Timothy Clontz
07-21-2012, 11:03 PM
Small Portfolio XLF & IAU 6.75%
Position Date Return Days
CSGS 10/3/2011 40.19% 292
NLY 10/25/2011 14.90% 270
KBR 10/27/2011 -19.10% 268
VG 10/27/2011 -42.86% 268
BT 1/4/2012 12.47% 199
SAI 5/30/2012 1.37% 52
XEC 6/5/2012 13.63% 46
DECK 6/15/2012 -2.75% 36
CVX 7/5/2012 1.70% 16
RIMM 7/16/2012 -6.48% 5
S&P Annualized 1.14%
Small Portfolio Annualized 5.91%
Large Portfolio Annualized 8.09%
From http://market-mousetrap.blogspot.com/2012/07/07212012-waiting-out-stupidity.html
As expected, RIMM is struggling out the gate. Would love to find a way to avoid that kind of thing, but there is a reason that Value Stocks are cheap: no one in their right mind would want them!
Of course, whenever I use my “right mind” I lose money.
The problem is that our minds tend to work faster than the businesses we try to invest in. We think in terms of days and weeks, while businesses operate in quarters and years. We see a good earnings report and a low current P/E and we want to invest in the company.
But a “Value Stock” is the exact opposite. The usual mark of a value stock is an earnings failure.
In fact… a few earnings failures. After a couple of them we start expecting that trend to continue.
And then, the trend doesn’t continue. We get a positive earnings surprise. And that darling growth stock with astronomical earnings does the opposite with a surprise earnings failure.
After a while the growth stock becomes a value stock and the value stock becomes a growth stock, and the whole cycle continues.
Value Stocks are cheap because no one wants them. They have bad prospects for the future, and things are horrible now. But the present slowly fades away and new earnings reports come.
The optimal holding period for my own model is currently 154 days (i.e. one to two earnings reports in the future). With ten stocks that leaves me rotating about once every two weeks.
The next scheduled rotation is August 2nd. Until then, there’s nothing to do but wait. I have to force myself to wait, because my “right mind” gets bored waiting for the next few earning periods to bail me out of stupid stocks like RIMM.
Tim
PS… here are some articles about how our brilliant minds goof us up when we try to invest…
http://www.sciencedaily.com/releases/2012/07/120706184351.htm
http://www.ritholtz.com/blog/top-10-investor-errors/
http://www.fool.com/investing/general/2012/07/10/histories-of-things-that-never-happened.aspx
Position Date Return Days
CSGS 10/3/2011 40.19% 292
NLY 10/25/2011 14.90% 270
KBR 10/27/2011 -19.10% 268
VG 10/27/2011 -42.86% 268
BT 1/4/2012 12.47% 199
SAI 5/30/2012 1.37% 52
XEC 6/5/2012 13.63% 46
DECK 6/15/2012 -2.75% 36
CVX 7/5/2012 1.70% 16
RIMM 7/16/2012 -6.48% 5
S&P Annualized 1.14%
Small Portfolio Annualized 5.91%
Large Portfolio Annualized 8.09%
From http://market-mousetrap.blogspot.com/2012/07/07212012-waiting-out-stupidity.html
As expected, RIMM is struggling out the gate. Would love to find a way to avoid that kind of thing, but there is a reason that Value Stocks are cheap: no one in their right mind would want them!
Of course, whenever I use my “right mind” I lose money.
The problem is that our minds tend to work faster than the businesses we try to invest in. We think in terms of days and weeks, while businesses operate in quarters and years. We see a good earnings report and a low current P/E and we want to invest in the company.
But a “Value Stock” is the exact opposite. The usual mark of a value stock is an earnings failure.
In fact… a few earnings failures. After a couple of them we start expecting that trend to continue.
And then, the trend doesn’t continue. We get a positive earnings surprise. And that darling growth stock with astronomical earnings does the opposite with a surprise earnings failure.
After a while the growth stock becomes a value stock and the value stock becomes a growth stock, and the whole cycle continues.
Value Stocks are cheap because no one wants them. They have bad prospects for the future, and things are horrible now. But the present slowly fades away and new earnings reports come.
The optimal holding period for my own model is currently 154 days (i.e. one to two earnings reports in the future). With ten stocks that leaves me rotating about once every two weeks.
The next scheduled rotation is August 2nd. Until then, there’s nothing to do but wait. I have to force myself to wait, because my “right mind” gets bored waiting for the next few earning periods to bail me out of stupid stocks like RIMM.
Tim
PS… here are some articles about how our brilliant minds goof us up when we try to invest…
http://www.sciencedaily.com/releases/2012/07/120706184351.htm
http://www.ritholtz.com/blog/top-10-investor-errors/
http://www.fool.com/investing/general/2012/07/10/histories-of-things-that-never-happened.aspx