Anyone have any ideas for contrarian bets of their own?
At the risk of looking like an idiot (have never worried about that). I’m looking closely at Nokia. I’m skeptical of Apple’s traction worldwide as I doubt the majority of the world will be able and willing to pay a substantial premium for the iPhone which tends to leave Android as Nokia’s real competitor in the smartphone market in low-midrange devices. I really like Windows Phone, and I don’t see it totally unrealistic that Nokia can strike back with a few good products.
I’ve only started thinking about this over the last few days, so nothing concrete yet. But definitely interested in hearing any contrarian ideas that others may have.
please define contrarian….not sure what that means really….
is my banco santander contrarian?
I think contrarian is going against the consensus. Yes stnander is contrarian. I think noone in the right mind would invest in Nokia right now.
Cities teem with evil and decay, let’s give it a good shake and see what falls out!!
for every security there is an owner…..
there are value guys i know who own nokia…i know francis chou owned it….
Nokia is up 12% today. Evidently, someone else thinks that it’s worth buying.
“I’m a CPA! I got money b***h!”
nokia is sorta like Rim no?
i figure if you can figure out the replacement value for these guys, than its good….it is quantitatively very cheap and their patents are problably worth their market caps alone, but i can’t figure that out so i sit out until someone convinces me of doing something….
Not really, with Rimm, their platform is dying, with nokia, they’re (slowly) movign to a new platform - wp8. I suppose it’s levered to success of winp8…not saying it’s an actionable idea…but could develop into one down the line.
Cities teem with evil and decay, let’s give it a good shake and see what falls out!!
how would this platform change the fact they’re losing market share?
i just need to know if its compatible with android…..
“Contrarian” is sort of a weird way to look at a stock. Since market consensus determines stock prices, if we define “contrarian” as “not equal to consensus”, any price prediction that is not the current market price is contrarian. That is, a long or short position in Nokia are both contrarian. By extension, any position where you want to make money (other than through beta) is a contrarian bet.
Anyway, Nokia is not the same as RIM, in my opinion. RIM can only succeed if both its hardware and software succeed. Nokia is mostly a hardware company. Their hardware is not bad either. It’s just a matter of matching it with the appropriate operating systems. Sure, their product is not unique (like Apple), thus margins will be thinner. However, they don’t have all their eggs in the same bucket like RIM, making Nokia much less risky.
“I’m a CPA! I got money b***h!”
Nokia’s not compatible with android, they’ve gone all in on Windows Phone.
Cities teem with evil and decay, let’s give it a good shake and see what falls out!!
This is how I think of it as well. Likewise, every investor is a value investor because the definition of investing is to deploy some amount capital with the expectation of getting more capital back at some future date, thereby generating value. No one sets out to get less capital back (an anti-value investor).
Symantecs aside, if you look around the industry for a while, it becomes clear that most people are doing pretty much the same thing and are neither contrarian nor value investors. Even people who are “value investors” tend to be very attracted to stocks that have already gone up (“Look, it’s working!”). Doesn’t mean you have to catch the bottom, but people are psychologically very attracted to stocks at their 52-week highs, even many “value” investors. I posted a stock pick on a major financial site that is invite only for professional investors – the chart looked horrendously bad with 3 successive gap downs. My pick was well thought out and researched but received a low rating from the investor community. That stocked doubled in less than 12 months for the reason I said and is probably on its way to doubling again. Take comfort in your meaningless charts, bitchez.
The sad truth, despite what CFA, MBA, books, Buffett, and everyone / everything else says, is that the only way to generate “value” is to buy something that someone else is going to be willing to pay more for at some future date. That’s it. I prefer the term “catalyst investing.” Trust me, plenty of small cap stocks stay cheap for loooooong periods of time in the abscence of a catalyst. Tell me what other people believe, why they are wrong, and what that means for the stock – that’s the way to invest.
“I lost my wife to a margin call. Wives get mad when you come home and say, ‘Sweetheart, I lost the house today.’” - Dennis Gartman on trading mistakes
what stock is this you feel will double?
If I told you it would out me because my write up is the only one on this ticker for the last several years (if ever) on both VIC and Sum Zero. That said, I am working on a few others now that I think have good potential and may post on those when I finish the analyses, however, many of the recs are sub-500mm of cap and may not be interesting to you.
“I lost my wife to a margin call. Wives get mad when you come home and say, ‘Sweetheart, I lost the house today.’” - Dennis Gartman on trading mistakes
Studying With
the Global Recovery will really pick up steam in th e next 12 months, interest rates will rise, unemployment will drop to 5% and FB will hit $100
i am interested in all caps……….so please feel free to share
Banana stands. There’s always money in the banana stand.
bromion, i think we are pretty much on point with our investing views. i’m just more trading oriented + shorter time frame as i have a preference for higher volume / larger cap names. always a pleasure to read your posts.
Career Coach -- www.linkedin.com/in/numicareerconsulting
How to Break Into Equity Research -- www.mergersandinquisitions.com/equity-research-recruiting
That’s a good point, numi. I do not really see myself ever becoming a trader, but I am starting to try to work more momentum into my “value investing” approach. There are few things quite as frustrating as having a well reasoned view point on something but having zero market reaction (or even a negative reaction) – the only logical conclusion is that either you are wrong or that everyone else is wrong, neither of which is very comforting. If I am going to buy something, I want it to go up pretty quickly and not take 3 years to play out. In theory a 3 year call is among the most attractive you can make as an investor because few investors look out that far and prices for many securities are much less efficient on a 3+ year basis, but in reality, 3 years is an effing long time to wait for something to work out (it sounds great in theory but try waiting that long for something to pan out) and as we have all seen, lots of unexpected things can happen over a three year time horizon.
For example, back in late 2007 I met with the CEO of Isilon Systems (formerly ISLN) and was pretty impressed with the company and its candidacy as a buyout (pretty clear case to be made at that time). The stock was way down from its recent IPO after a couple of missteps. I watched it for a while and bought some around $6 if I recall correctly. I was brand new to investing and did not have a real exit strategy per se but $6 seemed pretty cheap. Lehman then proceeded to hit not too long after that and the stock got down to $2!!! I cried a little inside but did not sell it (nor did I have the balls to buy more at $2). Isilon did get bought out, and the stock went out around $30 in mid-2010. I made a lot of money on that investment but it took FOREVER to play out and was pretty uncomfortable in the mean time.
I have seen many examples like that since then. The market is a discounting mechanism for the next 6 - 12 months and is not that efficient beyond that time frame (at least in small caps). But you better be pretty skilled at timing your entry or you can go broke being correct. I’m trying to focus on finding “value stocks” that are about to become “growth stocks” and develop momentum characteristics in the not-too-distant future. I feel like value investing is pretty dangerous unless you are pro and that anyone operating out of their arm chair at home should stick to a trend following strategy and maybe overlay some basic fundamentals onto a momentum strategy so you don’t get killed owning garbage – go with the hot 50 from IBD and avoid anything that looks overly suspect with a crazy business model, that sort of approach.
Basically, I think it’s definitely possible to be “too reasonable” for the stock market. You should be unreasonable because other people are going to be unreasonable. While I don’t advocate being an emotional investor, you certainly have be aware of how crazy and emotional other people might be. So the test is always, “Would an unreasonable person get excited about this?” If the answer is yes, you might have a good investment on your hands.
“I lost my wife to a margin call. Wives get mad when you come home and say, ‘Sweetheart, I lost the house today.’” - Dennis Gartman on trading mistakes
.
“I lost my wife to a margin call. Wives get mad when you come home and say, ‘Sweetheart, I lost the house today.’” - Dennis Gartman on trading mistakes
ohai - agree with your view and at some point a transaction has to take place. Imo, contrarian/consensus can be distilled to providing or taking liquidity.
I have a loong timeframe for my investment theses…like 5-10 years, and I’m ready to wait that time (I think). I just want to find stocks that are going to compound value over many years.
However that gets boring, so I also spend time looking for short term situations like net/nets and microcaps.
Cities teem with evil and decay, let’s give it a good shake and see what falls out!!
I like value + momentum.
One issue is when do you sell a position. Seems to me one should sell once it has reached a fair price and lost momentum (noting that momentum loss could happen well above fair price). There are those like Frank and Buffet who say that you should just hold them forever, and that’s not necessarily wrong, but it seems to me that one might as well hold the market portfolio if a stock is fairly priced. And if it was undervalued and has become fairly priced, what’s to say that it can’t become undervalued once again?
Buying something is actually relatively easy. It’s knowing when to sell that is the tricky part.
You want a quote? Haven’t I written enough already???
i need to work on my selling skills…..so far, i have sold mainly to buy other stocks or liquidate a mistake…….its not necessarily forever, i have only been doing it for about 3.5 years which isn’t long at all……i don’t see anything under 5 years as being particularly long….
Buffett does NOT say that you should hold them forever. He says that his *favorite* holding period is forever, and it makes sense, but that does not imply you should hold all stocks forever….so many people have that mistaken impression it’s not even funny.
Cities teem with evil and decay, let’s give it a good shake and see what falls out!!
This is a completely logical position to take (very bchadwickian) but again – you are thinking like the reasonable man. The most successful person in the stock market is the reasonable man who understands how the UNreasonable man thinks and can exploit that.
Obviously this is easier said that done, but the theory is that you would actually wait until it is overpriced if the momentum appears ready to continue. If you have a fair price in mind, there is a good chance that 90% of the other people in the stock don’t have that exact same view. If the stock is experiencing growing EPS and multiple expansion, it will tend to attract other investors as well as possibly sell side coverage. Initiation of coverage, company road shows, mention on blogs, etc. have the potential to boost the stock well in excess of fair value. The stock will only become undervalued again if you have a major market pull back or the company disappoints its investors (so figure out what the unreasonable men are focused on and make sure that is moving in a favorable direction).
The best stocks are value stocks that become momentum (multiple expanding) stocks.
I would only hold something forever if it were a growing annuity with high barriers to entry.
“I lost my wife to a margin call. Wives get mad when you come home and say, ‘Sweetheart, I lost the house today.’” - Dennis Gartman on trading mistakes
Studying With
MLPs?
“Some people make shoes. Some people make houses. We make money and people are willing pay us a lot to make money for them.”
MLPs – like oil & gas MLPs?
I don’t do anything with those. The firm I work for is an investment partnership. So it would be a partnership investing in a partnership which doesn’t really make sense IMO (although plenty of people disagree with that thinking). I also systematically avoid things that are highly commodity dependent. I have no clue what the price of oil is going to do in the next 1 month / 6 month / 12 month / 3 year / etc. period of time and I don’t want my investment returns to be based on that. I almost always tend to focus on operating businesses, with a strong preference for industrials and service businesses (both consumer and business services).
The interesting thing about O&G is that a lot of companies have a demand spike somewhere around $75-80 a barrel in oil and the Street knows that, so you get increased volatility at certain price ranges. I just want to focus on operations, not some guess about black goo.
I never look at O&G, financials or biotech – waaaaaaay to much guess work for me.
“I lost my wife to a margin call. Wives get mad when you come home and say, ‘Sweetheart, I lost the house today.’” - Dennis Gartman on trading mistakes
I’m with you bromion. I’m fine with a value criterion for selecting stocks, but using momentum for entry and exit decisions. And I think you’re right that there’s no reason to sell something at fair value if the momentum is still going upwards.
Curtis Faith says in “The way of the turtle” that you should only exit a trade after it has started going against you, rather than have a profit target (like fair value) because once it’s gotten to your target, you never know exactly how high it can go. I know that that’s trading versus investing, but active management decisions often have a trading component to them.
You want a quote? Haven’t I written enough already???
Would you recommend the turtle book, bchad? I have looked at the reviews on Amazon but never purchased it. I did read William O’Neill’s book on CanSlim and I guess I don’t really get that book – the IBD approach always strikes me as pretty risky, in part because I usually end up trying to short some of the top performers on that list (anything with an unsustainable business model). I like the idea of trend following but want to be on the early side of the trend, not late trend, in other words, although clearly much easier said than done. It always strikes me that the momentum guys get involved in the most dangerous part of the stock’s upward trajectory, and it’s fine and good to say you have stops in place, but what if the stock opens WAY down? MAKO is a good example – how well would stops have worked there? Not so much.
“I lost my wife to a margin call. Wives get mad when you come home and say, ‘Sweetheart, I lost the house today.’” - Dennis Gartman on trading mistakes
I like the Curtis Faith book, though I read it early in my career, and don’t subscribe to it hook, line, and sinker. The bit about waiting for a drop from the peak to close a position stuck with me, although I have sometimes considered modifying it to close out half a position at a profit target and letting the other half follow the “wait for the top” rule. The problem with doing it half and half is that it then makes it far more complex to do the position sizing, because you have to figure out if you have a full position on or half a position that is waiting for a drop to close out. I just haven’t thought through how to do this.
I find Van Tharp’s book better and more systematic in its coverage, but Van Tharp covers a much wider set of trading criteria. I think that reading Faith first was helpful because I could focus only on his system, and then when I read Van Tharp, I could see how the things that Van Tharp talked about were themes and variations on Faith’s stuff.
What virtualy all the trading books I’ve read have emphasized (Van Tharp, Faith, Elder, etc.) have emphasized is how control over your emotions is so critical in both investing and trading. They just chalk it up to rewards from discipline, and I find it easier to be disciplined when I’m relying on some kind of quantitative tool rather than trusting my subjective evaluations of stuff.
But I think there is more to it than just “being disciplined.” The fact that other investors are reacting emotionally itself creates the profit opportunities, so the discipline is in being able to maintain a clear head in the midst of panic. This squares up with some of your earlier observations in this thread about being able to take advantage of other peoples’ irrationality.
You want a quote? Haven’t I written enough already???
As for stops, I’ve found that there are two levels of risk control.
1) Stops… this is for ideas that prove themselves wrong early on or just never go anywhere. It takes you out of a bad trade, but it also frees up capital to be deployed to better ideas.
2) Position sizing… this is actually your first level of risk control… ideally your position sizing is done so that your portfolio can withstand very large mistakes in any one trading/investing decision. So if you have something that gaps through your stop, yes, you will get hurt more than your stop makes you think you would, but the impact to the portfolio itself is not lethal. This might reduce some of the participation on the upside, but as long as you aren’t getting your stops gapped through on a highly regular basis, you can keep those returns skewed positively.
You want a quote? Haven’t I written enough already???
Pages