Author Topic: The bargain thread  (Read 3706 times)

Seppia

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The bargain thread
« on: July 27, 2015, 10:59:50 AM »
Hello
I am very new here, but my impression is that most of the users follow the rule of selecting an asset allocation and sticking to it.
This is obviously a very smart choice, but it has the downside of being a little boring.
I have found that what works best for me is to have the vast majority of my investments to be on auto pilot as well, but I regularly put aside a small portion of my savings in cash for what I call "opportunistic" investments.
It is fun, and if the trading is not speculative I think sometimes the returns can be good.
Maybe a way to add a little more risk, but keeping it safe by doing this on a small percentage of the monies.
I still maintain a buy and hold approach, so opportunities almost always arise for me when prices are unusually low, as I hate to sell (I probably sold stocks/funds around 5 times total in the last 10 years).

If any of you do something similar, we could use this thread to post recommendations on what we consider to be "bargains".

I'll start by recommending vanguard's energy sector fund (VGENX), also available as an ETF (VDE).
Reasons why I recommend (I bought VGENX, but I would assume the below are all valid for VDE as well):

1- aside from a brief period between November 2008 and April 2009, it has never been as low as today in the last 10 years.
2- in spite of the recent price drop, and in spite of some suggesting it could drop even further, I don't think oil has suddenly and forever become an unprofitable business to be in (assuming you have a long term horizon)
3- U.S. Stocks in general are high so I see this as one of the few opportunities to "buy low" in today's market.

Sorry if there's already a similar thread, if that's the case I can just copy/paste this there and the mods can delete this one.
« Last Edit: July 27, 2015, 11:02:36 AM by Seppia »

leostrauss

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Re: The bargain thread
« Reply #1 on: July 27, 2015, 11:12:06 AM »
Most people here think that market timing or sector rotation is futile. Yet blindly buying index funds would have meant buying lot's of Pets.com in 2000 and a lot of Bear Sterns in 2007. Common sense dictates one should be at least a bit tilted towards commodities producers at this point. I wouldn't go all in with oil producers but I would (I am) buying dividend yielding oil producers etfs.

forummm

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Re: The bargain thread
« Reply #2 on: July 27, 2015, 11:17:54 AM »
The obligatory caveats :) Let's assume you find any research you do to support this entertaining--so the time cost is $0. In general, the transaction costs and capital gains taxes will eat away any financial gains you get. With ETFs you limit the transactions costs (to almost $0 if you use free trading--just the bid/ask spread is lost). But you still have taxes if you're doing this outside an IRA-like account. Just things to think about.

Good luck with your ideas. I hope you get crazy rich and/or have lots of fun!

Seppia

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Re: The bargain thread
« Reply #3 on: July 27, 2015, 11:34:44 AM »

The obligatory caveats :) Let's assume you find any research you do to support this entertaining--so the time cost is $0. In general, the transaction costs and capital gains taxes will eat away any financial gains you get. With ETFs you limit the transactions costs (to almost $0 if you use free trading--just the bid/ask spread is lost). But you still have taxes if you're doing this outside an IRA-like account. Just things to think about.

Good luck with your ideas. I hope you get crazy rich and/or have lots of fun!

I am not yet a pro in US investing, because I have only lived here 5 years, but I guess that once I have maxed out my 401k and Roth I have no more options to invest tax free correct?

Regarding the capital gains: no I usually don't sell, I just try to buy low (and hold). As I was mentioning I have sold a grand total of about 5 times in 10 years of investing :)

The research might cost me time, but it's something I have fun doing so I don't see it as an issue

Transaction costs are zero for vanguard funds, and even if buying single stocks they can be relatively insignificant assuming you actually are buying low

Seppia

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The bargain thread
« Reply #4 on: July 27, 2015, 11:40:26 AM »
Common sense dictates one should be at least a bit tilted towards commodities producers at this point. I wouldn't go all in with oil producers but I would (I am) buying dividend yielding oil producers etfs.

While I am a strong believer in the fact that on average you cannot beat the market, I like you, feel that
- at times
- with a small % of your total investments
There are opportunities to zig when everybody zags
In this specific case (vanguard's VGENX) the risk is not super high. It's a sector specific fund but it's not like you are buying a single company that might go bankrupt tomorrow.
Plus again, I think we might be using oil for a while in the future, so combined with the 10-year low prices I presume it's a pretty good buy today.

Then I obviously don't have any crystal ball and I might be terribly wrong, but that's why I put a smaaaaaaaall amount in it.

brainfart

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Re: The bargain thread
« Reply #5 on: July 27, 2015, 01:16:53 PM »
An ETF for Greece was my last buy, it's pretty cheap right now but might drop more.

Russia will probably be my next buy, with a Shiller P/E of below 7 (?) that market is severely undervalued compared to the US (over 25).

I only invest small amounts in regional markets and single stocks, most is passively invested.

Seppia

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The bargain thread
« Reply #6 on: July 27, 2015, 01:44:12 PM »
Would you mind sharing the codes?
They are related to countries too risky for me even for small amounts of money, but I love looking into this stuff.

nobodyspecial

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Re: The bargain thread
« Reply #7 on: July 27, 2015, 03:32:48 PM »
Common sense dictates one should be at least a bit tilted towards commodities producers at this point.
Unless they go bust after another 3years of $50/barrel and their drilling/mining rights go to the banks - in which case common sense dictates buy banks with big loans to oil producers.

mrpercentage

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Re: The bargain thread
« Reply #8 on: July 27, 2015, 03:57:53 PM »
We have economic warfare going on will oil. Nations are involved. I think oil is low but stick with premium names so you don't go under waiting for the return. It could be a couple years to see the full benifit of investment. Be careful

Seppia

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Re: The bargain thread
« Reply #9 on: July 27, 2015, 05:37:05 PM »

Common sense dictates one should be at least a bit tilted towards commodities producers at this point.
Unless they go bust after another 3years of $50/barrel and their drilling/mining rights go to the banks - in which case common sense dictates buy banks with big loans to oil producers.

I don't know, it seems unlikely for the whole energy sector to go bankrupt.

We have economic warfare going on will oil. Nations are involved. I think oil is low but stick with premium names so you don't go under waiting for the return. It could be a couple years to see the full benifit of investment. Be careful

Could be maybe even 5 or 10 years to see the benefit, I have time I hope (I'm 35).
Exxon used to be the largest publicly traded company in the world up until recently, these guys can be even more powerful than nations and have strong lobbying powers.
I am not overly worried.
This looks to me like a sector-specific 2008-2009, again a good opportunity to buy low provided you either buy a fund (like I am doing) or the top companies (if I had to I would pick royal Dutch and Exxon), and you don't go all-in but stay reasonably diversified on the majority of your investments.

Money Badger

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Re: The bargain thread
« Reply #10 on: July 31, 2015, 06:18:23 PM »
Here's my shopping list at the moment...

RBL - While Russia's leader is an A-hole, the russian's aren't.   Some day, pray they will be friends again.   Already enjoyed a dead cat bounce on this one... waiting for a re-entry point once oil finishes crashing in price.

JMF - If you like income, this oil/gas MLP fund holds MLPs so all quarterly divys/returns of capital are *generally* tax exempt.   I haven't enjoyed the selling process on this one so buyer beware.   But it's paying through the nose as it feels for a bottom on share price and selling well below NAV.   Keep in mind energy MLPs are for moving the commodity so aren't supposedly aren't valued on how much the commodity cost.   The market disagrees right now, hence... bargain!

MHI - I like munis.  This one uses leverage.   It has been crushed by the interest rate worries.  Buy in late Aug or Sept before the next Fed meeting.   Collect divys.   Enjoy appreciation!