Literacy Capital Share Discussion Threads

[effortless cool] 06/6/2011 15:16

Invisage - 6 Jun'11 - 13:08 - 73 of 80


freecapital

Your quite a remarkable chap. Very impressed with how you have marketed and promoted the book.

Quite impressed with you as an investor in the book as well.

What I did'nt understand is why you left a big clue as to who you are? It is almost as if you wanted to be known by the reader.


Invisage - is the clue to which you refer his name in large letters on the front of the book? Very careless of him, i agree.

[energyi] 06/6/2011 15:04

There's now an INTERVIEW with the Author :

Guy Thomas is interviewed by Dominic Fisby in the latest Frisby's Bulls And Bears.

Research actuary turned private investor, Guy Thomas, author of Free Capital: How 12 Private Investors Made Millions In The Stockmarket discusses his book, some of stories and methods in it, and also looks at some of his own investment strategies.


FBB Link:


Read the BLOG about the book:

[davydoo] 06/6/2011 14:49

Fair point. As a small cap investor I'm already facing substantial liquidity issues on some stocks and have relied on bids to get me out. I face a similar thing now with a large holding in YGH.

[horndean eagle] 06/6/2011 14:43

davydoo,

I wasn't referring to the psychological aspect of having a larger pot of capital. My point was about liquidity. Much harder to enter and exit less liquid stocks. Speaking from experience here.

[davydoo] 06/6/2011 14:09

I disagree horndean, my trading performance has been transformed since i reached a level that wasnt all or nothing decisions, I might not have a million to invest yet, but the position I'm at gives me confidence I could manage it more rationally and with less emotion than days gone by when my invested capital meant buying a house or staying rented.

[invisage] 06/6/2011 14:06

Yep I know a few others from the book too. Certainly an interesting read.

[horndean eagle] 06/6/2011 14:04

Enjoyed the book. Recognised a few people from it. Shows that there are many ways to skin a cat. A few of them seem to have got lucky with being in the right place at the right time. Give it a another ten years and a follow up book would be very useful. Turning 100k into 1m is a very different proposition from turning 1m into 10m.

[zangdook] 06/6/2011 13:51

Thee are many things you don't understand, Invisage. Here's a tip: you're not thinking hard enough. Screw up your eyes, hold your breath and concentrate until you can taste blood.

[invisage] 06/6/2011 13:08

freecapital

Your quite a remarkable chap. Very impressed with how you have marketed and promoted the book.

Quite impressed with you as an investor in the book as well.

What I did'nt understand is why you left a big clue as to who you are? It is almost as if you wanted to be known by the reader.

[freecapital] 06/6/2011 12:16

Audio interview with Dominic Frisby ("Frisby's Bulls And Bears) about Free Capital:

[fyodor espenson] 31/5/2011 21:40

not reall a competitor..these are hedge fund guys

[freecapital] 31/5/2011 11:59

Another competitor book...

New Market Mavericks

by Geoff Cutmore

Eight UK mainly professional investors, at least moderately well known. Hugh Hendry, Michael Browne, David Murrin, Philip Manduca, Chris Locke, Richard Cunningham, Peter Toogood, David Schwartz.

I haven't actually read this , it's £36 on Amazon! Wiley are expensive.

[freecapital] 31/5/2011 11:58

davydoo I agree institutions sometimes have non-financial motivations. Or more precisely, motivations that are unrelated to the future prospects for the share. Some will sell arbitrarily if market cap falls below a certain level, eg £50m or £100m. Peter Gyllenhammar talked about this in the book.

I have also had cases where I bought a stake just under £250k off a very large institution and I had the feeling that because their stake was now under £250k, it was not worth their while to follow it, they just wanted to get rid.

[davydoo] 30/5/2011 19:14

freecapital, very good point about counterparties with 'non-financial' motivations. Whilst i agree that you'd rather your counterparty was a 'muppet' than an institution, sometimes small caps can benefit from arbitary selling by institutions being 'corporate muppets' I am currently observing this with DWN, a once much larger company, that is now a very small but profitable company, the previous largest holder Schroders, appear to be on an automated exit strategy regardless of news. Its like the fund manager has made a decision to get out, largely i suspect because their loss is so great and any future gains will have a minimal impact to the future performance, and their dealers are just exiting as instructed into any buying. Ive been buying a lot of their sells. davydoo v goliath.

[invisage] 30/5/2011 18:58

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 18:54

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

[invisage] 30/5/2011 18:52

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 18:51

frteecapital

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

[freecapital] 30/5/2011 18:49

(*) 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 18:47

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 18:21

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 17:59

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 17:46

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 16:29

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 11:09

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.