A new generation of value investor

[MWaterman]

Hey all. I found this forum from a link in "The Dividend Guy" blog, which you may have guessed, focuses on ideas for dividend based investing. I started buying stocks in 2003 but discovered Benjamin Graham around 2006 and since then have made incredible advances in my ability to choose good investments. I originally started a Sharebuilder account way back in 2003 with just $5, and it's now worth 2,000 times that much.

I'm carving out a niche for myself using Graham techniques. The largest holdings in my portfolio are very high quality companies like the kind Warren Buffett likes, but I've also carved out a niche in recognizing companies that are only so-so and are on the edge of improving how they do things, are selling well below their potential, and then I sell them when things are back to normal. I call it "Equilibrium Investing", and it's based on the economic idea of price elasticity. I believe that substitutes for profitable companies are not readily available in the market and so they are the preferred purchase of Intelligent Investors.

Because I love doing it so much, I've changed my college major from electronics to finance and I want to specialize in analyzing financial reports. Each year I order a great big box of reports from Yahoo! Finance and go hunting for the best values. I made 16 big investments over the last two years and every single one has been profitable. I know it won't last forever, but I think I'm off to a tremendous start based on the averages. Here's hoping.

[yakers]

Welcome. Maybe you're the next Buffett, someone has to be, but the odds are pretty long. You know when to buy, do you know when to sell? Years ago I had a trading account and did beat the S&P500 after expenses but not by a massive amount. There are bargains out there and reading the reports are useful. But I didn't have a large enough account to make the effort worth it. Now I have mostly index funds and have just about caught up to my net value from 2007. I am a far cry from some of the good asset analysts on this board. One thing I know is I don't know when to sell. If I had sold at markets highs I would be better off now. The company financial reports I see don't give me the insight when to sell. So mostly index and balanced funds and periodic rebalancing to a desired asset allocation seems the best approach for me. And the draw down phase which I entered when I retired in 2008 is different that when I was accumulating. So welcome, and tell me if you have figured out when to sell a stock and what asset allocation works for you.

[audreyh1]

Thanks for introducing yourself.

So you found this from another financial forum. It must be interesting for you to see us at one end of the career timeline, as you start out at the other.

Certainly we are interested to hear anything you have to say about companies and investing. I have recently heard the theme (Grantham, I think) about "quality companies" - larger caps that are in good financial shape - being favored in the current economic environment. Sounds like your strategy - also finding those that are close to becoming such a company.

Have you perused the Morningstar forums? There are a lot of experienced retail investors over there and lots of very interesting discussions. My favorite is the Fidelity forum.

Audrey

[MWaterman]

With regards to selling, I've actually done pretty well with that. Mostly I'm using yield as a guide to go between different kinds of income investments. I've noticed that even within the same sector companies tend to be cyclical, which sort of goes against the ETF/Mutual Fund grain out there, and it presents occasional opportunities. I always buy for the long term, but I find that the market frequently forces my hand at selling when it moves the price of things up so fast that there's no way the underlying business could catch up.

I also own a group of the type of company Buffett refers to as having "Durable Competitive Advantage", so I haven't had any need to sell those yet. Depends on where things go if we get really bullish from here. I do stick to a bond hedge so that makes me have to trim back holdings now and then.

[MWaterman]

Quote:

Originally Posted by audreyh1 Have you perused the Morningstar forums? There are a lot of experienced retail investors over there and lots of very interesting discussions. My favorite is the Fidelity forum.

Not yet. I'm actually really impressed with what I've read so far here, but then that's probably because most of my forum experience has been with Yahoo and they just post insanity over there. I also do a lot of talking to new investors with Sharebuilder who ask about various things. Mostly I try to keep people from making the same mistakes I did when I started, and point them in the direction of the most valuable information.

I may have a look there at Morningstar.

[haha]

Quote:

Originally Posted by MWaterman Not yet. I'm actually really impressed with what I've read so far here, but then that's probably because most of my forum experience has been with Yahoo and they just post insanity over there.

[Dawg52]

Quote:

Originally Posted by MWaterman Not yet. I'm actually really impressed with what I've read so far here, but then that's probably because most of my forum experience has been with Yahoo and they just post insanity over there. .

Quote:

Originally Posted by haha

Most of us are a slight upgrade to the yahoo posters, so it's a step in the right direction.