Is there an undervalued asset class in the house?

[Nords]

The INTC reference was a joke toward CFB........you didn't get that?

In the context of other stock comments I must've missed the subtlety of the humor.

Are you saying you want a full blown discussion of stochastics, Wave Theory, CAPM, Black and Scholes Option Pricing Model, etc? Because I could post that stuff on here but 80% of the folks wouldn't care or understand it.........

Well, I prefer a discussion oriented toward an income statement or a balance sheet or a spreadsheet model but I'm conversant with the other concepts too. If you think you can hold up your end of the conversation then bring it on...

As for the TA and the CAPM, I guess it has its appeal and its limited applications. But I remember Bill Sharpe saying that he was glad the Nobel Committee can't reclaim its awards in light of subsequent research.

We can get plenty of non-specific comments on Yahoo! or M* or TMF. The only other board that I've seen come close to decent analysis was FundVision, but that's a board for hyperactive day-traders led by a moderator who never seemed to lose a shekel. I'm more interested in fundamental deep-value analysis, especially long-term and dividend-oriented, by people who can teach what they've learned from their mistakes as well as their successes. This section of the board was created for the purpose of doing something better than the crap that can be found everywhere else, so why revert to old habits?

Most of my discussion is in the PM mode with the other "stock-pickers" on the board. That way we can talk freely without ongoing nit-picking and thread overrun.......

And without the harsh glare of publicity!

 

[kcowan]

One of my "high-growth" O&G plays is Connacher (CLL.TO), recently integrated and well-positioned for growth.

 

[terminator]

If you think you can hold up your end of the conversation then bring it on...

IFC -- Investor's Fight Club

 

[cute fuzzy bunny]

First rule about IFC...we dont talk about IFC...

Hey brewer (useless since you arent reading this, right?), I made a quick jab joke complete with a winky to financedudes opening gambit. You elected to take it as criticism and go thermonuclear.

In a discussion about stock picking, I think its pretty dang relevant to talk about the issues with the process, success factors, wins and losses, strategies and the real facts and data behind the whole matter. Perhaps not in a "which asset class is undervalued" post, but its a relevant discussion.

The facts and data say that stock picking is a losers game. Some people will be lucky, some people will have an innate skill.

But I'm afraid you leave me chilly when you make picks, tell us they're not your best, bunch up your knickers when someone brings up a bad pick, sell off stuff you had been praising just days before, and then top it off by telling us that you have no idea how much money you're making or losing.

 

[cute fuzzy bunny]

The INTC reference was a joke toward CFB........you didn't get that?

I got it...for Nords' benefit, I made a comment about people who get rich off of one stock as much by luck as by chance. FD was just noting that i'm one of those lucky stiffs.

I suspect we all get here one of two ways: long LBYM/penny saving and getting lucky. People who are working a low six figure portfolio probably need to pick some individual stocks in the hopes of snagging the superstock that puts them through the ceiling and makes their ER dream happen.

Just dont confuse luck with skill...

Cyclinginvestor...pretty interesting stuff...I was quite interested in why your portfolio was so uncorrelated from the S&P 500 in the late 90's and early 00's...REITS make a lot of sense, and clearly that whole sector has been a runaway train for the last 6-7 years. Congratulations on the picks.

 

[FinanceDude]

In the context of other stock comments I must've missed the subtlety of the humor.

I'll give you the benfit of the doubt since you actually OWN some stocks, unlike CFB, who doesn't own any now but keeps beating the drum on the
"stockpicking is a loser's game" mentality..........

If you think you can hold up your end of the conversation then bring it on...

I apologize, I guess you do have a sense of humor, because that comment is darn funny to me.............

This section of the board was created for the purpose of doing something better than the crap that can be found everywhere else, so why revert to old habits?

So let me understand this, you want an in-depth analysis of a stock so you can nitpick it more? You would never buy an aggressive stock anyway, so why should I bother with some of my more interesting picks?

I will post an in depth analysis on one of my growth stocks. If that doesn't satisfy you, well too bad, brewer is the bottom-fisher quant guy on here............. I look at technical and fundamental analysis regarding a stock, and will buy into weakness or strength depending on positive long-term signs, like increasing cash flows, increased R&D spending or acquisition of another firm's patents, etc. It's not pure fundamental amalysis...........

 

[bpp3]

Here is my cumulative performance versus a total market index fund. To do the comparison, for each stock I own I pretended that I bought an equal amount of the index fund. This should give a pretty good net-of-fees comparison. Dividends are ignored, but the dividend yield of my portfolio is a bit higher than that of the index. Also, two stocks which went private on me are ignored, but they were sold at a profit anyway. The plot starts from Feb. of this year, though my portfolio of individual stocks started about 3 years ago.

I took Bernstein's 15-stock myth message to heart, so I hold as many names as possible (I'm up to 70 so far) in an attempt not to lag the index too badly. So far so good.

My stock-picking rule more-or-less consists of throwing darts at the list of stocks which are in the lower half of the market in terms of P/E and P/B. I also have more small and microcaps than are in the index, but the net effect of the size tilt (if broken out separately) has fluctuated around zero over the course of this graph.

 

[cute fuzzy bunny]

Bpp...interesting stuff...so your portfolio from your description seems to have a value tilt? Looks like you're picking up a 1.25-1.75% boost over the s&p500...however the value indexes have about a 2-2.25% boost over the S&P.

Do you think your outperformance of the S&P 500 is due to the picking or the value tilt in selection?

 

[bpp3]

Bpp...interesting stuff...so your portfolio from your description seems to have a value tilt? Looks like you're picking up a 1.25-1.75% boost over the s&p500...however the value indexes have about a 2-2.25% boost over the S&P.

Sorry if I wasn't clear: my bogey is not the S&P500, but the TOPIX, a Japanese total-market (almost) index. Specifically, I am tracking against a TOPIX ETF put out by Nikko Asset Management (ER = 11 BP), which is what I would have invested in were it not for certain tax issues.

Do you think your outperformance of the S&P 500 is due to the picking or the value tilt in selection?

I wouldn't really call the outperformance statistically significant at this point; it would be wiped out entirely if my single best-performing stock (Sumitomo Metals, up 350% -- and no, I had no idea it would do that well) were to go bankrupt.

If it persists, my guess would be that the value tilt at purchase time is good for a one-time pop as a stock goes back to the mean (on average, excepting cases like the aforementioned Promise, which has probably suffered a permanent loss due to the changed laws). Over time, though, the performance of my portfolio should come to approximate more and more that of a total-market index. At least that is my hope.

 

[CyclingInvestor]

I suspect we all get here one of two ways: long LBYM/penny saving and getting lucky. People who are working a low six figure portfolio probably need to pick some individual stocks in the hopes of snagging the superstock that puts them through the ceiling and makes their ER dream happen.

Just dont confuse luck with skill...

Cyclinginvestor...pretty interesting stuff...I was quite interested in why your portfolio was so uncorrelated from the S&P 500 in the late 90's and early 00's...REITS make a lot of sense, and clearly that whole sector has been a runaway train for the last 6-7 years. Congratulations on the picks.

I did not really try to load up with REITs, but once I understood them well enough
to analyze them and add them to my stocks tracked (in late 98 ), they all were
20-40% undervalued, while the other blue chips I tracked (GE, JNJ, etc) were
all 20-50% overvalued. It took until late 05 for the REIT valuations to start
exceeding the other blue chips (based on how I evaluate them), causing me to
start replacing them with the non-REITs that I follow.

My primary reason for holding individual stocks, however, is not superior
performance, but a better feel-good factor. I sleep much better at night holding
the companies that I respect, than the motley collection that index funds must
by their nature include.

 

[cute fuzzy bunny]

I loaded up with REITS around the same time, for the same reasons. Unfortunately I sold them too soon. Way too soon...almost 2 years ago.

Hmmm...social and conscience factors...not something we talk about as much as we probably should.

Thats right BPP, you're not from around these parts.

So you're not finding that the valuey picks you're making are staying valuey? A lot of the US value stocks seem to continue to be "bad stocks, which end up being good to own anyhow" as bernstein suggests.

And a round of thanks for people who actually ante'd up, instead of presuming the eye of sauron was upon them with all attendant malice.

 

[Nords]

I'll give you the benfit of the doubt since you actually OWN some stocks, unlike CFB, who doesn't own any now but keeps beating the drum on the "stockpicking is a loser's game" mentality..........

Well, for starters he's not calling stockpickers losers. He's referring to the Charles D. Ellis book. It's an apt term for the situation.

I apologize, I guess you do have a sense of humor, because that comment is darn funny to me.............

Well, I have a hard time keeping a serious look on my face when I read the words "Wave Theory".

So let me understand this, you want an in-depth analysis of a stock so you can nitpick it more? You would never buy an aggressive stock anyway, so why should I bother with some of my more interesting picks?

Well, sure. Isn't that the whole reason for having a stockpicker's board?

Just to be clear on this, I'm not nitpicking the stock picks-- I'm nitpicking the quality of the analysis. You picked the stock and presumably invested money in it and made a big profit, so there's no need to feel thin-skinned about the comments of anonymous Internet posters. You can rest on your assets secure in the knowledge that you've already accelerated your ER date.

For starters I'm not sure what an "aggressive" stock is. What does it do aggressively? Is that another name for small-cap growth stocks or is it some other category of investment?

I will post an in depth analysis on one of my growth stocks. If that doesn't satisfy you, well too bad, brewer is the bottom-fisher quant guy on here............. I look at technical and fundamental analysis regarding a stock, and will buy into weakness or strength depending on positive long-term signs, like increasing cash flows, increased R&D spending or acquisition of another firm's patents, etc. It's not pure fundamental amalysis...........

Like I said, I'm more interested in the process than I am in latching on to the next moonshot. You guys presumably do this all day long and have it down to a system. I appreciate that there's more than one way to make money in the market, but most of the ways I've seen so far don't fit into the lifestyle most people would choose to live. Nothing wrong with that, but generic glittering generalities are everywhere. I'd rather see a detailed discussion of screens or technicals or fundamentals as long as we don't read words like "upside potential"...

 

[maddythebeagle]

Err...maybe I am missing something, but arent "valuey" indexes always undervalued...that is what I have been adding to....

 

[cute fuzzy bunny]

Depends on which index and from whom. In general, once a stock becomes "good" and the p/e (etc) rise, the index should divest its holdings.

"Good" stocks tend to not stay "good" for long, on average. "Bad" stocks tend to stay "bad" for some time.

 

[bpp3]

So you're not finding that the valuey picks you're making are staying valuey? A lot of the US value stocks seem to continue to be "bad stocks, which end up being good to own anyhow" as bernstein suggests.

Good question. It looks like only about half of my current holdings would still pass my value screens today, and the longer they have been held, the more likely for them to have drifted out of bounds. Makes sense I guess.

Err...maybe I am missing something, but arent "valuey" indexes always undervalued...that is what I have been adding to....

If it is a value index, then yes, it is kind of by definition always made up of undervalued stocks, since stocks get booted out of the index when they become too highly valued, as CFB says. In my case I never sell, so I would expect my holdings to generally become less valuey over time. Though some probably never will, or will at least take a long time to do so, as CFB points out.

 

[bpp3]

heh heh heh . So what criteria do you put into your stock screener before you search for stocks?

For what it is worth, here are mine. (Not sure it will be of much reference to anybody else, though.)

Large cap stocks:
Exchange: Tokyo Stock Exchange, Section 1
Market Cap.: >2500 oku yen (>~2.1 billion USD)
P/E: 0-23
P/B: 0-2

Small cap stocks:
Exchange: Tokyo Stock Exchange, Section 2 (preferably -- but will shop in the low end of Section 1 if run out of candidates in Section 2)
Market Cap.: <2500 oku yen (all stocks in Section 2 are below this anyway)
P/E: 0-18
P/B: 0-1
Liquidity: Greater than 100 lots/day traded on average in last 25 days (this measure is provided by brokerage screening tool)

Notes: The upper ranges of P/E and P/B are the median numbers
for the respective exchanges and capitalization ranges. These
numbers get revisited periodically as the market moves as a whole.
The combination of P/E and P/B cuts leaves about 1/4 of the stocks in
each capitalization range available. (P/E and P/B turn out to be
surprisingly uncorrelated.) For the small caps, the liquidity
requirement cuts the available universe down by another factor
of 5 or so.

When I have money to invest, I run either the large-cap or small-cap
screen (depending on which class needs to be rebalanced into), and
filter the results for sub-lot sizes or multiples thereof that match
the amount of money I have to invest that day. (Typical lot sizes are
100-1000 shares, and my broker offers low-cost window trades in units of 1/10 lot.)

Then it is time to get out the darts.

Ok, I will peek at a few things:
1) Industry classification, to ensure diversification;
2) Dividends: some preference for at least 1% yield, but no hard and fast rule;
3) List of major shareholders, with some preference for less closely-held companies;
4) A glance at cashflow and debt numbers (not obviously bleeding to death).

However, if I find myself taking more than an hour or two dithering over
which candidate to pick, I pour myself a shot, make an offering to the
spirits of the efficient market, and force myself to just pick the largest
cap stock on the list. After all, there is always next month.

I never (willingly) sell, and always put new money into new names.

And that's how I make a DIY index fund.

 

[CCdaCE]

What's Warren buying?

Nords:

I'm assuming you're aware that your buddy Warren has been adding to Railroads and some other misc. areas, Wells Fargo Bank and Johnson & Johnson are the other big names that I recall.

But, he's cuttin' back in other areas like Bud and other financial-related businesses (H&R Block, Amer. Express, etc.).

See the Morningstar article if you already haven't.

-CC

 

[kcowan]

On individual stocks, I look at the analysts opinions then study selected analysts. I try to understand the business model and look for side-effects that the analysts might miss. I look for naysayers on the boards and make an assessment of their reasons for being down. Then I study trends to see whether this stock is in an uptrend or a trough. If in a trough, I wait for some upward movement.

e.g. HMC is possibly ripe for an uptrend and may have just made the turn. It is on my watch list for tax-deferred account (8 years).
e.g. AAPL is a major holding now but is likely to drop when their 2Q financials are published, presenting another buying opp, or some options action.
e.g. JSDA has been beaten down by The Street for missing their 1Q numbers so might be in for a recovery IF they make good progress on their financials in 2Q.
e.g. ACH is up 40% so far this year but has tremendous upside so look for a buying opp.
e.g. AMX has been beaten down a bit by the Chavez nationalisation but has great potential in other Latin countries besides Mexico.
e.g. CA has a CEO who I know and he has brought in a bunch of guys I also know so he might be able to leave the stench of Wang and Kumar behind him.

Lots of others to chat about and a ton of analysis behind each one. I am mostly interested in discussing HMC and CA because I have not bought them yet.

 

[GhostofTomJoad]

I'm watching our ER portfolio hit a seemingly never-ending series of new highs. My Fidelity.com daily e-mail alerts consist mostly of "xxx hit a new 52-week high." Our kid's college fund is going to both Harvard AND Yale. We're not rebalancing because everything seems to be going up fast enough to remain more or less in its allocation.

I'm not looking for trouble and I'm not going to chase performance. I'm even getting nervous about shorting anything else because I'm afraid of all the irrational investors. I could sit on our current holdings for quite a few more years, including my shorts in First Federal and Abercrombie & Fitch. I'm just having a hard time finding anything that makes me go "Hmmm!" and look up its history or fire up a spreadsheet.

So... what asset class sucks? I'm not talking about "This is too expensive". I'm talking about "This is cheap for a reason, and it's a really ugly one!"

I've been looking at Marine Shipping outfits.
P/E is extremely low for :
AMKBY. 1.9
HPGLY. 2.9
ESEA. 1.74

There are a big handful of others. SOME are real dogs.

 

[MichaelB]

This sure is a blast from the past.

 

[REWahoo]

This sure is a blast from the past.

Yep, anyone doubting the existence of an afterlife need only point to the resurrection of this long dead thread.

 

[NW-Bound]

Wow, what an old thread! Many of the participants have long disappeared too. But if the thread topic fits, why not revive it?

I've been looking at Marine Shipping outfits.
P/E is extremely low for :
AMKBY. 1.9
HPGLY. 2.9
ESEA. 1.74

There are a big handful of others. SOME are real dogs.

Being an active investor, of course my curiosity is piqued. These shipping stocks are not on my radar, but of course I knew about Maersk (AMKBY) even though it never crossed my mind to look up its stock.

AMKBY has no coverage by any US analyst. Nobody cares. I wonder why.

It's not a small Denmark company with 110,000 employees. On the surface, performance in recent years was impressive.

Revenue in 2019 (prepandemic) was 39 billion Krona, in 2020 was 40B KR, increasing to 62B KR in 2021, and 82B KR in 2022. Huge increase.

EPS increased from 22 KR in 2019 to 1595 KR in 2022. Huge!

Dividends increased from 22 KR in 2019 to 619 KR in 2022. Huge!

So what's wrong with this stock?

Earnings in 2023 are expected to decrease to 213, and down to 49 in 2024. Why? I have not found the reason, but that expected earning decrease explains the depressed stock price.

Very interesting stock, but it takes more work to understand the above numbers.

 

[Koolau]

Yep, anyone doubting the existence of an afterlife need only point to the resurrection of this long dead thread.

Nothing is truly dead until a Mod says it's dead. I just don't know how folks find these old threads.

In any case, I gave up on individual stocks years ago - I was no good at it and didn't have the interest to do the research. SO, it's MFs for me EXCEPT Old Megacorp which, over the years, has made me a small fortune - and continues to make me a small fortune even to this day. Heh, heh, it's much better than when I had to report to w*rk every morning. Now, I just enjoy life and watch the stock price do its thing for me. YMMV

 

[GhostofTomJoad]

My spouse-person likes to stay clueless about it all. My self-appointed task is to throw X amount over the wall I've put between IRA and taxable, each January, thus growing the taxable side, little by little. We pay no 1040 tax, so the first priority is simply to make more of the portfolio more easily accessible for her. My IRA is funds. Taxable is stocks. That could change, but not yet...

 

[Out-to-Lunch]

My spouse-person likes to stay clueless about it all. My self-appointed task is to throw X amount over the wall I've put between IRA and taxable, each January, thus growing the taxable side, little by little. We pay no 1040 tax, so the first priority is simply to make more of the portfolio more easily accessible for her. My IRA is funds. Taxable is stocks. That could change, but not yet...

Just curious: As long as you are throwing it over the wall, why not throw it into a Roth rather than taxable?