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Explorer ○○

What research do you do prior initiating a long term position?

So I have the majority of my money investing in ETFs, but then I do have a portion that I invest in individual stocks. My question is for all of you who invest in long positions what kind of research do you conduct before investing in a particular stock? Any tools you like more than others? Just seeing how my process compares to you all!

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Frequent Contributor

Re: What research do you do prior initiating a long term position?


@investlikedad wrote:

So I have the majority of my money investing in ETFs, but then I do have a portion that I invest in individual stocks. My question is for all of you who invest in long positions what kind of research do you conduct before investing in a particular stock? Any tools you like more than others? Just seeing how my process compares to you all!


          First we decide what type of stock we’re looking for. We only invest mostly in individual growth stocks in addition to ETF’s as you seem to do. Then we look at the top owned, managed etc. growth OEF’s and ETF’s in that area of interest. We then compile a list of the top 10-15 holdings of each. This is our top tool and most important to us because a pattern emerges which are the most well thought of companies. In addition top OEF funds usually hold long term unless something changes. We can also see when they take profits.
         
          We don’t allocate or diversify. Our goal is to make capital gains. We then check out the management of companies, the numbers. With growth we skip PE because it will be high. Using this method since the late 80’s led to investments in MSFT, AAPL, INTC then and AMZN during the bank crisis. We still hold all except INTC. We also hold FB, CRM, MA, V, and UNH. You’ll have to decide your buying point. Thinking long term when we were younger we just jumped in then.

           Naturally over time the professionals self fulfill their own prophecy by copying each other or their research departments come up with the same conclusions making us as copycat amateurs money as evidenced with tech currently. This is a pattern we have benefitted from over and over for 30+ years.

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Participant ○○○

Re: What research do you do prior initiating a long term position?

We haven't invested in individual stocks since Jan 2006. But from 1994-2005 we did.

We'd start the year with 16 equally weighted low PEG stocks with excellent financials. Sorted by momentum.

Every quarter we would sell the worst performer and put those proceeds into the best performer. By year's end we held 12 stocks.

Rinse and repeat. 

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Frequent Contributor

Re: What research do you do prior initiating a long term position?

I only invest in mutual funds/ETFs/CEFs.

Once I have considered an asset class or sector or space to invest in, and have a fund or ETF  in mind, it takes me about AN HOUR at most, to complete my research/due diligence, to get started.

R48

 

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Explorer ○○○

Re: What research do you do prior initiating a long term position?

I have five screens: 1. Do I understand the business? 2. Does the company have a sustainable competitive advantage? 3. Does it have a fortress balance sheet? 4. Does it have an ever increasing dividend driven by increasing cash flows? 5. Is the price and dividend yield attractive?  This reduces stocks to a very manageable level from which additional research can be accomplished.

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Participant ○○○

Re: What research do you do prior initiating a long term position?

@retiredat48,

After you have established a position, such as VSS , How long does it take for you to cut loose a loser?

You have been recommending VSS as a foreign investment for at least 10 years. You recommended it to me about that time ago and recently have still been recommending it. Do you ever cut loose a loser?

I cut loose VSS  long ago along with Vanguard int'l stock index. I transferred them both to VWILX Van. Int'l growth.

Just wondering if you ever abandon a position, if not publicly.

Fishingrod

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Re: What research do you do prior initiating a long term position?


@Fishingrod wrote:

@retiredat48,

After you have established a position, such as VSS , How long does it take for you to cut loose a loser?

You have been recommending VSS as a foreign investment for at least 10 years. You recommended it to me about that time ago and recently have still been recommending it. Do you ever cut loose a loser?

I cut loose VSS  long ago along with Vanguard int'l stock index. I transferred them both to VWILX Van. Int'l growth.

Just wondering if you ever abandon a position, if not publicly.

Fishingrod


First, VSS (Vanguard International Small Cap, ex USA) is not a "loser".  And don't forget the 2.8% annual dividend yield.

Second...the international market has been a relative drag the last decade compared to USA market.  But that often comes with the territory of an asset allocation approach.  There are times USA lags; international good.  

And yes, I did sell SOME VSS in Q1, with the onset of COVID.  I considered small caps would take a hit (both USA and int'l); and that int'l would not have a fed reserve backing it up with money, to get through COVID.  I also put "Europe" in the doghouse.

Turns out, int'l has recovered better than I expected, and no more selling ensued by me.  In fact VSS has had quite a good run-up.  Further, it may be time for international to "shine"...considering the poorer last decade.  So I have stopped all exiting, have added some, and am satisfied with my portfolio position.

The virus uniquely has hit all small caps.  They will likely have their day in the sun...think vaccine.  Chart of VSS is both at the previous high price levels, AND is above its 200 day Moving Average.  I am now holding.

R48

 

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Participant ○○○

Re: What research do you do prior initiating a long term position?

Thanks @retiredat48 ,

I guess I was kinda harsh on the loser comment. VSS(Vanguard International Small Cap, ex USA) is not a loser. It just has not been the place to be for a long time.

Of course now that I say this VSS will take off further, and VWILX In'tl growth will falter.

Fishingrod

 

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Participant ○○

Re: What research do you do prior initiating a long term position?

I'm gradually moving away from researching individual stocks. 

My reasoning is that I do not know enough and probably will never know enough.

The market, with hundreds of thousands of professional analyst and specialist along with a slew of insiders collectively know far more than I (or any single individual) will ever know.  There is simply too much information for a single person.

Not saying I don't own any.  However, these are positions that have significant long term gains and I would need to pay big time taxes to cash out of them (BRKb and SPGI).

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Explorer ○○○

Re: What research do you do prior initiating a long term position?

I do a lot of the things others have offered here but My long term is usually +2 years or shorter when in a market where we now exist, one in a defined trading range.    Primarily though I look for mega trends and with funds not just the TRENDS but at YTD, 1yr and 3 yr performance data.  So trend funds like FMILX have crashed and burned vs being stars 10 years ago.  ANFFX was another that was not rolling along too well until of late.  But then the FTRNX has delivered. PHSKX is to the moon but YCGEX has disappointed by only not losing any money.  So I do the same selecting in individual stocks vs what intrinsic value they may represent and if I think their industry has legs.  So MGM looked great as the SCOTUS had not yet made it's ruling on sports Gambling but the side bets were that they would strike down the Federal laws allowing sports gambling in a few states but violating the tenth amendment rights of the rest.  That case was instead settled on a point of Contract law.  I made a little money in MGM and then the MAD man and the plague struck it down.  As I watched CA fry it occurred to me there was strong value in CWT in the $30 handles.  It occurred to me that GREEN was the future but that the US would only be dragged into it kicking, screaming and resisting.  I decided there were/ are better OPPs in Canadian UTEs especially those with strong Green generating capacities.  Also in US UTES and in Canada there has been a frenzy of activity buying out US small and mid cap Utes.  Usually by Canadian companies seeking the Strong US$ flows to their earnings.  WGL was on my watch list but I was buying some of the others.  I made out nicely in the Vectren and Empire district buyouts.  More recently I made out when Alta GAS Canada AGAAF ...NOT ATGFF was bought out by a Canadian teachers pension fund.  Valener was taken out by The new name for it's part--owner Province of Quebec GAZ Metro.  Last week I was stung a little by EVRG making a statement based on their settling with a private equity agitator that they would NOT be seeking a Buyer.   Over all Small cap utes have put on a strong rally out of the March lows as their dividends in the Short term are slaying ZERO RATE Bound US Gov't Junk debt.  In the long term they may be knocked back by inflation and real market interest rates asserting.  It seems CCL could not borrow 3 billion at a 0% rate.  In the meantime S/C utes are raising capital with longer term lower rate offerings to then retire higher coupon debt with ST maturities.  These cash raises often create a discount blurb in these stocks.  I own enough so that I think I have an 80% chance of being included in the next one to get an offer. Why might Palladium in another 1 1/2 years not return to $3K?   

Another coming to fruition may be Infrastructure.  Post the sharp market selloffs induced by the Joe-Camela fiasco "THEY" will be desperate to get a massive infrastructure spending bill passed in Congress.  Old Fords and natural stone may last forever  but not the infrastructure spawned out of THE Clean Water Act of 1972.  The already thousands of red listed bridges.  Sorry disaster movie fans the chimpanzee bridge previously held up by decaying and worm eaten wooden pilings has already been replaced. No collapse forthcoming on a cold dark winter SUNDAY night as the Skiers and riders back up bumper to bumper returning from the pistes. This one is a great example of how new bridges have greater traffic capacity than the roads that lead into and away from them.. I have made a killing in HWYJersey barriers and the Zipper systems for odd lane highways. SUM has been working for me and AEGN really came alive last week.  NUE pays a 4.6% dividend. All Water utes need valves and motors.  The wastewater plants need new pumping stations and both need better flow and pressure instrumentation.   

UPS was an obvious mega trender vs the colossal growth in AMZN.   AMZN annually over whelming the begger thy neighbor fiscally strapped USPS.  USPS often having to rent parking for postal vehicles in order to accommodate the trailer loads of parcels that now typically exceed the physical constraints of the Post office buildings.  Wasn't UPS just a $100 handle stock a few weeks ago... Now they will do what the USPS cannot do and charge market rates for peak traffic delivery services. CMI with their line of Nat Gas Compressed,LNG or LPG fueled Heavy duty truck engines that do not produce the amounts of nitrous oxides diesel fueled engines do. MATX last week out with a blowout earnings report based not on the business they lost to lost tourism in Alaska and HI but on massive volumes of Covid related items being shipped from China to the US west coast on nonstop container ships.  The videos were there months ago with CNBC's  Jane Wells  in the port of Long Beach illustrating the massive Covid related imports from China being unloaded. 

I probably have a near lifetime supply of John Lennon Postage stamps I bought about three weeks before the last rate increase.  How hard is it to make 10% on postage stamps in a few weeks.  The oldest "FOREVER" US postage stamps pay 3 times what a 1 yr CD pays. +3% a year?   Are you ready for the next retail customer postal rate increase?  Think your Congressman gives a fat rat's Derrierre about the environment when an average day produces 2 lbs of junk mail per delivery address and Lumber futures have nearly doubled in a year?  Why should junk mailers be paying less than half what retail customers pay just to mail out a sympathy card.  Just keep cutting down more trees or producing more junk plastic.  

Noting the activity in Lumber futures early in the month and at the end of July I mugged up on some forest products company shares.  I just this past week sold shares in one of those companies  RYN for a 5% gain.  I have a 5% Ultra ST gain in ACAZF but am waiting on the Loonie to make a spike and for the ex date just a couple weeks away.  But For a +8% gain using a dividend capture strategy, I could be selling out of ACAZF shares with late July and early Aug cost basis'.  If you go to your local LOWEs and there is an extreme shortage of PT decking boards what are we to think?  

The JOE-Camela era ...  what could be a surer megatrend bet than SDS.  

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Participant ○

Re: What research do you do prior initiating a long term position?

Normally, I check the planetary alignments to see if they are favorable.  Sometimes the moon is in Venus or the market is in Uranus.  In which case I am fully invested. 

If this fails, I check with the FT in Wong Tai Sin.  he has a nice hand with those Joss Sticks.

If this fails, I pretend I am an ostrich.

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Re: What research do you do prior initiating a long term position?


@investlikedad wrote:

So I have the majority of my money investing in ETFs, but then I do have a portion that I invest in individual stocks. My question is for all of you who invest in long positions what kind of research do you conduct before investing in a particular stock? Any tools you like more than others? Just seeing how my process compares to you all!


How many years is long term? it should be at least 5 years maybe more.

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