In a break from tradition, let's have a 'strategic' thread on the investors BB - such threads are usually a staple of the traders BB.

This thread is intended not to be about any tactical issues such as individual share longs or shorts - more a general discussion on whether share prices in general approximately represent fair value given all that is known about a company at any given moment in time.

Chartists (and I count myself amongst their number) will dismiss any fundamental analysis with a flippant 'It's all in the price dear boy'.

Pure fundamentalists will explain that given sufficient research, anyone can become more knowledgeable than the market and therefore be better placed to gauge true value. (sometimes described as 'the Zulu Principle' - after Michael Walters' book by that name)

Added On edit - oops - It was Jim Slater who wrote the Zulu Principle - not Walters. in the book, Slater argues the case for research and fundamentals by explaining that there are very few people thoroughly researching any single topic, if you make that topic narrow enough. He goes on to explain that everyone can be an expert so long as their research topic is made very specialised.

These posts copied from '5k - where should I invest it? I need to make money short term' thread



MightyMicro - 03 May'04 - 01:36 - 74 of 78

Listen to Gausie. Listen and think. All he is really saying is heed the market.

Why should LEEWINK (with all due respect) know something that has been hidden from the rest of us in the marketplace?

LEEWINK says he has "spent countless money on professional opinion, weeks of research (still digging now pardon the pun), and a fare amount of money on various sites to gain my info".

Well, we all do research, but who did he spend all this "countless money" with? I think we should be told the source of this apparently extremely expensive wisdom.

I'm not mocking -- I'm merely exhorting caution -- how do we know who LEEWINK is or what he knows?

The final danger sign "If you don't believe what you read on a bb why are you here ???"

Do you believe everything you read on a BB? Yes? In which case, I can authoritively tell you that the Moon is, indeed, made of Green Cheese.

Now you all know, for sure.

MM


LEEWINK - 03 May'04 - 11:03 - 75 of 78


12th August 2003 I mentioned NOP, could of doubled your money on that one, and a few probably did at minimal, shortly after this date NOP had a centre large spread in one of the main newspapers, from there people started to see and hear about the company for its potential, and onward it went from there.

Its early stages for NML now, mine prospecting in other minerals is due to come to a head soon, and the work to begin on the mines themselves to get this latest diamond mine started, it will happen, the latest area of land in question still has further possible exploration and this insert now is from there current and lastest RNS.

Now If i said to you 6 months ago buy AFD you would of had the same reaction as now when I say NML, AFD 10 folded in 4-5 months of open, and although has dropped to stable now, still looks a good share if you had it at the low of 7p, it is to me the base level to buy NML now, as the prospecting starts, NML are utilising machinery very well and can shift it to whichever projects they like, "others" I think was mentioned.

NML have produced concrete evidence of the upside potential now, but there is so many further possibilities as you can see again, from this last RNS insert :-

************************************************************

Angola Diamonds

&lt Snip a long boring bit &gt

*****************************************************

Bear in mind, this is only the new diamond area which in time terms is young, they also mine precious metals etc to which the company are constantly gaining ground on too, as well as more in the pipeline, like you say, you makes ya choice.


Gausie - 03 May'04 - 11:18 - 76 of 78 edit



Lee

A very long and, I'm sure, a very informative post.

However - unless there's anything there that you and only you know or understands, then it's all in the price. If the market knows it then the market's priced it.

Gausie


Testex - 03 May'04 - 11:38 - 77 of 78


So the markets " KNEW" AFD last year was going to 80p? but they held it back?

I was thinking of buying NRK at 738 thinking it might get up to 760, but if the markets "KNOW" it will never do it, i might as well stop trading.

Brilliant Advice Gausie, thanks, i'll close all my accounts tomo and start betting on horses.

P.s Do you know if the bookies "know" the winners by any chance? ;-)

My question then is this:

Testex, why do you believe that you know facts about NRK that will cause the share price to go from 738 to 760, whilst the rest of the market remains blissfully unaware?

Leewink, what is it that you know about NML that the market is unaware of that will cause the price to rise many times over?

To each of you - how have you come into this knowledge ahead of the city institutions with their teams of highly paid researchers?

Gausie,

"sometimes described as 'the Zulu Principle' - after Michael Walters' book by that name"

Aren't you mixing Mike Walters up with Jim Slater? I though that Mike Walters was responsible for a different piece of literature entitled "How to ramp penny cr@p".

:o)

Jim Slater wrote the book "the Zulu Principle" - I know because I finished reading it 2 weeks ago.

The "Zulu principle" explains how to see the holes and the hidden assets in a balance sheet in seconds, how to identify under-valued companies and read market trends, etc etc.

Thanks for pasting my threads, my forecasts - it has nothing to do with charts etc, as you can't tell nothing from them, they only outline the past in trends etc, they don't outline the future or forthcoming events, they don't include true price on a share or / as regards to facts forthcoming.

Facts only come in the form of written statements from the company concerned and they are the ones I work on, I also take forward projections and "if and buts" into account too.

I can't be bothered to explain them all, after the reaction I have had, but I will say if it was all in the price like someone has stated and the future is known now, NML would be multi pound a share now, and of course you can laugh, i'm not worried in the slightest.

Leewink

Thanks for your comments.

I wanted to use this thread to look more at structure than specifics - so I'd sooner keep company names out of it. Moreso company facts, figures and statements.

My proposition is that if a particular company is undervalued, I am unlikely to be the first or only person to notice - regardless of how much research I do.

Existing holders will become more and more convinced that they're onto a good thing, and other fundamentalists will also start to notice how 'cheap' the share is.

The outcome of such a scenario is that there will be few sellers and many buyers. The demand will cause the share price to gently trend upwards. As more researchers discover the share, the price will start increase at a faster rate.

This is what I mean when I suggest that 'it's all in the price'. When a share price is rising - the market is recognising that a share is undervalued. When a share price is falling then the converse must apply - the market thinks the share is overpriced.

Gausie

.... done ya self a real favour with this thread, all in the price ??? let me think - NO, now that took some answering didn't it.

ROFLMAO

Think Gausie has tried to explain himself well here, lighten up Leewink,

oh , you mean market sentiment now.

.... oh, and "keep company names out of this thread", you pasted it all at the top of this one, lets make it simple, do you believe in forward projections ???

Its all in the price

I like to read forward projections - they can be every bit as interesting as horoscopes and other fictional tongue-in-cheek works.

The only thing that matters is how the market receives the publication of the latest set of DCFs for a company.

The market will read the projections, review their likelihood of success, determine the meaning and effect of failure, weigh up the risk against the reward and come up with a market price that reflects all of these factors.

When a new set of projections come out, if the market thinks they're bollocks then the price falls. If the market likes them, then the price rises.

Rudy

Diiferent views, interesting leewink says facts only come from statements hmmm, what about world com and that other little company that went bust. They gave out great statements and wiped out a lot of people. How do we tell fact from fiction?

I never bother trying to separate fact from fiction.

I always assume, until proved otherwise, that folk say and
do stuff to profit themselves in life at other peoples expense.
Sad outlook, I know, but it stops you getting shafted.

I find the simplist way is to follow a trend between support
and resistance on a chart.

Stuff like Worldcom doesn't suddenly drop to bust from an uptrend.
It's usually trending down anyway, so you would be looking for
pops to short, not dips to buy, if you follow the chart.

Take a look at Marconi before it crashed.
Would you have been looking to go long or short prior to the event?



I may sound simple, but after checking out different methods, I find
that the best thing for me is to go back to basics and follow a trend
between support and resistance. I try to use swing and P@F charts
to try and keep me with the trend.

Nice to have a strategy discussion for a change.

Melnibone.

Melnibone, Im with you charts to me are what the 'Herd' are doing and is the only way to make money short term. We have all heard the let the trend be your friend comments and in most cases it works, yes you have to keep one eye on the news but if the news is reported as good and the price is falling then I follow the price. After all price is the only true measure all the rest are predictions. Even the company is assuming it will hit targets based on what it thinks will be future performance and market forces. I suppose for longer term investors the judgement has to be on news etc. but that means tying up cash with a limited short term return. How long do you leave money in a share that is not going anywhere best to act like a spreadbet cut your losses and move on. By the way I do invest as well as short term trade. KA

The only problem with facts is when they are stated.

Like Iraq had weapons of mass destruction one year ago, now Iraq has America and the coalition.


I suppose the statement could be seen as true.

My feelings are that if the fundamentals of a company are seemingly sound it may be appropriate for short term dealing. At least generally you shouldn't loose your shirt!!

Melni - it seems fundamentalists would have missed the entire dotcom bubble. Sure every tech co was overvalued. But so what? Every day they kept rising and getting even more overvalued. Many fortunes were made on the way up. Many more were lost on the way down.

I have a good friend who swears that the best stocks to choose are those where the fundamentals look good but the stock is 'unloved'. He and I trade at diametrically opposite ends of the spectrum. (I say friend - he actually once passed me a dodgy 5 note - but I forgive him)

I understand that he also married his wife because she was ugly - he reasoned that she could only get prettier.

"what about world com and that other little company that went bust. They gave out great statements and wiped out a lot of people. How do we tell fact from fiction?"

I can't comment as i'm unsure of the company or facts.

play with what you can lose, simple.

marconi, ah come on, don't tell me if you bought it you'd be in right from the top to bottom, jeez, cut ya losses, better your price or whatever, that isn't rocket science is it ??.

I don't do longs or shorts, I don't read charts for the past as they are a mere indicator of the past sentiment, Gauge the company - if your happy buy in.

Half the time if a share moves fast a trend line is useless as you can simply see its being bought or sentiment is good, past trends are a waste of time, you'll never make money that way of thinking - whats the point of gauging the past if the company multiplies its profits etc ??, and if your up on a share and you want to sell at that do you honestly look at the charts then to see what the other sheep are doing or do you make your own choice ??.

If you don't like a quiet share like some do, even though it can and will gain, don't buy it, if you can't take a tip and research it properly yourself so you understand the probabilities and the upside don't comment or consider buying it.

dont know mate, just referring to other posts, its a bit off shot now, thought it was about "its in the price".

gotta laugh, bb's are great.

see ya all, lee

Gausie

An interesting debate. At the moment it appears that you can only be a chartist or a fundamentalist and not use both to aid investment decisions.

As per my name you can tell where my base lies, though I am slowly learning some of the charting theories to compliment my fundamental understandings. I also believe there is a huge difference between what I would term short term trading and long term investing.

Personally, i believe that there are companys that are overvalued and undervalued based on sentiment but that at a point in the future fair value as
i perceive it will be revisited. Hence some of the shares I own for LTBH are unloved stocks which I believe are currently undervalued.

I also invest in stocks for LTBH where i believe the company will grow at a faster rate than expected due to their marketplace/business model/management and that over time there share price will increase with this growth.

i believe that market sentiment to big announcements is nearly always overdone (based on herd mentality), especially on the downside, which to me distorts the theory that "its all in the price" and often provides a short term trading opportunity or an entry point for a LTBH depending on the company and its situation.

in addition to LTBH, I do also short/medium term trade, mainly based on current sentiment, though i still prefer any longs to still have a sound fundamental base and on a short look for a weak fundamental base. My personal use of charting currently is more for finding an entry/exit point for a share.

I guess this game takes all sorts and a variety of methods. Each can have there claims of success and failure. I have found a method that works for me (utilising my strengths in reading company accounts and analysing company info) and I know others are successful using other methods. Personally I am always trying to learn from the methods others use to evolve my investing and trading style.

I think Guasie is trying to point out that there is another world out there that does on many occassions effect share prices.

I am a fundamentalist at heart, and look at the fundamentals for investing, but in the last year have increasing been using charts to trade and I have started to ignore the fundamentals for my decisions.

Until a year ago, I didn't realise that there is a huge difference between trading & investing. I thought because I bought a share and sold it with a profit in a week and did that several times over I was trading. But the reality is I was actually investing - just over a short period. I now have a trading account where I open positions in a share, which can be short (selling a share so I can buy it later when it drops in price) or long (buying a share to sell later when it goes up in price).

Because more and more people are trading rather than investing they are ignoring the fundamentals and just looking at the market sentiment for a share. The simplest way to do this seems to be by using charts.