Author Topic: Yes you can beat the pros  (Read 7427 times)

dungoofed

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« Last Edit: November 08, 2015, 07:00:52 PM by arebelspy »

candymaldy

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Re: Yes you can beat the pros
« Reply #1 on: November 08, 2015, 05:55:55 PM »
Interesting article.

What does he mean by "beat" though? 

The chief advantage of managing your own money is that it doesn't want to run away from you when the market crashes and stocks are cheap.  Sadly it's a rare bird who can take advantage of such opportunities.

mrpercentage

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Re: Yes you can beat the pros
« Reply #2 on: November 08, 2015, 06:25:20 PM »
True. I'm still buying COP even though the pros might think I'm a fool. The thing is, oil is going up eventually. The pure play will pay off in years even if major hits due to earnings or dividend cuts are a possibility in the short term. I don't think Conoco is going under. So it is cheap and a buy if you are not ever planning to sell.

I set targets to stop buying. I don't set targets to sell. I think it will be a tremendous long term advantage but only time will tell.

I had to stop buying Exxon for now already. A target was hit already. Kinda bummed about that. I will go into REITS as soon as the full mania of interest rates sets in allowing me to build into long term positions at lower rates.

I also am in mid and low cap funds. No 500 for me.

StockBeard

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Re: Yes you can beat the pros
« Reply #3 on: November 10, 2015, 06:33:02 PM »
The thing is, oil is going up eventually.
Interesting. I could see the following becoming kind of the norm within 50 years, and oil becoming obsolete:
https://en.wikipedia.org/wiki/Making_Sweden_an_Oil-Free_Society

But I'm daydreaming :)

frugal_c

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Re: Yes you can beat the pros
« Reply #4 on: November 10, 2015, 07:00:35 PM »
I have been reading these types of articles for 20 years.   There are all these reasons why it should be straight-forward to beat the market.  However, I find that it is extremely difficult to do consistently, particularly with a diversified portfolio.

I think for most people, there time is better spent trying to start a business than trying to beat the market.

dungoofed

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Re: Yes you can beat the pros
« Reply #5 on: November 10, 2015, 08:08:49 PM »
I think the article was talking about beating the pros (as opposed to the market) so the bar is actually a little lower than say VOO.

For what it's worth, I have seen first hand the lengths portfolio managers go to in order to get a slither of a microcap without moving the market. For this reason alone there will always be massively undervalued companies in the market.

ShoulderThingThatGoesUp

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Re: Yes you can beat the pros
« Reply #6 on: November 11, 2015, 06:05:59 AM »
The thing is, oil is going up eventually.

There's a solid argument that it isn't anytime soon. The Saudis thought they would eliminate fracking companies by lowering prices. But the companies are hanging on, lowering costs, and still getting credit. Obviously lots of layoffs in Houston and Midland right now, but they're not ghost towns. If a few companies and fields can be viable at $50 oil, every increase in price will bring more wells online. The petrostates now have to sell more and more oil to remain viable as Iranian oil becomes more available. The Saudis locked themselves into a vicious cycle - they managed to lower costs, but they might not be able to raise them.

This month or next, LNG exports from the United States will start. Maybe that will raise natural gas prices slightly in North America, but certainly it's not good news for Gazprom.

frugal_c

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Re: Yes you can beat the pros
« Reply #7 on: November 11, 2015, 06:07:59 AM »
I think the article was talking about beating the pros (as opposed to the market) so the bar is actually a little lower than say VOO.

For what it's worth, I have seen first hand the lengths portfolio managers go to in order to get a slither of a microcap without moving the market. For this reason alone there will always be massively undervalued companies in the market.

Perhaps but in practice I have found this hard to do.   In my case I have been saving a long time so the amount I can put into any one microcap is maybe 2% of my portfolio.  I find it really hard to find large numbers of micro-caps.  I have also spent quite a bit of time trying to find cheap micro-caps, and even then when you really dig into them the last couple years their haven't been that many bargains IMO.  Usually once you start reading through all the releases you start to find something that seems shady.

I agree, in theory, that if you have a large amount of time you probably can beat the market by 2 or 3 percentage points over longer periods buying micro/small caps I just think the time requirement is a full time job once your portfolio hits a certain size.
« Last Edit: November 11, 2015, 06:47:55 AM by frugal_canuck »

Scandium

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Re: Yes you can beat the pros
« Reply #8 on: November 11, 2015, 10:13:07 AM »
True. I'm still buying COP even though the pros might think I'm a fool. The thing is, oil is going up eventually. The pure play will pay off in years even if major hits due to earnings or dividend cuts are a possibility in the short term. I don't think Conoco is going under. So it is cheap and a buy if you are not ever planning to sell.

So this bet will require oil to jump back up, by quite a bit. And it require COP to be around to take advantage of it, and they have to take advantage of it correctly. And if this happens in say 10 years, the jump in the stock price has to be so large as to make up for 10 years of mediocre performance, compared to having that money in something that actually went up in that time.

Yeah good luck with that.

When people say things like "oil will go up/we'll always need it" or "people will always buy beer", they seem to ignore the fact that even if this is true, we can't know which company will be delivering the oil or beer. I might not be anyone of the current players.

frugal_c

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Re: Yes you can beat the pros
« Reply #9 on: November 11, 2015, 10:34:35 AM »
We will definitely always need energy, not sure if we will always get it from oil/nat gas.

protostache

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Re: Yes you can beat the pros
« Reply #10 on: November 11, 2015, 11:09:21 AM »
True. I'm still buying COP even though the pros might think I'm a fool. The thing is, oil is going up eventually. The pure play will pay off in years even if major hits due to earnings or dividend cuts are a possibility in the short term. I don't think Conoco is going under. So it is cheap and a buy if you are not ever planning to sell.

So this bet will require oil to jump back up, by quite a bit. And it require COP to be around to take advantage of it, and they have to take advantage of it correctly. And if this happens in say 10 years, the jump in the stock price has to be so large as to make up for 10 years of mediocre performance, compared to having that money in something that actually went up in that time.

Yeah good luck with that.

When people say things like "oil will go up/we'll always need it" or "people will always buy beer", they seem to ignore the fact that even if this is true, we can't know which company will be delivering the oil or beer. I might not be anyone of the current players.

The thing about the oil majors is that they have massive tangible assets. They're trading a little bit over book value (the dollar value of all of their tangible assets, including oil reserves, rigs, fleets of ships, etc). Even if the price of oil stays flat, it's not like the value of those assets goes to zero. If/when ConocoPhillips drops far enough, some other oil major will sweep in and buy them whole, and the stock holders will get stock in the new company. It's happened before and it'll happen again.

Even if (really, when) oil stops being the backbone of our entire civilization, the oil majors are best positioned to take advantage of the change. They won't go away.

The best way to buy into an industry like oil or pharma is to buy shares in all of the major players, either individually or with a fund or ETF. It sounds like that is exactly what mrpercentage has been doing. It's just that ConocoPhillips happens to be attractive right now, so that's what he's talking about.

Scandium

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Re: Yes you can beat the pros
« Reply #11 on: November 11, 2015, 12:00:45 PM »
True. I'm still buying COP even though the pros might think I'm a fool. The thing is, oil is going up eventually. The pure play will pay off in years even if major hits due to earnings or dividend cuts are a possibility in the short term. I don't think Conoco is going under. So it is cheap and a buy if you are not ever planning to sell.

So this bet will require oil to jump back up, by quite a bit. And it require COP to be around to take advantage of it, and they have to take advantage of it correctly. And if this happens in say 10 years, the jump in the stock price has to be so large as to make up for 10 years of mediocre performance, compared to having that money in something that actually went up in that time.

Yeah good luck with that.

When people say things like "oil will go up/we'll always need it" or "people will always buy beer", they seem to ignore the fact that even if this is true, we can't know which company will be delivering the oil or beer. I might not be anyone of the current players.

The thing about the oil majors is that they have massive tangible assets. They're trading a little bit over book value (the dollar value of all of their tangible assets, including oil reserves, rigs, fleets of ships, etc). Even if the price of oil stays flat, it's not like the value of those assets goes to zero. If/when ConocoPhillips drops far enough, some other oil major will sweep in and buy them whole, and the stock holders will get stock in the new company. It's happened before and it'll happen again.

Even if (really, when) oil stops being the backbone of our entire civilization, the oil majors are best positioned to take advantage of the change. They won't go away.

The best way to buy into an industry like oil or pharma is to buy shares in all of the major players, either individually or with a fund or ETF. It sounds like that is exactly what mrpercentage has been doing. It's just that ConocoPhillips happens to be attractive right now, so that's what he's talking about.

How much are rigs, ships and oil reserves worth if we invent fusion reactors and start using electric everything?

protostache

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Re: Yes you can beat the pros
« Reply #12 on: November 11, 2015, 12:08:41 PM »
True. I'm still buying COP even though the pros might think I'm a fool. The thing is, oil is going up eventually. The pure play will pay off in years even if major hits due to earnings or dividend cuts are a possibility in the short term. I don't think Conoco is going under. So it is cheap and a buy if you are not ever planning to sell.

So this bet will require oil to jump back up, by quite a bit. And it require COP to be around to take advantage of it, and they have to take advantage of it correctly. And if this happens in say 10 years, the jump in the stock price has to be so large as to make up for 10 years of mediocre performance, compared to having that money in something that actually went up in that time.

Yeah good luck with that.

When people say things like "oil will go up/we'll always need it" or "people will always buy beer", they seem to ignore the fact that even if this is true, we can't know which company will be delivering the oil or beer. I might not be anyone of the current players.

The thing about the oil majors is that they have massive tangible assets. They're trading a little bit over book value (the dollar value of all of their tangible assets, including oil reserves, rigs, fleets of ships, etc). Even if the price of oil stays flat, it's not like the value of those assets goes to zero. If/when ConocoPhillips drops far enough, some other oil major will sweep in and buy them whole, and the stock holders will get stock in the new company. It's happened before and it'll happen again.

Even if (really, when) oil stops being the backbone of our entire civilization, the oil majors are best positioned to take advantage of the change. They won't go away.

The best way to buy into an industry like oil or pharma is to buy shares in all of the major players, either individually or with a fund or ETF. It sounds like that is exactly what mrpercentage has been doing. It's just that ConocoPhillips happens to be attractive right now, so that's what he's talking about.

How much are rigs, ships and oil reserves worth if we invent fusion reactors and start using electric everything?

If you want to get speculative on me, then I guess nothing? But at that point we'll be in a post-scarcity world and this whole "financial independence" thing will be passť.

Scandium

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Re: Yes you can beat the pros
« Reply #13 on: November 11, 2015, 12:42:36 PM »
True. I'm still buying COP even though the pros might think I'm a fool. The thing is, oil is going up eventually. The pure play will pay off in years even if major hits due to earnings or dividend cuts are a possibility in the short term. I don't think Conoco is going under. So it is cheap and a buy if you are not ever planning to sell.

So this bet will require oil to jump back up, by quite a bit. And it require COP to be around to take advantage of it, and they have to take advantage of it correctly. And if this happens in say 10 years, the jump in the stock price has to be so large as to make up for 10 years of mediocre performance, compared to having that money in something that actually went up in that time.

Yeah good luck with that.

When people say things like "oil will go up/we'll always need it" or "people will always buy beer", they seem to ignore the fact that even if this is true, we can't know which company will be delivering the oil or beer. I might not be anyone of the current players.

The thing about the oil majors is that they have massive tangible assets. They're trading a little bit over book value (the dollar value of all of their tangible assets, including oil reserves, rigs, fleets of ships, etc). Even if the price of oil stays flat, it's not like the value of those assets goes to zero. If/when ConocoPhillips drops far enough, some other oil major will sweep in and buy them whole, and the stock holders will get stock in the new company. It's happened before and it'll happen again.

Even if (really, when) oil stops being the backbone of our entire civilization, the oil majors are best positioned to take advantage of the change. They won't go away.

The best way to buy into an industry like oil or pharma is to buy shares in all of the major players, either individually or with a fund or ETF. It sounds like that is exactly what mrpercentage has been doing. It's just that ConocoPhillips happens to be attractive right now, so that's what he's talking about.

How much are rigs, ships and oil reserves worth if we invent fusion reactors and start using electric everything?

If you want to get speculative on me, then I guess nothing? But at that point we'll be in a post-scarcity world and this whole "financial independence" thing will be passť.

Not necessarily. My point was to point out unknown unknown to quote a great philosopher.. You can find a solution to all the scenarios you can think of, but it's the ones you don't think of that kill some companies, and makes billions for others. Buggy whips were a sure bet, until cars. IBM would rule the world, until PCs. Blackberry was unbeatable, until iphone. And etc with many more. It's what you don't see coming that make or break a company, or portfolio. Which is why I find "cash flow analysis" and all that so silly. It assume no major changes, revolutions, upheavals etc. 

protostache

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Re: Yes you can beat the pros
« Reply #14 on: November 11, 2015, 01:03:32 PM »
Not necessarily. My point was to point out unknown unknown to quote a great philosopher.. You can find a solution to all the scenarios you can think of, but it's the ones you don't think of that kill some companies, and makes billions for others. Buggy whips were a sure bet, until cars. IBM would rule the world, until PCs. Blackberry was unbeatable, until iphone. And etc with many more. It's what you don't see coming that make or break a company, or portfolio. Which is why I find "cash flow analysis" and all that so silly. It assume no major changes, revolutions, upheavals etc.

One pithy observation (that he lifted from a NASA administrator) does not make Donald Rumsfeld a great philosopher :)

I disagree that analyzing a business as a business is silly. It's a different philosophy than indexing, and it takes more work, but it can definitely lead to better results, however one chooses to define that. I don't claim to know everything about stock investing. Heck, I barely know more than nothing. Maybe in 30 years big oil will have been supplanted by big battery. Who knows, right? But it's impossible to plan anything that way. I, for one, refuse to stop learning about businesses and ignore what makes them tick just because sometimes great ones fail.

(Oh, and the buggy whip comparison is fundamentally flawed.)

CoderNate

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Re: Yes you can beat the pros
« Reply #15 on: November 11, 2015, 06:33:30 PM »
True. I'm still buying COP even though the pros might think I'm a fool. The thing is, oil is going up eventually. The pure play will pay off in years even if major hits due to earnings or dividend cuts are a possibility in the short term. I don't think Conoco is going under. So it is cheap and a buy if you are not ever planning to sell.

So this bet will require oil to jump back up, by quite a bit. And it require COP to be around to take advantage of it, and they have to take advantage of it correctly. And if this happens in say 10 years, the jump in the stock price has to be so large as to make up for 10 years of mediocre performance, compared to having that money in something that actually went up in that time.

Yeah good luck with that.

When people say things like "oil will go up/we'll always need it" or "people will always buy beer", they seem to ignore the fact that even if this is true, we can't know which company will be delivering the oil or beer. I might not be anyone of the current players.

The thing about the oil majors is that they have massive tangible assets. They're trading a little bit over book value (the dollar value of all of their tangible assets, including oil reserves, rigs, fleets of ships, etc). Even if the price of oil stays flat, it's not like the value of those assets goes to zero. If/when ConocoPhillips drops far enough, some other oil major will sweep in and buy them whole, and the stock holders will get stock in the new company. It's happened before and it'll happen again.

Even if (really, when) oil stops being the backbone of our entire civilization, the oil majors are best positioned to take advantage of the change. They won't go away.

The best way to buy into an industry like oil or pharma is to buy shares in all of the major players, either individually or with a fund or ETF. It sounds like that is exactly what mrpercentage has been doing. It's just that ConocoPhillips happens to be attractive right now, so that's what he's talking about.

For the purpose of things like secured loans, the value of oil reserves and infrastructure changes based on the cost of oil. If you have billions of barrels of proven reserves but your extraction cost is greater than the price of oil, then your reserves are worthless except as an option on future oil prices. Similarly all your extraction equipment is only as valuable as the margin you are getting on the oil extracted over the lifetime of the equipment. If you're not operating your equipment for a long period of time, it becomes a liability, not an asset. See the offshore services sector (SDRL, RIG, DO, HERO, etc.)

Scandium

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Re: Yes you can beat the pros
« Reply #16 on: November 12, 2015, 07:06:46 AM »
Not necessarily. My point was to point out unknown unknown to quote a great philosopher.. You can find a solution to all the scenarios you can think of, but it's the ones you don't think of that kill some companies, and makes billions for others. Buggy whips were a sure bet, until cars. IBM would rule the world, until PCs. Blackberry was unbeatable, until iphone. And etc with many more. It's what you don't see coming that make or break a company, or portfolio. Which is why I find "cash flow analysis" and all that so silly. It assume no major changes, revolutions, upheavals etc.

One pithy observation (that he lifted from a NASA administrator) does not make Donald Rumsfeld a great philosopher :)

I disagree that analyzing a business as a business is silly. It's a different philosophy than indexing, and it takes more work, but it can definitely lead to better results, however one chooses to define that. I don't claim to know everything about stock investing. Heck, I barely know more than nothing. Maybe in 30 years big oil will have been supplanted by big battery. Who knows, right? But it's impossible to plan anything that way. I, for one, refuse to stop learning about businesses and ignore what makes them tick just because sometimes great ones fail.

(Oh, and the buggy whip comparison is fundamentally flawed.)

What I find silly are those discount cash flow analysis, future growth calculations, discounted future assumed dividends etc. I mean it makes little sense. All those factors are in the public domain and known by all (or are assumptions based on public knowledge) so are already priced into the stock as perfectly as possible! The only thing that would move the stock price significantly (i.e. make you rich, or poor) are unknowable future events. Since nobody can predict those you are basically placing a bet that some event might happen that will affect company A more positively than company B, so therefore I'll buy company A. Now there's nothing wrong with that gamble, you might come out ahead, but I fail to see how SEC forms or cash flow analysis will reveal this info.

Retire-Canada

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Re: Yes you can beat the pros
« Reply #17 on: November 12, 2015, 07:12:30 AM »

For the purpose of things like secured loans, the value of oil reserves and infrastructure changes based on the cost of oil. If you have billions of barrels of proven reserves but your extraction cost is greater than the price of oil, then your reserves are worthless except as an option on future oil prices. Similarly all your extraction equipment is only as valuable as the margin you are getting on the oil extracted over the lifetime of the equipment. If you're not operating your equipment for a long period of time, it becomes a liability, not an asset. See the offshore services sector (SDRL, RIG, DO, HERO, etc.)

Also if you have massive proven reserves and the reality of global warming is that most of them can't be taken from the ground and utilized by humans there is going to be an ugly value correction when those reserves are written off. Mark Carney has started saying that to get the ball rolling so that it comes as less of a shock to energy companies and investors. He's not some communist-left-wing-enviro-whack-job.

http://www.theguardian.com/environment/2014/oct/13/mark-carney-fossil-fuel-reserves-burned-carbon-bubble

Hopefully O&G investors are starting to consider this when the formulate their price expectations for these companies.

JetBlast

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Re: Yes you can beat the pros
« Reply #18 on: November 12, 2015, 09:07:44 AM »

What I find silly are those discount cash flow analysis, future growth calculations, discounted future assumed dividends etc. I mean it makes little sense. All those factors are in the public domain and known by all (or are assumptions based on public knowledge) so are already priced into the stock as perfectly as possible!

Now we're getting into the debate about the Efficient Market Hypothesis, and whether all publicly known knowledge is truly reflected in stock prices and therefore stocks are always perfectly priced. If you think so, then the analysis is silly.  But there are many that find EMH to be nonsense as it completely ignores the human aspect of markets and is based on every single market participant being a "rational agent".

Personally, I fall in the camp that EMH is what's silly, not the discounted cash flow analysis and projections.

YoungInvestor

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Re: Yes you can beat the pros
« Reply #19 on: November 12, 2015, 10:52:47 AM »

What I find silly are those discount cash flow analysis, future growth calculations, discounted future assumed dividends etc. I mean it makes little sense. All those factors are in the public domain and known by all (or are assumptions based on public knowledge) so are already priced into the stock as perfectly as possible!

Now we're getting into the debate about the Efficient Market Hypothesis, and whether all publicly known knowledge is truly reflected in stock prices and therefore stocks are always perfectly priced. If you think so, then the analysis is silly.  But there are many that find EMH to be nonsense as it completely ignores the human aspect of markets and is based on every single market participant being a "rational agent".

Personally, I fall in the camp that EMH is what's silly, not the discounted cash flow analysis and projections.

Weak form emh is hard to argue with, but perfectly efficient markets are non-sensical. Why would there be such intraday variations if emh held true?

I like holding some individual stocks, and I'm beating the market so far on them. If I got to a point where I was lagging, I'd reconsider.

Scandium

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Re: Yes you can beat the pros
« Reply #20 on: November 12, 2015, 11:26:09 AM »

What I find silly are those discount cash flow analysis, future growth calculations, discounted future assumed dividends etc. I mean it makes little sense. All those factors are in the public domain and known by all (or are assumptions based on public knowledge) so are already priced into the stock as perfectly as possible!

Now we're getting into the debate about the Efficient Market Hypothesis, and whether all publicly known knowledge is truly reflected in stock prices and therefore stocks are always perfectly priced. If you think so, then the analysis is silly.  But there are many that find EMH to be nonsense as it completely ignores the human aspect of markets and is based on every single market participant being a "rational agent".

Personally, I fall in the camp that EMH is what's silly, not the discounted cash flow analysis and projections.

Weak form emh is hard to argue with, but perfectly efficient markets are non-sensical. Why would there be such intraday variations if emh held true?

I like holding some individual stocks, and I'm beating the market so far on them. If I got to a point where I was lagging, I'd reconsider.

Even when we accept some non-rational behavior, how do we know whether it's high or low? All stocks aren't perfectly priced, but I have no way of knowing consistently when it's too high and when it's too low (and per studies neither do most traders).

You don't have to accept total EMH to conclude that armed with the exact same information as everyone else on the planet I have low chance of deducing the correct future when the majority of others don't.

Jack

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Re: Yes you can beat the pros
« Reply #21 on: November 12, 2015, 11:33:08 AM »
I think the article was talking about beating the pros (as opposed to the market) so the bar is actually a little lower than say VOO.

For what it's worth, I have seen first hand the lengths portfolio managers go to in order to get a slither of a microcap without moving the market. For this reason alone there will always be massively undervalued companies in the market.

Perhaps but in practice I have found this hard to do.

Nah, it's easy. Proof:

Most pros themselves fail to beat the market (measured by comparing the returns of the mutual funds they manage against the benchmark)

After factoring costs, they do even worse.

An individual investor can trivially almost-match the market by investing in a low-cost index fund.

Matching the market (or "almost-matching" the market) beats failing to match it.

Therefore, an individual investor can trivially beat (most of) the pros.


dungoofed

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Re: Yes you can beat the pros
« Reply #22 on: November 13, 2015, 12:01:38 AM »
I think the article was talking about beating the pros (as opposed to the market) so the bar is actually a little lower than say VOO.

For what it's worth, I have seen first hand the lengths portfolio managers go to in order to get a slither of a microcap without moving the market. For this reason alone there will always be massively undervalued companies in the market.

Perhaps but in practice I have found this hard to do.

Nah, it's easy. Proof:

Most pros themselves fail to beat the market (measured by comparing the returns of the mutual funds they manage against the benchmark)

After factoring costs, they do even worse.

An individual investor can trivially almost-match the market by investing in a low-cost index fund.

Matching the market (or "almost-matching" the market) beats failing to match it.

Therefore, an individual investor can trivially beat (most of) the pros.



When Ritholtz introduced his article here: http://www.ritholtz.com/blog/2015/11/the-amateur-investing-advantage/ he said "and its not about what you might think" which I assumed to be referring to indexing.

mrpercentage

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Re: Yes you can beat the pros
« Reply #23 on: November 13, 2015, 12:54:33 AM »
On the Majors--

Most major oil players are not just in oil. Exxon has gone out of its way to be seen as an energy company. Conoco has its hands in natural gas and most importantly has its hands on a ton of domestic oil. Conoco is THE largest independent exploration upstream company. If the world goes to crap and war goes everywhere and you live in the United States-- guess who's oil you are going to be buying. Guess who has the contract for Alaska now-- hint, not Exxon.

We are always one war, bombed refinery, one tidal wave, Katrina, or other natural disaster from extremely high oil. Always.

That said, the entire U.S. economy is based on oil. The entire thing. The roads, tires, gas, paint, plastics, natural gas power plant-- from the airplane, ship, farm tractor, dumptruck, semi, the packages of all the frieght, and the lights and electricity-- its all big oil now. All of it. That aint changing tomorrow. Tesla is good but not THAT good.

That said. I want prices low for a long time. I can build into them for a long time. Its also great for our economy. Im too much of a realist to think it will last forever. I don't think the majors will get choked out either. If you think our goverment will give GM a ton of money and then turn and give the oil majors the middle finger you are smoking something good. They are still too strong to need it right now and that says a lot.

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Re: Yes you can beat the pros
« Reply #24 on: November 13, 2015, 10:14:05 AM »
On the Majors--

Most major oil players are not just in oil. Exxon has gone out of its way to be seen as an energy company. Conoco has its hands in natural gas and most importantly has its hands on a ton of domestic oil. Conoco is THE largest independent exploration upstream company. If the world goes to crap and war goes everywhere and you live in the United States-- guess who's oil you are going to be buying. Guess who has the contract for Alaska now-- hint, not Exxon.

We are always one war, bombed refinery, one tidal wave, Katrina, or other natural disaster from extremely high oil. Always.

That said, the entire U.S. economy is based on oil. The entire thing. The roads, tires, gas, paint, plastics, natural gas power plant-- from the airplane, ship, farm tractor, dumptruck, semi, the packages of all the frieght, and the lights and electricity-- its all big oil now. All of it. That aint changing tomorrow. Tesla is good but not THAT good.

That said. I want prices low for a long time. I can build into them for a long time. Its also great for our economy. Im too much of a realist to think it will last forever. I don't think the majors will get choked out either. If you think our goverment will give GM a ton of money and then turn and give the oil majors the middle finger you are smoking something good. They are still too strong to need it right now and that says a lot.

There are multiple wars going on in oil producing countries right now, yet WTI is closing in on $40. I don't doubt that someone is going to make a lot of money in the oil patch in the next few years. I just don't think tangible book value is a good metric for investing in oil companies at this time.

mrpercentage

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Re: Yes you can beat the pros
« Reply #25 on: November 13, 2015, 10:17:54 PM »
You might be right. I have doubts that I will find a better time to buy in during my life time though. Money managers need to worry about short term gains-- I don't.

I think a long term down trend will play out like this: First they will sell second rate assets (they are doing this), then they will lay people off (they are doing this), then they will begin to shut down production and lay even more people off (on the way to doing this), then they will cut dividends (probably temporarily- Conoco might have to but will strongly resist it, they want to be an aristocrat), finanly they will lay off everone but a select core of start up engineers  and shut down production completely to kill supply. If all three do this you can find high prices real soon. The three being Exxon, Cheveron, and Conoco. They will not sell core assets. That would put them out of business for good at a low you-are-desperate rate. They wont do that. They will fire everyone and shut down a month first.

Seppia

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Re: Yes you can beat the pros
« Reply #26 on: November 15, 2015, 09:04:53 AM »

True. I'm still buying COP even though the pros might think I'm a fool. The thing is, oil is going up eventually. The pure play will pay off in years even if major hits due to earnings or dividend cuts are a possibility in the short term. I don't think Conoco is going under. So it is cheap and a buy if you are not ever planning to sell.

So this bet will require oil to jump back up, by quite a bit. And it require COP to be around to take advantage of it, and they have to take advantage of it correctly. And if this happens in say 10 years, the jump in the stock price has to be so large as to make up for 10 years of mediocre performance, compared to having that money in something that actually went up in that time.

Yeah good luck with that.

When people say things like "oil will go up/we'll always need it" or "people will always buy beer", they seem to ignore the fact that even if this is true, we can't know which company will be delivering the oil or beer. I might not be anyone of the current players.

That's why VGENX exists :)
I have no idea what will happen tomorrow, but buying at historical lows is an idea I'm not too much against.