Saturday, April 28, 2007

From My Notebook and Other Sundry Things

I'll start with the sundry, in no particular order

First: My Fantasy Portfolio is $68 shy of $1,300,000. I still have a single holding IIVI. My rank is 20,627. Not a bad showing I think. It would have been nice to have had an AAPL or an AMZN in there for earnings surprise. I would be happy to have a top 10,000 finish, but I recognize that I've not put so much thought into my investments this past week given some maneuvering in my real portfolio.

Second: MarkM kindly suggests that I should not be too hard on myself for my bearish stance. I agree with him. The self-flagellation that I should be engaged in is my lack of patience with the unfolding.

Third: FMD: My dithering and then deciding managed to have a successful outcome. Sadly, I have to admit to being a bit of an ambulance chaser. What is hard is knowing when the stock is just bouncing a bit (and let's face it, a bounce of 5% or so is not a bad pop) on it's way down further or whether or not you are seeing a bona fide investor panic for no compelling reason. If it is the former, then your becoming enamored with your purchase can be deadly. If it is the latter, then you have a terrific opportunity. Due diligence--quick due diligence--is key; for if you are right, there will be a quick recovery. But we all know that the extent of recoveries is most accurately judged using a rear view mirror. So you have that dithering period between when you bought it/the subsequent recovery (you're trying to figure out if you have a dead feline on your hands) and the stock's catching its breath to either go north or south. I admit, this is the time where my firm conviction at purchase begins to wane, and I doubt myself. I felt that FMD fit the bill of an overdone investor panicked sell-off. So I have Sep40's bought with my gains on buying and flipping the stock. If the calls expire worthless, I'm more than even money on the entire transaction. I also did this with HERO. But I bought earlier dated calls, so I had to flip them quickly. But it was a profitable transaction. I subsequently re-entered my HERO position for a longer term holding (stock, not calls). They have earnings on Monday. I'm okay with weathering any downturn on that.

Now I don't recommend this strategy to any prudent investor. But I'm not comfortable being long this market, so this allows me to make some money (so long as it is successful) while waiting for the end of the world. This strategy has allowed me to make up for my least successful strategy which is to make a bet than "x" is going to happen (through puts) and "x" happens, just not in the time frame I expected. This has been a critical lesson for me to learn--but sadly, I'm a hard headed student and my lesson was more expensive than it should have been.

Look to your own activities where you may have been a hard headed student and see if you cannot get your tuition more cheaply!
The point of this is not to suggest any strategies to you (never take any advice from me!), but rather stress the importance of knowing your own weaknesses and strengths, and ensuring that you do not make investment decisions that do not play to those strengths.

Fourth: My Notebook: I enjoy the Barron's interviews done by Sandra Ward. For one's that I particularly like, I print them out. I was leafing through my notebook (after 3-hole punching my "Market Boom" paper) and found a July 24, 2006 interview with Dean LeBaron. Here are some of the points from that interview he states that he
  • likes bargains--no matter where they are-- he likes multiples of 2-3 x earnings or 3 x's cash; but admits that those are hard to find.
  • makes a map of the GDP of all of the countries to find opportunities.
  • is concerned that the USD is losing value and too many portfolios are in dollar denominated assets (Note that this was in July, where you weren't hearing a preponderance of this discussion).
  • is concerned that there is too much debt in potentially weak hands. Further, debt used to be based on repayment fundamentals, now much of it is based on refinancing fundamentals--therefore, debt may not be repaid.
  • thinks there are too many investment people and that "anything that is likely to be interesting is likely to be covered and well-covered, and not necessarily by intelligent people who are correctly motivated.
  • is mostly in cash/cash equivalents.
  • admits to being a gold bug; but he hopes that gold is the wrong investment, for if it is the right investment that means bad things for most other investments.


GemmaStar said...

Thanks for the recap of the significant points in Dean LeBaron's interview. I'd forgotten it.

I've been buying more ADRs. I look for good companies (mostly in Europe, I'll admit) and figure that not only will they do well on their fundamentals, but that I'll also enjoy the extra "pop" of a company with NON-dollar denominated earnings.

Of course, many international U.S. companies bring in their bacon from the overseas markets, which is another way to invest with this consideration in mind.

Anonymous said...

You are "bearishly" up 30% in your Fantasy Portfolio. Nice.


Max said...

"stress the importance of knowing your own weaknesses and strengths, and ensuring that you do not make investment decisions that do not play to those strengths."

i love this quote.

you've turned "Know Thyself" into a succinct investment mantra that works for *everyone* (investors, and traders alike)