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

To: The Dodgy Ticker who wrote (462)	2/21/2008 12:42:53 PM
From: bruwin	Read Replies (1) \| Respond to of 4719

'PORTFOLIO' RESULT. Hi again Bob. For quite a while now I’ve had the feeling that we’ve had prior exchanges on S.I., but I couldn’t remember where or when. While trawling through some older posts at "Value Investing" I came across the following one you directed my way. It was #24258 of 6 July 2006 .... "Thanks, Mr. Bruwin. I think I'll pick them all and put them in a portfolio to track how they do for the twelve months 1/06 thru 12/06. I'll use their prices on 2/1/06 and see how much they appreciate by 31/12/06." Well ... if you did that, let’s see how they did over that period :- On 1/1/06 On 31/12/06 % Gain HANS 19.70 33.92 72.2% ANST 17.18 28.12 63.7% AOB 4.29 12.12 182.5% PDX 45.00 48.53 7.8% NATH 10.30 14.45 40.3% BRY 28.60 29.13 1.9% Average Gain for 6 stocks = 61.4% I can find no details for IPS. Well, well, well .... who would have thought that a portfolio of less than 10 stocks would make the 40% per annum target I mentioned and discussed between posts #24195 and #24225 at "Value Investing". Apparently not Paul Senior (#24210), Grommit (#24213), CrazyPete (#24207), Carl Worth (#24227) and more recently Jurgis Bekepuris in #379 below. And from the details in my Header Board, a 50% Capital Gain was achieved again in 2007 !! Rest assured, I don’t wish to be derogatory towards most of the above gentlemen. I just wish to make it clear, to anyone who may read this, that those individuals have operated in accordance with a different paradigm to mine. They are, for example, into multi-stock Diversification which they believe mitigates against risk. Yet the most successful investor the current world knows of (Mr. W.Buffett) advises us to do just the opposite, for a very good, logical reason. "Why put your money into No.20 on your list of stocks, instead of putting it into the top 5 choices" he asks ? All you are going to do is drastically dilute your Capital Gain. And this is exactly what happens to the holdings of those gentlemen, according to their own admissions. And because of that, they cannot accept the fact that a regular 40%/annum Capital Gain is achievable. And why should there be this "risk" that they refer to if the companies they invest in are currently displaying indisputable evidence that they are making excellent profits ? Surely these companies will very likely be the last ones to suffer if "the Market" turns sour. And if they do suffer, one hasn’t lost until one has sold. And which companies do you think will be the first to recover and reverse their unjustified downward price trend ? It will be those companies that informed investors know to be currently under-priced because of the inherent quality of their Financial Fundamentals. It is exactly that calibre of company that Warren Buffett snaps up at times when others are fearful and he then becomes greedy !! One needs to have the courage of one’s "Fundamental Analysis Convictions", and not to be swayed by any irrational behaviour in the stock market, which is what Warren Buffett has displayed time and again over the years. The main problem, I believe, lies in the strategy the above gentlemen adopt in analyzing the companies they invest in. Amongst the criteria they use are those that will not identify a company’s current ability to be profitable and provide exceptional shareholder value. They remain dogged in their determination to use ratios such as P/Bk, P/S etc.. etc.., irrespective of the lack of success they achieve with these parameters. But there again, that’s their business ..... I trust you put a few dollars into those stocks, even at the time you placed that post ?!