Mar

22

 I haven't read all of Mr. Mee's letter on buying the worst but let me say that I completely recant and disavow all my conclusions about buying the worst individual stocks. My conclusions were not based on a prospective files but on compustat files. They didn't take proper account of survivor bias in many different ways nor did they uncover the 1000 fold gems that Gilespie used to like to buy. Dimson has a paper saying that buying the best is better than buying the worst, and he is a very careful researcher.

Stefan Jovanovich writes: 

There seems to me one occasion when the worst are the best — when the companies' futures as enterprises are flexion calls. As Mr. Einhorn said recently, "if the market capitalization of the equity is less than half of the face value of the debt, the stock remains in an option area"; buying those options can be profitable if one knows the central bank's is about to flex its rescue muscles. Buying $1 stocks in 1939 (after Germany invaded Poland) is another way of putting it. This is hardly a plan for sustained investing; over time the worst do come last, as the Chair says; but the longshots can be worth the bet if there is a near-certainty that the jockeys on the lead horses have all had instructions to pull back on the reins.

Gary Rogan writes: 

The well-publicized "magic formula" really says nothing more than both the price and inherent quality of the business are important, and some weighted average should be used for stock selection. If you can find something that's outstanding in both, as opposed to either outstanding in one of them this will pay off.

Yesterday I finished reading Great by Choice by Jim Collins and Morten Hansen and if I were to distill what's it saying about what it takes to outperform the market by 10x is that (a) you need to be good enough inter terms of both creativity and paranoia (b) more importantly you have to pace yourself for consistency, not moving too fast or too slow almost without regard to the external environment (c) have some sort of a detailed internal recipe that you maintain but also adapt to external changes as opposed to either not having a recipe or sticking wit the present version too long.
 


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2 Comments so far

  1. drdimick on March 24, 2012 12:01 am

    Connecticut Best for Women

    As the Chair so resides there, seeing how the topic of best and worst is in fashion, one may note that his state of residence is ranked first for being most favorable for women…

    “After examining at the data, iVillage concluded that Connecticut was the best state in all the country for women to live in, something that surely doesn’t come as a surprise to the 1.8 million females who reside there. In terms of healthcare, wages and education, Connecticut’s female denizens are doing quite well. A whopping 90% of women have health insurance, the median female salary is $46,000 and more than a third hold a four-year college degree.”

    See… http://newsfeed.time.com/2012/03/14/the-5-best-u-s-states-for-women/#1-connecticut

    I hope American women have an opportunity to learn the truth of what a majority of woman here in Communist China so endure relative to education, employment, healthcare, and social mores. I think of my mother and grandmother relative to my sister a la these varying warps in time.

    You go girls…

    dr

  2. douglas roberts dimick on March 25, 2012 1:33 pm

    Structure of Buying: Surveying youtube

    Part education, part entertainment, one may survey assorted approaches to how and what to buy at youtube.com. My goal for so doing with both googling and youtubing every now and then is to explore key words and concepts for purposes of review and integration relative to my work.

    An example of possible results from such research is a reoccurring use of the word “structure” by either recognized or self-proclaimed providers of market expertise. Many seem to use this word in varying correlations to consistency, confidence, as well as more technical applications to include stops and targets.

    I find such research relates to Victor’s recent article query… “Okay, how can this be turned into profit in markets at the borders or other fields?”

    See… http://www.dailyspeculations.com/wordpress/?p=7255

    One may also find a fair amount of humor to be mined from what are mostly amateur productions.

    Here is a random sampling…

    Timing Your Forex Trades Pt 1 -
    http://www.youtube.com/watch?v=VUA4DR9wF_U&feature=related

    Day Trading, Scalping with 1 Contract –
    http://www.youtube.com/watch?v=jDnaqiEAZQI&feature=related

    Live Day Trading March 5th 2012 –
    http://www.youtube.com/watch?v=B7rjZzf3uP4&feature=channel

    Trading Interview with Mark Cook, Market Wizard –
    http://www.youtube.com/watch?NR=1&feature=endscreen&v=K4d6LmNDVFY

    Dave Ramsey – Day Traders Lose Money 7 Out of 10 Times –
    http://www.youtube.com/watch?v=BWIpTdg7tj8&feature=related

    Tiger Cub David Gerstenhaber: The economist whose passion for markets began at age 14 –
    http://www.youtube.com/watch?v=eGrEAc1L8JI&feature=relmfu

    Meet Danny Yong, Asia’s rising hedge fund titan –
    http://www.youtube.com/watch?v=1cN8be1Kmgk&feature=relmfu

    Forex Signal Mentor – 200 Moving Average –
    http://www.youtube.com/watch?v=Uv95l_OFaiE&feature=related

    Ichimoku: Strategies, Setups and What to Watch for –
    http://www.youtube.com/watch?v=A1cMuGGVp-g&feature=related

    Ratio Trading, FMP 02/20/2012 –
    http://www.youtube.com/watch?v=Wng5TsYNSwU&feature=relmfu

    Enjoy…

    dr

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