Sunday, June 12, 2016

Random thoughts: Who kind of investor am I? (From "the art of execution" by Lee Freeman)

The book was introduced by Andy from TAcomob blog.

It was an easy read, I finish the book in 3 hours, every page of it and even have time to go through some sections again.

Easy read but highly enlightening. The third or forth book provide some answers to many of my questions. I will add it to my recommended reads. 

I am not giving any summary but internalizing what I read with my own investing experince. When Andy asked me what kind of investor I am, I can't answer. SMoL said I am a Rojak investor. I think I really am. It showed that I dun fit into any of the book's 3 tribes or 2 gangs, in fact I overlapped quite a lot.

The magic range for cut loss is given. 20-33%. FSL was bought at 1.62, it is last traded at 1.75. It went to a low of 1.28. That is a fall of 21%. I always have the mental struggle that had I "cut loss", I would have miss this rebound and I had re-examined my story for buying and the story has not changed except that no dividends has been declared. But I feel that minus has been offset by the well execution of MR Osaka. 

I have a better feel of the range now. 20% is properly too low a bar for me to cut loss. 

As for sembcorp, I did behave like hunter and accumulate at 3.8, with an average price of about $4. If I assume 30% loss as cut loss I would have gotten out at around $2.7. But I watch it go to $2.14 without buying nor selling. I did bid at $2.1 thou. So, it would seem that my temperaments are that more of a hunter than Assassins. 

But wait, there is a problem. Hunter allowed their portfolio to be concentrated because they dare to position big. Also, they have serveral rounds of fire.

I could perhaps only fire 2-3 rounds with my "diversification" at perhaps 2-3 counters out of 8-12 counters? Hardly a good hunter.

So to be a more effective hunter, I could either work to increase my war chest or reduce my counters or do away with the self-imposed limit of not more than 15% in one counter. None of which I am actually comfortable with. In fact, I hope to reduce all my counters to not more than 10% of my portfolio. 

As for being a connoisseur, I hardly recall picking any counter than generate more than 50% return (even if I had sold them earlier) the only 2 examples I can think of is China Gaoxian, from 19 cents to 37 cents (peak at 45cents) and CES at 48 cents. China Gaoxian has gone to the dogs and CES is a shade of its peak. YZJ was bought at AV. Price of 90 cents and its peak is 1.44 (I already sold at 1.2 plus)  So does buy and hold really work? I am better off doing buy and sell isn't it? 

Of course, there are examples like Best world or UMS which are muti-naggers but they are not in my radar. 

So I have the aspiration to be a hunter-connoisseur but is still ill-equipped as a hunter and unconvinced as a connoisseur. The examples quote in the book do buy and hold for 3-5 years, hardly value-investor time frame. Assuming fundementals did not change, there is no guidelines of how much profits is "enough" except that it is trimmed on its way up. I guess we can apply "trailing stop" or valuation method to determine it.  But looking at my own investment radar, even at its peak, YZJ and CES are hardly overvalued. 

Of course, one big contrast is YZJ and CES are all in cyclical industries and is hardly "cash generating"
Machines or companies with "visible future earnings". 

Also hunter exposed themselves to more loss, while it is possible to turn a loss to a win or reduce loss, hunter's accumulation could also magnify the loss. Since gurus with their expert analysis only have a hit rate of 49%, what more to say about mine?

I am not expecting a book to do magic but is just blogging to summarize my thoughts which I find always useful. 

In conclusion, I believe to improve myself better, I might need to do a combination of assassin and hunter to better manage my bullets as I continue to save more and add to the funds. 

As for the winning exits side, I dun believe I can exit near peak and is ok with    My returns so far. 

I hope with more practices, I can improve my returns and I think the first thing I need to do is to reconcile the contradiction of diversification and having enough ammo to have a good position size of a winner? 

Also, it is possible to be both a hunter and assassin? Accumulate more at a lower AV. Price and cut loss when the AV. Price is perhaps 20%-33%? Or hunter and assassin dun mix? 

Also, the effect of dividends in managing "loss" is not discussed. My wife is jumping when I asked her to cut APTT at a loss of 16%. But I told her with her dividends, she actually exited with 5% gains. She said like that also count? I say "of course, it is a safety net"

Still have not found the answer of what kind of investor am I. The only closest answer perhaps is "dividend" investor.
------ 

Andy, if u are reading this, thanks for the recommendation. 

17 comments:

  1. You are likely a hunter, as the hunter, assassin labels are derived from how one cuts losses. It is less determined by the number of stock holdings

    ReplyDelete
    Replies
    1. Hi think not left, I also think I am a hunter inclined, but I am wondering how effective a hunter I am.

      You dun hunt with only 2 rounds right?

      Delete
    2. I am more assassin inclined, though i can be rabbit or hunter (with 2-3 rounds at times). Whether hunter or assassin depends on how convinced i am with my initial investment hypothesis.

      Delete
    3. Oh. TNL,

      True, no need to be fixated on anything. Rabbit has its day too?? Lol

      Delete
  2. How about becoming fishermen?

    We patiently wait for the tide. The best tide is in the early morning or early evening. Cooling and nice. Yes. These are best tides but not necessary we will catch big fish ourselves. Luck still matters but we may get luckier with these tides.

    ReplyDelete
    Replies
    1. CW,

      Fisherman and hunter not mutually exclusive.

      They both Hunt. One wait for low tide, one wait for the animal to be injured

      Delete
  3. Sillyinvestor,

    Look at the labels your readers are throwing at you. Do they describe their investing styles more than yours?

    Hint:

    Recall what you like to say to your wife or friends when you give investing advice.

    That's your style.



    P.S. That's will cost you another cup of coffee. I'm keeping tabs.

    ReplyDelete
    Replies
    1. Yo...SMOL,

      Like that eh... I am a dividend investor.

      How many coffees already?

      Now my turn, what kind of trader are u??

      Delete
    2. Sillyinvestor,

      I feel like pouring hot coffee on you now...

      Read a book so easily distracted. Someone said something, so easily influenced.

      I've said during our conversations and in my blog I'm a Trend Follower. But that does not preclude me from using the trading styles of other schools.

      When I called you a Rojak investor, it wasn't meant as a compliment.

      You don't say or write things with conviction. What's the point of saying:

      "The only closest answer perhaps is "dividend" investor"?


      Forget about "labels".

      Wait till you are making consistent money from your investing - you'll know what sort of investor you are:

      The money making investor; or

      the money losing investor.


      You cannot be coddled. Must kick you out of the shade of the umbrella.

      Delete
    3. SMOL is right!

      Only two types of investors/traders.

      Money making ones that speak louder and money losing ones that keep quiet. :-)

      Delete
    4. Wa, why so fierce?

      Learning mah; so will take this idea and that idea mah. I also know Rojak is not a compliment lol. Cannot pretend to have conviction when I dun have right. I only know what I am not, but duh know what I am.

      Earn money doesn't mean I know what investor I am lei.

      Like people ask u what work u do, u say work that pays, some people will laugh some will feel like slapping u lor ... Lol

      Btw, coincidently my MIL ask me, u still "playing" shares. I said Yeah. She says still making money? I ask "you mean historically or but recent buy or a specific counter?" She said everything together la.

      I said of course la, otherwise why am I still doing it and reading and learning...

      Sorry, I know I shameless hehehe

      Delete
    5. CW,

      Please la, I know people who talk loud loud about their winning trades buy hush hush about their losing ones lor...

      I think overall they are still doing very well la, but they always trumpet the winning ones and conveniently forget their bad call.

      Delete
    6. Sillyinvestor,

      Hee hee.

      Got your attention right?

      You are an educator. You know the tricks and techniques of pedagogy as well as I do.

      The man, his son, and the donkey listened to everyone but forgot why they went to the market in the first place ;)

      Delete
    7. Smol,

      Lucky u no teacher, always kick
      Pupil ... ;)

      Delete
    8. si, you can add some more skills to your repertoire.
      i feel you are quite similar to cw.

      Delete
    9. Hmm SMK,

      I think I can add many more skills and emotions resilence ...

      I think CW is very cool, if similar to him, I quite happy. But I think I am different. I dun have cash rotting away LOL

      Delete
    10. CW got cash rotting away?

      Delete