What stock to buy?
"What stock to buy?"
While I was walking into NTU-IIC room, a good friend of mine, Benjamin, asked me for stock recommendation. I hesitated at that instant. It was easy for me to answer him with some stock recommendations but that question had an underlying problem that I wished to address.
You see, everyone wants to be told what stock to buy. When I was younger, the books that I borrowed from the library have “stock selection” in the titles. It seems that the key to investment is stock selection. Even as I was explaining my investment philosophy to others, the question that I always received would be how to pick a good stock. Another instance was during my AB228A class. When someone asked me what stock to short in the Singapore exchange, I told him any stock. He was shocked, partly because he thought that I was fooling around with him. Yet, I was dead serious.
They have something in common.
In both instances, they have clearly ignored the fact that everything goes up in the bull market and goes down in the bear market. An opposition camp would of course rebut me by saying, “So there is no point of doing stock analysis!?” Face it; you aren’t Warren Buffett, so stop trying to be one. Everyone wants to be like him because it is really empowering to be able to predict the future in some ways. Therefore, the whole cycle starts to continue and everyone starts churning out all the intrinsic values with all the crazy formulas that layman can’t understand. They will then buy the stock and claim to be investors in good business at cheap prices and wait. Mind you, they can wait really long. More often than not, they will tend ignore the market and hope.
Clearly, I don’t deny the use of studying particular stock. It differentiates the returns that you will be getting once you get the general market sentiment correct. Back then when I was shorting Hang Seng Index in 2008, I didn’t know that banks would collapse one after another. I don’t think I have the capability to know that the balance sheet of Citigroup is so horrible. It was not clear cut to me (actually I never take a look at them), but I know one thing for sure - the market sentiment is really bad and every stock will fall. If you could pick out the rare stock that did not plunge such as SMRT, congratulations, your stock picking ability is superior and I can’t match it at all.
The only reason why one will choose to only concentrate on stock picking is because one believes that stocks will go up in the long run. Indeed, the bull market from 1980 to 2000 is something that I can’t rebut and ignore. Look, if you were to go down to history, there will be plenty of periods where this mentality is poisonous.
Remember, everything goes up in the bull market and down in a bear market. There will be times for you to buy and hold and for you to simply get out and short the market.
By Toh Chin Sheng
VP, Research & Education of NTU Investment Interactive Club ~disclaimer:The information, statistical data and opinions contained herein are of the author’s own, and have been obtained from sources which he/she believes to be reliable, but it does not represent that they are accurate or complete, and they should not be relied upon as such. All opinions expressed and data provided herein are subject to change without notice. The securities mentioned in this report may not be suitable for all types of investors. ALL investments involve different degrees of risk. You should be aware of your risk tolerance level and financial situations at all times. Read any and all prospectuses carefully before making any investment decisions. As you know, a recommendation, which you are free to accept or reject, is not a guarantee for the successful performance of an investment and we are expressly prohibited from guaranteeing accounts against losses arising from market conditions. NTU-IIC and its members will not be held liable in any manner for any losses arising directly or indirectly from investment decisions undertaken based on the information/statistical data/opinions expressed. |
<a href=http://www.samestock.com rel="dofollow">Best Stocks and Shares ISA </a>
***************************
Tamara
This new technology products to bring real benefits to our lives in many ways a very poor state by the
oto kiralama kiralık oto kiralık araç araba kiralama kiralık araba
This new technology products to bring real benefits to our lives in many ways a very poor state by the right to use your berbaerinde getirmektedir.teknoloji and science that should be a very positive situation.
Yours truly <a href="http://www.otokiralamaa.com" title="oto kiralama" target="_blank">oto kiralama</a> oto kiralama,
<a href="http://www.otokiralamaa.com" title="araç kiralama" target="_blank">araç kiralama</a> arac kiralama <a href="http://www.otokiralamaa.com" title="kiralık araba" target="_blank">kiralık araba</a> olmalı
<a href="http://www.otokiralamaa.com" title="kiralık araç" target="_blank">kiralık araç</a> kiralık araba <a href="http://www.otokiralamaa.com" title="araba kiralama" target="_blank">araba kiralama</a> araba kiralama
its a very nice concert...........
----------------------
Andrew Robert
Banking Tips
Hi SC again, nice to hear from you. Do I happen to know you?
What you have said, is definitely legit. I guess there is something more into Buffett. I feel that his intangible skills such as foresight is far more superior than everyone. As a result, his judgement has always paid off.
I wouldn't deny stock picking. It is just that I have seen people who are learning investments, approach it from a wrong angle. In fact I made this mistake myself before as mentioned. The purpose of this article is to remind people constantly that they can be wrong and not that the market is wrong.
Never argue with the market is what I emphasized greatly.
For example, William Wang says that it also depends on what an investor is looking for in return. This can be a double edge sword. The idea of growth stocks intertwine with the idea of buy and hold which often make people self-denial. They believe strongly in their judgement and hope. This is not what I will like to advocate because I believe that volatility is the order of the day in the future. More often than not, investors forget their initial reasons for their investments. The reason for having a stop loss as both a time stop and price stop is evident. As simple as a stop loss mechanism is, it is hard to implement.
I remember how I used to be a fervent follower of fundamental analysis. However, after some time, reality struck. There are so many ways to manipulate financial statements that I no longer trust the figures I'm analysing. Fundamental analysis is still useful in the sense that it allows me to find out more about the nature and viability of the firm's business, but all the talk about finding the intrinsic value doesn't seem to appeal to me very much now.
At the end of the day, I prefer to let the share price do the talking, and follow the trend. Buy high and sell even higher!
Good read. But I have some points to add.
Anyway, the way Buffett buy stock, he did not really predict the future. That's why he is buying stuff that he understand such as non-technology. If you study Buffett closely, he pick stock using purely past figure alone. He did not do all the fancy discounted cash flow projections that most analyst do. But, one key thing that he did is to look at first before he even look at the past figure is the "survivability" of the business.
Stock picking is still useful.The only market that fail to perform in the last decade is the developed market The emerging market perform very well. Stock picking =/= buy and hold. Buffett buy and hold because he has such a huge capital base that make him going in and out of a stock almost impossible. But, for small investor like us, when the price reaches an unjustifiable level, we can just move out of a stock.
I think market sentiment goes hand in hand with stock picking. Stock picking means getting the right business as the right price(normally a very low price). When market sentiment is bad, all things are cheap. You can pick the good stocks. When market sentiment are good, things may get more expensive, you can sell your stocks. You are shorting hang seng during the period that I am buying up stocks that are undergoing a free fall. I think both of us profited from it albeit in a different way.
I admire your guts in trying different strategy and method.