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Strategies & Market Trends : Value Investing
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Mattyice
To: Mattyice who wrote (55450)6/12/2015 10:00:31 PM
From: Graham Osborn1 Recommendation  Read Replies (1) of 78748
 
Hey Mattyice,

Thanks for the post, I for one can sympathize with your sector bets although I've tended to focus on individual companies that exemplify the discrepancies of which you speak.

In terms of shorting vs. long-term puts I tend toward the former just because there is more short-term control of the degree of hedging and I can use TA. I also dislike volatility in my portfolio as a whole. But everyone has their preference and clearly there are those (thread's founder included) who have had success with a put-hedged portfolio. I do think his application was unique in that (1) the timing problem was structural rather than market-driven (2) the premiums for bonds are much cheaper (3) he was trading in an effectively new market where the risk/ reward was appreciated by few, and hence not priced into the premiums. It will take a very special situation where I have that level of foresight. Theses that don't solve the timing problem have stumped many a fundamentalist e.g. Robertson, Einhorn.

In term of sector vs company focus, my thesis has been that there are certain companies that lead each credit bubble and typify its excesses. Names that come to mind are Worldcom, Enron, Tyco in the 1990s/ 00s and Lehman Brothers in the mid-2000s. These were companies so benefited by the excess of the time that they actively concealed credit risk from their shareholders, leading to a predictable ultimate implosion. My view is VRX will be the next. I will try and detail this out at some point. That of course does not solve the timing problem. So senza a thesis on when they can no longer re-fi, I'll be stuck shorting their dead cat bounce. FWIW one of their largest shareholders just dumped $1B worth.

Here's waiting for the value,
Graham
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