Forum Archive Index - November 2002

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Morgy,


Good post from you.  Lot's of ideas to 'punt' around.

>
>
>Re punting, I was really referring to the numbers that get bandied
>around on share sites not strict fundamental investment that you
>follow. i.e Should be worth x y z because of this or that projected
>revenue blah de blah de bla
>
>


Reduced to its simplest form, I don't claim to do anything more than 
that myself.   Except that I tend to focus on the fundamental 
strengths of a business that are not so affected by business cycles.


>
> 
>It is interesting to note that these expert fundamental investors 
>who follow the line that investment is for the longterm buy and sell
>more than any other investor group. 
>
>I read an interesting article last week which basically said that 
>they do the exact opposite of what they claim to do, i.e they buy 
>and sell on they claim to do, i.e they buy and sell on sentiment
>because their jobs are on the line or if they cashed out
>as they have been advised to do from their own TA people since 2000
>that money would transfer to the CD or treasury bonds people in
>their companies and they wouldnt have anything to do.
>
>


I fear your reading is correct Morgy :-(.   I remember reading a 
reference to a study that stated that the performance of fund 
managers is inversely related to the frequency of trading shares.  In 
other words the more they buy and sell the worse they do!  This is 
not entirely a result of incompetance.  It is because fund managers 
face tax on their capital gains whenever they buy and sell. 


>
>its as logical as buying a downward
>trending stock knowing the intrinsic value per share is much higher
>and keeping that stock despite a dropping value, it is simply belief
>in ones own superior knowledge despite evidence to the contrary. 
>


Usually with a second line share I prefer to buy before any uptrend.
  
Usually that means when the share is in a trading range, but 
sometimes I do buy in the downtrend - even if I don't realise it at 
the time!   Doing it this way means I am not competing with any 
traders hungry for the same share.  Sometimes if you wait for an 
uptrend you are just reducing your profits.  Scott Technology, for 
instance, jumped 15% in one day on the announcement of its results 
recently.  Much better to be in before any such price spike, and if 
it was cheap enough beforehand, then why not?



> 
>I think
>it is an important point not stressed often enough that at most
>times the share price is not in sync with the companies actual
>performance. 
> 
>The share price reflects the public "perception" of where the
>"current performance" is going, either ahead of it or lagging
>depending on how much info is in the public domain, hence one of the
>reasons actually watching the price of a stock can give a heads up
>on what the insiders actually know. High or poor performance can
>often be signalled by the buying habits of insiders. 
> 


Cynical aren't you?   I'm not really convinced there is that much 
insider trading about.   There is certainly reaction to external 
events that gets reflected in share prices.  But personally I think 
there are far too many conspiracy theories running around as regards 
insider trading.


> 
>Re LPC, I am surprised you know the lower price as I guessed you
>wouldnt follow it as you knew the value was there anyway and would
>look at the price longterm i.e once every year or so  :-) 
>

I never assume I am smarter than the market, so I tend not to buy all 
the shares I am after in one hit.  Why should I think myself so 
well informed that I know exactly the right day to buy?  I also tend 
not to bet the farm on one company no matter how good I think it is.  
I'm keeping an eye on LPC with the idea of maybe picking up some 
more, or maybe I'll top up with some more RBD instead.  I'm looking 
at relative value not absolute value too.  In any event I find it 
useful to even keep an eye on companies I won't be buying ,just 
to make sure my value market measuring stick remains sharp.

SNOOPY



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