Investing

Trading idea- Based on Graham (TSX)

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  • Nov 20th, 2017 6:10 pm
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xb0yHF wrote:
Nov 1st, 2017 2:27 pm
I’m following this model.

Can somebody please shed some light if we should buy more quantity if the stock (e.g. GIL) sees a drop like this and consider it a buying opportunity?
The model itself doesn't add more to an existing stock in red nor do partial sell to lock profit. Up to you if you want to i guess.
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xb0yHF wrote:
Nov 1st, 2017 2:27 pm
I’m following this model.

Can somebody please shed some light if we should buy more quantity if the stock (e.g. GIL) sees a drop like this and consider it a buying opportunity?
Presently, the model's intention is to have an equal weight distribution (up to 5% weight deviation). GIL is presently ranked at 92, which is decent if you want to add more. Need to wait until tomorrow to determine if today's decline affects the ranking.

I personally wait until Mondays to make any modifications.


Rod
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Dang, not looking good for ZCL :(
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SkimGuy wrote:
Nov 3rd, 2017 10:12 am
Dang, not looking good for ZCL :(
Like most growth stocks that misses estimates, they were harshly penalized. ZCL missed revenue and earnings, and announced that they won't meet their 10% compound annual revenue growth this year.

We'll see on Monday what the signals will be. GIL just dropped 3 points in the ranking to 89, so the model will not be selling anytime soon.


Rod
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1 - 2 - 3 punches for Nov... ZCL - SJ - GIL. Ouch ouch ouch
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I bought 450 shares of of ZCL @ 11.51 as a joke/gamble. Let's see how it goes since it was on value investing (Graham) thread when its price was $13+.

I've set the sell price at $12.00, it should net me ~$200 after commissions. No, this is not an attack on anyone, just some light hearted fun. I should set the sell price at around $11 so I don't lose too much at fun and games.

But seriously though, what's the deal with these guys, are they selling enough fiberglass stuff or not? Rodbarc?
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ksgill wrote:
Nov 3rd, 2017 9:00 pm
I bought 450 shares of of ZCL @ 11.51 as a joke/gamble. Let's see how it goes since it was on value investing (Graham) thread when its price was $13+.

I've set the sell price at $12.00, it should net me ~$200 after commissions, let's see how it goes. No, this is not an attack on anyone, just some light hearted fun. I should set the sell price at around $11 so I don't lose too much at fun and games.

But seriously though, what's the deal with these guys, are they selling enough fiberglass stuff or not? Rodbarc?
No idea. For short term investing using algorithmic trading models, I don't see these companies as partnership for the long term (like I do for my long term investing with dividends), but simply stocks or piece of papers to get in and out according to rules based on sound financial ideas - like Graham's principle of investing. This is a mechanical model that screens for stocks following Graham rules, and then these stocks are ranked by a mix of quality, value, growth and momentum, to determine the best probability of short term return. As an attempt to estimate future value, it uses market sentiment to drive those decisions. Not all stocks will be winners, and it should compensate for the losing ones and in the long run provide a decent return. But once in a while, it will find a stock that meets all the criteria, but the company posts disappointing results, which no one was expecting. While unfortunate, the diversification and consistency of the model should compensate for these shortfalls. Investing is a business, and like any business, losses are part of the game sometimes. "Every investor should be prepared financially and psychologically for the possibility of poor short-term results." - Benjamin Graham

Regarding ZCL, the stock today also had 3 times more volume than usual, which suggests that a series of stops might have been triggered and kept executing, which usually keeps driving price lower for smaller caps. They have been exceeding expectations, but since they posted lower results and lower guidance, the stock took a dive. Not the first, won't be the last. The reaction was extreme, so I wouldn't be surprised if it bounces back, hopefully this works out for you.

With events like these, it is paramount to stay on course, and that requires temperament. I find it a lot easier with an algorithmic model. Although SJ and ZCL had a big down day today, the portfolio was down 1.7% today, which is not a huge deal. Diversification on how the model / portfolio is constructed makes a big difference - and why I always suggest to not cherry pick a few companies only, but to buy all holdings as per model suggestion.


Rod
Everything about my Investing and automated Trading strategies to boost your income: https://boostyourincome.ca
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Ha! Well, hey it was a gamble! What's unclear to me is the value that these companies have.. They dropped 15%+... and possibly more. That doesn't make much sense. What good is the valuation model? Maybe ignore this question, I've caused enough ruckus.
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ksgill wrote:
Nov 3rd, 2017 10:08 pm
Ha! Well, hey it was a gamble! What's unclear to me is the value that these companies have.. They dropped 15%+... and possibly more. That doesn't make much sense. What good is the valuation model? Maybe ignore this question, I've caused enough ruckus.
No, that's actually a good question. One of the primary reasons why investors often make bad investment decisions is because their judgement is usually based only on price movement. Price movements alone can be very misleading. A rising stock price will often lure an investor to sleep creating a false sense of security where they believe that all is well. On the other hand, a falling stock price usually creates anxiety and sometimes leads to outright panic. These feelings can be rational as long as they are justified by sound fundamentals. Knowing the differences between rational and emotional reactions will make all the difference. Before the stock dropped 15%, there were a set of criteria that were evaluated to determine value.

First, active investors (factor-based) believe in the merits of stock selection and we come up with many different sets of detailed factor-based rules in an effort to point them toward issues with characteristics we believe it will be associated with superior risk-return characteristics. It's an approach that focus in the presence or absence of particular characteristics and/or on how a stock ranks for a characteristic on a best-top-worst scale.

Second, the intrinsic value of a business is driven by fundamentals and can be calculated within a reasonable degree of certainty. Once this calculation is made, sound investing decisions can be made and implemented. However, even if when we find value, not all stocks carry the same risks. It all comes to what kind of trader you want to be. Is your goal to limit the losses or to maximize the gains? You cannot have it both ways. Higher gains come with higher risk and inevitably will produce some big losers. This model is focused on higher total return, based on a combination of Graham's principle and a ranking combination of value, growth, momentum and quality. Another factor is that any business public or private, derives its value based on the underlying performance that the business generates. These value drivers include, but are not limited to, operating results such as earnings, cash flows, sales (revenues) and dividends. Common sense tells us that the true value of a large multinational business, or any business for that matter, cannot possibly change as quickly or as much as daily price quotations would indicate. So not only price cannot be predicted (operating performance can be estimated), but also, price can be affected by fear or greed.

"Value" in a stock is the attempt to identify its intrinsic value based on past, present and future. And that can only be used with the information present at the time. Although it's not perfect, it's a very decent sounding board to identify a business to invest on. It can be calculated. Potential return can be estimated with a reasonable degree with accuracy - not foolproof, but not random either. Zoom out a bit, and see how this strategy (or any value strategy) have been performing, and that might answer how good is the valuation model.

A valuation model attempts to capture market inefficiencies. There are ALWAYS going to be market inefficiencies. The Efficient Market Hypothesis disregards all the investors who are making short-term and long-term trades for reasons that have little to do with company performance. Thousands of traders are buying and selling based on minute movements in prices. Some investors are wildly overreacting to market news while others have decided to keep buying stock in a company no matter what happens. In other words, there’s nothing efficient about the market. To keep one step ahead, to find the inefficiencies and take advantage of them, it takes some work. But it's worth it. Using a platform and computing power that can process more information than most investors can gives you an edge, even though we have access to the same public information. Again, not foolproof on every transaction, but decent in the long run.

So we need to take valuation into account. It won't prevent those big drops, but it does build a margin of safety, much better than if we ignored valuation. So value investing or Graham method is not dead because of events like today. These are the exception.


Rod
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Fingers crossed, let's see what happens!
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November 5, 2017 signal:

SELL: SJ
BUY: TIH

Stats updated on the website.

It now features the status for the market timing indicator as well.


Rod
Everything about my Investing and automated Trading strategies to boost your income: https://boostyourincome.ca

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