private client broker? Why does he believe that he will be a winner here?


Idox appeared on my screen as interesting in mid Dec 2017, as I knew nothing about the company I looked it up, found the reason for the recent large drop and let the information rattle around my brain for a while.

The bad news was the accounts had allocated revenue to the wrong year and the CEO was sick, there was also a statement that the revised accounts would be out in Feb 2018, this was my targeted sell date.

I bought on the 9th of Jan 2018 and sold on the 2nd March 2018.

I am often told that the small 4.5% (after fees) profit is too small to cover my losses as this would equate to about 30% over the year. Truthfully I was hoping for a bit of a bigger response to the revised accounts whilst that might or might not appear later on I don't want remain trapped in the company for the next 6 months or so to find out.

GeoffF100 wrote:These companies are all quite small, and their share prices have recently fallen steeply.


You seem to be suggesting that the falling share price is a bad thing, but none of my current holdings are older than 3 months except PFG and the falling share price is indirectly part of the reason for buying. There is bad news associated with all of them which I believe has unreasonably depressed the share price in the short term.

Whenever a pot yields a profit I take 20% of the profit out and put it into the building society, the idea being to protect myself against ever needing to sell shares as I need the money. I keep a maximum value for each pot and would not take the 20% if I had made a profit on the latest transaction but this hadn't made up for earlier losses.

For what it is worth, this is version 3 of my investment history.

Version 1 was AIM companies that had potential and an apparent desire to grow, it was inspired by Misys a really ambitious AIM company in the late 1980s and early 1990s that used a niche supplier of computer systems to insurance brokers to create a much larger company. This ended with most of the funds lost as it seems that the Misys management were exceptionally good at growing a business.

Version 2 was much closer to the HYP advocated on TMF and here, I found that I needed money in 2008/2009 and got badly hurt.

Bye

Ian

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Re: A new user of this sites strategy

#121828

Postby Itsallaguess » March 3rd, 2018, 10:53 am

IanSmithISA wrote:
Version 2 was much closer to the HYP advocated on TMF and here, I found that I needed money in 2008/2009 and got badly hurt.


You don't give too many details here, but when you say that you got 'badly burnt', was that because you had to liquidise some investments to provide some capital, and that happened during a period where the market was relatively low?

I only ask because that might have been the case no matter which 'Version' of your strategy you were using at the time, perhaps?

Many investors of many different (non-HYP...) strategies still make sure to have provision for access to non-core-investment capital for just those types of turbulent market-periods, and if you'd not personally done that during the period in question, I'm not sure how much blame the actual core-investment strategy being used at the time should be given....

Cheers,

Itsallaguess

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Re: A new user of this sites strategy

#121839

Postby kempiejon » March 3rd, 2018, 11:38 am

Itsallaguess wrote:Many investors of many different (non-HYP...) strategies still make sure to have provision for access to non-core-investment capital for just those types of turbulent market-periods, and if you'd not personally done that during the period in question, I'm not sure how much blame the actual core-investment strategy being used at the time should be given....


Yes, this is relevant, before we start any investing I think it prudent to have enough readies to cover predictable expenditure and account for a few unexpected ones too. Being a forced seller is not a position to put oneself in. Part of my planning is to have around a year of expected investment income available in cash holdings.

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Re: A new user of this sites strategy

#121845

Postby GeoffF100 » March 3rd, 2018, 12:01 pm

You seem to be suggesting that the falling share price is a bad thing, but none of my current holdings are older than 3 months except PFG and the falling share price is indirectly part of the reason for buying.

A lower price is clearly a good thing. The problem is that a sudden fall usually indicates that the company is in trouble. I cannot find a reference, but there have been academic studies of a mechanical strategy that buys shares that have fallen in value. On average, in the long term, they have outperformed the market. What typically happens is that the market is right about most of the shares, they are rubbish, but the market sometimes gets it wrong. These companies recover and make the investor big enough profits to more than make up for the losers. It is like any other value strategy. High risk, but high returns, if you are lucky.

My point is that, taken in isolation, your portfolio is very risky. Partly because you are buying risky shares, and partly because of the lack of diversification. Halving your stake, and not multiplying up on the same company, or companies in similar businesses would help. You have not responded by telling us about the rest of your portfolio. Having a small proportion of your portfolio in high risk sharer is not necessarily a bad thing.

In a downturn like 2008, you live off your bonds, or use them to buy more equities if you dare.

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Re: A new user of this sites strategy

#121920

Postby BusyBumbleBee » March 3rd, 2018, 5:35 pm

Itsallaguess wrote
Your approach, on the face of it, seems to be suggesting that rather than driving on a single road for a given length of time, you've decided that you're going to take the same journey, but by using lots and lots of different, shorter roads.
which is a good analogy. He didn't point out though that junctions on roads are often the most dangerous places.

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Re: A new user of this sites strategy

#126335

Postby Pipsmum » March 20th, 2018, 11:18 am

This thread is very interesting concerning investment behaviour styles.

Investing for the long term with long and slow judgments, with spare or regular readies to hand, both large or small, so the fluctuations in the market or a share price need not matter. Something that occasionally gets picked up and examined and added to now and again to keep it in good order.

More sporadic selling and buying:-
Perhaps a game of financial chess played for the sheer sport of the conquest. More like a game but still serious or maybe just because it's possible.
Perhaps a real need to be able to get any available funds to do some severely hard work because other forms of investment are too slow, too unforthcoming, or both.

Just interesting looking at methods and the sage advice. Thanks for sharing them.

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Re: A new user of this sites strategy

#133329

Postby Pipsmum » April 19th, 2018, 6:04 pm

I've been reading about 13 trading tips by a master trader, a Mr Minervini. I'm guilty of some and others have made me think.

http://www.minervini.com/blog/index.php/blog/show/top_13_reasons_why_most_traders_fail_to_achieve_big_performance

Is there a point where a regular trader deems it fit to take a decent profit and run? Assuming a stop loss was in place of 8 - 10% to allow for normal fluctuation.

There is a 'normal' acceptance level of loss at say between 1.25% - 2.5% of a portfolio (according to this master trader), so I wondered if there was a matching accepted level of profit as a guideline?

I wondered if there was an average % per day that rising shares rise that is seen as a good optimum rise, or is good only upwards? I sort of mean where is good and where is greedy. i.e being greedy and missing the boat instead of catching the fishes.
OR
Does a good trader just let the risers rise and cut off the sinkers to renew the lines.

tjh290633
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Re: A new user of this sites strategy

#133335

Postby tjh290633 » April 19th, 2018, 6:41 pm

Pipsmum wrote:Is there a point where a regular trader deems it fit to take a decent profit and run? Assuming a stop loss was in place of 8 - 10% to allow for normal fluctuation.

There is a 'normal' acceptance level of loss at say between 1.25% - 2.5% of a portfolio (according to this master trader), so I wondered if there was a matching accepted level of profit as a guideline?

I wondered if there was an average % per day that rising shares rise that is seen as a good optimum rise, or is good only upwards? I sort of mean where is good and where is greedy. i.e being greedy and missing the boat instead of catching the fishes.
OR
Does a good trader just let the risers rise and cut off the sinkers to renew the lines.


It's all relative, Pipsmum. In other words absolute rises are not important, it's the change relative to the market that matters.

As I've mentioned many times, I will trim shares back (by 25%, say) if the holding value rises above 1.5 times the median holding value. I have 36 holdings (plus Carillion), but when I had less than 30 I worked on twice the median. When under 20, I worked on 10% of the portfolio value as the guideline. If the share keeps on rising, then trim back again, and again if needed.

Going the other way, I will sell completely if the shares rise so far that the yield falls below half that of the market, say 2%.

I do not use stop losses, as the market can sometimes move faster than you can. Day to day movements can be volatile these days with automated trading.

TJH

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Re: A new user of this sites strategy

#133432

Postby Pipsmum » April 20th, 2018, 9:46 am

Thank you. That is very helpful indeed.

It's interesting to make mistakes and learn on the way to both advantage and disadvantage, but of course to the negative can seem discouraging and sometimes painfully expensive. This Minervini chaps structured trading approach seems to make sense, in that he seals the routes to failure in a seemingly watertight fashion and has a concrete structure to work to.

It can be quite hard for a newb to completely understand the larger picture and to have any grasp of a proper structure initially when the very terms themselves haven't yet made sense. Particularly the two seemingly opposing approaches of growth trading V long term yield hunters. Sometimes in muddling the two approaches, then profits can be either lost or take more work to achieve the same result.

Also sometimes the smaller investor/trader might be very content with what may seem to other, more serious quantity investors, to be quite a piddling profit in the shorter term and perhaps taken more often. The blue figures are certainly more encouraging to see for a newb, but only matter on a growth stock and may not be of any interest for a yield dog where red figures might mean a better yield.

All very interesting and I can see that it is very important to have a very, very strong longer term plan to stick to. However to have a concrete plan involves learning all this at ones own pace and with some mistakes made.

With regard to the repeated trading of the same share to gain the profit within the highs and lows. I have been looking at where the sp is during the Xdivi date. The sp seems to always go down just after that, so it would be interesting to compare the merits of either waiting for the divis or creating your own by trading after the XD dates for the lesser sp each time and selling just before it gets higher before the next Xdivi date. I have these sorts of shares saved in a watchlist called zig zag shares. I haven't done enough theoretical research yet to see, but I suppose if it was that simple, then everyone would do that instead.

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Re: A new user of this sites strategy

#133463

Postby tjh290633 » April 20th, 2018, 11:43 am

Pipsmum wrote:With regard to the repeated trading of the same share to gain the profit within the highs and lows. I have been looking at where the sp is during the Xdivi date. The sp seems to always go down just after that, so it would be interesting to compare the merits of either waiting for the divis or creating your own by trading after the XD dates for the lesser sp each time and selling just before it gets higher before the next Xdivi date. I have these sorts of shares saved in a watchlist called zig zag shares. I haven't done enough theoretical research yet to see, but I suppose if it was that simple, then everyone would do that instead.


If you search around, there have been a number of topics on this subject. In general it seems that you are no better off if you try to harvest dividends or take advantage of price changes around the XD dates.

What is certain is that you will usually buy more shares for the same amount of money if you buy after the share has gone XD. On the other hand, if your main objective is dividend income, buying immediately XD will make you wait up to 9 or even 10 months for the next dividend. Buying cum-dividend will improve your cash flow.

TJH

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Re: A new user of this sites strategy

#133492

Postby Quint » April 20th, 2018, 12:38 pm

Pipsmum wrote:I've been reading about 13 trading tips by a master trader, a Mr Minervini. I'm guilty of some and others have made me think.

http://www.minervini.com/blog/index.php/blog/show/top_13_reasons_why_most_traders_fail_to_achieve_big_performance

Is there a point where a regular trader deems it fit to take a decent profit and run? Assuming a stop loss was in place of 8 - 10% to allow for normal fluctuation.

There is a 'normal' acceptance level of loss at say between 1.25% - 2.5% of a portfolio (according to this master trader), so I wondered if there was a matching accepted level of profit as a guideline?

I wondered if there was an average % per day that rising shares rise that is seen as a good optimum rise, or is good only upwards? I sort of mean where is good and where is greedy. i.e being greedy and missing the boat instead of catching the fishes.
OR
Does a good trader just let the risers rise and cut off the sinkers to renew the lines.


I guess this boils down to the difference between a trader and an investor. Traders are often people who experiment with other peoples money and get paid for doing it.

Then make more money by writing books about it.

Me, I am in the investor camp.

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Re: A new user of this sites strategy

#133499

Postby Itsallaguess » April 20th, 2018, 1:00 pm

Pipsmum wrote:
Also sometimes the smaller investor/trader might be very content with what may seem to other, more serious quantity investors, to be quite a piddling profit in the shorter term and perhaps taken more often.


There's another thread on the Share Ideas board, asking 'What's the worst investment you've made?', but I think I might also start another thread asking 'What's the worst investment idea that you've since taken a different view of?'.

On that thread, I'd personally raise the very important point that action (trading) does not necessarily generate the returns that I look for.

What I now know to be true is that doing very little actually delivers the returns that I'm looking for.....

Time alone does most of the heavy lifting.....

Cheers,

Itsallaguess

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Re: A new user of this sites strategy

#134418

Postby Pipsmum » April 24th, 2018, 12:53 pm

I suppose the only way to surely know, is to run two theoretical parallel ways and see which worked best. Or analyse the folio conducted as it was, whilst looking at what the figures might have been if one left it alone. Maybe easier with the right online financial software package.

Sound advice being learned from here is leave it alone and stop fiddling about. Not always adhered to when temptation in the way of a profit shows its hand when one is short of dosh.

Trading advice that does seem to be good is to brutally cut any losers beyond a safety margin and only go with the positives. I'm certainly guilty of picking the flowers and leaving apparent weeds. Maybe they'll all eventually flower if left to, over years and years.

Learning takes time and mistakes get made. Thank you all for such patient advice. It is being listened to on the whole.

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Re: A new user of this sites strategy

#134434

Postby GeoffF100 » April 24th, 2018, 1:43 pm

Pipsmum wrote:Trading advice that does seem to be good is to brutally cut any losers beyond a safety margin and only go with the positives.

There is an old stock market adage that says that. Cutting losers cuts your risk, but it also cuts your return. Sitting on your winners makes sense, but shares can become too popular and over valued nonetheless.

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Re: A new user of this sites strategy

#134442

Postby Itsallaguess » April 24th, 2018, 2:12 pm

Pipsmum wrote:
I suppose the only way to surely know, is to run two theoretical parallel ways and see which worked best.


That approach might tell you which of the parallel theoretical strategies worked best over a particular period in purely technical terms, but I think one of the biggest lessons that I've learnt over the years is that I'm quite willing to trade away some aspect of the 'best technical returns', if that means I get 'acceptable returns', but using a strategy that best suits my own investment personality...

Theoretical strategies won't give you any real insight into that aspect of investment, and it's something that really shouldn't be underestimated once any sizeable amount of capital is being invested.

I'm really quite happy to trade a percentage of my 'potential' returns away if it means I get to carry out a strategy that means I can sleep at night....

Cheers,

Itsallaguess

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Re: A new user of this sites strategy

#134922

Postby Pipsmum » April 26th, 2018, 2:10 pm

Seeing a non-return of -14.4% when requiring some capital, makes for slightly different short term strategies to passively investing for the long term. A solvable but interesting matter which makes every pound count rather more.

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Re: A new user of this sites strategy

#135935

Postby Bubblesofearth » May 1st, 2018, 8:15 am

IanSmithISA wrote:
My belief is that it is highly likely that most companies that exist today, will not exist in 50 years time in the same form.

Some will merge fairly and the shareholders will have a valuable holding in the new company.

A very small number will stay owned with an ownership structure that remains fundamentally unchanged

The rest will either go out of business completely leaving shareholders with nothing or will slowly lose value and merge on unfavourable terms.

Accepting this, if you do, the longer you hold shares in a company the more likely you are to be holding them when things go wrong. I am trying to minimize the time I am exposed to a risk, although others may disagree, that is unkownable to me.

Ian


You might find this interesting;

https://investorplace.com/2015/05/origi ... es-stocks/

There is another study available online that looks at actual performance of the original Dow components over a century or so. I posted this on TMF some time back but sadly can't seem to find it now - you might have more luck searching around? Bottom line it showed that simply buying and holding these original companies would have been better than holding a Dow tracker (which of course changes holdings over time). If you are sufficiently interested and do manage to find the link then please post it here as it would be nice to review it again.

BoE

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Re: A new user of this sites strategy

#139428

Postby DiamondEcho » May 16th, 2018, 6:25 pm

Pipsmum wrote:I've been reading about 13 trading tips by a master trader, a Mr Minervini. I'm guilty of some and others have made me think.
http://www.minervini.com/blog/index.php/blog/show/top_13_reasons_why_most_traders_fail_to_achieve_big_performance


In my international banking career I never came upon the term 'master trader', despite spending most of those years on trading floors. Is that sufficient a warning light yet? We don't see who this guy is, who he worked for, what he did - at least not that I can see.
Also the idea that a 'big swinging Wall St trader' is qualified to advise strategies suitable for longer-term/accumulating/retirement purposes is stretching credibility. One is looking ahead, for himself, 10 seconds, a minute, a few hours. The other is contemplating others and their needs 20-30 years ahead - about as culturally and skill-set opposed as you might get IMHO.
Run a mile, and fast, I'd say.


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