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

To: Kirk © who wrote (252)	9/19/2006 4:59:22 PM
From: OldAIMGuy	Respond to of 4080

Hi Kirk, Re: Long term... you have your core holdings while trading around the volatility for added return. This is essentially what I do. I have three things I'm attempting to do as an investor: 1) Profitably capture volatility over time 2) Profitably gain from price appreciation over time 3) Dividend capture over time These aren't mutually exclusive, either. I use the same general risk management methods with all three types of holdings. All three I trade around core positions. This keeps my FIFO gains well beyond the 12 months necessary to lower my tax burden. That in and of itself is a mission. Long term capital gain tax rate for U.S. citizens is essentially a discount of about 1/2 of short term tax rates. Best regards, Tom

To: Kirk © who wrote (252)	9/19/2006 6:02:30 PM
From: bruwin	Respond to of 4080

Thanx for that Kirk. The point I often try to make is that I, personally, judge a stock based on specific criteria within its Financial Statements, viz. its Income Statement and Balance Sheet. I'm not particularly interested in whether or not "the Market" is up or down, but rather whether or not that particular QUALITY stock is currently cheap or expensive. You will often find that, just prior to a QUALITY company's results coming out, that the P/E of that company is on the high side. Mainly because its price has gone up in the last 3 or 6 months (depending on which stock market you're in) due to its good performance in the period, and the "E" in P/E has remained static because its still 3 or 6 months old. Then its results are published and one sees that there's been a good increase in EPS. Obviously one revises the "E" value, i.e. the denominator, and now we have a lower P/E, and quite often a relatively cheaper stock. Therefore if the P/E is now lower and other trends within the Statements are showing good percentage increases, then I'm happy to stay with the stock, and even buy more if I can afford it ! You mentioned "trading around volatility". Well, I'm not a Trader, but I will buy more stock in the above type of company when there's a temporary fall off in its price. These fall offs occur when there's some selling pressure due to profit taking, or uninformed folk selling because some highly paid "Analyst" wrote something in his column or newsletter (See PDX in Sep. '04, with an overnight fall to $27. It's now trading at about $48. So much for that particular "advice"). And that's how I'll continue to judge and support that company, until such time as its Financials start too deteriorate, or I find another company that's performing better. Personally I couldn't care less whether or not, for example, "the Dow" is up or down. This is an index of the average performance of 30 large cap stocks. So what. I doubt very much that the performance of "the Dow", in the period Sep. '04 to Sep. '06 had any influence on the price performance of PDX. I prefer to spend my time on individual companies as opposed to being too concerned about Market averages. My own "metrics" are based on aspects that I can calculate, and draw conclusions from, using the basic principles of mathematics. I'm afraid I cannot calculate nor evaluate "market sentiment". In my opinion, it's one of the many "buzz phrases" that have come into vogue in recent times, and more often than not, they lead investors down cul-de-sacs and along garden paths. I go along with several aspects of pcyhuang's "Contrarianess", because there are companies out there which many investors haven't as yet realised their potential. More often than not they haven't realised their true Fundamental Quality and Potential because they're not looking in the right places nor at the right "markers". Some folk spend so much time studying patterns and shapes in charts and drawing conclusions from Indicators, without taking into account how those Indicators are derived, on what sort of mathematical basis they were formulated, and what sort of "information" one is actually getting from them. Broadly speaking any Indicator relies on three sources of data, viz. Price, Time and/or Volume. So if that's what you're putting into an equation or ratio, then, on the basis of basic mathematics, you won't get an answer related to the Financial Fundamentals of a company. And in the medium to longer term, it's the Quality of those Fundamentals which will ultimately determine the trend of its price. All you'll get is an answer related to the interaction between Buyers and Sellers. And in the shorter term, who knows why they're doing what they're doing ? Many of those that sold PDX in Sep. '04 for $27 obviously had no idea about the inherent Fundamental Quality of the company !! The same, I believe, could be said for those who drove AHFI's stock price from $1 to $5 in Jun. to Nov. '04, based, to a very large extent, on Technical Indicators. The stock plunged to about 50c in no time when it became apparent it was, Fundamentally, junk. It trades today at $0.005c.