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Strategies & Market Trends : Contrarian Investing -- Ignore unavailable to you. Want to Upgrade?

To: pcyhuang who wrote (247)	9/19/2006 11:46:05 AM
From: bruwin	Read Replies (1) \| Respond to of 4080

The fact is, there are over 3100 companies on the Nasdaq. And the question is, what are those 4 Indicators going to tell you, other than indicating the average activity that took place within those 3100 stocks, (bearing in mind the performance of the better stocks would have been negated by the poorer ones)? Maybe there was more overall buying than selling, and maybe more stocks closed higher than those that closed lower. But so what ? What has that got to do with the performance of those individual stocks that one can discover via the quality of their fundamentals ? I suggest that one will have seen occasions that those Indicators would have been on the down slope, but that would have made very little, if any, difference to the performance of a stock that was "firing on all financial cylinders", making above average profits etc .. etc.. When informed investors detect and identify Quality they buy into it, irrespective if several hundred other stocks are doing whatever they’re doing. And, IMO, "Market Sentiment" has very little to do with basic, honest-to-goodness fundamental value. It would be interesting to know how much emphasis Mr. Buffett puts on that particular concept when he decides on what company to next buy into. When one calculates an EBITDA/Turnover ratio you have something "tangible" to consider and evaluate. I doubt the same can be said for "Market Sentiment". IMO, a lot of it’s all about (1) identifying fundamental quality, via adequate screens and a thorough analysis of a company's fundamentals via its financial statements etc.. (2) determining whether the stock is currently cheap or expensive (3) choosing those short-listed stocks whose recent earnings performance indicate the greatest potential in price increase over the next 6 months. By all means, combine (1) to (3) with one or two Technical Indicators that will show Market Interest, via buyer/seller interaction, in those stocks in order to assist with "timing". And why be all that concerned with "the state of the market" ? Rest assured, it takes really BIG, mighty upheavals for virtually EVERY stock in "the Market" to be affected. One of the most recent was 9/11. But how long did that fall last in the grand scheme of things ? "The Market" has long since recovered, as it always has, and always will. No other form of investment, as far as I’m aware, has beaten the stock market for overall Capital gain over the long term. I doubt if that will ever change. Where "sector behaviour" may very well be a factor is in the resource-based stocks. Because here we have companies whose performances are very much linked to the price of their Resource, and the company’s management can do very little about it. So if the oil or gold price falls through the floor, it’s unlikely that oil or gold stocks are going to make much in the way of profits. You say, "trade with the trend". Well ... that may be fine for the Daytraders and Swing Traders. But for Investors, IMO, it’s all about identifying true Quality in a company and confirming its ability to making ongoing profits and thereby providing value, and a good Dividend, for its shareholders. That’s what will always attract Buyers, and buying demand will, in the medium to longer term, power a stock’s price upwards .... and a constant monitoring and evaluation of its Financial reports will tell one whether to buy more or sell. If one has done one's homework with regard to adequate company analysis, then one should feel confident and have the "courage of one's financial convictions" with regard to one's investment. I respectfully suggest that Mr.Warren Buffett is an excellent example in this regard. I also suggest that, as Investors, our investment time horizons should generally be a fair bit longer than the short term traders. For those who are interested (or give a damn !!) maybe the next thing we can discuss/debate is that rather nebulous ratio ... P/S.