Forum Archive Index - February 2000

["hugh webber" <hugh.webber@clear.net.nz>]

Either you're a long term value investor or you're a day trader and I don't
think 
there's room in between. As a long term value investor one can view the 
situation with detached amusement. 
I must say I'm impressed with the day traders
very professional, objective and ruthless approach combined with extensive
background
knowledge and cynical sense of humour. I guess it comes from making your
living out of
it - only the successful survive.
I was interested in the egoli.com.au poll on going into it; that the
progressive result was about 80% 
of investors did so for capital gain (hope NZ IRD doesn't get hold of that)
and 20% for dividends.
The dividend investors will obviously be sitting pretty albeit cursing they
might have got in too soon.
I think Buffett's approach that you make your calculations on EPS trend,
return on shareholders funds
average, management, consumer monopoly (desirably like AIA) vs commodity,
P/E; take the plunge
and then wait with equanimity for the pay-off. So sometimes it keeps going
down - that doesn't 
invalidate your correct investment decision; its probably some people
panicking or forced sales
through over borrowing and the situation recovers maybe through a
succession of day trader nibbles
but you as the long term value investor are the one who makes the big
gains.

Occasionally for periods of time gravity appears to stand on its head as it
did in 1986 to 1987 but
eventually economics reasserts itself. The bigger the departure then the
bigger the recovery.
If good companies continue to pay increasingly good tax paid dividends
while the bubbles continue
to make losses then anyone can see that there is going to be a marked shift
back at some stage.
Otherwise you're just playing Russian Roulette betting that you will jump
in time but you never do.

Another thing to be beware of is falling in love with a share or shares
which is warned against in the
best books but I'm afraid I've noticed some sad cases of it on Sharechat.
People should operate by
factual analysis and dates, not by emotional attachment. I fell in love
with BIL for some years but I did 
get out at just over a dollar and I learned a lesson from it, I've never
fallen in love with a share again; like
the day traders you have to be ruthless.
Its interesting to analyse oneself and then pick the technique that works.
I found setting dates in terms 
of a month and a year that I would sell by worked much better than picking
a price or a ratio as a trigger.
One can get short circuited by an offer too good to pass up of course like
the IP bid for part of CHH at
$3.80 or the BIL bid for part of Air NZ at $3.40 (I accepted both).
If you pick a price you'll find that when you reach it you say to yourself
hang in here for the ride its going higher
which means you're trying to pick the bottom or the top which is impossible
to do. Ditto with the ratio unless
you're a man of steel, someone who can kick the strongest addiction.

I offer this as the result of 20 years of experience, the last 5 pretty
successful because of the learning curve but also 
from reading the best literature available and I'd have to pick
Buffettology by Mary Buffett as the best. I suppose having
an economics double major also helps but my feeling is that anyone with a
brain and common sense can win this game.
Why pay heaps to ignorant mediocre funds managers who think they are
professionals when you can do so 
much better yourself?

cheers,
hugh









 

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