Author Topic: Individual value stocks  (Read 8952 times)

Buffaloski Boris

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Individual value stocks
« on: September 02, 2019, 05:38:34 PM »
There have been a lot of topics of late on dividend stocks.  I figured it was time to start a topic on "value" stocks to share thoughts.   I've been buying value stocks as a supplement/ alternative to index funds.  I'm a buy and hold investor, although I'm not above selling a stock if I think it makes sense. Feel free to post any stocks you're thinking about or want to recommend.

To get it started, here's a stock I'm looking at right now.

US Steel (X) last close at $11.07
PE ratio :1.96
EPS $5.66
Yield: 1.81%

Given that the PE ratio for the S+P 500 is a little above 21, this stock is definitely on sale.  It may or may not be worth owning.  I'm curious as to what other value investors are doing and how they would look analyze such a stock?

(One of my personal investment rules is never to invest more than a very small set percentage of my stash on any one stock. So I'm not going to "sell the farm" to buy this or any other single stock.)

ctuser1

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Re: Individual value stocks
« Reply #1 on: September 02, 2019, 06:43:17 PM »
Micron Technology, Inc.
Symbol: MU

P/E Ratio: Somewhere around 3/4/5.
The exact number is not relevant since this is a cyclical industry where the memory prices go up and down in cycles. The prices were very high a year ago, and is in the dumps now. So the trailing P/E is very favorable.

Balance sheet is very strong. Leadership has solid technical background (CEO Sanjay Mehrotra basically built up SanDisk from the ground up and holds many patents). Hence the "defense" looks very strong for this stock and it is not in doubt that they will wither the current round of memory price downturn.

Offense/Bull-Thesis: X-Point.
The technology is not yet cost effective in it's current generation. Sometimes these types of revolutionary technologies never really come to market fruition. This one seemed very promising, however.
If this does come to fruition, then MU (along with Intel) will own the market. Speculatively, this should play out between now and the next three years.

I have been eyeing MU since the last 1 year. I have not bought any. I generally avoid buying individual stocks unless it has a very strong thesis, and then I buy with a 20-30 year horizon. For me to buy MU, the following needs to happen:
1. Sentiment to worsen further, possibly taking the MU prices down to $20's.
2. Some technical articles, whitepapers start come out indicating XPoint is close to mass-scale commercialization.

Once/if these happen, I will free up space in my roth by selling some index funds, and get into a small ($10-20k) position.

vand

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Re: Individual value stocks
« Reply #2 on: September 03, 2019, 04:02:30 AM »
Awesome. An Active Investments thread to annoy the indexers. I'm in.

Yep, been building my value/income portfolio from UK bluechips.

Current holdings:

VOD.L
AV.L
BLND.L
BARC.L added today

Most of these have seen a big fall in their share price over the last few years. They're all solid companies imo but going through a cyclical rough patch. Vodafone for example has had to invest heavily into 5G infrastructure, but this should begin to pay dividends (haha) over the next upswing.

Early days yet but the portfolio has handily beaten the FTSE so far.  I basically look to position myself for the next 10 years, and I think that at some point the market's preference for growth shares will turn around and value will being to outperform again.

At the moment I'm not really very interested in small cap value, at least not while I think there is plenty of value around in blue chips.
« Last Edit: September 03, 2019, 04:25:37 AM by vand »

ctuser1

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Re: Individual value stocks
« Reply #3 on: September 03, 2019, 06:20:21 AM »
Awesome. An Active Investments thread to annoy the indexers. I'm in.

Errrr... I’m not trying to annoy indexers.

I’m an indexer myself. Since 2014, all my new money has gone into indexes, mainly because it has been difficult to find value with so much run-up in the market!! :-(..

I’d still love to learn about ‘value stocks’ today in hopes of identifying the likes of AAPL in 2012, US railroads in 2000-2008 (I got in late, in 2010) etc.

Banks today, and *some* semi’s (e.g. MU and to some extent INTC) are in this category, but not to the extent the examples above were.

reeshau

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Re: Individual value stocks
« Reply #4 on: September 03, 2019, 06:28:52 AM »
Given that the PE ratio for the S+P 500 is a little above 21, this stock is definitely on sale.  It may or may not be worth owning.  I'm curious as to what other value investors are doing and how they would look analyze such a stock?

Well, the trailing P/E may be under 2, but the forward P/E, the earnings you will get if you buy in, is 20.89.  That's always a trick with cyclical investing: the short-term metrics are always skewed, in the way opposite of where the cycle is heading.

Given where we are, I would start with whether or not you think the company would survive the next recession.  Not going out of business, necessarily, but not going through Chapter 11 or a fire sale to someone else.  A lot of that answer depends on cash flow.  US Steel has reduced their debt quite a lot from recent years, but they didn't really return to profitability until 2017, which means they haven't had flexibility to invest in the business until then.  Their current ratio is 1.4, and they have some long-maturity debt, but I would want to think about their upcoming debt maturities, and how that would look in the face of a business downturn.

The interesting thing here is that this should be an industry which is a beneficiary of the current trend toward tariffs--since the last industry alarm bell was dumping by Chinese companies.  But with tariffs so pervasive, all countries are seeing a manufacturing slowdown, so even here it may not be good news, overall.

I don't think X is at a buy-of-a-lifetime level yet.  But part of the trick of value investing to me in putting in the time to know an industry; you can't wander in and be smarter than the market in a space.  Seeing how the players look, and how they have behaved since the last downturn, could let you recognize what stands out now.

Now, Nucor is at a 10 forward P/E, 6 trailing...same concern with debt, but it has been profitable throughout the last economic cycle, and their base process is proven more flexible than the integrated steel manufacturers.  That could tempt me.

Buffaloski Boris

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Re: Individual value stocks
« Reply #5 on: September 03, 2019, 03:06:07 PM »

Well, the trailing P/E may be under 2, but the forward P/E, the earnings you will get if you buy in, is 20.89.  That's always a trick with cyclical investing: the short-term metrics are always skewed, in the way opposite of where the cycle is heading.

Given where we are, I would start with whether or not you think the company would survive the next recession.  Not going out of business, necessarily, but not going through Chapter 11 or a fire sale to someone else.  A lot of that answer depends on cash flow.  US Steel has reduced their debt quite a lot from recent years, but they didn't really return to profitability until 2017, which means they haven't had flexibility to invest in the business until then.  Their current ratio is 1.4, and they have some long-maturity debt, but I would want to think about their upcoming debt maturities, and how that would look in the face of a business downturn.

The interesting thing here is that this should be an industry which is a beneficiary of the current trend toward tariffs--since the last industry alarm bell was dumping by Chinese companies.  But with tariffs so pervasive, all countries are seeing a manufacturing slowdown, so even here it may not be good news, overall.

I don't think X is at a buy-of-a-lifetime level yet.  But part of the trick of value investing to me in putting in the time to know an industry; you can't wander in and be smarter than the market in a space.  Seeing how the players look, and how they have behaved since the last downturn, could let you recognize what stands out now.

Now, Nucor is at a 10 forward P/E, 6 trailing...same concern with debt, but it has been profitable throughout the last economic cycle, and their base process is proven more flexible than the integrated steel manufacturers.  That could tempt me.
Some great points and I thank you for the insights and info on Nucor. I like this industry a lot so I think it would be worth following.
« Last Edit: September 03, 2019, 08:10:58 PM by Buffalo Chip »

vand

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Re: Individual value stocks
« Reply #6 on: September 04, 2019, 03:09:58 AM »
Awesome. An Active Investments thread to annoy the indexers. I'm in.

Errrr... I’m not trying to annoy indexers.

I’m an indexer myself. Since 2014, all my new money has gone into indexes, mainly because it has been difficult to find value with so much run-up in the market!! :-(..

I’d still love to learn about ‘value stocks’ today in hopes of identifying the likes of AAPL in 2012, US railroads in 2000-2008 (I got in late, in 2010) etc.

Banks today, and *some* semi’s (e.g. MU and to some extent INTC) are in this category, but not to the extent the examples above were.

So.. you're saying that because you can't find anything you consider value, you decided to give up and settle for something that even less value that what you have already looked at? Because if you can't find value in individual stocks you're sure as hell not going to find it in the market as a whole.

I'm just pointing out the internal inconsistency... there's nothing wrong with indexing, but recognise that what you're doing is choosing passive over active investing. If you're happy to accept whatever the market delivers then that's the right choice for you. Personally as an active investor I'm trying to do a bit better.

That people are so steadfeast in their belief in the superiority of passive investing as evidence on these forums and their like is actually great for me - it's what gives me and other active investors like me an edge.



ctuser1

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Re: Individual value stocks
« Reply #7 on: September 04, 2019, 06:38:40 AM »
So.. you're saying that because you can't find anything you consider value, you decided to give up and settle for something that even less value that what you have already looked at? Because if you can't find value in individual stocks you're sure as hell not going to find it in the market as a whole.

You are ignoring risk in what you said, and focused only on return part of the equation.

Alpha is great. Risk-adjusted-alpha is better.

Individual value stocks tend to give better alpha historically. The risk adjusted alpha of holding any "individual stock" not properly diversified is not great, however!!!

I invest in individual value stocks when there is a screaming buy of the lifetime (in my judgement) with sufficient margin of error to overcome the lack of diversification issue.

When I don't find such screaming buy's, I default to a passive indexing mode where the diversification, re-balancing (within the equity groups, as weights change) are done well and cheaply for me.

ctuser1

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Re: Individual value stocks
« Reply #8 on: September 04, 2019, 06:55:42 AM »

Just wanted to make one more point.

I don't know your background and don't intend to make judgements about it. Statistically, however, an astonishingly small percent of people who *think* they can consistently spot the market inefficiencies are actually capable of doing so.

I *have* picked individual stocks as my sole investment strategy for almost 7-8 years before putting indexing in the mix. The thing that turned me around was when I spent some time to build a program trading algo during my work at a hedge fund. All the "indicators" that I thought were obvious - in short and long term - turned out to not be exploitable if a sufficient number of other people are already exploiting it. i.e markets are adaptable. If there are too many investors who are after a specific source of inefficiency - individual returns will get very close to zero in no time.

After coding hard for a couple of years, and thinking harder for a little longer, I figured out that I was not really as much of a genius at spotting sources of inefficiency in time to exploit it as I was thinking myself to be. So, now I dance into individual stock territory *only* when it is sufficiently screaming of a value. :-)...

Car Jack

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Re: Individual value stocks
« Reply #9 on: September 04, 2019, 09:28:01 AM »
I don't actually know what a value stock is, but I also don't care.

With respect to US Steel, I'd hope that you already plan to sell well in advance of the next election because if our next president drops the steel tariffs, that stock is going in the toilet.

vand

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Re: Individual value stocks
« Reply #10 on: September 04, 2019, 10:31:44 AM »
@ctuser1 , I agree that risk-adjusted return is the standard which comparisons should be made. Believe me, I would love to discuss Sortino ratios all day.

I know what the research says about the performance of individual stock pickers.

My rebuttal is that the research is equally unflattering for passive investors. They generally underperform the indexes they are meant to be wedded to.

Passive, active, mixed or whatever, all the research shows that investors are still human and still prone to human emotional failing. They get too bullish at market tops and, perhaps more importantly, panic during market routs. This will never change. You can have the greatest investment vehicle in the world, but if you don't understand risk and where your uncle point is, there will almost certainly come a point where the pain of a decline is too great and you will abandon the strategy, crystalizing the risk and not being around to reap the reward that is usually just around the corner. I mean, everyone know that you buy more during a bear market, right? Everyone knows that? So why do so many do the opposite? It's not because they don't know what to do, it's because emotion overides intellect and they just want out.

I'm not so high and mighty to admit that I have made a lot of mistakes, lost a lot of money and missed out on a lot of opportunities as an active investor. But I learnt and am still learning, and I am a much better investor today than I was in the past.  As an active individual investor I am not wedded to any particular market or strategy. If I judge stocks to be better risk/reward then I can tilt towards stocks; otherwise I can play more defensively and tilt towards something like the Permanent Portfolio (which has done brilliantly past year). I can tilt towards precious metals, commodities, bonds, emerging markets, real estate, value, growth or cash as I see fit. Whatever the prevailing investing headwinds, there is a strategy out there that will be well suited to it.
« Last Edit: September 04, 2019, 10:36:32 AM by vand »

frugledoc

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Re: Individual value stocks
« Reply #11 on: September 04, 2019, 10:40:52 AM »
@ctuser1 , I agree that risk-adjusted return is the standard which comparisons should be made. Believe me, I would love to discuss Sortino ratios all day.

I know what the research says about the performance of individual stock pickers.

My rebuttal is that the research is equally unflattering for passive investors. They generally underperform the indexes they are meant to be wedded to.

Passive, active, mixed or whatever, all the research shows that investors are still human and still prone to human emotional failing. They get too bullish at market tops and, perhaps more importantly, panic during market routs. This will never change. You can have the greatest investment vehicle in the world, but if you don't understand risk and where your uncle point is, there will almost certainly come a point where the pain of a decline is too great and you will abandon the strategy, crystalizing the risk and not being around to reap the reward that is usually just around the corner. I mean, everyone know that you buy more during a bear market, right? Everyone knows that? So why do so many do the opposite? It's not because they don't know what to do, it's because emotion overides intellect and they just want out.

I'm not so high and mighty to admit that I have made a lot of mistakes, lost a lot of money and missed out on a lot of opportunities as an active investor. But I learnt and am still learning, and I am a much better investor today than I was in the past.  As an active individual investor I am not wedded to any particular market or strategy. If I judge stocks to be better risk/reward then I can tilt towards stocks; otherwise I can play more defensively and tilt towards something like the Permanent Portfolio (which has done brilliantly past year). I can tilt towards precious metals, commodities, bonds, emerging markets, real estate, value, growth or cash as I see fit. Whatever the prevailing investing headwinds, there is a strategy out there that will be well suited to it.

You are clearly a master investor.  Please stay around to guide us dumb indexers when the market crashes and we are all in a blind panic lol.
« Last Edit: September 04, 2019, 10:50:29 AM by frugledoc »

BeanCounter

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Re: Individual value stocks
« Reply #12 on: September 04, 2019, 11:09:49 AM »
posting to follow. I am interested in adding more individual value stocks to my portfolio because the total market index is slightly heavy in tech and I'm not sure I want all of that.

ctuser1

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Re: Individual value stocks
« Reply #13 on: September 04, 2019, 11:56:38 AM »
My current individual holdings (no new positions initiated since 2014, except for normal dividend reinvestment):

Winners:
AAPL (cost basis @66.16 during the 2012-2013 dip).
INTC (cost basis @$20. long time ago).
NSC (cost basis $66. long time ago).
BAC (not sure of the cost basis. forgot the login info of the account this is in).

Meh to losers:
WFC (cost basis @$49)
XOM (cost basis @91)
GSK (cost basis @$53).

Of these - WFC was a black swan event after I purchased.
GSK - sloppy research on my part. I was getting out of AZN and wanted to put in some pharma company. I clearly did not do good research back then. It's outlook has significantly improved since then, however. So I am not getting out.
XOM - Energy sector. What more  to say? I'll keep on holding as a contrarian bet.

They still constitute almost 50% of my portfolio despite no new investment since 2014:
1. winners ~45%. Yay, the joy of compounding.
2. losers ~5%. Meh!!

Irrespective of the winner/loser category - I am keeping on holding them for the foreseeable future with a 20+ year time horizon. I will dump them if the long term thesis has a clear change for the worse (a.l.a. GE).

« Last Edit: September 04, 2019, 12:02:46 PM by ctuser1 »

vand

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Re: Individual value stocks
« Reply #14 on: September 04, 2019, 12:29:02 PM »
@ctuser1 , I agree that risk-adjusted return is the standard which comparisons should be made. Believe me, I would love to discuss Sortino ratios all day.

I know what the research says about the performance of individual stock pickers.

My rebuttal is that the research is equally unflattering for passive investors. They generally underperform the indexes they are meant to be wedded to.

Passive, active, mixed or whatever, all the research shows that investors are still human and still prone to human emotional failing. They get too bullish at market tops and, perhaps more importantly, panic during market routs. This will never change. You can have the greatest investment vehicle in the world, but if you don't understand risk and where your uncle point is, there will almost certainly come a point where the pain of a decline is too great and you will abandon the strategy, crystalizing the risk and not being around to reap the reward that is usually just around the corner. I mean, everyone know that you buy more during a bear market, right? Everyone knows that? So why do so many do the opposite? It's not because they don't know what to do, it's because emotion overides intellect and they just want out.

I'm not so high and mighty to admit that I have made a lot of mistakes, lost a lot of money and missed out on a lot of opportunities as an active investor. But I learnt and am still learning, and I am a much better investor today than I was in the past.  As an active individual investor I am not wedded to any particular market or strategy. If I judge stocks to be better risk/reward then I can tilt towards stocks; otherwise I can play more defensively and tilt towards something like the Permanent Portfolio (which has done brilliantly past year). I can tilt towards precious metals, commodities, bonds, emerging markets, real estate, value, growth or cash as I see fit. Whatever the prevailing investing headwinds, there is a strategy out there that will be well suited to it.

You are clearly a master investor.  Please stay around to guide us dumb indexers when the market crashes and we are all in a blind panic lol.

If you weren't such a close-minded "My Way Is The Only Way" d1ck you might actually learn something and become a better investor yourself. 

Did you go away and do any research when I revived the PM thread?

Do you think you might be doing better if you had added some PMs to your portfolio when I was advocating to do so? Have you seen what silver & platinum have done since I said that I considered them the real undevalued plays?

I imagine not, as you're too wedded to your cookie cutter plan.

UnleashHell

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Re: Individual value stocks
« Reply #15 on: September 04, 2019, 12:43:07 PM »


If you weren't such a close-minded "My Way Is The Only Way" d1ck you might actually learn something and become a better investor yourself. 

Did you go away and do any research when I revived the PM thread?

Do you think you might be doing better if you had added some PMs to your portfolio when I was advocating to do so? Have you seen what silver & platinum have done since I said that I considered them the real undevalued plays?

I imagine not, as you're too wedded to your cookie cutter plan.

Forum rules:
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Sort yourself out.

frugledoc

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Re: Individual value stocks
« Reply #16 on: September 04, 2019, 01:23:21 PM »
@ctuser1 , I agree that risk-adjusted return is the standard which comparisons should be made. Believe me, I would love to discuss Sortino ratios all day.

I know what the research says about the performance of individual stock pickers.

My rebuttal is that the research is equally unflattering for passive investors. They generally underperform the indexes they are meant to be wedded to.

Passive, active, mixed or whatever, all the research shows that investors are still human and still prone to human emotional failing. They get too bullish at market tops and, perhaps more importantly, panic during market routs. This will never change. You can have the greatest investment vehicle in the world, but if you don't understand risk and where your uncle point is, there will almost certainly come a point where the pain of a decline is too great and you will abandon the strategy, crystalizing the risk and not being around to reap the reward that is usually just around the corner. I mean, everyone know that you buy more during a bear market, right? Everyone knows that? So why do so many do the opposite? It's not because they don't know what to do, it's because emotion overides intellect and they just want out.

I'm not so high and mighty to admit that I have made a lot of mistakes, lost a lot of money and missed out on a lot of opportunities as an active investor. But I learnt and am still learning, and I am a much better investor today than I was in the past.  As an active individual investor I am not wedded to any particular market or strategy. If I judge stocks to be better risk/reward then I can tilt towards stocks; otherwise I can play more defensively and tilt towards something like the Permanent Portfolio (which has done brilliantly past year). I can tilt towards precious metals, commodities, bonds, emerging markets, real estate, value, growth or cash as I see fit. Whatever the prevailing investing headwinds, there is a strategy out there that will be well suited to it.

You are clearly a master investor.  Please stay around to guide us dumb indexers when the market crashes and we are all in a blind panic lol.

If you weren't such a close-minded "My Way Is The Only Way" d1ck you might actually learn something and become a better investor yourself. 

Did you go away and do any research when I revived the PM thread?

Do you think you might be doing better if you had added some PMs to your portfolio when I was advocating to do so? Have you seen what silver & platinum have done since I said that I considered them the real undevalued plays?

I imagine not, as you're too wedded to your cookie cutter plan.

Oops, I seem to have upset you enough to induce insults :)

My way is not "my way" it's Jack Bogle's way and is backed up by a tonne of evidence.  At work I practice evidence based medicine and in investing I practice evidence based finance.

My cookie cutter plan is good enough.  I've been very lucky in life and my family is financially secure, so please don't be upset and call me a d1ck just because I'm confident that the indexers (who chose an appropriate asset allocation and stick to it through thick and thin) will outperform whatever strategy you are trying by a long shot over the long term.
« Last Edit: September 04, 2019, 01:25:38 PM by frugledoc »

vand

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Re: Individual value stocks
« Reply #17 on: September 04, 2019, 01:47:50 PM »
@ctuser1 , I agree that risk-adjusted return is the standard which comparisons should be made. Believe me, I would love to discuss Sortino ratios all day.

I know what the research says about the performance of individual stock pickers.

My rebuttal is that the research is equally unflattering for passive investors. They generally underperform the indexes they are meant to be wedded to.

Passive, active, mixed or whatever, all the research shows that investors are still human and still prone to human emotional failing. They get too bullish at market tops and, perhaps more importantly, panic during market routs. This will never change. You can have the greatest investment vehicle in the world, but if you don't understand risk and where your uncle point is, there will almost certainly come a point where the pain of a decline is too great and you will abandon the strategy, crystalizing the risk and not being around to reap the reward that is usually just around the corner. I mean, everyone know that you buy more during a bear market, right? Everyone knows that? So why do so many do the opposite? It's not because they don't know what to do, it's because emotion overides intellect and they just want out.

I'm not so high and mighty to admit that I have made a lot of mistakes, lost a lot of money and missed out on a lot of opportunities as an active investor. But I learnt and am still learning, and I am a much better investor today than I was in the past.  As an active individual investor I am not wedded to any particular market or strategy. If I judge stocks to be better risk/reward then I can tilt towards stocks; otherwise I can play more defensively and tilt towards something like the Permanent Portfolio (which has done brilliantly past year). I can tilt towards precious metals, commodities, bonds, emerging markets, real estate, value, growth or cash as I see fit. Whatever the prevailing investing headwinds, there is a strategy out there that will be well suited to it.

You are clearly a master investor.  Please stay around to guide us dumb indexers when the market crashes and we are all in a blind panic lol.

If you weren't such a close-minded "My Way Is The Only Way" d1ck you might actually learn something and become a better investor yourself. 

Did you go away and do any research when I revived the PM thread?

Do you think you might be doing better if you had added some PMs to your portfolio when I was advocating to do so? Have you seen what silver & platinum have done since I said that I considered them the real undevalued plays?

I imagine not, as you're too wedded to your cookie cutter plan.

Oops, I seem to have upset you enough to induce insults :)

My way is not "my way" it's Jack Bogle's way and is backed up by a tonne of evidence.  At work I practice evidence based medicine and in investing I practice evidence based finance.

My cookie cutter plan is good enough.  I've been very lucky in life and my family is financially secure, so please don't be upset and call me a d1ck just because I'm confident that the indexers (who chose an appropriate asset allocation and stick to it through thick and thin) will outperform whatever strategy you are trying by a long shot over the long term.

The only timeframe I'm concerned with is from today to the day I stop investing (death). I don't care about what stocks or any other market has done in the last 100 or 1000 years, but that doesn't mean I haven't studied market history and understood the economic forces which shaped markets as they did. I position myself based on my view of of how the economic forces acting in the world today will shape the markets going forward.

I'm glad youre financially secure. Your goals are different from my goals. You investing plan will not work for me and mine will not work for you. Please recognise that, and if you have nothing interesting to add to the topic being discussed, then maybe go find another thread to post in.

frugledoc

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Re: Individual value stocks
« Reply #18 on: September 04, 2019, 01:57:09 PM »
@ctuser1 , I agree that risk-adjusted return is the standard which comparisons should be made. Believe me, I would love to discuss Sortino ratios all day.

I know what the research says about the performance of individual stock pickers.

My rebuttal is that the research is equally unflattering for passive investors. They generally underperform the indexes they are meant to be wedded to.

Passive, active, mixed or whatever, all the research shows that investors are still human and still prone to human emotional failing. They get too bullish at market tops and, perhaps more importantly, panic during market routs. This will never change. You can have the greatest investment vehicle in the world, but if you don't understand risk and where your uncle point is, there will almost certainly come a point where the pain of a decline is too great and you will abandon the strategy, crystalizing the risk and not being around to reap the reward that is usually just around the corner. I mean, everyone know that you buy more during a bear market, right? Everyone knows that? So why do so many do the opposite? It's not because they don't know what to do, it's because emotion overides intellect and they just want out.

I'm not so high and mighty to admit that I have made a lot of mistakes, lost a lot of money and missed out on a lot of opportunities as an active investor. But I learnt and am still learning, and I am a much better investor today than I was in the past.  As an active individual investor I am not wedded to any particular market or strategy. If I judge stocks to be better risk/reward then I can tilt towards stocks; otherwise I can play more defensively and tilt towards something like the Permanent Portfolio (which has done brilliantly past year). I can tilt towards precious metals, commodities, bonds, emerging markets, real estate, value, growth or cash as I see fit. Whatever the prevailing investing headwinds, there is a strategy out there that will be well suited to it.

You are clearly a master investor.  Please stay around to guide us dumb indexers when the market crashes and we are all in a blind panic lol.

If you weren't such a close-minded "My Way Is The Only Way" d1ck you might actually learn something and become a better investor yourself. 

Did you go away and do any research when I revived the PM thread?

Do you think you might be doing better if you had added some PMs to your portfolio when I was advocating to do so? Have you seen what silver & platinum have done since I said that I considered them the real undevalued plays?

I imagine not, as you're too wedded to your cookie cutter plan.

Oops, I seem to have upset you enough to induce insults :)

My way is not "my way" it's Jack Bogle's way and is backed up by a tonne of evidence.  At work I practice evidence based medicine and in investing I practice evidence based finance.

My cookie cutter plan is good enough.  I've been very lucky in life and my family is financially secure, so please don't be upset and call me a d1ck just because I'm confident that the indexers (who chose an appropriate asset allocation and stick to it through thick and thin) will outperform whatever strategy you are trying by a long shot over the long term.

The only timeframe I'm concerned with is from today to the day I stop investing (death). I don't care about what stocks or any other market has done in the last 100 or 1000 years, but that doesn't mean I haven't studied market history and understood the economic forces which shaped markets as they did. I position myself based on my view of of how the economic forces acting in the world today will shape the markets going forward.

I'm glad youre financially secure. Your goals are different from my goals. You investing plan will not work for me and mine will not work for you. Please recognise that, and if you have nothing interesting to add to the topic being discussed, then maybe go find another thread to post in.

Actually, "my" investing plan will work very well for you, as it will for anybody who wants to passively invest.

If you have kids, your time frame is long after your death.


vand

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Re: Individual value stocks
« Reply #19 on: September 04, 2019, 03:39:31 PM »
@ctuser1 , I agree that risk-adjusted return is the standard which comparisons should be made. Believe me, I would love to discuss Sortino ratios all day.

I know what the research says about the performance of individual stock pickers.

My rebuttal is that the research is equally unflattering for passive investors. They generally underperform the indexes they are meant to be wedded to.

Passive, active, mixed or whatever, all the research shows that investors are still human and still prone to human emotional failing. They get too bullish at market tops and, perhaps more importantly, panic during market routs. This will never change. You can have the greatest investment vehicle in the world, but if you don't understand risk and where your uncle point is, there will almost certainly come a point where the pain of a decline is too great and you will abandon the strategy, crystalizing the risk and not being around to reap the reward that is usually just around the corner. I mean, everyone know that you buy more during a bear market, right? Everyone knows that? So why do so many do the opposite? It's not because they don't know what to do, it's because emotion overides intellect and they just want out.

I'm not so high and mighty to admit that I have made a lot of mistakes, lost a lot of money and missed out on a lot of opportunities as an active investor. But I learnt and am still learning, and I am a much better investor today than I was in the past.  As an active individual investor I am not wedded to any particular market or strategy. If I judge stocks to be better risk/reward then I can tilt towards stocks; otherwise I can play more defensively and tilt towards something like the Permanent Portfolio (which has done brilliantly past year). I can tilt towards precious metals, commodities, bonds, emerging markets, real estate, value, growth or cash as I see fit. Whatever the prevailing investing headwinds, there is a strategy out there that will be well suited to it.

You are clearly a master investor.  Please stay around to guide us dumb indexers when the market crashes and we are all in a blind panic lol.

If you weren't such a close-minded "My Way Is The Only Way" d1ck you might actually learn something and become a better investor yourself. 

Did you go away and do any research when I revived the PM thread?

Do you think you might be doing better if you had added some PMs to your portfolio when I was advocating to do so? Have you seen what silver & platinum have done since I said that I considered them the real undevalued plays?

I imagine not, as you're too wedded to your cookie cutter plan.

Oops, I seem to have upset you enough to induce insults :)

My way is not "my way" it's Jack Bogle's way and is backed up by a tonne of evidence.  At work I practice evidence based medicine and in investing I practice evidence based finance.

My cookie cutter plan is good enough.  I've been very lucky in life and my family is financially secure, so please don't be upset and call me a d1ck just because I'm confident that the indexers (who chose an appropriate asset allocation and stick to it through thick and thin) will outperform whatever strategy you are trying by a long shot over the long term.

The only timeframe I'm concerned with is from today to the day I stop investing (death). I don't care about what stocks or any other market has done in the last 100 or 1000 years, but that doesn't mean I haven't studied market history and understood the economic forces which shaped markets as they did. I position myself based on my view of of how the economic forces acting in the world today will shape the markets going forward.

I'm glad youre financially secure. Your goals are different from my goals. You investing plan will not work for me and mine will not work for you. Please recognise that, and if you have nothing interesting to add to the topic being discussed, then maybe go find another thread to post in.

Actually, "my" investing plan will work very well for you, as it will for anybody who wants to passively invest.

If you have kids, your time frame is long after your death.

In case it hasn't quite been made clear to you, I don't particularly care for passive investing or want to participate in it. Nothing could be more dull, and for me a big part of the challenge and fascination of investing is to fit the pieces together for yourself into a style that reflects your own values and personality.

My own investing timeframe ends at my death. I invest for my children today to give them a leg up in life, but when they come of age that estate passes to them and they will be responsible for its upkeep, at which point it's not mine to worry about any more.


frugledoc

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Re: Individual value stocks
« Reply #20 on: September 04, 2019, 04:05:50 PM »
@ctuser1 , I agree that risk-adjusted return is the standard which comparisons should be made. Believe me, I would love to discuss Sortino ratios all day.

I know what the research says about the performance of individual stock pickers.

My rebuttal is that the research is equally unflattering for passive investors. They generally underperform the indexes they are meant to be wedded to.

Passive, active, mixed or whatever, all the research shows that investors are still human and still prone to human emotional failing. They get too bullish at market tops and, perhaps more importantly, panic during market routs. This will never change. You can have the greatest investment vehicle in the world, but if you don't understand risk and where your uncle point is, there will almost certainly come a point where the pain of a decline is too great and you will abandon the strategy, crystalizing the risk and not being around to reap the reward that is usually just around the corner. I mean, everyone know that you buy more during a bear market, right? Everyone knows that? So why do so many do the opposite? It's not because they don't know what to do, it's because emotion overides intellect and they just want out.

I'm not so high and mighty to admit that I have made a lot of mistakes, lost a lot of money and missed out on a lot of opportunities as an active investor. But I learnt and am still learning, and I am a much better investor today than I was in the past.  As an active individual investor I am not wedded to any particular market or strategy. If I judge stocks to be better risk/reward then I can tilt towards stocks; otherwise I can play more defensively and tilt towards something like the Permanent Portfolio (which has done brilliantly past year). I can tilt towards precious metals, commodities, bonds, emerging markets, real estate, value, growth or cash as I see fit. Whatever the prevailing investing headwinds, there is a strategy out there that will be well suited to it.

You are clearly a master investor.  Please stay around to guide us dumb indexers when the market crashes and we are all in a blind panic lol.

If you weren't such a close-minded "My Way Is The Only Way" d1ck you might actually learn something and become a better investor yourself. 

Did you go away and do any research when I revived the PM thread?

Do you think you might be doing better if you had added some PMs to your portfolio when I was advocating to do so? Have you seen what silver & platinum have done since I said that I considered them the real undevalued plays?

I imagine not, as you're too wedded to your cookie cutter plan.

Oops, I seem to have upset you enough to induce insults :)

My way is not "my way" it's Jack Bogle's way and is backed up by a tonne of evidence.  At work I practice evidence based medicine and in investing I practice evidence based finance.

My cookie cutter plan is good enough.  I've been very lucky in life and my family is financially secure, so please don't be upset and call me a d1ck just because I'm confident that the indexers (who chose an appropriate asset allocation and stick to it through thick and thin) will outperform whatever strategy you are trying by a long shot over the long term.

The only timeframe I'm concerned with is from today to the day I stop investing (death). I don't care about what stocks or any other market has done in the last 100 or 1000 years, but that doesn't mean I haven't studied market history and understood the economic forces which shaped markets as they did. I position myself based on my view of of how the economic forces acting in the world today will shape the markets going forward.

I'm glad youre financially secure. Your goals are different from my goals. You investing plan will not work for me and mine will not work for you. Please recognise that, and if you have nothing interesting to add to the topic being discussed, then maybe go find another thread to post in.

Actually, "my" investing plan will work very well for you, as it will for anybody who wants to passively invest.

If you have kids, your time frame is long after your death.

In case it hasn't quite been made clear to you, I don't particularly care for passive investing or want to participate in it. Nothing could be more dull, and for me a big part of the challenge and fascination of investing is to fit the pieces together for yourself into a style that reflects your own values and personality.

My own investing timeframe ends at my death. I invest for my children today to give them a leg up in life, but when they come of age that estate passes to them and they will be responsible for its upkeep, at which point it's not mine to worry about any more.

Okay, if you want to invest for fun do it with a small part of your portfolio but it really shouldn’t be seen as a hobby. 


Telecaster

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Re: Individual value stocks
« Reply #21 on: September 04, 2019, 04:58:36 PM »
Given that the PE ratio for the S+P 500 is a little above 21, this stock is definitely on sale.  It may or may not be worth owning.  I'm curious as to what other value investors are doing and how they would look analyze such a stock?

You can't really look at it like that.   As a starting point, you want to look at how it compares to other, similar stocks in the same sector, as well as what that company's historical P/E range has been.   With a P/E that low, it means the stock has been beaten down hard.  So now you have to really do some research and find out if the bad news is justified, or if the low price is an over reaction.   That's the hard part because unless you are in the board room it is hard to know what the future prospects really are.  The market is saying "almost none."   But maybe the market is wrong.  A recent example is CBI.   It seemed to be unfairly beaten down, and had a very bright future.  But it turned out the price should have been beaten down even more.   That's the tough part about value investing. 

Buffaloski Boris

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Re: Individual value stocks
« Reply #22 on: September 04, 2019, 05:30:19 PM »
The problem with putting together one of these topics is that you’re more likely to attract folks who are interested in demonstrating their loyalty to an investment orthodoxy than they are at looking at something different. MMM himself has drawn the parallels to a cult.

Here’s a fun stock to discuss: MO. Thoughts?

vand

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Re: Individual value stocks
« Reply #23 on: September 04, 2019, 11:49:29 PM »
There are lots of stocks in the UK’s FTSE 100 which I think are great value and getting overlooked right now due to Brexit uncertainly and just preference for growth in general. These are all on low PEs and have some fat dividend yields. The whole index itself is yielding about 4%, which is the highest in recent times apart from the 09-11 period.

My shopping list includes
BATS.L
IMB.L
BT.A.L
RIO.L
BP.L
RDSB.L
LLOY.L

I'm pretty sure that the Banking is not going to go away, but European Banks have struggled ever since the financial crisis and in recent years have sold off. BARC and LLOY are trading at less than half tangible book value. Before the FC they were stock market darlings. Its not impossible to think they may one day recover back to those levels, but even a return to merely "normal" trading will deliver a good return.

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=SX7P&insttype=&freq=2&show=&time=13
« Last Edit: September 05, 2019, 03:50:30 AM by vand »

AdrianC

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Re: Individual value stocks
« Reply #24 on: September 05, 2019, 06:47:00 AM »
The problem with putting together one of these topics is that you’re more likely to attract folks who are interested in demonstrating their loyalty to an investment orthodoxy than they are at looking at something different. MMM himself has drawn the parallels to a cult.

Well, some of us have been down this road before.

What is your edge?
How can you do better than the thousands of professional investors, most of whom don't beat the index over the long term?
Do you have better data? Do you have better research?

You don't have to answer to your investors. That's a plus.
You're not forced to sell to meet redemptions.
You have what I call time arbitrage - you can wait it out...but that's no fun.


habanero

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Re: Individual value stocks
« Reply #25 on: September 05, 2019, 06:52:58 AM »
The problem with putting together one of these topics is that you’re more likely to attract folks who are interested in demonstrating their loyalty to an investment orthodoxy than they are at looking at something different. MMM himself has drawn the parallels to a cult.

Well, some of us have been down this road before.

What is your edge?
How can you do better than the thousands of professional investors, most of whom don't beat the index over the long term?
Do you have better data? Do you have better research?

You don't have to answer to your investors. That's a plus.
You're not forced to sell to meet redemptions.
You have what I call time arbitrage - you can wait it out...but that's no fun.

You also - at least in theory - have an advantage in managing a tiny amount of money. There are / migt be ideas that work on a small scale but not on a large scale - aka the reason why hedge fund performance generally declines as they grow.

vand

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Re: Individual value stocks
« Reply #26 on: September 05, 2019, 09:48:22 AM »
Another few edges the private investor has:

They can go to cash
They can use derivatives and hedge
They don't move the market
They are less restrictive in what they can buy

But the biggest one that has already been mentioned is their small size and their size and liquidity that comes with it. They can buy a microcap without shifting the market. That might even be the shares in their own employer if they can see with the own eyes that good things are happening there. Imagine a £20bn fund trying to buy a microcap £10m stock... it's not even going to move the needle for their bottom line, yet if they pull the trigger and hoover up the stock it's probably going to move it 10% or more. Imagine it costing you 10% each time you each time you want to enter or exit a position... even moving the stock price 1% is a big handicap for a fund, it's 1% off the bottom line.
« Last Edit: September 05, 2019, 09:50:08 AM by vand »

Buffaloski Boris

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Re: Individual value stocks
« Reply #27 on: September 05, 2019, 03:57:12 PM »
Well, some of us have been down this road before.

What is your edge?


Good question. I’m tempted to say: see me in 5 years and I’ll tell you how it worked out. But I’ll add a little more in addition to the excellent responses by VAND and HabaneroNorway.

- that actively managed funds don’t do as well as the indexes isn’t  much of a surprise given what the incentives are. Keep in mind that an active fund is not paid so much for performance as they are based on total assets under management.  If there is a great investment that is counterintuitive, it is maybe not in A fund managers interest to choose it, given that the strategy could result in investors pulling funds.  Individual investors are under no such constraints.

- I do think it is quite possible to obtain returns that are very satisfactory By investing in individual stocks.  I think this is done primarily by becoming very knowledgeable in certain markets sectors, investing in companies of interest, and by being willing to stick it out.

habanero

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Re: Individual value stocks
« Reply #28 on: September 06, 2019, 02:24:25 AM »
As an - not quite-to-the-point analogy:

Someone I know has an handsome sidegig on arbitraging stuff on our local Craigslist. The skills required are basically as follows:
- have encyclopedic knowledge of what a lot of stuff is worth
- spend a lot of time looking for stuff selling significantly below these prices
- like to haggle, deal and juggle a lot of buyers and sellers

The relevant point is that in this local market, there is a fixed amount of arbitrage to be made. There are only a certain number of items for sale, of which only some are priced enough below resell value to be of interest and are relatively easy to offload quickly. This is a close to risk-free strategy with a %-wise return on each trade that is extremely high, but the activity doesn't scale very well.

Of course, equity markets are nothing like Craigslist, but the point is still the same. It might be possible to hunt down bargains in rather obscure names that hardly anyone looks at in earnest or close to noone really cares about. It's viable on a small scale and a very high percentage of the market doesn't even bother looking as the liquidity is shit and the names cannot be traded in any meaningful scale.

In my own tiny single-name portfolio I have 2 names that, 1h30m after local market open hasn't traded yet. Another one I own has actually traded, but only in approx US$1700 so far. The bid/offer spread is  1%, in one of them it can be as high as 3-4%. The size on each side of the market is tiny.
« Last Edit: September 06, 2019, 03:19:09 AM by habaneroNorway »

AdrianC

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Re: Individual value stocks
« Reply #29 on: September 06, 2019, 05:58:06 AM »
But the biggest one that has already been mentioned is their small size and their size and liquidity that comes with it. They can buy a microcap without shifting the market.

Sure. Thinly followed microcaps is probably the best hunting ground for the individual investor. It's not easy. Micro cap investing is difficult and risky. It's not for me.

Panly

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Re: Individual value stocks
« Reply #30 on: September 06, 2019, 06:56:39 AM »

Capri holdings qualifies for me:
Good cash flows
Low valuation
A track record of excellent capital allocation.

Beaten down by trade war fears and worries about Versace.

Buffaloski Boris

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Re: Individual value stocks
« Reply #31 on: September 06, 2019, 10:16:29 AM »
Given that the PE ratio for the S+P 500 is a little above 21, this stock is definitely on sale.  It may or may not be worth owning.  I'm curious as to what other value investors are doing and how they would look analyze such a stock?

Well, the trailing P/E may be under 2, but the forward P/E, the earnings you will get if you buy in, is 20.89.  That's always a trick with cyclical investing: the short-term metrics are always skewed, in the way opposite of where the cycle is heading.

Given where we are, I would start with whether or not you think the company would survive the next recession.  Not going out of business, necessarily, but not going through Chapter 11 or a fire sale to someone else.  A lot of that answer depends on cash flow.  US Steel has reduced their debt quite a lot from recent years, but they didn't really return to profitability until 2017, which means they haven't had flexibility to invest in the business until then.  Their current ratio is 1.4, and they have some long-maturity debt, but I would want to think about their upcoming debt maturities, and how that would look in the face of a business downturn.

The interesting thing here is that this should be an industry which is a beneficiary of the current trend toward tariffs--since the last industry alarm bell was dumping by Chinese companies.  But with tariffs so pervasive, all countries are seeing a manufacturing slowdown, so even here it may not be good news, overall.

I don't think X is at a buy-of-a-lifetime level yet.  But part of the trick of value investing to me in putting in the time to know an industry; you can't wander in and be smarter than the market in a space.  Seeing how the players look, and how they have behaved since the last downturn, could let you recognize what stands out now.

Now, Nucor is at a 10 forward P/E, 6 trailing...same concern with debt, but it has been profitable throughout the last economic cycle, and their base process is proven more flexible than the integrated steel manufacturers.  That could tempt me.

I've been looking at Nucor and I'm sorely tempted.  What I've seen indicates that they are just a top notch company. One of their other competitors, STLD, looks to be a player as well.  Decisions, decisions.     

Buffaloski Boris

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Re: Individual value stocks
« Reply #32 on: September 06, 2019, 11:12:34 AM »

Capri holdings qualifies for me:
Good cash flows
Low valuation
A track record of excellent capital allocation.

Beaten down by trade war fears and worries about Versace.

Interesting.   Thanks for the post!   One thing about these forums: you learn about stuff you'd never even thought about.  Fashion? Never even crossed my mind. 

vand

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Re: Individual value stocks
« Reply #33 on: September 17, 2019, 04:13:15 AM »
Is the pendulum about to swing back to value?

https://www.barrons.com/articles/value-stocks-momentum-growth-economic-expansion-correlations-russell-1000-51568663103

"Value has outperformed momentum by 9 percentage points in September. That is the widest divergence in performance between the two factors (or stock attributes) since 2010"

chasesfish

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Re: Individual value stocks
« Reply #34 on: September 17, 2019, 10:27:18 AM »
Posting to Follow.

Playing around in Value Stocks, Financials, and Treasuries in this market.  Currently on the treasury bandwagon with the recent move up.

Bernard

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Re: Individual value stocks
« Reply #35 on: September 17, 2019, 04:12:11 PM »
I own a lot of winners (AMZN, COST, NFLX, MA) and I own equally many losers (DDD, PII, TCS) which I slowly dispose of once they have their day in the sun. Luckily, due to Amazon, which I bought at $300, I'm still way ahead in the sum total. But I have turned my back to individual stocks and am only doing index fund investing now.
With one single exception: ROKU.

When I dumped DirecTv and bought two Roku boxes for $49.90 from Amazon to fill the void about a year ago, I knew immediately I have a winner. I bought ROKU at $42 or $47 (to lazy to look it up, and it went over $170 already. There's a good chance that ROKU will follow Netflix into the super-bagger territory in a few years' time. I'll let you know when it hits $350, okay?

vand

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Re: Individual value stocks
« Reply #36 on: September 23, 2019, 02:09:43 AM »
There are lots of stocks in the UK’s FTSE 100 which I think are great value and getting overlooked right now due to Brexit uncertainly and just preference for growth in general. These are all on low PEs and have some fat dividend yields. The whole index itself is yielding about 4%, which is the highest in recent times apart from the 09-11 period.

My shopping list includes
BATS.L
IMB.L
BT.A.L
RIO.L
BP.L
RDSB.L
LLOY.L

I'm pretty sure that the Banking is not going to go away, but European Banks have struggled ever since the financial crisis and in recent years have sold off. BARC and LLOY are trading at less than half tangible book value. Before the FC they were stock market darlings. Its not impossible to think they may one day recover back to those levels, but even a return to merely "normal" trading will deliver a good return.

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=SX7P&insttype=&freq=2&show=&time=13

There is an unprecedented divergence between Value and Growth right now in developed markets, especially as mentioned in UK stocks.

However, interestingly value has still been much the better performing in EMs and Asia.

https://www.moneymarketing.co.uk/investment-uncovered-historic-levels-of-divergence-exist/

« Last Edit: September 23, 2019, 02:13:29 AM by vand »

chasesfish

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Re: Individual value stocks
« Reply #37 on: September 23, 2019, 03:44:08 AM »
Posting a follow up - What do you think about EM in general?  Heard one of my favorite investors Howard Marks bring it up in a recent interview, specifically because its underperformed for over 10 years.

Emerging Markets PE is under 13 if you were to buy VWO.  S&P is over 20.  Its also the one space I would debate paying a little more for active management

vand

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Re: Individual value stocks
« Reply #38 on: September 23, 2019, 03:53:21 AM »
Posting a follow up - What do you think about EM in general?  Heard one of my favorite investors Howard Marks bring it up in a recent interview, specifically because its underperformed for over 10 years.

Emerging Markets PE is under 13 if you were to buy VWO.  S&P is over 20.  Its also the one space I would debate paying a little more for active management

Yep, I like EMs are both a value and cyclical play... I think there's a good chance they'll outperform in the next cycle and therefore probably a good idea to have some exposure. But they are incredibly volatile too.

Long term they have returned similar to S&P500, but have a very pronounced negative correlation to the strength of the USD, makes them a good diversifier to developed markets.

More discussion here:
https://forum.mrmoneymustache.com/investor-alley/emerging-markets-both-return-enhancing-and-risk-reducing/



« Last Edit: September 23, 2019, 04:08:52 AM by vand »

ctuser1

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Re: Individual value stocks
« Reply #39 on: September 23, 2019, 05:41:37 AM »
Posting a follow up - What do you think about EM in general?  Heard one of my favorite investors Howard Marks bring it up in a recent interview, specifically because its underperformed for over 10 years.

Emerging Markets PE is under 13 if you were to buy VWO.  S&P is over 20.  Its also the one space I would debate paying a little more for active management

A topic of keen interest to me. I spend several years chasing, studying the Indian markets. Other large EM markets would have their own characteristics, but some common themes may rhyme.

BSE Sensex followed similar pattern to SP500. Search "INDEXBOM: SENSEX" in google finance and you will see:
1. Crash of 2000, 50% - 5200 -> 2600.
2. Crash 2008, 60% - 20000+ to 8700.
3. Recovery has been similar. It stands at 36000+ today.
4. The volatility seems higher than SP500.

Indian economy has grown much faster than the US economy in the interim, but the BSE SENSEX has only grown alongside SP500. Ever wonder why?

Well, my pet theory is that the market is not as efficient as the US market:
1. There are many insider trading and price fixing scandals (https://groww.in/blog/famous-scams-indian-stock-markets/) that are caught, and probably many more that are not!!
2. The "promoters" (i.e. the stock market fat-cats) skim off too much of the return for themselves.
3. It is conventional wisdom (i.e. nice way to say it is not backed by rigorous research) in the indian market that active investing tends to beat passive investing simply because the active managers can avoid the large, partially government owned enterprises from India's past.

So, I became concerned at the inefficiency of the market instruments available to retail investors and started looking at individual companies. On this, I zeroed in on the Tata group of companies. Yes, the same gang that:
1. swarms all IT shops with cheap indian engineers. (NSE: TCS)
2. Owns Jaguar and Land Rover and was famously trying to make the Tata Nano the new Model T for the emerging markets. (NYSE: TTM)
3. Owns Corus steel (NSE: TATASTEEL)

My interest in the Tata group was part value stock chasing, and part ethics driven. Tata Sons (the group company) is majority owned by very well-run charitable entities. These entities are known for running some of the top schools, universities and educational institutes in India that make measurable impact in the "teach someone to fish" fashion. TIFR, TERI etc bear their names. There are many others where they donated vast sums and are premier institutes of education of India today.

I'm also impressed that they don't waste money building temples and mosques and churches (something I consider wasteful) or focus solely on "give someone fish" brand of charity.

For every $1 in profit that TCS software engineers bring home - > $0.50 go towards one of those well run charitable trusts.

This is not to say Tata group never made ethical mis-steps. The group companies are independent and they have sometimes done egregious things. They famously helped the British empire trade opium in China back in the 18th century  - causing a lot of human misery. In general, however, tata group is known for their sense of ethics.

So, armed with the hundreds of hours of research long time ago (before 2007) I did loads of paperwork to trade some of the individual stocks in the Indian market and made some ho-hum returns (nothing better than simply investing in SP500).

Since about 2009, I have not done it any more. What's the point of chasing a market that is anyway correlated with SP500, gives similar returns and is a huge paperwork headache!! You complain about paperwork in US banks, try dealing with Indian government paperwork to prove you are not doing money laundering!!

You could do various India ETF's that are out there. But then again - they are likely similarly correlated to SP500 and return similar.

I don't know much about any other markets, so can't comment. China seems scary to venture into. Didn't do a lot of reading up on Brazil (perhaps someone else familiar can comment). Other markets are way too small to spend so much time researching.

That leaves the good ol SP500 for me. I'm happy with it!!

Buffaloski Boris

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Re: Individual value stocks
« Reply #40 on: September 23, 2019, 03:43:09 PM »
Posting a follow up - What do you think about EM in general?  Heard one of my favorite investors Howard Marks bring it up in a recent interview, specifically because its underperformed for over 10 years.

Emerging Markets PE is under 13 if you were to buy VWO.  S&P is over 20.  Its also the one space I would debate paying a little more for active management

Why even go EM? There are a lot of developed stock markets that have low PE ratios compared to the US.

bacchi

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Re: Individual value stocks
« Reply #41 on: September 23, 2019, 04:00:41 PM »
Posting a follow up - What do you think about EM in general?  Heard one of my favorite investors Howard Marks bring it up in a recent interview, specifically because its underperformed for over 10 years.

Emerging Markets PE is under 13 if you were to buy VWO.  S&P is over 20.  Its also the one space I would debate paying a little more for active management

Why even go EM? There are a lot of developed stock markets that have low PE ratios compared to the US.

https://www.starcapital.de/en/research/stock-market-valuation/

ctuser1

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Re: Individual value stocks
« Reply #42 on: September 23, 2019, 08:33:31 PM »
Why even go EM? There are a lot of developed stock markets that have low PE ratios compared to the US.

Developed markets outside US scare me!!

I've looked at Europe and South Korea to be more specific. There are simply too many macro headwinds for both. It's possible I am just a supremely poor stock picker - but I have always been burned whenever I have dabbled into them. AZN and Samsung both seemed like good value to me - but turned out to be major value traps. And they are not the only ones!!

I still smart from thinking that I paid Fidelity a few hundred $$ (something like $300 or so, if I remember correctly) in commissions to trade Samsung in the Korean market!!

The one EM I dabbled in (India) treated me wayyy better. I just disliked the additional volatility compared to SP500, the high correlation, and the paperwork!!

Maybe Australia is better. Their demographics and other macro indicators certainly seem to be a lot better!! I have never happened to dabble in it - so I wouldn't know.

vand

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Re: Individual value stocks
« Reply #43 on: September 24, 2019, 02:08:53 AM »
Posting a follow up - What do you think about EM in general?  Heard one of my favorite investors Howard Marks bring it up in a recent interview, specifically because its underperformed for over 10 years.

Emerging Markets PE is under 13 if you were to buy VWO.  S&P is over 20.  Its also the one space I would debate paying a little more for active management

Why even go EM? There are a lot of developed stock markets that have low PE ratios compared to the US.

In a word: Diversification.
Yes there are other developed markets cheaper than the US, but they are also much more correlated. EMs offer something different in this regard:



and we know that if you take two equally performing but uncorrelated asset classes, you can reduce your risk/enhance your return by blending them and (optionally) rebalancing.

Given the data table above...  for the risk-defying thrill-seeking return chasers which tend to permeate these CAGR level discussions, the logical thing would be to put as *much* as you can into EMs and them temper them with a sliver of US equities in order to "smooth out the ride" ;-o
« Last Edit: September 24, 2019, 02:21:11 AM by vand »

ctuser1

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Re: Individual value stocks
« Reply #44 on: September 24, 2019, 05:02:46 AM »
and we know that if you take two equally performing but uncorrelated asset classes

"uncorrelated" is no longer what it used to be!!!

A whitepaper describing massive rise in all risk-asset correlation in 21st century:
https://pdfs.semanticscholar.org/15d0/3022164c5038d44378147a2c0cf668a4daa1.pdf

There are massive amounts of research on this topic.

Correlations have been rising for some time, at least since 2000. The culprit is supposed to be the ever tighter global trade and supply chain integration. However, since 2008 crisis it seems to have increased particularly steeply, probably because investors have clued on the fact that there is no rock to hide under from contagion effect.

Uncorrelated moves in 1980's and 1990's no longer represent the present-day expectations!! Past performance may not predict future returns etc. etc. etc.

Buffaloski Boris

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Re: Individual value stocks
« Reply #45 on: September 24, 2019, 05:34:21 AM »
Why even go EM? There are a lot of developed stock markets that have low PE ratios compared to the US.

Developed markets outside US scare me!!

I've looked at Europe and South Korea to be more specific. There are simply too many macro headwinds for both. It's possible I am just a supremely poor stock picker - but I have always been burned whenever I have dabbled into them. AZN and Samsung both seemed like good value to me - but turned out to be major value traps. And they are not the only ones!!

I still smart from thinking that I paid Fidelity a few hundred $$ (something like $300 or so, if I remember correctly) in commissions to trade Samsung in the Korean market!!

The one EM I dabbled in (India) treated me wayyy better. I just disliked the additional volatility compared to SP500, the high correlation, and the paperwork!!

Maybe Australia is better. Their demographics and other macro indicators certainly seem to be a lot better!! I have never happened to dabble in it - so I wouldn't know.

There are low cost, index ETFs out there that invest in specific countries.

 I’m not a fan of index funds (big surprise there, huh?), but my skepticism is more for the large cap index funds in the US. I think index funds are a good tool for international where the transaction costs are high.

Scandium

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Re: Individual value stocks
« Reply #46 on: September 24, 2019, 08:26:05 AM »
Posting a follow up - What do you think about EM in general?  Heard one of my favorite investors Howard Marks bring it up in a recent interview, specifically because its underperformed for over 10 years.

Emerging Markets PE is under 13 if you were to buy VWO.  S&P is over 20.  Its also the one space I would debate paying a little more for active management

Why even go EM? There are a lot of developed stock markets that have low PE ratios compared to the US.

https://www.starcapital.de/en/research/stock-market-valuation/

Wow, Russia: P/E = 5.5. Argentina 5.9!
Sign me up!

vand

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Re: Individual value stocks
« Reply #47 on: September 24, 2019, 08:52:38 AM »
Posting a follow up - What do you think about EM in general?  Heard one of my favorite investors Howard Marks bring it up in a recent interview, specifically because its underperformed for over 10 years.

Emerging Markets PE is under 13 if you were to buy VWO.  S&P is over 20.  Its also the one space I would debate paying a little more for active management

Why even go EM? There are a lot of developed stock markets that have low PE ratios compared to the US.

https://www.starcapital.de/en/research/stock-market-valuation/

Wow, Russia: P/E = 5.5. Argentina 5.9!
Sign me up!

Why bother with stocks? Interest rates in Argentina are 60% so just buy bonds.

Of course, their peso is devaluing by at least that amount...

vand

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Re: Individual value stocks
« Reply #48 on: September 24, 2019, 09:05:04 AM »
and we know that if you take two equally performing but uncorrelated asset classes

"uncorrelated" is no longer what it used to be!!!

A whitepaper describing massive rise in all risk-asset correlation in 21st century:
https://pdfs.semanticscholar.org/15d0/3022164c5038d44378147a2c0cf668a4daa1.pdf

There are massive amounts of research on this topic.

Correlations have been rising for some time, at least since 2000. The culprit is supposed to be the ever tighter global trade and supply chain integration. However, since 2008 crisis it seems to have increased particularly steeply, probably because investors have clued on the fact that there is no rock to hide under from contagion effect.

Uncorrelated moves in 1980's and 1990's no longer represent the present-day expectations!! Past performance may not predict future returns etc. etc. etc.

You are correct that equity markets are much more correlated than they used to be. In particular, Asian markets which used to be somewhat negatively correlated with the S&P now tends to move in lock step, such is the world.

There are probably several reasons for this. One is probably the increase in HFT and big-data algorithms. Another is the continual progression of the bond market; as the world is increasingly flooded with cheap money it makes sense that risk-assets should be increasingly influenced by this force. And another is probably the increasing influence of indexing and global ETFs...

My response to this is: diversify even more beyond the traditional stocks/bond portfolio and look into other asset classes. Consider gaining exposure to real-estate/REITs, commodities, precious metals, cash, forex, as well as specialist investments (just as an example, I have been pondering investing in bonded whiskey casks).  As ever though, you should only ever invest in what you have a good understanding of (although that said I would argue few people have a very good grasp of even stocks & bonds).
« Last Edit: September 24, 2019, 09:16:22 AM by vand »

ctuser1

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Re: Individual value stocks
« Reply #49 on: September 24, 2019, 10:33:05 AM »
...REITs...cash, forex, as well as specialist investments (just as an example, I have been pondering investing in bonded whiskey casks).  As ever though, you should only ever invest in what you have a good understanding of (although that said I would argue few people have a very good grasp of even stocks & bonds).
REIT/Cash/Bonds/some FX etc are all good candidates for the "fixed" or "semi fixed" portion of your portfolio.
If you have a hobby and deep knowledge on some niche area (e.g. whiskey casks) that you can monetize, that can be great as well.

I'm indeed working on building up to a 20% cash cushion right now (only at 5% right now), so that I can buy up in the next recession.
I need to think of some bonds/FX at some point of time - definitely before retiring.
REIT - well - I'll have to think about it. Not sure exactly what purpose they serve. But I can't think of anything intrinsically negative about them either!!

Consider gaining exposure to real-estate/..., commodities, precious metals, ....
1. Commodities and precious metals have zero intrinsic value.
2. RE has intrinsic value (NPV of rent) - but the prices are wildly off-kilter from the intrinsic value almost anywhere you want to buy. + appreciation of intrinsic value is abysmal in RE, no "real return" in intrinsic value whatsoever as rent just keeps up with inflation.

#1 has price discovery solely by second order effects like demand supply mismatch with complex underlying drivers. Second order functions, by their very intrinsic mathematical nature, are much more volatile and difficult to predict. If there were ever any true Markov Chain random walk - commodity/gold prices are it!!

I fail to see how that benefits the "risk adjusted return" of my portfolio in any form or fashion. I stay off them for the same reason I don't go and play the slot machine as an "investment" - I have zero ability to predict their movement or trend, and have not found anyone with a consistent ability to do so!!

#2 just increases with inflation. No real return there. You make money on leverage. Given the counter-productively socialist housing policies in the US in the form of government subsidized leverage (couldn't we ever figure out the right areas in the economy to be socialist about!!! housing "Loans"!! Student "Loans"!! WTF!!) - it is usually profitable if you can put in the work.
Too much work, though! I have my hands full with work on the one house I live in!!

« Last Edit: September 24, 2019, 10:39:17 AM by ctuser1 »