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Looking for value.

Sunday, May 2, 2010

After learning TA, I tried applying it and I have made and lost money. I think I am not very good as a trader since I must have lost more than I made. My roots are in FA but it was only during this recent crisis that I beefed it up. I believe that my current style of combining FA and TA is most suitable for me.

The thing about FA is that we are looking for value. We want to buy something valued at $1 for 50c, for example, but that, to anyone who has been practising FA for sometime, is too simplistic. Let us not dwell on that for now in order to push this post forward.

When we buy something based on FA, the chances of us being disciplined and to hold on, riding through rough patches, are higher. This is because our knowledge of the fundamentals of the stock anchors us down.  We are less likely to be flighty. Personally, I need that kind of anchor. That was how I had the mental strength to hold on to Healthway Medical when some gave up.  The story is here.

I am not a good trader because I don't like to cut loss and if I do cut loss, I hurt.  I am not without emotions and I don't like feeling hurt.

I am not a good trader because I feel half clothed not knowing the fundamentals of a company.  I feel like I am looking through lens with cataracts.

A clear picture of a company's fundamentals is important for me.  I would buy into a company that is undervalued or even fairly valued as long as I see potential given the circumstances in the present and what is foreseeable in the future.

For anyone who wants to look for value in companies, start by reading up on financial statements. As good a place to start as any is here. Economics and the industry the company is found in are important considerations too. Not everyone enjoys FA just like how not everyone is a good trader.  We have to find our own niche. Whatever our choice, remember that there is no free lunch in this world.

Related posts:
Portfolio strategy: Undervalued high yield counters.
High yields: Successes, failures and the in betweens.
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The "Woodstock of Capitalism": An Insiders' View
Posted Apr 30, 2010 07:30am EDT by Heesun Wee



A 'powerful' sermon. Matthews says the Q&A session is a highlight for him -- watching both Buffett and Munger apply their guiding principles to each, individual question...."Do the right thing. Look for value. And buy and hold" is their message, Matthews says. But, "it's the difference between reading a sermon on paper and actually hearing it in person. It's very powerful....

4 comments:

Createwealth8888 said...

Stock Picking: FA or TA or Both?

http://createwealth8888.blogspot.com/2008/11/stock-picking.html

AK71 said...

Hi CW,

Thanks for sharing. :-)

David said...

Hey AK71,

I think you should read the intelligent investor by warren buffet. In it he writes about "value investing" and how you should be able to buy and sell stocks not by looking at the stock counter but by the fundamentals. I myself am still trying out both investing and "trading" which to me is a bit more like speculating.

David
InvestorDavid.com

AK71 said...

Hi David,

I am familiar with Warren Buffet's style. :) I was a pure FA practitioner too. However, over the last one and a half years or so, I have experienced for myself the usefulness of TA and how it could complement my FA.

Every person has to find a style that suits him or her. Pure FA practitioners could do very well too, I am sure. :)

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