I will stop being a trader, to become a value investor

just read a very good observation in an email and thought i would share it

[As a side note, do your best to filter out comments like "investors are moving out of stocks and into ..." or "investors are selling into this decline" or "investors are buying into this rally." On balance, investors do not sell shares, and they don't buy shares. Every share purchased is a share sold. The only question is what price movement is required to prompt a buyer and a seller to trade with each other. No money will come off the sidelines into stocks. No money will come out of stocks and onto the sidelines. All such talk is non-equilibrium idiocy. Keep in mind that the "market" consists of different traders with a variety of time-horizons, risk-tolerances, and analytical methods (e.g. technical, report-driven, value-conscious). It is helpful to think in terms of which group of individuals is likely to do what, and when. It is equally important to know which group of investors you belong to. As the old saying goes, if you're at a poker table and you don't know who the patsy is, you're the patsy.]
 
>Trading is not too predictable

90% of losers, 10% of winners... if you're one of the lucky few, congrats, otherwise you're definitely right.

MOST people on EliteTrader think that they make money but compared to compounding interest over 10-20-30 years (and that's NOT to talk about income taxes), they are LOSING money.

Again I'm not talking about the lucky few but when a game is rigged with 90% losers down the road, I still wonder why in the world they wanna play it.

> and technical analysis doesn't >work in the long run.

Not true :)

>In the short term, stocks move randomly, but longer term, they >reflect fundamentals.

DEFINITELY true, I was long oil stocks in 2004, steel stocks in 2005, when they went from $10/20 to $50/100, trust me, I was happy as a long-term investor :)

Saying that there's NO value at present is a JOKE, there is value YEAR in and year out. Every year you can find some great opportunities thanks to fundamentals, stop kidding me.

And yes, fundamentals got me OUT of them as well BEFORE the crash. Every trader talks about day trading financials... a SKILLED fundamentalist would have made a killing in shorting those bank stocks from... 2007 (no no, I'm not kidding)

>So I'll stick to Value, the smart way to do it.

I've been a pro analyst for 7 years and what I can tell you... IF AND ONLY IF small players were playing the long term.. they would TRASH hedge funds.

But the PR of Wall Street is made to keep them in the day trading game... guess who's the winner at the end of the day? :p

So yes, if you have no edge in trading, INVEST, read the best guys around, KEEP IT SIMPLE (in TA it is already true but in FA, it's VITAL!), understand WHY you invest in companies, get the dividend (it's HALF of the performance in the long haul, NEVER forget this) and you'll do just fine Madam, Sir :)

But most importantly, it's ALL about compounding effect, all the billionnaires you can see in Forbes have used it.

Take care, and good investing!
 
Agree 100% - and the best thing you can do is do your own homework and ignore pretty much everything any 'analyst' says about a company or sector from Wall Street (with a few exceptions, though.)

Sure, their comments may move markets but that's the herd and beholden mutual funds moving in formation based on whatever they're told. Retailers then pile on at the top of that move and get screwed.

But then again, most retail folks go all-in at one time -- ie, buy 500 of ABC at $50 *now*. And in this market in particular that'll kill you on a major swoon. That's why, as I have begun to build core positions in a few companies, I am scaling in a few times (both up and down) to build longterm positions and doing the dollar-cost-average thing.

But I agree - Keep It Simple and Do Your Own Homework. :)
 
Quote from short&naked:

This ain't the 60s, buddy.

How has he doing since 2000? Not that well. Why? Because in a liquidity bubble stocks prices have nothing to do with fundamentals.
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1985: “ I can guarantee we will not do as well as in the past, ” Buffett told shareholders at the annual meeting.

1992: Charlie Munger told Business Week: “ Size at a certain point gets to be an anchor, which drags you down. We always knew that it would. ”

1995: At Berkshire Hathaway¢s annual meeting, Buffett again cautioned: “ The future performance of Berkshire Hathaway won¢t come close to matching the performance of the past. ” He explained that “ a fat wallet, however, is the enemy of superior results. ” And anyhow, “ We don ¢ t have to keep getting rich at the same rate.”
 
Quote from Miron:

>Trading is not too predictable

90% of losers, 10% of winners... if you're one of the lucky few, congrats, otherwise you're definitely right.

MOST people on EliteTrader think that they make money but compared to compounding interest over 10-20-30 years (and that's NOT to talk about income taxes), they are LOSING money.

Again I'm not talking about the lucky few but when a game is rigged with 90% losers down the road, I still wonder why in the world they wanna play it.

> and technical analysis doesn't >work in the long run.

Not true :)

>In the short term, stocks move randomly, but longer term, they >reflect fundamentals.

DEFINITELY true, I was long oil stocks in 2004, steel stocks in 2005, when they went from $10/20 to $50/100, trust me, I was happy as a long-term investor :)

Saying that there's NO value at present is a JOKE, there is value YEAR in and year out. Every year you can find some great opportunities thanks to fundamentals, stop kidding me.

And yes, fundamentals got me OUT of them as well BEFORE the crash. Every trader talks about day trading financials... a SKILLED fundamentalist would have made a killing in shorting those bank stocks from... 2007 (no no, I'm not kidding)

>So I'll stick to Value, the smart way to do it.

I've been a pro analyst for 7 years and what I can tell you... IF AND ONLY IF small players were playing the long term.. they would TRASH hedge funds.

But the PR of Wall Street is made to keep them in the day trading game... guess who's the winner at the end of the day? :p

So yes, if you have no edge in trading, INVEST, read the best guys around, KEEP IT SIMPLE (in TA it is already true but in FA, it's VITAL!), understand WHY you invest in companies, get the dividend (it's HALF of the performance in the long haul, NEVER forget this) and you'll do just fine Madam, Sir :)

But most importantly, it's ALL about compounding effect, all the billionnaires you can see in Forbes have used it.

Take care, and good investing!
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There is another possibility: Long term TA trading.
To think that fundamentals drive stocks (or anything else for that matter) in a high liquidity/credit environment is naive to say the least. The FA stock game is as rigged (if not more so) than the day trading game. There are plenty of players with a lot of money that have access to info much earlier than most others and will price bad news into a stock much faster, leaving the rest to hold the bag.
 
Quote from flyingiguana:

i'm a value trader!
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Actually value investing means some (long term) trading.
Not buy and hold.

A true value investor would not hold an overvalued stock (like 1999-2000).
 
Quote from crgarcia:

Actually value investing means some (long term) trading.
Not buy and hold.
More...

I disagree.

I true VALUE investor does wind-up buying and holding ( with perhaps some options hedges on ) and usually goes through an incredible amount of pain as the "mo-mo" fund guys will push growth stocks way beyond any rationale means just as the VALUE names get liquidated on the other side of the coin because the ROTATION dictates that the value names get pressured.

If you don't believe me, try having bought the defense stocks like LMT, GD, NOC, and RTN in March of 2000 when Yahoo, Double-Click, and JDSU were going to the moon.

Trust me, it was a pretty painful.

Just like buying the oil service stocks in 1998 ( when crude dropped to $11 per barrel ) and waiting, and waiting, and waiting till there was some ROTATION out of the market leaders and into the drilling group.

Bottomline:

You don't TRADE value stocks if you are a VALUE INVESTOR.
 
I think value investing is the way to go right now. Maybe not buy & hold forever but buying bargains to hold for a few years until they approach full value will turn out well.

I'm finding many cheap stocks at the moment, such as-

Mkt leading EU co with 40% of its market
Past 4 yrs sales growth 50%+ yr
Generating 10% Free cash Flow
no debt,
management owns 30% and buying like crazy right now.
Share price is down 90%
And the best part is This company is not only selling for only 5x fcf but also selling for half of the net cash on its books- Insane!

I'll make 10X my money when things settle.
And i'm seeing many like this especially in the small & mid cap sectors.
 
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