# My stock picks



## financeguru (Jan 18, 2010)

OK, so i want to present my stock picks as to currently what i'm invested in...always good to get insight from fresh perspectives.

About me: I'd consider myself a growth focused aggressive investor. I'm aiming to have a million dollar portfolio by the time i turn 40 and plan on leveraging, using the SM etc. to get there. Currently 33. 

Here is what i hold right now and my rationale of holding onto some of the stocks i have:

Barrick -ABX (Gain: -6%, Portfolio Holding: 5%)
I have been holding ABX for the better part of a year now and have seen this stock do nada despite Gold Bullion prices rallying. When Barrick removed its hedge against gold prices, I thought the stock would move up but so far has not reciprocated. Recently the stock has witnessed a lot of insider buying which is always a good sign. While watching this stock do nothing is frustrating - I’m holding on for at least a year to see whether the outlook for gold materializes.

Cenovus – CVE (Gain: 4%, Portfolio Holding: 3%): I acquired Cenovus with the Encana split and am holding at present time. The stock hasn’t done much for me, but its too early to tell and it apparently has some good assets.

Research in Motion – RIM (Gain -6%, PH: 10%): This stock is still trading at very low multiples, compared to its peer group and those who are holding onto it will do well. I bought this stock at 50ish and sold at 77 only to buy back at 82 again. I’m down right now but the smart phone industry has room for all players to grow, even if RIM loses market share - next Earnings report should be good but if they miss analysts forecasts by a few cents expect it dive. For that reason, I will have a sharp stop loss order pre-earnings

Horizon Beta Pro Oil Bull –HOU (Gain 15%, PH: 5%): My leveraged play on oil, the only way is up for oil, and HOU while risky is one of the best ways to profit

Methanex –MX (Gain 46%, PH: 3%): My only regret is not buying more shares than I did – MX will do well in an improving economy and has a decent yield to boot. Methanex makes Methanol a raw material for various products/chemicals and also a fuel

Dendreon – DNDN ( Gain 34%, PH: 9%): Dendreon can easily be a 10 bagger. It is also one of my most speculative buys. The company is in the process of getting its drug Provenge approved from the FDA, which is used to treat Prostrate Cancer. The key date to watch is April 30th, when the FDA ruling comes in. I expect the ruling to be favorable and so do a lot of other investors, which perhaps explains why it has gained 30% within the last month or so. If all goes to plan, this stock may be @ 200ish in 4-5 years

Encana –ECA (Gain 16% PH: 4%): Encana is a solid blue chip company in the oil sands space. I may get out of this stock in the near future though given how natural gas is falling.

Google – GOOG (Gain 40%, PH: 15%): Google is a money making machine and I expect the shares to reach 650ish fairly quickly. Trades at very high multiples, typical of a growth company but I’m reassured by the huge economic moat that this company seems to possess. I don’t see anyone challenging its competitive advantage – yahoo, bing et al. This company has a monopoly on internet ad revenue. 


Apple – AAPL (Gain 11% , PH: 10%): Apple portrays a hip culture and charges a premium for any device it makes. I was a convert when I started using the i-phone. Even though market cap is $200B, it has such a low share of the smartphone, laptop market, that there is strong upward potential. I wouldn’t bet against this company and Steve Jobbs capabilities. My only regret is not buying it @ 100 and then at 130 and then at 160….i was waiting for this stock to correct but it never did (ultimately bought it @ $200 a share). The stock is also trading at lower multiples after restatement of earnings in accordance with GAAP – that along with the i-pad suggests a great buying opportunity even at these levels

City Bank C (Gain 19%, PH: 6%): I recently added to the stock @ 3.5 and it has repaid my enthusiasm. I think the stock is depressed because of the Government’s intention to dump its holdings in the next couple of months – after that the stock can easily go 5 or 6 dollars. Although shareholder equity has been diluted, its been beaten up so bad, that the only way for the stock to go is up. Will also do well with the recovering economy

FNX Mining (Gain 10% , PH: 5%): I love their business model and FNX is my commodity play that will do really well with the improving economy. A cyclical stock that will go up as world economy expands and Nickel and Copper prices go up. This stock incidentally was TSX best performing stock over the last 10 years I believe

Uranium One – UUU (Gain 3%, PH: 3%): More and more nuclear reactors being built which will increase the demand for Uranium. The only knock against Uranium one is that its major mines are in Kazhakistan ( I believe) which has some political unrest.

Temple Reit – TR.UN (Gain 25%, excluding dividends, PH: 5%): My sole REIT, which owns hotels in Fort McMurray. Every quarter I get $215 for just holding this stock, so expect to make back my money just in dividends within the next couple of years , not to mention the capital appreciation.

MWJ: Direxion Daily Mid Cap Bull 3X(Gain 9%, PH: 3%): I’m betting on an economic recovery and want to amplify my return on investments. I might add to this position fairly soon – specially if there is a correction. I like these instruments, as you don’t have to spend precious time stock picking and they give you quick returns (as well as losses). 

WLC: Western Lithium Corporation (Gain -14%, PH: 4%): If the future is in electrical and hybrid cars, then WLC might be a good buy. The company is sitting on the fifth largest reserves of lithium. This stock is a speculative bet. Still 3-4 years away from production. I’m looking for a ten bagger (fingers crossed).
Stocks I own in my TFSA:
HNU: Horizon’s beta pro natural gas bull (Gain -48%, PH: 2%): I made a lot of money trading in and out of HNU, but seems like my luck has run out. I think natural gas prices are on their way down and the contango effect hasn’t helped. I expect to be out of this stock within a month or so.


EDC: Direxion Emerging Market Bull 3X (Gain: 33%, PH: 4%): If you believe that the emerging market is going to outperform the developed world, then why not put a more substantive bet on it. Great vehicle for trading and I expect to make a lot of money playing EDC.

Osisko: OSK (Gain 5%, PH: 3%): Another gold play, however I might be pulling out of this stock and sticking with Barrick

Overall gain since Oct. 2008, 52% . Total holdings $114K approx. 20K is my own equity, 34K HELOC and the rest on leverage).


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## scomac (Aug 22, 2009)

Have you ever put pencil to paper in an attempt to figure out what sort of returns will be required to reach your goals? Based on your current portfolio values and your investing timeline, you will need to earn a CAGR of 36.7% to reach $1M by age 40. The probability of that occurring will be remote at best even with the amplification of leverage.

I wish you good luck with your investing endeavours and urge you to reassess your objectives and set your targets at more realistic levels.


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## andrewf (Mar 1, 2010)

All I can say is: wow. You are one market dip from having your portfolio wiped out.


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## financeguru (Jan 18, 2010)

Scomac, you are right, it is aggressive i'm hoping that i get there by 43, but no harm in trying. I should have clarified what i meant by getting to $1M ...it would also include any real estate investments. Currently i'm in the process of renting out my condo, in which i have about 90K equity. I also plan on contributing b/w 30-40K per year (assuming my job situation remains the same), based on that and the amplification by margin, the returns worked out to be about 10% per year. I will though reduce my leverage within the next 2-3 years.

Andrewf, lets see....i look forward to corrections, i dont think there is going to be more than a significant dip within the immediate future and if it does happen, i look forward to it, it will be a great buying opportunity.


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## steve_jay33 (Aug 29, 2009)

From a diversification point of view, you are in Commodities, Oil/Gas, Tech, Drug, Finance, REIT and you have 17 stock positions. From a stats point of view that should be ample diversification, depending on your weighting of course. (Seems heavy in commodities and oil/gas) 

My two questions are:
1.	How are you selecting your businesses/stocks? What is your decision for buying a business
2.	Have you figured out your downside risk on the business/stocks you own? (Saying it can only go to 0 doesn’t really count as an analysis)


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## andrewf (Mar 1, 2010)

devinci said:


> Hi all,
> I am new comer in trading world. I would like to learn more how to pick the good stocks to buy?
> I am currently college student and have no student loan.
> I am willing to put $1000 to begin.
> ...


If you have $1000, I wouldn't even bother with ETFs, much less individual equities. Look at index mutual funds. If you're a novice, you should definitely stay away from penny stocks.

Also, as a student it's probably more prudent just to hold it in a savings account in case you need the cash. Not sexy, but you have plenty of time ahead of you to invest in the market. Investing $1000 now won't get you appreciably further ahead.


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## MoneyMaker (Jun 1, 2009)

only position I like is your holdings in Citigroup.. seems like a lot of glamour type companies in your portfolio


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## el oro (Jun 16, 2009)

ABX - You can lower your risk and keep your return the same by selling ABX and buying one of the gold indexes like GDX or the HUI. But, imo, in the longterm the large cap golds won't be able to keep up with the return from actual gold or quality juniors/mid-tiers. As price of gold rises, the large caps won't be able to replenish reserves fast enough due to peak gold. GDXJ is a decent junior ETF.

HOU, MWJ, EDC & HNU - Not something you should hold for long-term. Do you know how the daily rebalancing works on these things?

UUU & ECA: Good holds for at least the next 1.5 years.

Saying things like "the only way for the stock to go is up", "I made a lot of money trading in and out of HNU, but seems like my luck has run out" combined with your massive leverage has me worried for you. Do you have a strategy when you trade in and out of stocks?


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## financeguru (Jan 18, 2010)

Steve Jay
Yes, 17 stocks, but 3 leveraged trading tools.... the leveraged stocks are trading investments, i don't stay in them too long. For example, i got into EDC when it fell to $90 a few weeks ago. I have a target in mind and will be out when it reaches that ($150). 

As for choosing businesses, my strategy is usually a top down approach. Macro analysis followed by sectors which i think are going to do well. I believe that stocks rise with the rising tide, so i focus first on my general outlook of the market and then follow it up with detailed analysis of what sectors one should be into. When looking for stocks, i focus on stocks that i think may possess a competitive advantage (Google, Apple) or have been beaten down to a degree that makes their evaluation favorable. All that aside, i still want to buy stocks at a decent price, so I do use P/E ratios and run screens (P/B, quick ratio etc). I'm heavy/bullish on commodities because i believe the emerging markets are will all the action will be and commodities will do well. That said my highest weighting is on Information Technology (Google,RIM, Apple) as i think all are quality companies to own for the long run.

I also focus on sector rotation, i was bullish on canadian FIs, and was invested in Royal for 5-6 years, i added to my position when the stock fell to 30ish and got out when the stock hit 56 (though i still hold in my RRSP account). At the present time, i believe Canadian Financials are appropriately valued and won't be getting in for at least a few months.

Finally i'm becoming much of a buy and hold type investor now, but in 2009, i was trading the swings....i found the environment very volatile to be simply buy and hold.

My exit strategy is to get out when a stock goes below 25% of my purchase price, but have not exercised this religiously, something i need to work on. 


MoneyMaker interesting to see your take on CitiGroup, i was actually deliberating b/w City and Bof A - the analyst outlook for Bof A seems very positive. What stocks would you recommend currently, if not any of the stocks i picked, i'm always interested in learning?

$1600 Gold by 2011, i like your monicker, why are you so bullish on gold? I take it that you are more of a fan of gold bullion than gold stocks, but it seems that Gold stocks have not moved at all in relation to the price of Gold, do you think this would not be a good entry point to get into stocks? HNU, EDC, HOU are trading vehicles, i don't intend on holding for the long term, i'm out of HOU today.


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## el oro (Jun 16, 2009)

Why am I so bullish on gold? That's a loaded question. Think of gold as the currency of the only nation (let's call it country X) that can't print more and more money. The price of gold in each currency is the exchange rate with country X. Over the past decade you have seen and will continue to see the countries of the world devaluing their currencies (pushing gold steadily higher) for one reason or another (paying off debt or staying competitve). 

How else will broke countries pay off their debts? Raise taxes causing rich people/companies to bring their tax revenues elsewhere? Cut spending? See Greece as an example of what happens when you try that. Both solutions are wildly unpopular. So, instead they print money to push the problem into the future.

Here is a longer answer: http://www.gata.org/node/8281

Excerpt:


> That brings us to the favorite country of everyone in this room, Canada. I suspect that the Canadian authorities will be forced to deal with reality soon. Despite the hedge funds' love affair with the Canadian dollar, the economic and financial fundamentals in this country don't support the current level of the loonie. We are attached at the hip economically to the United States and as our dollar rises, our manufacturing industries or what's left of them are being destroyed. Budget deficits are exploding at all levels of government.
> 
> One year ago the feds didn't have one, but now the deficit is annualizing somewhere north of $60 billion. Ontario is homing in on $25 billion and even hydrocarbon power Alberta has ruefully admitted that its deficit forecast has risen to $6.9 billion, as very low natural gas prices, among other things, take their toll.
> 
> Bank of Canada head Mark Carney and Finance Minister Jim Flaherty know these problems all too well, although much of the public seems blithely unaware, and I am eagerly awaiting Carney and Flaherty's response. Rumors of aggressive quantitative easing are growing, adding yet another nation to the expanding list practicing this dark art.


Stock of companies selling real products/services will provide adequate protection but will be outperformed by gold and other metals, agriculture and energy... IMO.

There is still a window of opportunity over the next week or two before a nice rally into the end of April.


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## humble_pie (Jun 7, 2009)

all in all, a smart, lean portfolio that's less aggressive than appears at first glance. All in all, i quite like it. Not for myself, although i do hold a number of these stocks. And not because i think this is the yellow brick road to one million. I like it because it's reasonably diversified, because a few of the picks are startlingly good in their sector (osisko for example), and because there are some unobtrusive strong conservative holdings beneath the speculative plays.

what i don't like is the debt ratio. I don't understand how the stated margin from the broker can be so generous, since some of the stocks are unmarginable or marginable only at 25%. However, that's a headache for the broker & the investor, not for this forum.

re dendreon: this is a popular stock with a wild history. I've lost track of the story, but how many times has this often-a-bridesmaid been on the cusp of FDA approval for a new blockbuster drug.

there is a school of thought that says buy emerging pharmas as they ride up to nose-bleed levels of pre-approval frenzy. Then at some judicious moment prior to expected approval date, the pros bail & begin to short. The reason is that the vast majority of emerging pharmas get rejected, not approved. Statistically, there is a probability of getting this strategy right if one plays enuf juniors. I don't do this myself because i believe one needs close to an MD degree to be able to analyze a stem cell's prospects. But many do. It's a popular approach.

barrick. A decent dinosaur to own if one keeps the monster staked inside a sturdy stockade of otm short calls & puts, which greatly increase the return that otherwise would be limited to the relatively puny dividend. Barrick is an ideal stock for such a strategy as it trades in a band that inches up at a lilliputian pace in long, slow heaves, ie it's easier to keep moving the option stakes & constructing probabilities than for something like, say, kinross.

selling osisko to replace w barrick is a drastic flip. Perhaps some mid-cap gold as a halfway house ? or the gdx that 1600gold suggests ?

apple & rimm are a nice pair - safer than holding just one of them - but i'd monitor the combined weighting on a daily basis because it's a high 20% of the portfolio. Also re weightings i might beef up financials. The truly testosterone might look at distressed euro banks, but i'd still pick a more cautious big beefy canadian, even if it's recently grown to the size of a sumo wrestler. Maybe one with overseas muscle like scotiabank.


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## el oro (Jun 16, 2009)

Also, for a non-moving large company like Barrick I would have sold covered calls for two months out at a 10% premium. Using this simple strategy, you'd probably have made money off of ABX by now.


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## humble_pie (Jun 7, 2009)

always sell covered calls in barrick. I sell further out in time than 2 months, though - contrary to traditional theory. That's because time value in the 2-month premium has already begun to decay, and what one wants to sell is, of course, max time value.

so i'd sell calls further out in time, when the time component of theoretical value is still robust. The julys, say, or even the octobers if a bidder presents an exceptionally attractive price, rather than the aprils.

another reason for selling options further out in time is that the hidden "management cost" of each option trading decision is less if one only has to work an individual company's trades 3 times a year instead of 6 times. At 600 or 700 trades per annum, the management cost of each decision becomes significant.


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## financeguru (Jan 18, 2010)

Humble pie, Gold @ 1600
Yes i'm contemplating getting rid of either some Barrick or Osisko...my current exposure to gold stocks is 8% of my portfolio and i want to bring that to perhaps 5% (this might just happen by default without selling either as i increase my exposure to other sectors). What clouds my judgement is my outlook for gold, which i am not that clear on as i once was. I've kept Barrick as a hedge against inflationary pressures and to keep a diversified portfolio and then added Osisko, as i think this company has a lot of upside potential. However i'm turning a bit bearish on gold itself. From what i understand, increases in price of gold assumes a strong inflationary environment and I think we are a long ways away from that. For that reason alone i see gold trading in a range for the next few months (even till the end of 2010), so perhaps gold stocks are better used as a trading tool rather than buy and hold. The other reality is that in real terms gold has not gone anywhere from 1981 to present date - yes this may be obfuscated by the fact that a lot of the central banks have been damping their gold but it still makes me a bit leery. 

I don't know enough of puts and calls to use them, it is something that i want to read up on a lot more before i seriously consider using these tools.

Gold @ 1600, i don't agree with your scenario of Canada. Canada's debt/defecit is smallest amongst other industrialized countries and the commodities play which is Canada's strength will ensure that Canada will do better than the U.S in general. Canada is lucky that it has been blessed with so many natural resources. The U.S economy is in shambles and the deficit is just out of control. This year the budget deficit will be what 1.3 Trillion? Compare that to Canada's piddly $60B or whatever the number is...

Humble Pie, re: Dendreon, yes it has been the bridesmaid before as well, but i would be really really, really surprised if the FDA turns down approval of the drug this time around. Not to take a chance though , i am contemplating two options, one is to sell my additional loading (100 shares) on the stock a day or two before the announcement, keep the rest (200 shares) and put a sharp stop loss order if the FDA approval doesn't go through or to put a stop loss order on the entire damn thing. If FDA approval fails, the stock will careen to the single digits very quickly. Dendreon has been shrouded with some really obscure swings...case in point when it fell from the mid twenties to single digits 6-8 months ago in a minute of trading for no apparent reason whatsoever. SEC had to intervene but found nothing phoney about the trades that were placed. Go figure.

About Canadian Banks, yeah i plan to add, i wanted to get into Royal recently when it was @ 52, but missed out. That said, i've got a lot of Royal in my RRSP and my wife's RRSP account, so i feel i still have decent exposure. BNS is definitely the way to go for int'l exposure, but i think it might be duplicating a bit of what i will get through City. As such if i do add to FIs it will be either Royal or TD.


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## humble_pie (Jun 7, 2009)

great thinking-prep on dendreon. Don't mean to harp on this stock, but the fact is we cannot post a tome on each of your holdings, while at the same time i'm sure an identical clever strategy has gone into each of your other picks. So we're just using dndn as an example of way-to-go.

for my own part, i'd certainly sell out all of my original dndn investment in dollars plus a generous margin ... maybe something like 150% of orig inv ... and i'd certainly stick with the rest, as these will all be freebies. And again just speaking for myself i wouldn't wait until "the day or 2 before" because 1) tons of pro players will be executing this strategy and 2) in my experience, which is quite limited, FDA approval announcements don't appear on schedule.

just out of curiosity, i moseyed over to the dndn option tables to see what the open interest positions have to say for themselves.

uh-oh. There it was. Large open call positions are not bullish signs, although novices always believe that this is the case. On the contrary, large open call positions are indicators that pro traders have already shorted the stock & bought these calls as a hedge.

in dendreon, there it was. The sharks have - quite sensibly - overshot april because they know fda announcements don't always appear on schedule. Instead they've gone to the may calls. And there they are, all the submerged short sharks, quietly feeding below the surface. Do you see them, fg ? in the 40, the 45 & the 50 dollar calls. Esp in the 45s. More than than 17 thousand of them ...

they're fairly jolly in the puts, too, apparently thinking for the most part that dndn won't drop much below the 17.50 range if fda approval snafus, while some institutions appear to have bought a long-stock-long-put combo (ie bullish but hedged.)

what fun.


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## Cal (Jun 17, 2009)

I would consider selling some of your apple and taking the profits.

And considering mortgage debt (you mention condo has debt, and I am assuming that you also have a prinicple residence with a mortgage)...I personally wouldn't want to be so leveraged.

We currently have a market where everything has risen in value, as there is so much cheap money floating around. I am concerned that there may be another leg down, as some of the banks have not written off bad loans, as they can't afford to. (see zerohedge for article) And why all of the debt attention ois on Greece and not on other countries (that owe more) is beyond me.

Good post though....it is cool to see someones else's holdings, and what their reasoning is for holding them.


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## financeguru (Jan 18, 2010)

Cal said:


> I would consider selling some of your apple and taking the profits.
> 
> And considering mortgage debt (you mention condo has debt, and I am assuming that you also have a prinicple residence with a mortgage)...I personally wouldn't want to be so leveraged.


Cal, i recently did a mortgage application for the new property we are buying, our debt equity ratio is about 20%. Apart from the investment LOC, i don't have any other debt and once the condo is rented out, it will be a cash free property for me.

A word on leverage, i have taken out $34K of investments on my LOC and put in equity of $20K over the last year and a half. Currently my portfolio worth is 82K (excluding margin), equating to a gain of about 51%. I have ability to add to my equity positions through an untapped 30K LOC if i need to, so not worried about a market correction - neither do i think i'm over leveraged.

Why would you suggest getting rid of apple, i feel that apple has room to grow and as a pair holding with RIM, helps me hedge my risks. My assumption here is that the smartphone market which is currently about 20% of the total cell phone market will witness aggressive growth over the next few years -specially as smartphones become mainstream in the developing world. The two companies primed to take advantage are RIM and Apple. I see both growing, but even if one gets hammered, it will be to the other's advantage. (In my ideal scenario, i see both growing irrespective of marketshare, because of the sheer growth of the market itself). I'm more bullish on Apple as compared to RIM. Its more diversified in terms of products and it has mid cap characteristics, in that its share of cellphone, computers etc. is about 10-15% in each segment eventhough its market cap is now bigger than Walmart. The jury is still out on the ipad and here again i see a big win for the company.

Recent buys and sells:
Sold HOU @ 9.4 for a 15% $810 dollar gain. I held this for about a month or so.

Decreased my holding in Barrick by 1/3. Currently hold 100 shares, sold 50 @ $40.7
Bought Ford @ 13.5....330 shares. I'm looking to increase my holding in Ford as the company is gaining in market share, is the best american car company and is benefiting from Toyota missteps. I also think long term when Americans start spending money, annual car sales will go back to pre-recession levels of approx. 15million cars per annum (currently 11million cars),this company will benefit.

Sold HNU @ $7...leveraged ETFs are a double edged sword - had a capital loss of 50% on this one ($2000)
Sold ECA @ $33.5, with the price of natural gas so low, i don't see Encana going anywhere in the near future. Might be a good long term hold for value investors (trading @ 6X multiples) but not for me.
Bought Suncor (SU) @ 31.3, like the general dirction of oil and i think the comnpany has fallen to a value where it makes valuation lucrative.I sold last time @ 38 and will hope to ride this stock again in the near term horizon. 

Stock on the radar: VXX (VIX ETN), i like this ETN as a hedge to the market increase and potential corrections. I'm looking to buy b/w 10-15 dollars price range - currently @ 22.5. Its based on the volatility of the VIX index and in times and is inversely correlated with sharp market decreases (-90% or so).


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## Cal (Jun 17, 2009)

To clarify.... you said you have a combined 20% equity in both properties. Not bad, just make sure that you keep the other place rented out. (Ha...like you needed to be told that!)

And I didn't say to sell Apple. Just that I would consider taking some profits.


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## xcaret (Feb 13, 2010)

*Hey Devinci*

I too was wondering what stocks were good ,and how to find them.In 1999 I read a book on Warren Buffet ,the worlds greatest investor. His stock had averaged 35% over the years since conception (1965) I bought several a shares uin 2001 still have them,they have not even come close to averaging 10%,and this is the worlds best investor.. I'm not complaining ,most stocks did far worse. What I'm saying is you have $1000.00 big deal win lose you will learn something ,go for it. Keep reading what out there in librarys and on the net. You have nothing to lose ,as you probably won't lose the whole $1000.00 and once your invested your going to be more interested than ever and gain all kinds of knowlege.. Keep in mind that experts are jumping out of windows every day and not one single mutual fund has beat the s&p over the last 25 years .( or so I have read) so that tell us know one knows what to pick...
I wish you well,your still a kid so dive in,take your chances...and have fun .The main thing is have fun,like gambling at a asino but with out the house stacked against you ( or is it)..ha.


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## high octane (Jul 21, 2009)

xcaret said:


> Keep in mind that experts are jumping out of windows every day and not one single mutual fund has beat the s&p over the last 25 years .( or so I have read) so that tell us know one knows what to pick...


Yea but mutual funds have many other limiting factors. You pay someone to actively manage them, they may make unnecessary trades to justify their job, maybe poor tax efficiency, maybe poor timing. Their hands are tied imo

I think it's more efficient to manage your own money once you have enough to afford the trading fees


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## humble_pie (Jun 7, 2009)

i like that part about conception. Although i always thought that the big WB was buffing his stocks immaculately.


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## financeguru (Jan 18, 2010)

High Octane is correct, Mutual Funds do have many mitigating factors. With the advent of ETFs, i personally don't get why one should keep on investing in MFs. There may be some 'star' MF managers out there, who have a good track record of beating the market, problem is very hard to find. It seems like the real money is made by hedge funds who dont have to play by the same rule book as MFs.

I'm an optimist in nature but one of the reasons why i published my picks is to keep myself grounded as i find some people here and on other sites way too cynical than i am. I was reading Bill Carrigan's article today who writes for the Toronto Star and who like myself believes we are in a raging bull and two lines struck me, "investing is not a spectator sport, you have to participate". People who are risk averse are still waiting for that market correction, well they were waiting all of last year and are probably still waiting right now, the problem is when they do pile in their money, the market will actually be ripe for a correction and they will go through the buy high and sell low curse.

xcaret, if investing in berkshire has got you a 10% annualized return over the last 10 years which is the worst period of performance of the market apart from the depression era, thats still prettty good.

Humble_pie, would you mind sharing any of your picks? You seem to be very knowledgeable so i'm curious to know. Are you into equities? Small Cap/ medium/large...any sector/country you like?


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## humble_pie (Jun 7, 2009)

guru you mentioned you have roy bnk in your rrsp ...

i am not getting it about the canadian banks.
insiders are still bolting.
they have been hemorrhaging out since early last summer.
hundreds of millions of dollars have melted out of banks like icebergs in july.
in the 3 banks i watch - ry, td & bmo - not one insider has stuck in as much as one toe, save & except a bit of indirect family shuffling.

charts are looking mildly bullish.
one might think that banks are still a soft buy.
but where are the insiders.


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## steve_jay33 (Aug 29, 2009)

humble_pie said:


> guru you mentioned you have roy bnk in your rrsp ...
> 
> i am not getting it about the canadian banks.
> insiders are still bolting.
> ...



What source are you using for insider trading?


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## Oldroe (Sep 18, 2009)

Insiders are selling because they are up 50-60%. From a year ago that's good money for bank stocks. I'm holding wife wants a pension.


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## financeguru (Jan 18, 2010)

Humble_pie
Perhaps because a lot of these executives realize that their valuations are too high...time to sell. In general i'm netural on canadian banks, but bullish on american banks....all the action has already taken place in Canada. When canada's largest company gets beaten up to half its market cap and has for the most part avoided the subprime crisis you know its a time to buy and so i did . I got out of Royal about 4 months or so ago when it was trading at 56 and looked to re-enter when it went down to 52 but deployed my money elsewhere and now think its overvalued. I see it trading sideways for a while and not fitting into the growth oriented characteristics for my portfolio. In my calculations, it'll take a big earning surprise to keep on propelling banks upwards.

Of the canadian banks, i actually am starting to think that Royal might not be the place to invest your money. I think Gord Nixon could have done a better job at identifying acquisition opportunities in the U.S when banks were selling at amazing discounts. Their RBC Centura project is yet to be profitable. What is its strength is also is weakness, in that RBC is just too slow and revels in being the middle of the pack follower. On that count, I wonder how long will it be when TD actually overtakes RY in terms of market cap...i understand that their footprint in the States is now composed of a 1000 branches....thats almost the size of their Canadian operations. 

All in all, in the financial space i'm going with City bank right now. The bank still has a considerable int'l footprint and should do well as the developing world recovers more quickly than the devceloped world. My average cost on that stock is $3.5 and as of today it was sitting at $4.3 so a 23% gain already. The negative against City Bank is the U.S government selling its shares back - it may lose some value when U.S of A dumps its shares (which may be yetanother good opportunity to buy) but after that should keep on creeping upwards....unless we get blindsided with another crisis.


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## MoneyMaker (Jun 1, 2009)

Oldroe said:


> Insiders are selling because they are up 50-60%. From a year ago that's good money for bank stocks. I'm holding wife wants a pension.


how do you know this? insider selling can mean anything? perhaps they need money to buy a home, or settle a divorce, etc etc

Whereas insider buying is a better sign as there is only one reason why one would buy.. and thats to profit


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## MoneyMaker (Jun 1, 2009)

steve_jay33 said:


> What source are you using for insider trading?


https://www.sedi.ca/
http://Canadianinsider.ca


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## humble_pie (Jun 7, 2009)

what's odd about canadian banks is that so many insiders sold last june & july, missing out on the phenomenal 30-40% rise that has occurred since. It's unusual that so many with such privileged viewpoints would have been so wrong.

while i do agree with the conventional wisdom that says isolated insider sells are meaningless whereas isolated insider buys are significant, nevertheless what happened in canadian banks last summer was tidal waves of selling. As in hundreds of millions of dollars by many dozens of well-positioned individuals, all selling much too soon.

smaller waves of insider selling occurred in september/october and again recently.


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## steve_jay33 (Aug 29, 2009)

MoneyMaker said:


> https://www.sedi.ca/
> http://Canadianinsider.ca


Thank you MM for the website.

I have to agree insider selling doesn't mean very much, unless you can tie it to the individuals net worth. 

Is anyone attempting to place a VALUE on CAD banks?


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## humble_pie (Jun 7, 2009)

when the shoeshine boys, who 24 hours ago didn't know an insider trading data base from a dishmop, start opining like this, then you know it's time to think about selling, as the late joe kennedy once famously remarked.


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## Oldroe (Sep 18, 2009)

Hope you are right I'm ready to buy.


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## humble_pie (Jun 7, 2009)

do go ahead & buy cdn banks down across the boards & dropping.
five minutes left to act this week.


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## Oldroe (Sep 18, 2009)

That might be down for you, doesn't even raise eyebrow for me.


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## humble_pie (Jun 7, 2009)

anybody have a view to share on uranium ?

shale gas & heavy oil present environmental costs. The alternatives - solar & wind power - can't supply a populous nation.

not that i'm a fan of nuclear reactors, but france & china have already chosen the other yellow metal route.


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## humble_pie (Jun 7, 2009)

another way of putting this is Where do we think we are on the david-rosenberg/eric-sprott spectrum.


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## financeguru (Jan 18, 2010)

David Rosenburg is starting to look more and more foolish with every day he spouts his nonsense about a double dip. Every passing day reveals that the U.S economy is healing, suggesting that if you weren't invested in 2009 and right now, you made a huge mistake.
Eric Sprott is a person i admire, but as far as i know he is really bullish on gold...obviously as a retail investor i don't have the same insight as him, but i'm not going to be putting 30-40% of my portfolio in gold.

I'm relatively bullish on Uranium, hence i'm sticking with Uranium One and waiting patiently....there haven't been too many nuclear reactors built in the advanced world over the last 20 odd years and countries like india/china seem primed to be building some to manage their growing energy needs. Uranium is also one metal that hasn't had the same bump in prices as other metals. Cameco also seems to be a good buy at current evaluations.

RIM: Another (relatively) disappointing earnings results. I am thinking of decreasing some of my exposure to RIM in the favor of Apple....the i-pad game changer or not, is getting rave reviews and will push Apple further up. 
I agree with some of the skepticism around RIM, it needs to innovate and come up with some better browsers, multimedia functions - otherwise its going to get smacked by Apple. Email enabled smart devices were the decade of the 2000-2010, multimedia is 2010-2020, and RIMs needs to show that its up for the challenge.

Nissan Leaf came out recently and the Volt will be out soon, both have one thing in common: a Lithium based battery. I see innovation driving the costs of the battery down further making electric cars more competitive - they still seem astronomically high right now. In that light, I wonder how long it will take for Western Lithium to make some money for me.....so far i'm sitting on 15% paper losses.


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## high octane (Jul 21, 2009)

financeguru said:


> RIM: Another (relatively) disappointing earnings results. I am thinking of decreasing some of my exposure to RIM in the favor of Apple....the i-pad game changer or not, is getting rave reviews and will push Apple further up.
> I agree with some of the skepticism around RIM, it needs to innovate and come up with some better browsers, multimedia functions - otherwise its going to get smacked by Apple. Email enabled smart devices were the decade of the 2000-2010, multimedia is 2010-2020, and RIMs needs to show that its up for the challenge.



What Apple has that will sell them a lot of devices is their touch screen. I've used a lot of touch screens and nothing comes close. I'm guessing their touch screen technology is patented

I don't even want to use my BB anymore. It's just so boring in comparison. Google Android has lots of potential as well because of Google Maps/Gmail/G Voice etc if people start using it on car computers, tvs, tablets etc but I don't think anyone can match the Apple touch screen. I think we'll see a lot of new Apple devices in the near future with their touch screens and massive app store, which has insane potential

The BB just looks business, so it will keeping selling just for that reason. I think touch screens are the future, and RIM is way behind

If I was Steve Jobs, I'd be developing a touch car computer next


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## andrewf (Mar 1, 2010)

RIM has touch devices.

Please realize that touch devices are suitable for light-duty tasks. People in an office will never do their 8 hours on a touch surface. They'd be exhausted by the end of the day. The lack of haptic/tactile feedback is also annoying. I know touch devices seem cool and are in all the best sci-fi flicks, but their utility is limited to things that rarely require interactions, like MP3 players, airport ticket kiosks, etc. Anything that requires a lot of fine selection or text input would be draining to do on a touch surface.


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## high octane (Jul 21, 2009)

andrewf said:


> RIM has touch devices.


Yes but it's not even comparable to Apple's multi-touch...

There are many uses for touch screens at work. We have them at my work on radar screens, comm panels, simulators etc.. and they seriously suck compared to Apple's

I do agree though if I have to type an exhausting work email on the road I prefer my BB for the keyboard feel. If I had to pick 1 or the other I wouldn't think twice..

The way I see it is touch on the go and keyboards for the desk. You'd be surprised how "light-duty" pretty much everything becomes with good apps.


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## financeguru (Jan 18, 2010)

Andrew

BB is the defacto office device and probably will be due to the security features inherent in BB devices enabled by the fact that RIM routes traffic through its own servers. The real battle is being fought in the personal domain where the potential market size drawfs that for business clients. RIM is losing the battle here. I was one of the late users of the iphone and i have both iphone and BB, i agree with high octane, the BB looks very stale in comparison with the iphone. Apparently i'm not the only one - a lot of BB users are looking to defect

http://www.marketwatch.com/story/why-blackberry-users-will-defect-2010-03-31

The other huge advantage iphone has over the BB is its App store. The proliferation of applications is just amazing. RIM can't provide the same experience because it doesn't have just one model like the iphone,so developers have to continuously rejigg their applications to make them work on newer models of the BB. This year is going to be interesting for RIM as it comes out with newer models - i expect significant upgrades. I think RIM can make it work - it has risen to the challenge before, but it certainly has its work cut out.


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## Toronto.gal (Jan 8, 2010)

While Apple is hitting all time-highs, RIM lost quite a bit last Thursday, so after flirting with the stock for some time, I got in for under $69, way below its all time-highs. 

I picked Apple at $199 & so far, my best investment of all time.


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## greenmoney (Mar 23, 2010)

As a BB user with several friends that have iPhones, I dont think you can argue that for the average joe looking to use a cool smartphone, the usability of the iPhone is superior. The web browsing is a constant annoyance on the BB, however this probably helps to make sure I stay below my monthly data cap 

That being said, I feel like the advantage RIM holds in data compression could be a key component going forward as smartphones penetrate further. To me, the user interface experience can be improved without too much hassle, but having devices that use 1/3 of the bandwidth of other smartphones seems like it would be harder for competitors to replicate.

just the opinion of an observer


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## m3s (Apr 3, 2010)

Data compression is a good point

Now that the iPad is coming with 3G, I have to wonder how many more devices will have 3G/4G connectivity going forward (car computers, tablets, netbooks etc, navigation devices, any portable device..)

I can see this really taking off, and APPL/GOOG will profit with their apps as well as the Telecoms for the 3G/4G data plans

But how will the infrastructure handle all that data


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## humble_pie (Jun 7, 2009)

... how about a little glow for uranium stocks.


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## andrewf (Mar 1, 2010)

I'd recommend that holders of AAPL keep their fingers on the trigger. Hedge funds and hype are driving the stock price (not to say it isn't a good company) and if the hedge funds head for the exit, I'd be very nervous about continuing to hold.


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## harry (Jan 7, 2010)

Financial guru: You don't have any expousre outside north America. You can make more money in emerging market such as China India and Brazil


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## harry (Jan 7, 2010)

Here is my portfolio. I am active trader as well long term investment. I think my portfolio is balanced and diversified. what's your comments?

Apple Inc. AAPL 239.95 -0.65 (-0.27%) 135.00 $17,752.50 $32,393.25 +$14,640.75 +82.47% -$87.75 82.47% 
Barrick Gold Corp. ABX 41.10* +0.22 (0.54%) 240.00 9,004.80 9,864.00 +859.20 +9.54% +52.80 9.54% 
Agrium Inc. AGU 68.57* +0.04 (0.06%) 250.00 11,442.50 17,142.50 +5,700.00 +49.81% +10.00 49.81% 
Bank of Montreal BMO 61.11* -0.21 (-0.34%) 303.00 10,053.84 18,516.33 +8,462.49 +84.17% -63.63 84.17% 
Cisco Systems, Inc. CSCO 26.28 -0.06 (-0.23%) 225.00 $3,867.08 $5,913.00 +$2,045.92 +52.91% -$13.50 52.91% 
Goldman Sachs Group... GS 179.50 +3.14 (1.78%) 130.00 $15,171.00 $23,335.00 +$8,164.00 +53.81% +$408.20 53.81% 
The Home Depot, Inc. HD 32.97 +0.36 (1.10%) 200.00 $3,667.00 $6,594.00 +$2,927.00 +79.82% +$72.00 79.82% 
HDFC Bank Limited (ADR) HDB 144.38 +0.13 (0.09%) 20.00 $2,402.12 $2,887.60 +$485.48 +20.21% +$2.60 20.21% 
Hewlett-Packard Company HPQ 53.63 +0.34 (0.64%) 250.00 $8,811.75 $13,407.50 +$4,595.75 +52.15% +$85.00 52.15% 
ICICI Bank Limited (ADR) IBN 44.05 -0.47 (-1.06%) 400.00 $7,272.80 $17,620.00 +$10,347.20 +142.27% -$188.00 142.27% 
Infosys Tech. Ltd. (ADR) INFY 60.31 +0.45 (0.75%) 215.00 $5,951.20 $12,966.65 +$7,015.45 +117.88% +$96.75 117.88% 
Intel Corporation INTC 22.31 -0.14 (-0.62%) 528.00 $8,120.64 $11,779.68 +$3,659.04 +45.06% -$73.92 45.06% 
Johnson & Johnson JNJ 64.93 -0.29 (-0.44%) 241.00 $13,235.72 $15,648.13 +$2,412.41 +18.23% -$69.89 18.23% 
The Coca-Cola Company KO 53.76 -0.06 (-0.11%) 230.00 $10,598.40 $12,364.80 +$1,766.40 +16.67% -$13.80 16.67% 
MasterCard Incorporated MA 256.88 +1.22 (0.48%) 105.00 $19,619.98 $26,972.40 +$7,352.42 +37.47% +$128.10 37.47% 
Microsoft Corporation MSFT 29.91 +0.56 (1.91%) 275.00 $6,182.00 $8,225.25 +$2,043.25 +33.05% +$154.00 33.05% 
Potash Corp./Saskatchewa... POT 114.90* +0.89 (0.78%) 180.00 19,458.00 20,682.00 +1,224.00 +6.29% +160.20 6.29% 
Rogers Communications... RCI.B 33.81* -0.12 (-0.35%) 378.00 11,305.98 12,780.18 +1,474.20 +13.04% -45.36 13.04% 
Research In Motion... RIM 69.80* -0.25 (-0.36%) 180.00 13,077.00 12,564.00 -513.00 -3.92% -45.00 -3.92% 
Royal Bank of Canada RY 58.94* +0.10 (0.17%) 202.00 9,009.00 11,905.88 +2,896.88 +32.16% +20.20 32.16% 
Sterlite Industries... SLT 19.49 +0.34 (1.78%) 475.00 $4,388.05 $9,257.75 +$4,869.70 +110.98% +$161.50 110.98% 
Suncor Energy Inc. SU 35.33* +0.74 (2.14%) 250.00 7,722.50 8,832.50 +1,110.00 +14.37% +185.00 14.37% 
Talisman Energy Inc. TLM 17.62* +0.22 (1.26%) 250.00 3,991.50 4,405.00 +413.50 +10.36% +55.00 10.36% 
Tata Motors Limited... TTM 18.74 -0.29 (-1.52%) 500.00 $1,446.00 $9,370.00 +$7,924.00 +547.99% -$145.00 547.99% 
Visa Inc. V 91.49 +0.78 (0.86%) 200.00 $11,181.00 $18,298.00 +$7,117.00 +63.65% +$156.00 63.65% 
Wipro Limited (ADR) WIT 23.36 -0.07 (-0.30%) 325.00 $3,857.75 $7,592.00 +$3,734.25 +96.80% -$22.75 96.80%


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## financeguru (Jan 18, 2010)

Harry
What companies would you suggest right now for int'l exposure, which are currently not overvalued? 
I am exposed to the developing world through EDC a 3X leveraged play on MCSI emerging markets index...my premise is that emerging markets are going to grow faster than developed countries in this bull period. I am up 50% on this index since i invested 2 months ago,( i had been tracking for the last 4-5 months). I'm going to keep on buying on dips.


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## financeguru (Jan 18, 2010)

mode3sour/Greenmoney

You have a good point about data compression, which is a major competitive advantage for RIM. It is for that reason, carriers love to do buy one get one free promotions for RIM devices. IF RIM can match Apple in GUI, better browsers, and in general better look and feel for their devices they will do well. I still think RIM is trading at a significant discount, that said Apple is a company that can disrupt the market and come up with game changers, in my mind it is THE most innovative IT company out there. Not to mention that Jobs can probably sell anything at this point of time to the company's cultish consumers. 

Andrew,
Apple is still not overpriced compared (p/e 20ish) to its historical premiums (P/E 25+) and how much larger is institutional holding for Apple as a percentage compared to any other large cap? I think the bigger risk for Apple is Steve Jobs health. The survival rate from pancreatic cancer is very low, however Jobs seems to have recovered fully. The stock will take a hit if Steve Jobs falls sick again. I wish him well.


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## harry (Jan 7, 2010)

Guru,

EDC is again ETF. If you look at the portfolio and holdings in this ETF. Long list of stocks. Majority of the stock holdings are from South american companies and mutual fund from Goldman Sachs. Very few are from Asian (China, India and Brazil). Majority of the growth comes from BRIC group. As I mentioned earlier I like to pick my own companies. I own HDFC, ICICI, Infosys, petro china, China mobile, Petroleo Brasileiro SA (PBR)etc. They are good dividend paying companies. I am not sure how much % ETF paying to investor. Since last year these stocks are performing 60 to 100% from bottom (march 9th)

My way of thinking that just like mutual fund manager ETF portfolio manager pick stocks for you. His target is to beat index not deliver a profit to investor. Since he choose and pick stocks for you so his interest makes money for him self first and than for investor. You loose true value of indvidual stocks performance. It doesn't mean I am smarter or genius.


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## andrewf (Mar 1, 2010)

Harry, frankly you're wrong. Most ETFs are index funds, which explicitly do not try to beat the market. Reducing tracking error is more important than generating alpha.

Picking individual stocks means you're more highly exposed to a smaller number of issues. You're assuming you're better than the market, even after all the fees and commissions you need to pay. What makes you think you can beat the market, and if you think you can, why aren't you running a hedge fund?


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## humble_pie (Jun 7, 2009)

andrew you are in over your head. Harry's picks & weightings are those of a well-chosen conservative senior global stock fund. He says he also market times. I would have no reason not to believe this.

would you kindly stop with the snarks about hedge funds. Your jealousy is showing.

what everyone should be able to see - what guru has already seen - is that harry has a close connection to a powerful emerging nation, and he has valuable knowledge from which those of us who are not blind with envy & spite might be able to benefit.


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## harry (Jan 7, 2010)

Andrew, You are right I may be wrong. The beauty of the stock market investment is different opinoins. If we all have same opinions than we all richer than any other investors. Based on my experience and some colleagues in Financial industry this is my opinion. It's not neccessary this is right approach. 

I have no intention to run hedge fund. Even though my friends in Barcleys and Morgan stanely appreciate my stratigies but I am happy in my IT Prfoession. Investment is my passion and I consider myself learner and join this forum to shares our ideas, startegies and opinions. Like Humble and Gurus they have some qualities which I don't have. You may be have some good strategies, market sense and skill set which we don't have. In this investment world no one is perfect. We all do mistakes, bad decisions and tratigies. My stratigies to share opinion with as many as investment folks and learn from them. 

Let's share the ideas and opinions which will be more fruitful and constrective for all of us.


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## andrewf (Mar 1, 2010)

pie: Seems like you're appealing to emotion and sentiment rather than rationality. My point about hedge funds isn't a snark. If he can generate alpha (as he claims), then he could be much better compensated working in the hedge fund industry. I'm sorry if I'm suspicious/skeptical of anyone who claims they can generate alpha. It's really hard. Most professionals can't. 

It has nothing to do with harry being wrong--just an acknowledgment that he's probably not beating the market in risk adjusted return. He's satisfying a hobby and not blowing his nest egg--that's all fine. He could do just as well be index investing with perhaps some basic trend-following and go golfing instead.


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## humble_pie (Jun 7, 2009)

and the snark index goes up another notch ...
do we have an inverse correlation here ...
snark index/golf score to portfolio performance ...


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## financeguru (Jan 18, 2010)

Harry

EDC is a leveraged play that replicates 3 times the returns of the Emerging Markets index. Yes, it has a multitude of countries represented, but it seeks to replicate returns 3X the performance of the companies within the index, so irrespective of the dogs that i get in buying the ETF, if the index as a whole goes up, i should theoretically make 3X the return.Dividends are not a primer driver for me, as i mentioned, i'm focused on growth stocks. EDC has risen 300% over the last 12 months and 400% from the lows in 2010.

From Google finance:
"Direxion Daily Emerging Markets Bull 3x Shares (the Fund), formerly Emerging Markets Bull 3x Shares, seeks daily investment results of 300% of the price performance of the MSCI Emerging Markets Index (the EM Index). The EM Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets"

The reason why i liked this index is because of its exposure to a large number of stocks, yet it *should* beat the gain in the emerging markets. I personally haven't spent much time researching int'l companies, and this is a great way for me to invest by avoiding company specific and country specific risk. My rationale is simple: I'm optimistic about the global recovery and therefore want to take advantage of better growth opportunities presented in the emerging markets, hence this pick. 

Disclaimer: i know that this is a risky investment tool and is good for short term trading. It will be a great buy if we get bit of a correction.

If you want to invest in India, Direxion the parent company has another product, INDL which is leveraged at 2X the indian index.

http://www.google.com/finance?q=NYSE:INDL

This stock is not showing too much movement, i wonder why. From Direxion's website:

Fund Objective
The Direxion Daily India Bull 2x Shares seeks daily investment results, before fees and expenses, of 200% of the price performance of the Indus India Index. There is no guarantee the fund will meet its stated investment objective.
Target Index
The Indus India Index, which is designed to replicate the Indian equity markets as a whole, through a group of 50 Indian stocks selected from a universe of the largest companies listed on two major Indian exchanges. The Index utilizes a proprietary measure called IndusCap, which takes into account restrictions on foreign ownership of Indian securities imposed by Indian regulators; and has thus been created specifically for use by funds managed on behalf of foreign investors (i.e. investors outside of India). The India Index has 50 constituents, spread among the following sectors: Information Technology


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## harry (Jan 7, 2010)

Guru

Thanks for sharing the information. No wonder INDL is not performing. This is ETF/ mutual fund with in ETF. Here is the holdings of this ETF. They are dierctly not investing in Indian exchange. Majority of holdings are Powershares and Goldman sach ETF. Your EDC is much better than this.

I will re-analyse EDC again it's seems intersting.. 


Account Ticker	Stock Ticker	Cusip	Security Description	Shares	Price	Market Value
INDL	PIN	73935L100	PowerShares India Portfolio	11488	23.19	266406.72
INDL	PIN	PIN	POWERSHARES INDIA PORTFOLIO	350300	23.19	8123457
INDL	PIN	PINMS	POWERSHARES INDIA PORTFOLIO	207800	23.19	4818882
INDL S88880210	GOLDMAN SACHS FINANCIAL SQUARE GOVT FUND	391198.18	1	391198.18
INDL S8888021C	GOLDMAN SACHS FINANCIAL SQUARE GOVT FUND	1640029.63	1	1640029.63
INDL S8888021S	GOLDMAN SACHS FINANCIAL SQUARE GOVT FUND	2010000	1	2010000


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## el oro (Jun 16, 2009)

andrewf said:


> If he can generate alpha (as he claims), then he could be much better compensated working in the hedge fund industry. I'm sorry if I'm suspicious/skeptical of anyone who claims they can generate alpha. It's really hard. Most professionals can't.


Just because an individual investor does well with their personal portfolio doesn't mean they would be a stellar money manager. It's much easier to beat the market with $50k or $500k than it is with $50M or $100M.


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## andrewf (Mar 1, 2010)

I'm not sure there is any evidence to support that. There are economies of scale in investment management, and the ideal fund size is definitely not under $1 million.


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## humble_pie (Jun 7, 2009)

ah, the emotionalism, the sentiment, indeed the moodiness of an argument that goes like this:

all successful portfolio managers are hedge fund managers.
everybody else is either a loser or, at best, an index also-ran.
X isn't a hedge fund manager or an indexer, therefore X must be a loser.

the best part is the punch line:

X would have a better life if he could learn to combine indexing and golf playing.

they say that's what elin was screaming when she bopped him with the golf club.


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## andrewf (Mar 1, 2010)

Like I said: put up or shut up. A 55% y/y return is not terribly impressive in the context of what the market has done in the past year. So, if you're not creating any value for the extra effort (and risk) of stock picking/concentration, why the heck would you want to do it?


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## financeguru (Jan 18, 2010)

This is such a futile argument. Yes the average investor is better off just going for a passive investing scenario full of ETFs, but some investors do beat the market. 

I believe that by picking good quality stocks, spending a little time doing research, one can beat the market. I think most of the people who write on this forum probably have the same belief and thats why we are here. I think Harry has corrected himself in saying that his annual return over the past 10 years is something like 10-12%.

Lets move on.


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## humble_pie (Jun 7, 2009)

i for one believe that most of the people who write on this forum are eeteeeffers.


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## financeguru (Jan 18, 2010)

humble_pie
Interesting you should say that, if there was a polling option like some other forums have we could actually do a poll to see....i think in general there are different areas of expertise for different people in this forum. For example, i don't know too much about the ins and outs of real estate, and this is a good place for me to learn, thats why i don't write too extensively in that area unless i'm asking some questions. I would hazard a guess that forumers active in that section are not as active in the investing area andmay be more of the ETF/index type. 

I think people like yourself, myself and others who are active in in the Investing area are more into stock picking but then i could be wrong.


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## andrewf (Mar 1, 2010)

"I think Harry has corrected himself in saying that his annual return over the past 10 years is something like 10-12%."

And that's fine. You could have done the same with a simple index ETF/market timing strategy. So all the stock picking is just a hobby that doesn't create value and hopefully doesn't destroy it. I find investing interesting, so I follow what firms are doing, as a hobby. Seems to me that stock picking is the same way.


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## financeguru (Jan 18, 2010)

^
I don't think so. 10-12% is still impressive given the current turmoil. From what i understand you are saying Andrew, is that retail investor should not bother about picking stocks other than as a hobby as they will end up with similar returns or worse , lesser returns than if they invest in a portfolio of ETFs and index traded funds. I don't believe in that, as i stated earlier, i believe one can do better. Each to his own.


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## andrewf (Mar 1, 2010)

Why base things on belief? Let's look at numbers. 

Read this paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=962461

I wonder what proportion of stock pickers has beaten this strategy. My guess is less than 0.5%. And it can be done in with about 15 minutes a month of attention.


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## financeguru (Jan 18, 2010)

andrewf said:


> I wonder what proportion of stock pickers has beaten this strategy. My guess is less than 0.5%.


Andrewf

This is pure conjecture, how do you know its .5% or 10% or 50% for that matter? All your paper shows is that market timing based on 200 day moving average beats the index. It doesn't show that only .5% of people who pick their own stocks beat the index, which is the relevant topic we are discussing.


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## Assetologist (Apr 19, 2009)

*Market Timing*



andrewf said:


> Why base things on belief? Let's look at numbers.
> 
> Read this paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=962461
> 
> I wonder what proportion of stock pickers has beaten this strategy. My guess is less than 0.5%. And it can be done in with about 15 minutes a month of attention.


Thanks for sharing this article - a great read that somewhat supports the idea that logical 'market timing' does reduce risk. 

This concept has always rung louder for me than 'dollar cost averaging' & I expect that market timing strategies will become increasingly important in the upcoming years.


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## Soils4Peace (Mar 14, 2010)

Interesting. You would have been out of REITs in 2007, and out of stocks about June 2008.


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## andrewf (Mar 1, 2010)

I've heard that less than 0.5% of professional money managers beat the index by 3%. This strategy outperforms the index by something like that. Of course, historical performance is not necessarily indicative of future returns.

Of course, the average return for retail investors is far worse than the index. Not much greater than 0% return, as I recall.


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## Soils4Peace (Mar 14, 2010)

In the 1980s I bought two funds managed by some of the top managers from the 1970s: Trimark Fund SC and Trimark Canadian Fund SC. I still hold these funds 25 years later. I will drop them when/if they underperform on a ten year stretch. I also hold Cundill Value, which is another top performer both then and now. If it works, don't fix it.


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## financeguru (Jan 18, 2010)

"I've heard that less than 0.5% of professional money managers beat the index by 3%"
Heard? 
"Of course, the average return for retail investors is far worse than the index. Not much greater than 0% return, as I recall."
Source? 
Whats a retail investor? There is no strict definition - if you lump a passive risk shy investor who sells on the first sign of distress in your definition of retail investor and is constantly selling low, buying high then sure i'll believe you. Even then, I don't think one can extrapolate the results of the population of retail investors to make broad conclusions of a specific investor's (e.g. Harry) performance. Harry's portfolio's performance depends on him and him only.


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## harry (Jan 7, 2010)

Andrew,

I am sorry. I don't understand your logics. It seems to me that you are typical kind of "Financial Adviser" or "Fund manager" who always want to scare retail investors that don't do it!! They always use some kind of papers, articals and references to support their arguments but don't shows own performance. 

If you think stock picking and trading by any retail investor is not more than hobbey. It's ok. I like to do this but don't trust "Financial Adviser". I will not blame any one if my portfolio not doing well. Also I am not paying any adviser for better portfolio performance.


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## andrewf (Mar 1, 2010)

Very well -- the figure came from this interview with Mohnish Pabrhai:

Pabrai: Well the best thing for an individual investor to do is to invest in index funds. But even before we go there, you know, Charlie Munger was asked at one of the Berkshire annual meetings by a young man, "How can I get rich?" And Munger's response was very simple. He said, "If you consistently spend less than you earn and invest it in index funds, dollar-cost average," because you're putting in money every paycheck, he said, "that in, what, 20, 30, or 40 years, you can't help but be rich. It's just bound to happen."

And so any individual investor, if they just put away 5%, 10%, 15% of their income every month, and they just bought into the low-cost index funds, and just two or three of them, to split it amongst them--you're done. There's nothing else to be done. _Now if you go to active managers, the stats are pretty clear: 80% to 90% of active managers underperform the indexes. But even the 10% or 20% who do, only one in 200 managers outperforms the index consistently by more than 3% a year. So *the chances that an individual investor will find someone who beat the index by more than 3% a year is less than 1%. It's half a percent.* So it's not worth playing that game._

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I never made any claim that Harry's return was the same as the average retail investor. I did say average retail investor, and not Harry.

A decent definition of retail investor is probably someone who invests their own money and is not an accredited investor. Retail investors do poorly for many of the reasons you note, and a few others.

Harry: I am not a financial advisor nor am I in any way involved in the investment industry. The strategy I suggested is designed for the DIYer. It's mechanical, low-cost, low-risk, doesn't require stock picking/research (this is very hard and most people are bad at it), and doesn't require one to trade ADRs on the Hang Seng while their kids are sitting in front of the xbox or the wife is in bed. That has a cost too. Maybe you don't value your leisure time, but I suspect that's a short-sighted view. I don't mind paying an MER of 0.25% or so (and much lower commissions than active trading requires) to not have to spend hours and hours combing through research and watching price fluctuations in real time. What a waste. But, if you enjoy that and consider it a hobby, all the power to you.


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## harry (Jan 7, 2010)

Andrew,

I am enjoying this. Two weeks back I was reading this NY Times articles about day trading and day trader.http://dealbook.blogs.nytimes.com/2010/03/28/day-traders-2-0-wired-angry-and-loving-it/

I like this paragraph from this article about stock trading. "So why do people persist in this line of work?

“The technical term is thrill-seeking,” says Hersh Shefrin, a professor of behavioral finance at Santa Clara University in California and author of “Beyond Greed and Fear,” an exploration of investors’ mindscapes. “There’s an adrenaline rush. And the thing about day trading is that it gives you pretty quick feedback. If you buy and hold, a lot of things need to happen before you see a result, and much of what happens relates to external factors that are beyond your control. With day trading, you’re in charge.” Also, he says, “people enjoy trading.”

I fall in this category. You may say "What a waste" but I don't care.


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## financeguru (Jan 18, 2010)

Many people come up with arguments like this guy is making but without looking at the underlying data that governs this conclusion, its a facile argument. There are lies, damn lies and then statistics.

Discussions on whether actively managed funds outperform a passive portfolio are nothing new. Mutual funds by their very definition are designed to provide the benefits of a diversified portfolio for small investors. If we understand this, we can also understand why they wont outperform the market: most of them end up being glorified indexed funds with a high MER thrown in. 
In addition, active mutual fund managers have a lot of restraints put on them, they can't short the markets for one, buying on leverage and option trading is a no no. They may be required to not increase holdings in one company more than say 4-5%. Typical mutual funds have more than 100 holdings, with that much diversification its near impossible to outperform the index.
Retail investors are not binded by any of these constraints and therefore the stats you are using are not an apples to apples comparison. In terms of my investing logic, i'd totally invest in index funds before i invested in a mutual fund. However both can be beaten by building your own portfolio. I'm not saying you will, but the odds are better.


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## andrewf (Mar 1, 2010)

financeguru said:


> Many people come up with arguments like this guy is making but without looking at the underlying data that governs this conclusion, its a facile argument. There are lies, damn lies and then statistics.
> 
> Discussions on whether actively managed funds outperform a passive portfolio are nothing new. Mutual funds by their very definition are designed to provide the benefits of a diversified portfolio for small investors. If we understand this, we can also understand why they wont outperform the market: most of them end up being glorified indexed funds with a high MER thrown in.
> In addition, active mutual fund managers have a lot of restraints put on them, they can't short the markets for one, buying on leverage and option trading is a no no. They may be required to not increase holdings in one company more than say 4-5%. Typical mutual funds have more than 100 holdings, with that much diversification its near impossible to outperform the index.
> Retail investors are not binded by any of these constraints and therefore the stats you are using are not an apples to apples comparison. In terms of my investing logic, i'd totally invest in index funds before i invested in a mutual fund. However both can be beaten by building your own portfolio. I'm not saying you will, but the odds are better.


So we would expect significant outperformance by hedge funds, which are not so handicapped. Most don't do that well, in risk-adjusted terms. There are a handful of really good hedge fund managers out there, but to suggest that anyone who invests as a retail investor without access to the resources and information these managers have and consistently match their performance isn't very credible.

It's theoretically possible to beat the index by stock picking. I'm saying it's not likely. Odds are you will either match or underperform.


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## financeguru (Jan 18, 2010)

andrewf said:


> There are a handful of really good hedge fund managers out there, but to suggest that anyone who invests as a retail investor without access to the resources and information these managers have and consistently match their performance isn't very credible.


I never said that, I do think that retail investors can beat the index. Two completely different things. Do you have statistics of how many hedge fund managers beat the index and by how much? An unbiased estimate at that? If yes, i'd like to see, if no your statement is pure conjecture.


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## andrewf (Mar 1, 2010)

I said it is theoretically possible for some to beat the index. Remember that alpha is a zero-sum game. For someone to outperform, someone else necessarily has to underperform the index.


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## financeguru (Jan 18, 2010)

*Dndn*

Quick update, looks like DNDN investors hit the jackpot, always the bridesmaid but never the bride as Humble_Pie put it, but not this time around. April 30th was the date for the FDA approval but they came out a day early. DNDN opens up fascinating new opportunities for cancer treatment and its very hard to evaluate this stock at present time...but i could easily see the stock double from here on. 

Its so easy to get greedy, now i'm wishing i had more riding on the stock.

http://www.google.com/finance?q=NASDAQ:DNDN


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