Venture Life Share Discussion Threads

[attrader] 16/5/2020 10:53

Good list APAD, i can definitely learn few things..

Here is mine on how NOT to invest based on own mistakes. I am hoping to not repeat these by posting these.

- Buy mining companies with undeveloped asset that require stupendous investment in infrastructure.
- Follow celebrity investors & hedge fund managers. Cook up bull case and overlook negatives
- Try to become a trader without realising how difficult it is to be successful at trading
- Do not investigate background of management or their previous ventures
- Buy oil explorers hoping to strike big
- Do not research product, customers, competitors, company culture. Buy based on financial statements
- Buy cheap value stocks hoping for market to re-assess their valuation
- Buy stocks with no competitive advantage
- Buy stocks where management runs business for their own benefit
- Buy cyclical capital intensive businesses with no history of superior ROIC
- Buy rollup business without any acquisition process, management skill & strategy
- Buy intensively competitive sector business where only winner is customer
- Buy stocks in complex sectors with difficult to understand businesses
- Double down on bad investments rather than cutting losses magnifying problems
- Cling on to bad investments (where thesis has been invalidated) hoping to break even
- Avoid high PE ratios stocks, ignore growth potential and potential upside
- Do not buy slowly in steps. Wait for price targets and loose opportunities

[redartbmud] 16/5/2020 10:51

The conclusion on the use of stock screening to exclude the rubbish is valid.

I take the point on Beddard, but having held stocks owned by Beddard, I might perhaps take a slightly different view on some of his weightings. It would be impossible for two people to take exactly the same view on all aspects of the valuation of a company. We all have very different backgrounds and experiences.
I would not presume that I can compete with him for a minute.
My knowledge has been built from reading and analysing the reports, attending company meetings and quizzing the directors on particular points of the business that interest me in particular. Based on those facts, I my opinion is bound to differ.
We both agree that the company is worth a long term investment.

Should we therefore delegate stock selection to a trusted professional, and therefore become a disciple with our funds?

red

[apad] 16/5/2020 10:22

General stock screening has little value for finding companies, although one might argue that it is a useful exclusion tool.

Beddard uses stock screening well. He creates his own screens based on a very focussed set of criteria that describe a particular type of company. It's a 'first tool' followed by a set of less numeric criteria

apad

[redartbmud] 16/5/2020 10:12

tlatsatt

Sorry, I confess that I have only really been tinkering aroung the edges for a while now.
Because of the electronic age there is now so much freely avaiable 'noise' generated by the competing experts, it is very easy to decome infected.

tlatsatt makes a good point about time in front of the screen.
Being basically locked yp for two months has definitely impacted on my ability to effectively discriminate, and ralionalise my thoughts. Maybe I should step back, for the time being.

What role does stock screening play in the piece?
Can we currently believe in the data that is being presented?

red

[thelongandtheshortandthetall] 16/5/2020 09:55

Red
My self analysis:

My weakness is primarily 'not' being a rabbit in the head lights.

Yes I get in and out quickly but med to long term results suffer.
I don't mind buying at any price because if the tide turns I know I can jump ship in the blink of an eye.
I can only assume that attitude leads me to buy more on whims than on long term commitments.

Had I held onto my winners and losers I'd be better off - esp if I added to the winners as time went along.
Something I need to address. Having more time in front of the screen is to my investing detriment.

You called me tinkerman before Red - completely justified.

YTD I'm up a bit. And the past few months has been entertaining (to tinker) but that isn't the goal really is it.
Yes..I might be up a bit YTD due to selling quickly when the virus was appearing on the horizon. But over the last 12 years say, I would be A LOT higher up overall, if I didn't tinker as much.

[apad] 16/5/2020 09:50

1. Buy quality companies — judged by what they do, and what makes them special, not as if they are an anonymous balance sheet.
2. Write the story of a company in a single paragraph. Make your own decisions.
3. Ignore celebrity investors and commentators paid by the column inch, but take on board other folk's arguments when they are backed by data.
4. Don't buy company stories you don't understand - ignore investor dazzlers.Don't follow 'how to do it' books.
5. It's a chaotic system that is not governed by rules, so develop an approach that suits you.
6. Read the directors biographies and favour companies run by sector specialists - especially if they own a decent percentage of the company.
7. Ignore companies in highly competitive sectors - banks, supermarkets, insurance companies, ....... you can't understand their balance sheets, and neither can anyone else.
8. Treat roll-out companies as positive if you buy early, but beware management believing it can go on forever.
9. Roll-up companies are attractive when they are buying smaller, privately owned, companies in a focussed sector.
10. High growth companies must have rapidly increasing turnover that management can deploy - do not use conventional metrics (e.g. PER) to assess such companies.
11. Ignore cyclical companies unless you understand the mechanics of the sector.
12. Do not buy infrastructure companies - their hunger for capital is satisfied by promising jam tomorrow.
13. Do not buy large conglomerates.
14. If you don't need the money, and are young enough, then major market slumps are just a buying opportunity.
15. Regularly increasing dividends, year on year, are the nectar of the gods - unless they are funded by asset sales and rent backs.
16. Find your own metrics, e.g. turnover per employee, that are immune from manipulation by evil accountants.
17. Scan the financial record for something unusual and try to understand its cause.
18. Buy in stages and keep researching. Look harder for negatives than positives and beware confirmation bias.
19. If a company buys a larger company - sell, because there are no financial indigestion medicines.
20. If a share falls steeply either sell or average down - don't freeze in the headlights.
21. If a share moves sideways, judge whether it is resting, after rapid growth, or is going nowhere long-term.
22. Run winners if the story hasn't changed.

[redartbmud] 16/5/2020 09:05

An interesting argument is developing.

Is there something new to be found in the arguments?
Markets trive on argument and counter argument, buys and sells.
Different camps - growth investing, value investing, dividend investing, buying tne dogs of the prrviuos year etc etc.

Question:
If we could analyse all of the recommendations issued by the tintins, since the beginning of the latest turmoil, would the ratios of buys v sells be significantly different in today's markets?
Their job is to help create a market in the shares on which they comment.
Logic told us to sell at the beginning of the episode, and buy back at much lower prices. When is that point? There are exceptions to that rule, and for those shares, you would now be out of pocket.

The income argument has largely gone out of the window. I am convinced that dividends will be rebased more closely to prevailing cash interest rates. It will still generate a premium, for the risk of holding an investment that 'could go down as well as up'.

As I see it, little has changed, when applying fundamentals.
1. Don't invest in companies with flat or declining profit streams, whose balance sheet is stuffed with debt. Most of the income is used to cover interest payments, and that may account for all or most of the free cash flow. A small dip in profits has a disproportionately negative multiplier effect, and destroys any perceived value in the business.
2. Seek out quality. The key is finding growth in vibrant sectors of the market. One where management is hungry for success, but not reckless it it's pursuit.
3. Companies that you can understand.
4. Recognise disruptors that can flourish - the Boos and Fevers of this world. They have been preceded by a long line of successful businesses, such a Rsw and Spx, but in a different time, and a different sector.
5. Throw away the conventions - maybe things like 'sell half on a doub;e' etc. There has always been an argument to run the winners, and add along the way.
6. Be ruthless, when the story changes to the negative. Most of the time, the share price falls, and it may take years to recover. Don't be afraid to take losses. The reamining cash can be reinvested more profitably elsewhere. How long must I wait for Equals to actually produce something positive?

Just a ew things to consider.
Please add to the debate. Now is a good time for re-evaluation.

red

[thelongandtheshortandthetall] 16/5/2020 09:03

Send them an email APAD?

[apad] 16/5/2020 08:50

Red,
I have been probing the FEVR annual report (100 pages and far too many bloody pictures!)
2019 debtors were £66.9million cf £6.7million in 2018.
There are no comments or explanations I can find. Do you think this odd?

agm statement on the 4June should indicate the extent of the On-Trade hit, which I expect to be massive. It's probably one of those occasions when the problem is well-known but the share price takes a hit when the numbers come out.

The fever-tree section in our local Coop is empty.

apad

[lauders] 16/5/2020 02:49

Belated Happy birthday from me too APAD. Hope you enjoy many more fruitful years! Enjoy the weekend too!

[adamb1978] 15/5/2020 20:48

Agreed Hyrdus - very good plan, and one which I have to fight to ensure I keep to

[hydrus] 15/5/2020 20:37

Yep APAD BOO and ASOS (although I accept BOO is the better company and my stake is positioned accordingly) are likely to take a huge market share over next couple years. How to value that?

[hydrus] 15/5/2020 20:34

Adam by a 'Woodford' I meant more that I'd tried something outside my comfort zone. Lesson for me has been to stick to my strengths

[apad] 15/5/2020 20:27

Indeed Hydrus, Terry Smith has been arguing against Value investing for a long time and it has been out of favour for a while now.
I was wondering by how much the current divi cuts will accelerate or confirm the trend.
Whenever the tintins criticise the price of a stock like BOO they seem to fall back on traditional judgements of appropriate PERs. Makes easy hand waves, I guess.
apad

[adamb1978] 15/5/2020 20:14

Good names Hydrus. Personally I wouldnt buy Woodford type things unless we get back under 5000 on UKX such that there is a better chance of some capital appreciation to supplement the income (...and obviously the income comes off the share price anyway so isnt additional).

I like the names you're in, but I'm not brave enough to buys those now. Things like KAPE, MXCT, D4T4 etc have the potential to join those names over the next few years and become 5-10 baggers.

Also worth looking at GTC - the market cap is less than the cash and surplus property. Values the existing (profitable) business at less than 0

[hydrus] 15/5/2020 19:30

What's the point in investing in anything other than quality growth? If I'd not done a woodford (my attempt to build an income portfolio) and stayed fully invested I'd be 20% up YTD. I wouldn't have slept mind you being fully invested. Strengthened my resolve to stick to the likes of BVXP, TM17, TSTL, MSFT, AMZN, BOO etc. Sleeping very well now.

[apad] 15/5/2020 19:24

I suppose I should top-slice BOO because management took advantage of the high share price to raise capital?
Rather, it gives me confidence in the management. It's too easy for the tintins to comment on the high valuation.
Maybe we will see wider spreads in valuations now that the likes of RDSB are not producing divis like wot they used to.

apad

[thelongandtheshortandthetall] 15/5/2020 18:49

Covid has woken us up to our interdependencies that cross boarder's and perhaps it isn't quite such a good idea where certain goods are concerned.

[redartbmud] 15/5/2020 18:43

The UK media has been very quick to criticise the government for it's lack of planning for a pandemic.
They have singularly failed to consider other aspects of daily life and business practice to secure continuous supply of food, medical and consumer goods etc.
They have fuelled the cheap consumer society that has also impacted significantly on local jobs.
Maybe this should be reviewed constructively, when the panic is over.

red

[apad] 15/5/2020 17:26

"Covid-19 has uncovered weaknesses in France’s pharmaceutical sector. With 80 percent of medicines manufactured in Asia, France remains highly dependent on China and India. Entrepreneurs are now determined to bring France’s laboratories back to Europe."

apad

[apad] 15/5/2020 17:13

Thanks for the best wishes, folks. Appreciated.

I think I have noticed that there are a couple of times to trade the UK market:
11:30 - 12:00 & 16:00 - 16:30.
Am I imagining patterns?

apad

[attrader] 15/5/2020 15:40

Happy birthday Apad, wish happy sailing and another year of big gains.