As some of you know, I’ve had a long time political blog. Lately, I’ve been writing sporadically, and it seems more and more about the financial scene, as the political scene cooled off (the passing of the critical election season) and the financial scene heated up (you need examples?!?!?!)
Since what I do for a living is in the financial industry, I’ve decided to start a financial blog as well. Since I work for a trading partnership, I won’t focus much on the trading side (we deal almost exclusively in options trading, so it’s not suitable for most people anyway.) What I will focus on is the side I love most, investing in stocks. The fascination, I think, is due to the fact that it’s much more difficult to be a good investor than it is to be a good trader, and it is a longer term proposition; with a trade, you know in a day or a week if you’re right- with stocks, it may be a quarter, a year, or indeed, a decade before you know if you’ve chosen wisely. What I will try to do is show ways to pick stocks that will make money, and in time frames that the average (impetuous) investor will appreciate.
DICLAIMER: I am not advocating the purchase or sale of any securities listed in this blog. I am not licensed, chartered, certified or any other way ‘entitled’ to give financial advice. This blog is for informational purposes only and I assume no responsibility for any results if you invest following my advice. Don’t sue me, if you lose money (mostly it would be a waste of time, as if all this crap goes south, so does my net worth! :) )
That said some information about me and my investment style. My background is upper-middle class Texan mid-century WASP normalcy. I grew up in family with some money, surrounded by families with (A LOT!!!!) more money. We had some investments, but most of my families ‘wealth’ came from personal real estate (buy a good house in the fifties and sell it in the nineties, always great advice!) and a family owned business. I have worked in real estate, both as a realtor and as part of an investing syndicate. After spending a number of years in the computer industry, I got involved in investing and trading in the market, and a number of years ago formed an investing partnership with a number of friends and colleagues. We closed it down twice and set it back up twice. We’ve made money each time, and this time (I, at least) intend to keep going. Our annualized rate of return last year was 274 percent vs. a loss of more than 30% for the market indices. We were on track for close to500% returns, but as we live by volatility, so did we die by it when the market volatility just went insane in November and December. When it comes to the market, I think I have some clues.
That however is trading. What this blog will focus on is investing. I define the difference mostly in terms of time frame. Our time frame in the partnership is usually less than a week; most of the time, if one of our trades runs more than three days, we’re going to lose that trade. Investing, in my view, is less intensive, in terms of ‘management’, has a longer time frame (three months to ‘forever’, as Warren Buffett would prefer), and is more qualitatively oriented. The options we trade every day have no ‘value’ other than as a trading device; I trade GM periodically, and it’s as value-less as it’s possible to get these days and still exist; commodities, except for a few investors with business or industrial needs, are valueless other than as trading entities.
An investment, on the other hand, has intrinsic value. If all else fails, it can be liquidated to recover value. Therefore, the approach is different. With an investment, we want to find a security that has the potential to grow, but also has underlying value, so we can determine its value and potential. I’d trade rat pelts if there was a market, and I could analyze the trading patterns, however, I would NOT ‘invest’ in them.
Thus, this blog will attempt to focus on finding stocks that will grow but that are unlikely to collapse and die while we watch. If this is sounding vaguely familiar, I will admit (cue Frau Blucher sound effects) ‘Yes, I am a value investor!’
Starting tomorrow, I will begin posting the portfolios that I am tracking. These will be divided into three groups. The first is essentially large-cap (maybe even super-large-cap.) These will include Dow and S&P500 stocks. The second group is what I term mixed-cap. These stocks include pretty much any stock, of any market cap, that fits the criteria of the portfolio. The third group is small caps. These are newer portfolios that I am tracking that match criteria of the first two groups, but only include stocks with market caps of $1B or less. This last group has (as of now!) NO track record. Do not trade these without medical help, your mileage may vary, do not try this at home!
Note: The title of this blog is a subtle jab at the disciples of the random walk thesis. All the efficient marketers, the asset allocators, and such. While I agree with them, that for most people, indexing and other minimally management-intensive investing is the way to go, I am firmly convinced, by my own success, and more impressively, by the Warren Buffetts, Charlie Mungers, and other Graham-Doddsvillers of the world, not to mention the Peter Lynches and David Dremens and William Ohigginses, that one can pick stocks that outperform the general market, in some cases, dramatically.
No comments:
Post a Comment