Literacy Capital Share Discussion Threads

[invisage] 30/5/2011 17:58

Free capital from all the small caps you have invested in what would you say are the top criteria each one should have met ?

The ones I can think of are

-Profitable
-low pe
-potential high growth rates in future years
-low debt
-ideally a dividend
-ideally directors hold a decent chunk of the stock
-good institutional backing
-track record of delivering share holder returns


I can't think of another 2 reasons.

[fyodor espenson] 30/5/2011 17:54

please dont entertain invisitard, he is a class A plum.

[invisage] 30/5/2011 17:52

I'd rather not go to 50 AGM's...Imagine the number of stocks I could research in that time period. :-)

[invisage] 30/5/2011 17:51

frteecapital

lol - That is a VERY GOOD analogy. I told you, your very smart! :-)

[freecapital] 30/5/2011 17:49

(*) FOOTNOTE - occasionally this isn't true. Sometimes your counterparty is trading because he needs cash, or he has cash to invest, or he's bored, or the stock is entering / leaving an index, or a fund is being closed down, or some other extraneous reason.

It is a very good idea to look for these counterparties with "non-financial" motivations, and trade with them.

[freecapital] 30/5/2011 17:47

As well as the Jim Slater point that fleas can jump (if not gallop), the other point about smallcaps is this.

With a smallcap, if you do your homework - read the accounts or ring up directors or go to 50 AGMs every year - then you have a good chance of knowing more than your counterparties.

This is because your counterparties are muppets. Some days 90% of the volume in XYZ Smallcap Superstock will be people who saw it tipped on ADVFN or in the newspaper. You want these people as counterparties.

With largecaps, your counterparties are likely to be mainly Fidelity, Goldman Sachs, etc. You will never have 90% of the volume represented by muppets.

Muppets is slightly harsh, but reality is harsh: on every(*) trade, both sides think they know more, and one side is wrong. Are you smarter than your counterparties?

[invisage] 30/5/2011 17:21

davydoo

You make an interesting point. I think the large caps that go out of fashion become quite obvious well before the big drops come.

I think people had plenty of time to get out of the likes of HMV & YELL. But the likes of BHP, RIO, BP, VOD, HSBC, Tesco etc I expect these businesses to have many more years in them.

I think with reasonable probability one can expect these businesses to have grown over the next 10 years.

I very much agree with your statement

whilst a small cap could be the market leader in a growing field.

But do you have the skill to find the small cap that could be the market leader in a growing field? Can you find the next ASOS?

I think that is very difficult to do & most people lose a lot of money trying. Whereas finding a good quality large cap on a cheap valuation is not difficult at all.

I think someone can do reasonably ok by simply buying a large cap with a healy balance sheet that is forecasted to grow profits in the coming years but is currently suffering from bad sentiment and make money.

The problem is you can't have a multi million £ portfolio using this method. So maybe the ultimate solution is to become a better stock picker & try and find the gems that are likely to be the next ASOS?

When reading Free capital most of the guys that have made a lot of money have done so from Inveting in small caps.

[davydoo] 30/5/2011 16:59

Invisage, whilst in gerneral large caps my be less risky than small caps, i dont think you should extrapolate that fact to suggest 'the average investor is more likely to lose from investing in small caps'

A large cap could be an unprofitable, uncompetitive business in a dying industry, whilst a small cap could be the market leader in a growing field. When all other facts are considred, whats the current capitalisation got to do with how you make your investment choices?

By the way freecpaital, I very much enjoyed your book. I bought mine through Amazon on the Kindle app for iPad. I'm glad you mentioned Market Wizards, as I had enjoyed those books and audio cd's in the past, but as they were often commodity related, your book had far more relevance to me as an investor.

[invisage] 30/5/2011 16:46

freecapital

What are your thoughts on Investing in large caps as opposed to Small caps ? Don't you think it is less risky to invest in large caps then small caps?

I know elephants don't gallop and all that but if the average investor invested in just large caps & collected dividends over a lifetime are they not likely to make money as the average investor is more likely to lose from investing in small caps?

[freecapital] 30/5/2011 15:29

I don't know which physical bookstores have it. If you need a copy quickly, buying from the publisher's website (Harrimam House) is probably a slightly safer bet than Amazon.

[andy] 30/5/2011 10:09

freecapital,

Apart from Amazon, do any of the bookstores stock your book?

I am off on a long flight on Friday so if I can purchase in the street I will take it for the journey.

[zangdook] 30/5/2011 03:33

Invisage

How much do you pay for the one-on-one investment advice you keep soliciting?

[stegrego] 29/5/2011 22:49

Ummm he is the author.....

Invisage is a brain drain, engage with caution.

[invisage] 29/5/2011 20:55

free capital

Thank you very much for the above links. I think they are very useful & I will look to buy the books to have a read.

I've worked out who you are in the book free capital. But I don't want to disclose it on a public bulletin board.

I think your quite an amazing character & have a remarkable background. I am realy impressed with what you have achieved.

I won't reveal on these boards how I worked it out, but you left a big clue :-)

I would like to get in touch and speak to you off board & want to learn from you.

Would it be ok if I left my email adress? I think I can learn a lot from you and would appreciate it if I can speak to you off the board.


thank you

[freecapital] 29/5/2011 00:14

All the above profile only USA professionals, and traders rather than investors.

For a UK focus, and more of a long term focus, there are two much less well known books.

"Money Makers"

by Jonathan Davis

Profiles based on interviews of Anthony Bolton, Ian Rushbrooke (RIP), Jim Slater, Colin McLean, etc. Out of print, but worth getting 2nd hand from Amazon or similar.

"Investing with the Grand Masters"

by James Morton

Similar to Money Makers. Some overlap of subjects (eg Anthony Bolton & Colin McLean in both), but anything about these guys is well worth reading.

The quality and focus declines towards the end of the book, in a chapter which profiles the activities of Prince Charles (!) with his charity the Prince's Trust. This was all very worthy but I thought the claimed connection to investing was a stretch.

Also out of print. Overall, less worthwhile than Money Masters.

[freecapital] 29/5/2011 00:12

Same interview / biographical concept as Free Capital, but focusing on professional not private investors:

"Market Wizards"

by Jack Schwager

The original and still the best.

"New Market Wizards"

by Jack Schwager

Almost as good as the first.

"Stock Market Wizards"

by Jack Schwager

General consensus seems to be that this is a step down from the first two, but still well worth reading. I don't know, I haven't read it.

[freecapital] 29/5/2011 00:08

SOME ALTERNATIVE BOOKS, FOR COMPARISON

The same concept as Free Capital, but about investors in the US not the UK:

The Warren Buffetts Next Door: The World's Greatest Investors You've Never Heard of and What You Can Learn from Them
by Matthew Schifrin



I have linked to the amazon.com (not co.uk) site because there are more reviews there.

[yaahoon 4 insurance] 26/5/2011 06:12

Where to buy?

[zangdook] 26/5/2011 02:03

Invisage

Why don't you do it? You could make a compilation of your often rude attempts to interrogate contributors on advfn.

[invisage] 25/5/2011 19:29

Still waiting for my copy, hopefully in the next few days.

Freecapital - perhaps you can interview others and expand the book?

Do you think you can find 50 good investors to compile into a book like Market Wizards ?

[stegrego] 25/5/2011 19:19

I bought it a few weeks ago on Kindle for my iPad.
Doesnt run out of stock and doesn't need reprinting :)

[freecapital] 25/5/2011 19:09

Yes that was Vernon: "Success in investing consists mainly of avoiding big mistakes."

But it's harder to get people to talk about mistakes. Especially to an unknown author. It may be easier for a second-time author.

[ukinvestor220] 25/5/2011 17:43

thankyou freecapital for putting this together - an excellent read.

someone in the book suggests that it is often insightful to read about investors who have failed, as it is possible to learn more from their mistakes than from the actions of the successful. now that would also be an interesting read :)

[2gekko] 25/5/2011 10:07

I ordered through Amazon and got mine yesterday,I have read 4 chapters so far

The book is a good insight into how other people trade/invest and I am enjoying reading it having found it a refreshing change from the many 'how to' books

[freecapital] 24/5/2011 18:45

Review by UK-Analyst.com:

"Main similarity is that all of them...work very hard...they simply love the thrill of the chase"

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