jeudi 23 février 2017

Waiting for the correction

I've always thought that Life was waiting to prepare some bad surprise for me. When everything is quiet and soft, life is waiting patiently behind the wall, sharpening a knife.

Well, after 37 years, I'm still waiting for a true vicious move of Life against me.

But, instead of attacking me directly, Life decided to attack by the sides. So, here it is, my son has been officially diagnosed with a slight Asperger.

If you read what Asperger is, you'll see that it's the lightest level of autism. Some say that Einstein and Beethoven (or Mozart?) and many university teachers had asperger syndrom. Maybe that theory was built by some Asperger guy who wanted to feel special, like those fucking images we see on Facebook, saying things like "blondes are more intelligent" (posted by a blonde). If we want to feel special with some disease/handicap, we could also state that cancer is good because Steve Jobs and Warren Buffet have had cancer. 

Anyway, I'm not that worried about that Asperger diagnostic. My son doesn't have any attitude problem. He only has problems to communicate precisely and understanding complex directives. I'm pretty sure he'll do well. Because I'm his fucking father and I'll work hard to make him succeed.

OK for lamentations.

Are you waiting for a correction? If you're a serious investor, probably not. You're probably always fully invested, even when the S&P is at an almost all-time high.

Being fully invested is probably not a bad idea. But, in any portfolio, there's poor performing stocks. And if they perform badly on a bull market, how will they perform when optimism will stop and decrease?

That's how I see things. I don't think we should sell our highest conviction stocks (Couche-Tard, Constellation Software, for instance). But for Gilead, for instance, it's different. That stock is at it's lowest price even if the market is very high. Some might say that the PE of Gilead is already pretty low, protecting it from further drop.

That's not how I see things. I believe that when there's sun and rain and most flowers grow easily, the flowers that don't grow won't get better when the sun and the rain will stop. I hate that fucking botanic metaphor. But that's how I see things: bull markets are made to lighten our position on our worst performing stocks.

So, I'm waiting for a correction, and I have a lot of money ready to be deployed. 

9 commentaires:

  1. In a big correction, stocks fall sharply, undervalued or otherwise. Having cash is a tremendous plus at that time. And that time will come.

  2. Best regard for your son. Susie (Warren's wife) said in the lastest documentory that she think his husband is a loner and geniuses are by nature loners.

    I think so. Though not all loners are geniuses. Buffett's a loner under the guise of manners learnt from Dale Carnegie. His wife should know better.

  3. Evaluating the current market environment is something I have gradually learned over time. Why is evaluating the current market environment important? Because at market extremes it can effect your investing behaviour (selling at the bottom and buying at the top). So it’s important to have a sense of what is going on in the market at any given time. The market has a language all of its own but we as investors and traders have a tendency to project our own language and beliefs onto the market.

    I have learned over my time to disregard the indexes and instead focus on the underlying breadth of the market. By applying moving averages to the cumulative Advance/Decline Line (of the NYSE) and then subtracting the longer moving average from the shorter one you get a trend deviation indicator ( a form of momentum). I have found this to be an excellent indication of what is currently going on within the market environment. I don’t try to predict the future with this indicator but I use it as a means to gauge current the risk/reward potential of the market.

    Right now I see the internals of the market in the midst of a waning (weakening) move up. On a short term basis I see more risk in this market than reward but longer term I am still comfortable holding my positions. The Stock Market is an interesting animal.

  4. Playing the Market is often a sweet and sour game...

    2 years ago, one of my favorite Money Manager, Veronika Hirsch, put 50% of her fund off the table waiting for correction and she missed an average year (Excluding Energy) and very good year (including Energy)for the Canadian Stocks... I think it could be a good think to take some Profits off the table ( I lost a lot of money with Concordia after a virtual Profit of more than 200% on paper, another hit on AutoCanada after a big gain on my statement, and a small gain on Valeant after a 3 bagger several months before...) but we should always stay in the Market... CRH (+150%), QSR (+65%) and NA (+60%) are good example over the last 12 months...

    What's the appropriate level of Cash is difficult to answer... But I think, it should always be under 25% if you are investing for a long period...

    The Solid stocks should be in the Core of your Portfolio... If you can sometime trimmed some positions, because the fondamental change of your business or if your position is too big in your Portfolio, all the researches identified the impact on the Performance of a Portfolio if you missed the best several days of a year, and the Performance is often close to 50% Vs Buy and hold positions...

    If a F1 Driver is staying in the garage when the he is under the impression of a potential Thunder Storm, he would never win a championship... But he need to use his knowledge to take the opportunity to shift few opponents when there is opportunities...

    Vigilance of the Market/ETF or Indivial stocks is a better attitude, but you have to stay on the track...

  5. So, guys, if you had a lot of money ready to be redeployed...

    what's your next new stock purchase? why?

  6. I don’t have any much money to be redeployed but if I did I think I would consider Proto Labs Inc. It trades on the Nasdaq under the ticker PRLB.

    Proto Labs is a quick-turn manufacturer of custom parts for prototyping and short-run manufacturing. The company’s manufacturing services include CNC machining, injection molding and additive manufacturing. They do almost all of their business over the internet. Low-volume manufacturing has historically been an underserved and fragmented market due to the inefficiencies inherent in the quotation, equipment set-up and non-recurring engineering processes required to produce custom parts.

    I don’t pretend to understand this business in its entirety but they claim their operating model eliminates many of those inefficiencies. Speed, cost and flexibility in design are becoming increasing concerns to its customers. They eliminate most of the time consuming and expensive labour required to quote and manufacture parts in low volumes through their proprietary software

    Their numbers are terrific with both operating margins and return on invested capital at 20%+. Apparently they require little incremental capital and labor to accommodate growth. They have managed to triple their revenues to $300 million over the past five years. The balance sheet is solid with $176 million of cash and marketable securities and no debt. It has operations in the United States, Europe and Japan.

    I’m not suggesting people run out and buy this site unseen but it does look like an interesting investment idea. As I think a market correction is eminent one could wait a few weeks before taking an initial position.

  7. About 15-18% of my portfolio is cash right now.

    If a correction happened, I'd add to my actual positions or I'd bought something like Winmark, Fortune Brands Home & Security, Dollarama, Mastercard or Hanesbrand. Hanesbrand looks pretty interesting at actual valuation (high ROE, low PE on an historical basis).

  8. I have 10% in Cash, I opted to diversify market risk by investing 75% of invested fund in developed Asian markets, Japan, Hong Kong and Singapore. Only 25% is invested in the US.

    Canadian market is interesting too but I need to limit my battle fronts and to re-invest, Sponsored-ADR like Novo is perfect. If I have more money and gathered scale, I'll certainly expand into more markets.

    I think global invedting provides much more interesting selections and much protection from market risk. That said, if the U.S. market tumbles, other markets would be adversely affected too, but to a lesser extent.

    If the S&P crashes, I'll move back to the U.S. market.

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