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

To: Paul Senior who wrote (54704)	1/4/2015 1:06:28 AM
From: Jurgis Bekepuris	1 Recommendation Recommended By pgo-neil Read Replies (2) \| Respond to of 78627

I have to say that I agree with both you and with Elroy. :) My investment approach is closer to yours although I don't have 120 stocks, but I had around 60. And I completely understand how new stocks seem attractive for one reason or other and I just keep adding them to the portfolio. I also understand how it would be hard for me to buy a single (or even couple) stock to 30% portfolio and keep it for X bagger. I also noted what Elroy said that it becomes harder to buy large positions as portfolio becomes bigger. When you are investing portfolio that is 0.5 your yearly salary, 30% position is just ~2 months salary and its loss does not seem that terrible. When you are investing portfolio that is 10+ years of your salary, 30% position is 3+ years of your salary and that might be rather scary to lose... (Although one could also lose the same 30% in market crash that decimates all stocks, but somehow that seems less scary?) I also agree with Elroy that concentrated positions are usually key to market outperformance by larger margin. I also understand where he is coming from when he talks about buying a lot more if a previously known stock in portfolio drops. Here I agree with both of you again: Agreeing with Elroy, for some companies stock dropping a lot because of some reason is a clear signal to add because you just know that the reasons are not going to destroy the company and stock will recover with big gains. Agreeing with you: for some companies, stock dropping a lot just exposes that I did not know jack about the company and I'd better fold or not increase the position at all. :) Do you remember how it was in the runup to 2000/2001? Did you experience similar market underperformance then? My portfolio was very small then, so I can't really say for sure. I just wonder if recent underperformance of spread out value portfolios (like yours and somewhat mine) is due to market runup to high valuations (I don't want to say bubble yet :)).

To: Paul Senior who wrote (54704)	1/4/2015 1:28:23 AM
From: Elroy	Read Replies (2) \| Respond to of 78627

This is a bit off topic, but..... Here's one thing I've never really understood about "value" investing. Lets say value investing is buying stocks that trade at below average price to book, price to sales, whatever metric you use. So you look at a stock, say XYZ. It's $50. You do your analysis, and you decide it is a value buy at $30. So the stock has no real news and falls to $40. Then it falls to $35. You don't buy, because you want to buy at $30. It goes to $33. It goes to $32. It goes to $31 on Monday. You still don't buy. Then it hits $30, on Tuesdsay, you buy some. And then on Wednesday it goes to $31. Naturally you don't sell it, right? So how did it work out that when it was $31 on Monday, you didn't want to buy it. But when it is $31 on Wednesday of the same week, you own it and you don't want to sell it? If it's worth holding at $31 on Wednesday, it seems like it should be worth buying at $31 on Monday. In other words - I get the "value" idea for buying a stock, but once it moves up even a little bit, it's probably no longer what you consider "good value" since you didn't buy it at that level on the way down, you waited until it hit your "good value" target. If you have prices that you consider "good value" once the shares begin to appreciate from that level, they naturally are no longer "good value" or are less "good value", so it seems like you're never going to hit a home run with a value stock, you're probably just going to squeeze out 10% or so if you're lucky and then not like the stock again. Just some musings! PS - I've always found the decision of where to sell a lot harder than where to buy. My sell strategy, to the extent that I have one, is don't sell losers. It leaves me with a catch-22. I tend to not sell the losers. And the winners, well they usually have improving stories and are doing well, so I don't want to sell them either!