3SOF

Finally here's the promised PDF document and the excel file I use to make the fundamental studies with the 3 year valuation model.

This thread will stay here for further strategic developments. Feel free to post opinions or contributions to improve the current strategy.

Thank you :)

Hi David

This is great   :)


it really makes it very easy for us to understand ....

You'er doing great work everyday David I'm impressed with your strategy disclosed and fundmental study

thanks David  :)

Very very interesting David!!!  :) :-*

<Applaud>

I've enjoyed reading your evaluations and it's great to see what you are looking for... I've just begun investing my money on my own and have been very pleased with your picks to this point.

Keep up the great work and I'm looking forward to learning more and making money with your sound stock picking advice.

Great work and great site!!

wow...you are the man! <applaud>  ;D

David! That was awesome.
Thank you sooo much. I learned a lot.

You described me ... "wait for a pull-back before I invest" hehe
And then I miss the "wave".

Thanks for your time and knowledge.

One area you did not cover was volume. Some stocks trade with very low volume. What is too low  or is this not a critical factor?

Quote from: Houlahan on April 11, 2007, 08:52:20 PM
David! That was awesome.
Thank you sooo much. I learned a lot.

You described me ... "wait for a pull-back before I invest" hehe
And then I miss the "wave".

Thanks for your time and knowledge.

One area you did not cover was volume. Some stocks trade with very low volume. What is too low  or is this not a critical factor?

I found what works well is look for stocks that trade more then $300,000 worth of volume each day on average. Also if the PPS is very high I would look for stocks that trade a min. of 50,000 volume on average each day.

Example Volume: 50,000 PPS: 10 = $500,000
               Volume: 300,000 PPS: 1.00= $300,000

Excellent work, David! Don't you think you should copyright protect it to prevent resale and reprinting?

Also, I have a question. When a stock becomes less convincing to hold over the long period and you decide to let go (like ARRS yesterday), would it be a good strategy to determine the exxit point based on the current technical reading of the chart? In other words, if there is no immediate need for the capital, should we set an exit target or put a stop limit order? For example, ASTI built a very nice short term speculative technical chart and is way above where we sold it. But is moves too fast, whereas ARRS is rather slow and may give us some extra $$$ if we set the exit point based on the technical analysis. What do you think?

Thanks for the encouraging words :)

QuoteOne area you did not cover was volume. Some stocks trade with very low volume. What is too low  or is this not a critical factor?

Volume is not a critical factor in my opinion. It is a technical aspect, not fundamental. It has nothing to do with the value of the business so, over the long term, it has nothing to do with the stock price either.

QuoteExcellent work, David! Don't you think you should copyright protect it to prevent resale and reprinting?

Thanks berloga, I don't think this paper is that good :)

QuoteAlso, I have a question. When a stock becomes less convincing to hold over the long period and you decide to let go (like ARRS yesterday), would it be a good strategy to determine the exxit point based on the current technical reading of the chart? In other words, if there is no immediate need for the capital, should we set an exit target or put a stop limit order?

That would be assuming I could predict the short term movements of stocks, which I don't believe I can (or better, I might believe I can, but reality over several years shows a different picture). If I waited to sell after I see it is no longer a hold, the stock might go up or down over the short term, since the short term is unpredictable. Why should it go up for us to take an extra points? It can also go down, and if sound fundamental analysis says it is a sell, it will probably go down.

QuoteFor example, ASTI built a very nice short term speculative technical chart and is way above where we sold it.

Yes, my timing on selling ASTI was bad, but I believe my reasoning was right. That stock probably won't go above $11 for a couple of years, and if it does that, it will quickly reverse in my opinion (as it happened yesterday when it approached $11). I could have had some patience there ... the stock didn't even fit my current model, so I shouldn't have bought it in the first place.

QuoteBut is moves too fast, whereas ARRS is rather slow and may give us some extra $$$ if we set the exit point based on the technical analysis. What do you think?

As I said it can go both ways over the short term, and when I sell a stock, it doesn't mean I expect it to go down, I just don't expect it to go up as much as it should over the medium term to be part of the Main Portfolio.

In a couple of weeks I expect the Main to be full invested and to have several candidates waiting for their opportunity to enter the portfolio.

Thanks for the suggestions :)

Great strategy, I will fine tune my CGAR values with each update suggestion. I think it will be very important if the CGAR values are based on the last closing price of the stock and not the price at which it was bought for the portfolio. You may have the same thing in mind but just wanted to point out.

:)

Quote from: stocky on April 13, 2007, 11:57:23 AM
Great strategy, I will fine tune my CGAR values with each update suggestion. I think it will be very important if the CGAR values are based on the last closing price of the stock and not the price at which it was bought for the portfolio. You may have the same thing in mind but just wanted to point out.

:)

Yes, that's the idea, the CAGR value for each holding will change:

1) When the stock price changes;
2)  When one or more of the 4 working variables of the valuation model change

Hmm, this would involve some programming efforts (unless I insert the CAGR values by hand everyday, which wouldn't be a problem either).

I'll talk to Ramsburg about this, thanks for the suggestion to improve our service :)

Quote from: David Randolph on April 13, 2007, 12:06:16 PM

Quote from: stocky on April 13, 2007, 11:57:23 AM
Great strategy, I will fine tune my CGAR values with each update suggestion. I think it will be very important if the CGAR values are based on the last closing price of the stock and not the price at which it was bought for the portfolio. You may have the same thing in mind but just wanted to point out.

:)

Yes, that's the idea, the CAGR value for each holding will change:

1) When the stock price changes;
2)  When one or more of the 4 working variables of the valuation model change

Hmm, this would involve some programming efforts (unless I insert the CAGR values by hand everyday, which wouldn't be a problem either).

I'll talk to Ramsburg about this, thanks for the suggestion to improve our service :)

That is a great idea to update the CAGR on a daily basis and it will be easier to determine the "Top 3: for the 3SOF Portfolio".

Great work David...I appreciate all the hard work you've obviously put into this...uhh, and also hoping that we reap the benefits.

Question...a methematical model is just that, a simplified representation of a complex system.  I understand that you incorporated key variables that you know from experience (and perhaps other models) will affect the future.

What has the model been 'calibrated' against?  Have you been able to capture historical data from perfroming stocks that fit this model?  Would this perhaps be a method for 'tweaking' the model that ultimately leads to validation and ultimately, improved predictive capabilities?  Obviously, the point of the model is too as accurate as possible.

I am a scientist and we often attempt to mathematically model something, but the model always requires calibration and subsequent validation.  You iterate your inputs based on testing, refine the model, and iterate some more until you are satisifed with the performance.

Thanks for your questions and comments JKN :)

Let me see ... as you know I've studied what, 400 stocks over the last six months? Since I studied them with an historical perspective, as time went on, I was able to see what influences stock prices the most, what fundamental changes led to major movements in stock prices.

I came to the conclusion that changes in the next 4 variables have the most impact on stock prices:

1) Historical dilution, I call it the "dilution factor"
2) Revenue CAGR
3) Net profit margin
4) EPS multiple

So I built this model that, given my estimates for these 4 variables, show the expected results of the investment in that stock at that price. If the four variables are correct, that is, reality meets the expectation, results will be the ones the model says and no other.

Now, since these variables are so important (the only ones that matter according to this fundamental system), perhaps I should have a model to estimate each and every one of them before inserting them into the major model :)

The way I'm doing it now, I'm considering history with an emphasis on more recent data and also qualitative information like press releases, analysts estimates and other, to get to the numbers for those 4 variables. But I guess I could be much more scientific about it, and I guess this process would be your "calibration" phase?

But, there's no need at all to be right on estimates to make money. Why? Because the available public information lead to those estimates, so everybody will see more or less the same share price CAGR that I see, that's why they'll buy the stocks I'm buying. What we need to make money is to immediately know the long term impact of changes in the four variables of the model in the stock price. Imagine there was a very important fundamental change, the stock is up 10%, but we see the long term impact of that change is 200% (this often happens). Or, another example, we hold a stock, and the quarterly results are out, the stock opens down 5%, but we see the long term impact of that change will take the stock down a lot more than that, so it is an obvious sell.

Of course, it would be great to test all this on past data, but since the four variables are not estimated using a mathematical method, I don't think that's possible, since there's always qualitative information and personal judgment involved.

I'm not sure I answered your questions, thanks for your comments :)

Thanks Dave.  I know that much of your experience with the relevant variables drove the construction of the model and that the value of the model wiill be proved out over time.  I guess its just the scientist in me that is always interested in details and improving the predictive capabilities of models.

Again, I want to underscore the appreciation that I have for you and all of the 3SOF staff.  You have the time, ability, and DRIVE to help me make money.  >:D

I have come to really enjoy the 'black box' investing that 3SOF allows me.  I don't worry or spend as much time over the market anymore and that allows me concentrate on other things...like work and family.

Kudos...

Me two. I found myself spending less and less time on the market, yet I am happier than ever with 3SOF.  ;D ;D

How often do you find someone who can change your life? I bet David is THE one!

Quote from: JKN on April 13, 2007, 01:34:04 PM

I have come to really enjoy the 'black box' investing that 3SOF allows me.  I don't worry or spend as much time over the market anymore and that allows me concentrate on other things...like work and family.

Kudos...

Hi David,

I'm new to the forum, and currently learning your 3sof model. I followed the example of AMKR and when calculating the gross margin, I found my data doesn't match. Taking FY 2004 as an example, the data shown on MSN is:

http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=Amkr&lstStatement=Income&stmtView=Ann

Total Revenue: 1,901.28   
Gross Profit: 363.27

Gross margin = (Gross Profit)/(Total Revenue) = 19.1%

And the number in the strategy document is 31.7%

Did I miss something? Also, MSN only shows the above data (detailed income statement) up to 5 years. Any public place I could get longer history data for free?

many thanks,
Jacky

Quote from: jackyw on April 18, 2007, 01:11:22 PM
Hi David,

I'm new to the forum, and currently learning your 3sof model. I followed the example of AMKR and when calculating the gross margin, I found my data doesn't match. Taking FY 2004 as an example, the data shown on MSN is:

http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=Amkr&lstStatement=Income&stmtView=Ann

Total Revenue: 1,901.28   
Gross Profit: 363.27

Gross margin = (Gross Profit)/(Total Revenue) = 19.1%

And the number in the strategy document is 31.7%

Did I miss something? Also, MSN only shows the above data (detailed income statement) up to 5 years. Any public place I could get longer history data for free?

many thanks,
Jacky

Excellent questions Jacky, I was waiting for someone to make that gross margin question.

I have a fundamental data service from www.alphatrade.com that costs just $5 a month (the problem is it is bundled with a $40 monthly news service :P), and sometimes that service and MSN Money differ in some values (it is rare, but it happens).

I went to check the values you're telling me at the unique true source of all numbers, the SEC file 10-K for 2004, and in that case, MSN Money is in fact right, Alphatrade is wrong and the calculus for the gross margin I made for AMKR are wrong. Thanks a lot for noticing, I'll have to correct that.

To get more data for free the best place is the Yahoo Finance link "SEC filings", the problem is it will give you some work to get the data looking on all forms 10-K or 10-Q.

Yep, the "SEC filings" would be the last resort unless I can't find a better source.

I can't agree more that data could differ from site to site. This time I am using ALDN.
The EPS for FY07 and 08 are:

MSN:    1.00    1.12
Yahoo: 1.17   1.30    (was 1.15    1.24  last night)

That's a big difference, but I assume the data on Yahoo is more up-to-date.

P.S. I can feel the pain of research and manually input the data after following the example. Thanks a lot for the great work!   ;)

Jacky

Hi David,
I was looking over some of the data used in your analysis, and have noticed a little quirk in how the data is used. The outcome of the analysis is often dependent on what starting year is used. Profitable, undervalued or undiscovered companies, with good growth potential usually have a catalyst for the growth, new management, new product or even a transformation in their business model. Data prior to this catalyst is sometimes of little or no relevance to the current situation.

When you get around to further defining how your four variables are determined, would you consider looking at ways to refine how we choose basic data?  Scientist often discard outliers in their data, so why shouldn't we?     

QuoteScientist often discard outliers in their data, so why shouldn't we? 

Being a scientist, I can say that outliers are NEVER thrown out...unless you know EXACTLY why they happened (in some cases you can use another test/model to determine whether it is ok to throw them out).  But, just because they don't fit the model/hypothesis doesn't mean you can discard them.  This is a big no-no in statistics.

As for situations where a company is undergoing some change/catalyst, you're right - the model won't be accurate - but that isn't what the goal of the model is.  It uses past performance to project future values assuming certain trends. 

When a catalyst is involved, past fundamental trends mean - not so much...and estimates must be made from hearsay (think MSI - and as David has pointed out, the only one in The Red).  This increases risk, and potentially reward - but I prefer the current 3SoF approach...(great work David).

.derek

Hi Derek,

Thank you for the thoughtful comments.

Quote
Being a scientist, I can say that outliers are NEVER thrown out

Consider this – we are already throwing data out, just by picking a ten year base period, instead of 8 years or 12 years or any other arbitrary period of time.

Quote
When a catalyst is involved, past fundamental trends mean - not so much...and estimates must be made from hearsay (think MSI - and as David has pointed out, the only one in The Red).  This increases risk, and potentially reward - but I prefer the current 3SoF approach. 

I would not have picked MSI as an example of the point I was trying to make. Most of the data is suspect and the "catalyst" is actually a future event. I passed on adding that to my portfolio.

Quote...unless you know EXACTLY why they happened (in some cases you can use another test/model to determine whether it is ok to throw them out).  But, just because they don't fit the model/hypothesis doesn't mean you can discard them.  This is a big no-no in statistics.

Well stated. It mostly, in a very lucid manner, makes the point I was trying to make. What I was suggesting was that we develop a model/hypothesis that will help us choose the yearly data set that best reflects the current operating conditions of the company.  Consider also the fact that, given the subjective nature of some of the assumptions that are used, we will never know EXACTLY what the right data set is. 

As an example, let's assume that mythical company XZX was in the asphalt shingle manufacturing business for 25 years and showed fairly steady net margins of 3.4%.  In 2003 it converted ½ of its manufacturing space to manufacturing roofing panels with integrated solar cells. Currently, (2007) they are selling everything they can manufacture at a 16% net margin. They will also complete a new plant in late 07 that will double production of the solar roofing panels.

The net margin data stream might look like this:
97   3.4;  98  3.3; 99  3.6; 00  4; 01  2.9;  02 2.2;  03 4.8; 04 7; 05 8; 06 9.6; 07E 10
a. Using data from 97 thru 06 we would arrive at an average net margin 4.9
b. Using data from 03 (when the company introduced a successful new product line) thru 06  we would arrive at an average net profit margin of 7.4
If we use a simple calculation using 1/3 of business has a net margin of 3.4; 2/3 has a net margin of 16, we might predict 08E of 11.8

I am not going to calculate CAGR for the first two models, but will leave that to any one who wants to do it. However, it is easy to intuitively see that time span selected, or methodology will make a great deal of difference in determining a final analysis. Imagine the result if our arbitrary time span included all 25 years.

Quote
but I prefer the current 3SoF approach...(great work David).

I agree great work David.
Just to be clear, I am not suggesting we throw data out just because it is inconvenient. I am not suggesting any fundamental change in strategy.

What I am suggesting is something David has talked about and that is refining the model. In this case I am suggesting that we take a look at developing a model or hypothesis that lets us decide more consistently what data is most applicable to the current condition of the company we are analyzing.
It just doesn't make sense to use older data from a company that used to make horse drawn wagons, but is know making sports cars.

Some questions we might consider:
How to determine when and how big a catalyst must be for it to influence our choice of data.
How consistent should our choice of time span be across all variables?
Should we consistently use the same time span for all analysis? Should we use something like a log scale to heavily weight the most recent data?
Which variables tend to be the most affected by choice of data set? Or are the all equal?
Should we alter the xl document to show both the arbitrary ten year results and the results from a model based the most recent business conditions?
Should we set a minimum time frame to consider, regardless of when we think a catalyst occurred?  3 years; 5 years etc.?

I am looking forward to any comments you might have. After all that is what this topic/board is about.



   

David, have you ever thought about buying stocks on 'non USA markets', like the Chinese or other interesting 'booming' stock markets!?
Bad idea, why/why not?  :)

Quote from: Se7en on April 19, 2007, 06:19:29 PM
David, have you ever thought about buying stocks on 'non USA markets', like the Chinese or other interesting 'booming' stock markets!?
Bad idea, why/why not?  :)

David?

Quote from: Se7en on April 24, 2007, 10:50:13 AM

Quote from: Se7en on April 19, 2007, 06:19:29 PM
David, have you ever thought about buying stocks on 'non USA markets', like the Chinese or other interesting 'booming' stock markets!?
Bad idea, why/why not?  :)

David?

I would like to, but access to information and trading possibilities have kept me away from that. Most people invest in foreign companies using mutual funds or hedge funds. I would like to do it directly, but I don't know where to find the information (and many times it is not in English and I don't know other languages, just Portuguese, English and Spanish) and US brokers don't trade those securities directly.

Definitely we'll get there sometime, but the world doesn't seem ready for direct foreign stock investments at this point in time. Fortunately probably the best foreign companies are also traded in the US exchanges, so we can buy their ADS's.

Quote from: David Randolph on April 24, 2007, 11:10:49 AM

Quote from: Se7en on April 24, 2007, 10:50:13 AM

Quote from: Se7en on April 19, 2007, 06:19:29 PM
David, have you ever thought about buying stocks on 'non USA markets', like the Chinese or other interesting 'booming' stock markets!?
Bad idea, why/why not?  :)

David?

I would like to, but access to information and trading possibilities have kept me away from that. Most people invest in foreign companies using mutual funds or hedge funds. I would like to do it directly, but I don't know where to find the information (and many times it is not in English and I don't know other languages, just Portuguese, English and Spanish) and US brokers don't trade those securities directly.

Definitely we'll get there sometime, but the world doesn't seem ready for direct foreign stock investments at this point in time. Fortunately probably the best foreign companies are also traded in the US exchanges, so we can buy their ADS's.

Etrade will offer direct trading on exchanges in Germany, Canada, London, Hong Kong, Japan, and a few other countries starting in a month or two.  Canadian and London stock info should be readily availiable and in English, so you might consider that as an option.  Only problem is you have to set up cash accounts in those currencies first.

If USD keeps on sliding against Euro, this may be of advantage to us to trade on a foreign exchange. I am not sure how actively those exchanges, e.g. in Frankfurt am Main are traded. I know Europeans are not as actively involved in the pension and other savings through the stocks exchanges as Americans, so the question is what volumes and returns are there?

But first many of us would have to convert their USD into Euro paying a conversion fee...

Quote from: berloga on April 24, 2007, 02:45:02 PM
If USD keeps on sliding against Euro, this may be of advantage to us to trade on a foreign exchange. I am not sure how actively those exchanges, e.g. in Frankfurt am Main are traded. I know Europeans are not as actively involved in the pension and other savings through the stocks exchanges as Americans, so the question is what volumes and returns are there?

But first many of us would have to convert their USD into Euro paying a conversion fee...

I think the conversion fee will be offset by the gain in the currency itself over the life of the investments you make as long as they are somewhat long term, i.e say half a year or longer.  Anyway, when they roll it out, I plan to give it a try and will report on the exchange rate aspects.  I will compare the rates they offer to the interbank rates reported on Oanda.com.

I'm thinking of making an important strategic change which can be summarized in two points:

1) My desire is to have a long term return on my investment of something between 30 and 40%, say 35%;

2) Yet, the valuation model only considers the stock "unattractive" when the stock, given its fundamental trends, is expected to start returning less than 16%. This means I would be satisfied with returns between 16 and 30%, which I'm not.

Therefore, should I change the "optimal selling price" calculation, from 16 to 35%? This would make the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php) much more demanding in terms of its holdings. I would have to work much harder to find an attractive candidate for the Main Portfolio.

Sounds great to me, what do you think?

The problem is my method of covering stocks with a more or less in depth video analysis wouldn't work very well with such a demanding strategy. I would have to have all fundamental data of all stocks already computed and updated with all changes to immediately spot the "35% plus" inefficiencies.

Over the next few days I'm going to search for a fundamental data service and software company that could do this for me. It will probably be a sizable investment, but I think it's worth it.

I'll keep you in touch with my findings.

hi david
i don t see any difference between the MainPortfolio and the fire portfolio (and the 3 stocks in the fire portfolio are already included in the main portfolio)

.......i liked the beginning idea much better....to screen every day...and jump on stocks that are on fire for 1-3 days like you made this 80% in 2-3 weeks.....you did a kind of stalking stocks and you were very successful...why to change a succesfull way of trading?

there should be more difference between the two portfolios one for long term with fundamentals like the main..and the 2nd portfolio really for stocks that are under fire short term....that is the reason for me that the performance doesn t go up in the last 2-3months....there were many stocks out there on fire ....(just my opinion)

Have a nice day
ket. 

I agree with you ket ...  :)

Why not have the same stocks to start in both, but one will have a watch list also and a faster turnover into the watch list  stocks when over valued or into a undervalued sector. Like we can buy some gold stocks tomorrow. ASA, AUY,

I agree bring back the 3 stocks on fire setup we had going 3 months ago... It was doing great even though you stumbled on the options... I believe the 3 stocks on fire should be 3 stocks that have high potential for fast gains with the best risk/reward... Longs or shorts doesnt matter. We should have a set time frame (1day-1month for example) for a trade and a clear exit and entry if the trade does or doesnt go our way.

Quote from: nullzero on May 11, 2007, 02:59:09 AM
I agree bring back the 3 stocks on fire setup we had going 3 months ago... It was doing great even though you stumbled on the options... I believe the 3 stocks on fire should be 3 stocks that have high potential for fast gains with the best risk/reward... Longs or shorts doesnt matter. We should have a set time frame (1day-1month for example) for a trade and a clear exit and entry if the trade does or doesnt go our way.

Hi Yukki, no sure if I understood your watch list stuff. I will have to read it again.

Yes Nullzero, I agree pick 3 stocks that are on fire.
I hate we would have to bump one of the stocks off the 3SOF list, for the members that are in it. But that is the idea, right? Only keeping stocks that are hot. 

Quote from: Houlahan on May 11, 2007, 10:27:41 AM

Quote from: nullzero on May 11, 2007, 02:59:09 AM
I agree bring back the 3 stocks on fire setup we had going 3 months ago... It was doing great even though you stumbled on the options... I believe the 3 stocks on fire should be 3 stocks that have high potential for fast gains with the best risk/reward... Longs or shorts doesnt matter. We should have a set time frame (1day-1month for example) for a trade and a clear exit and entry if the trade does or doesnt go our way.

Hi Yukki, no sure if I understood your watch list stuff. I will have to read it again.

Yes Nullzero, I agree pick 3 stocks that are on fire.
I hate we would have to bump one of the stocks off the 3SOF list, for the members that are in it. But that is the idea, right? Only keeping stocks that are hot. 

No, that's not the idea, the idea is identify and hold the three stocks with the best long term prospects of the Main Portfolio. Jesus, the short term vs long term debate doesn't let this message board, it doesn't matter how much I write about it, because it always comes someone new with the same questions.

I need to write a full article explaining why I think short term trading is a waste of time that won't make anybody money over the long run. I'm not saying you can't make 100% in two months, you can, but you can't sustain that over the long term, in fact, if you make 100% in two months I can immediately tell you you'll never get rich investing in stocks, never. Nobody ever did that, and nobody ever will, because the stock market is a fair game, it isn't a lottery.

Well, I'm not going to enter this discussion (again), if you want to, do all the short term trading you please, but let me work and make my 30% average annual return, in 30 years I'll be the richest man in the world. Thank you !

David, why don't you open back daily threads like before, now the interaction on the site is completely gone during the day, nothing on the forum, nothing on the chat ...  :(

Quote from: Se7en on May 15, 2007, 02:52:52 PM
David, why don't you open back daily threads like before, now the interaction on the site is completely gone during the day, nothing on the forum, nothing on the chat ...  :(

Interaction completely gone? You tell me about another website with a public portfolio management service where the portfolio manager replies to all doubts and comments made by subscribers, as he updates the analysis on all holdings everyday? I don't think you can, because on most services there's no interactivity at all.

Moreover, today I made several intraday comments on stocks I know, when they were needed, like it happened in NGA's thread. I didn't make more comments, because nobody asked me to do it.

I'm not going to talk about stocks I know nothing about, after a 3 or 5 minute look, because I know I'll miss a lot of important aspects and I'll be talking without knowledge and say things that aren't useful and that can be misleading. They're only useful for entertaining purposes, but I ain't no entertainer.

Therefore, I could open a daily thread, but don't count on me for the writing, I don't have the time or the will. As for the Chat ... again, I don't see the utility of talking about stocks on a random basis, without the necessary and previous study. Anyway, since "the costumer is always right", perhaps we can try something at some time of the day ...

Why don't you use this thread to post strategic questions or comments?

Thanks.

Quote from: David Randolph on May 15, 2007, 04:05:19 PM

Quote from: Se7en on May 15, 2007, 02:52:52 PM
David, why don't you open back daily threads like before, now the interaction on the site is completely gone during the day, nothing on the forum, nothing on the chat ...  :(

Interaction completely gone? You tell me about another website with a public portfolio management service where the portfolio manager replies to all doubts and comments made by subscribers, as he updates the analysis on all holdings everyday? I don't think you can, because on most services there's no interactivity at all.

Moreover, today I made several intraday comments on stocks I know, when they were needed, like it happened in NGA's thread. I didn't make more comments, because nobody asked me to do it.

I'm not going to talk about stocks I know nothing about, after a 3 or 5 minute look, because I know I'll miss a lot of important aspects and I'll be talking without knowledge and say things that aren't useful and that can be misleading. They're only useful for entertaining purposes, but I ain't no entertainer.

Therefore, I could open a daily thread, but don't count on me for the writing, I don't have the time or the will. As for the Chat ... again, I don't see the utility of talking about stocks on a random basis, without the necessary and previous study. Anyway, since "the costumer is always right", perhaps we can try something at some time of the day ...

Why don't you use this thread to post strategic questions or comments?

Thanks.

Hm, I guess you misunderstood me or I didn't explain it well ... :(
I actually meant the interaction between the members, not necessarily between you and the members. I know you update the portfolio every day and give answers to every question, that's absolutely great so I wasn't questioning that!
But with the daily topics, even if you weren't there, there was a lot of 'talk' between the members, sometimes 5 or 6 pages long, ofcourse your presence 'motivates' people to visit and post more  but this hasn't necessarily be the case, just a daily thread where we can share out thoughts/talk about stocks would be nice imo!

QuoteHm, I guess you misunderstood me or I didn't explain it well ... Sad
I actually meant the interaction between the members, not necessarily between you and the members. I know you update the portfolio every day and give answers to every question, that's absolutely great so I wasn't questioning that!
But with the daily topics, even if you weren't there, there was a lot of 'talk' between the members, sometimes 5 or 6 pages long, ofcourse your presence 'motivates' people to visit and post more  but this hasn't necessarily be the case, just a daily thread where we can share out thoughts/talk about stocks would be nice imo!

Ok, I misunderstood you because the thread you're mentioning already exists, I've created it I believe on tokyopua's request, it is the "Stocks on Fire thread" (http://www.3stocksonfire.org/trading/index.php?topic=9296.msg94994#msg94994), but in 6 weeks it got just 17 posts.

The Members Corner also exists for members to interact, but it's hard to get traction there (even though sometimes we get great posts).

I'm opened to suggestions Se7en :)

Ok, ok, ok ... I'm going to make an extra effort and put that chat working properly with enough people to have an interesting discussion. Hopefully the chat will get a life of its own when I'm not around (I'm sure that will happen if given some time).

Quote from: David Randolph on May 15, 2007, 04:35:14 PM
Ok, ok, ok ... I'm going to make an extra effort and put that chat working properly with enough people to have an interesting discussion. Hopefully the chat will get a life of its own when I'm not around (I'm sure that will happen if given some time).

Ok Se7en, I'm at the Chat now for a talk, I wonder if you'll be there. For anyone interested, lets meet at the Chat (until 13:00 ET, my kids arrive home at that time). Thanks :)

Just my opinion.  
I have a lot of respect for David and for his work.  I just miss the first days of the public thread that was open to the public begining this year.  I know that David doesn't like short term trading but during those days he picked up stocks on fire, sold quickly, made great gains, the thread was very dynamic and interesting and the 3SOF portfolio had a nice growth.... The things started to change when the portfolio stocks weren't on fire any more and they weren't sold.....

Quote from: nica33 on May 16, 2007, 12:25:21 PM
Just my opinion. 
I have a lot of respect for David and for his work.  I just miss the first days of the public thread that was open to the public begining this year.  I know that David doesn't like short term trading but during those days he picked up stocks on fire, sold quickly, made great gains, the thread was very dynamic and interesting and the 3SOF portfolio had a nice growth.... The things started to change when the portfolio stocks weren't on fire any more and they weren't sold.....

i could never be a long term trader...i can t hold stocks long in case a correction starts this hurts me too much....a mix from fundementals and technical trading is the best. Just fundamentals is nothing for me.....

Quote from: ket1390 on May 26, 2007, 11:07:13 AM

Quote from: nica33 on May 16, 2007, 12:25:21 PM
Just my opinion. 
I have a lot of respect for David and for his work.  I just miss the first days of the public thread that was open to the public begining this year.  I know that David doesn't like short term trading but during those days he picked up stocks on fire, sold quickly, made great gains, the thread was very dynamic and interesting and the 3SOF portfolio had a nice growth.... The things started to change when the portfolio stocks weren't on fire any more and they weren't sold.....

i could never be a long term trader...i can t hold stocks long in case a correction starts this hurts me too much....a mix from fundementals and technical trading is the best. Just fundamentals is nothing for me.....

Unfortunately its a flawed systems, over the long term small caps do better then midcaps by 1% and large caps by 3%. But only if the small caps are chosen when they are undervalued not when they are selected at there high. If chosen when they are in there final leg it has to be very short term.
There are alot of ways to make money doing this. Some people watch they stocks that have been going up and wait for them to correct before buying in, other short when this happens, David has been buy stocks have have run up on poor fundamentals ( my opinion ) so of course they will correct. If you look at the portfolio now, and Ive been telling you I would of sold most of the stocks in the portfolio awhile ago and take profits, because I can see this would happen, nothing to support the overvalued prices except hope. Game plan is:
1. We need to find good companies that have gone down for no reason.
2. Companies with real high growth that are forgotten like SILC was.
4. Companies that are undervalued in earnings in a trending up sector.
I saw right away that NTES,JAKK,ROY,EXM,PAL where not appropriate selections at this time. They all have there reasons and I stated them many times. Its ok to have 1 company like these in the portfolio but to have so many really hurts the performance.  Ever since David started this new system and videos the selections have suffered for the most part. There is no real growth here with these companies, David would argue this point.

We are coming up on June, and historical you would want to be out of the market by June 1 or 4th till the 3rd week in June. Or short small caps as a hedge SKK. ;)

I think David did a great job with this site and with suggestions.
he is totally right when he says that there are other newsletters (like Fool) that plugs 100 recommendations and say that "they beat the market".

This site plugs two portfolio: 15 stocks or 3 stocks.
It's a good way to manage small or larger amount of capital you retain.
It's simple and easy to follow.

Regarding performance: stock markets are volatile, unpredictable.
David has not the magic wand in his hands, he only suggests what he feels it's the best right now.

So, go on with your great job and enjoy your 3 days off.

Cheers from Italy,

Tera

yukii
you seem to have some suggestions for short term trading why not start your own thread under personal threads. I am sure you'll have a good number of people at least watching your picks.
When you do start your own thread do it just like you've recommended to do it before. you know, have it with buying 100 shares of XXX today planned sale at or around XX.XX tomorrow or by the end of the week. Also watching XXX and so on.

Wrangler has his own thread under public folders. Something like that is what I am talking about.
Just a thought.

Quote from: pinoleropuro on June 29, 2007, 07:13:25 AM
yukii
you seem to have some suggestions for short term trading why not start your own thread under personal threads. I am sure you'll have a good number of people at least watching your picks.
When you do start your own thread do it just like you've recommended to do it before. you know, have it with buying 100 shares of XXX today planned sale at or around XX.XX tomorrow or by the end of the week. Also watching XXX and so on.

Wrangler has his own thread under public folders. Something like that is what I am talking about.
Just a thought.

Hi Pinoleropuro
Thanks  for your suggestion
The reason I keep commenting on Davids picks is because I think David should concentrate on short term picks like he did before and was successfull. Micro cap are better suited for that. Since he changed his strategry the portfolio has suffered and just goes up and down with the market. They will not work out long term and david sells when they go down anyways. When he was doing short term trading I never used make any comments, just trade and be happy.
You don't think 3sof  made it to $300% doing long term trading I don't think so.
My portfolio is mostly long term mid cap and large caps and I trade microcaps. I think that would be
a better way to do a log term portfolio. I know this is not my website and David can do what ever he wants. Just though I could improve the site, I know there are alot of new people that do not have a lot of experience trading and being told to invest in 15 micro caps  with high beta with fantasy target
prices is just asking for trouble. I was trying to get David to see he is wrong and he should not be testing this out on his subscribers. The portfolio has not done much on anything since he started this new approach. 20 to 14 - 18 - 15 it will keep bouncing around that is the nature of this portfolio, if you don't sell and take your profits they will always correct and the micro caps correct the most, so they are not suited for this type of plan. You can have 2 micro caps in your long term portfolio but you need anchors to keep your profits. like APPLE or GOOGLE or even and larger small cap like TWIN, or LMIA. I don't do all these comments for myself as I just do my own thing anyways but I try to help
you guys out because I see you getting in trouble putting all your savings in all these micro caps.

Some news

The Federal Reserve's statement yesterday, following the meeting of the Federal Open Market Committee, got things mostly right.

The statement's characterization of the economy and inflation — if you know how to read their coded language — was accurate and insightful. The economy is expanding, and inflation is a threat.

They forgot one important thing. And it's a biggie.

They forgot to raise interest rates.

But they'll get around to that eventually. It probably won't happen till the end of this year, but it will happen.

Until it does, all systems are go for the stock market.
Through the end of the year, it's going to be great for stocks. With no contagion from subprime, and the Fed on the sidelines, there's nothing to stop the economy from growing a lot faster than "moderately," which means that corporate earnings are going to keep growing, too. So abstracting from the occasional correction here and there, stock prices should pretty much keep making new all-time highs through the end of the year.

Thats all folks have a good weekend!!!!!!

hi,
yukki makes some very good points.
for those who pay $50 per month david's strategies have been very erratic for a long time so if you are trying to follow him to the letter i can imagine it would be very frustrating  and difficult to do .  (take a look at stocktiger.com for simplicity in trading)
but it is a subscription site and if you are paying you are entitled to question and critize as you see fit.
personally i think this should return to a free site.
it was much better and much more active with good tech as well as fundamental traders .
jmo,
max

Quoteyukki makes some very good points.

No he doesn't. In 2006 the Main Portfolio returned 20% for the whole year. In 2007, with half of the year to go, it is up 18.34%. That gives 40% annualized return.

If I have a 30% average annual return for the next 30 years I'll be the richest man in the world.

What yukiii says is to try to have a higher return, by trading more. That's why his 40 years in the market are gone, and he's still short term playing the markets, not really going anywhere for decades.

QuoteThe reason I keep commenting on Davids picks is because I think David should concentrate on short term picks like he did before and was successfull. Micro cap are better suited for that. Since he changed his strategry the portfolio has suffered and just goes up and down with the market. They will not work out long term and david sells when they go down anyways. When he was doing short term trading I never used make any comments, just trade and be happy.
You don't think 3sof  made it to $300% doing long term trading I don't think so.
My portfolio is mostly long term mid cap and large caps and I trade microcaps. I think that would be
a better way to do a log term portfolio. I know this is not my website and David can do what ever he wants. Just though I could improve the site, I know there are alot of new people that do not have a lot of experience trading and being told to invest in 15 micro caps  with high beta with fantasy target
prices is just asking for trouble. I was trying to get David to see he is wrong and he should not be testing this out on his subscribers. The portfolio has not done much on anything since he started this new approach. 20 to 14 - 18 - 15 it will keep bouncing around that is the nature of this portfolio, if you don't sell and take your profits they will always correct and the micro caps correct the most, so they are not suited for this type of plan. You can have 2 micro caps in your long term portfolio but you need anchors to keep your profits. like APPLE or GOOGLE or even and larger small cap like TWIN, or LMIA. I don't do all these comments for myself as I just do my own thing anyways but I try to help
you guys out because I see you getting in trouble putting all your savings in all these micro caps.

What makes you think you know more than I do about the stock market or trading strategies? Who are you to tell me what to do or how to trade?

I own small caps because there are more inefficiencies there, in terms of their valuation when compared to the fundamentals. Moreover, it is a lot easier for a small company to grow 50% or more a year than for a $50 B or more company. To achieve a 30% or more average annual return I need stocks with high growth potential trading at low valuation, not big elephants that are already huge in size and can't grow more than 10 or 15%.

But, if you believe you know it all, that your strategy is the best, that I don't know what I'm doing, then why do you subscribe the 3 SOF Premium service? To disturb my work?

I'm not going to allow you to do that anymore.

Quotefor those who pay $50 per month david's strategies have been very erratic for a long time so if you are trying to follow him to the letter i can imagine it would be very frustrating  and difficult to do . (take a look at stocktiger.com for simplicity in trading) .
but it is a subscription site and if you are paying you are entitled to question and critize as you see fit.

What? Very erratic? I've traded less and the portfolio is up 18.34% this year. I justify every trade, not just when I recommend buying or selling, but all the days in between. But of course, I make mistakes like everybody else. Like everybody else, I don't know everything, in fact, the more I know, the more I feel the need to keep working hard, because there's still so much to learn.

But ask realcoolhead, for example, if it was hard for him to follow my recommendations and how much he's made out of them. And how much he made investing in the mutual funds he invests (in % terms, of course) or in all the other services he subscribed in the past.

Moreover it is extremely rude to come here and invite people to another website. No you're not entitled to criticize. If you don't like the service, just leave.

Quotepersonally i think this should return to a free site.
it was much better and much more active with good tech as well as fundamental traders .
jmo,
max

www.3stocksonfire.org has a free area with lots of good traders, but none has a portfolio and justifies all his buy/hold/sell decisions - they're not paid to do it or to take the responsibility, of course. I work here all day everyday and the website has a lot of costs (Ramsburg programs all day, there's a dedicated server, office rent, taxes). What you're doing is like me going to your workplace and say: "you know what, I think you shouldn't be paid anymore. Your work doesn't have any value. Work for free or go home".

How much of an offense would that be?

Again, not you or yukiii are obligated to pay, in fact, I kindly ask you two to cancel your subscription immediately.

Thank you.

We have 2 of these yukii and yukiii
are one and the same !  >:D

I agree with David. No one is obligating me to make certain decisions. In the end...I'm responsible for my own decision. David is a help and I'm learning from him. Now if I were to just go off and do everything he says without my own due diligence...then fundamentally, I'm in a world of hurt. Yukii's right in that there are people following David in every decision he makes...but if David's wrong...well then fine. They have no one else to blame but themselves. He's not obligating anyone to do anything. If he messes up too much...subscriptions decline and so does his pay. And for a volatile and unpredictable the market he has to work with, i'd say he has a lot of pressure on him.  I'd say leave him be.

David, you're doing a great job and I really appreciate you sharing your knowledge, your interaction and definitely your humbleness. You're helping me change my life. Just know that there are people here who really do appreciate you. Keep up the good work!

I second that, krupnac. I get tired of reading posts like Yukiii's here prompting not to buy what David suggests, but offering other picks and not justifying them.

There is a lot of bullshit (pardon my French) out there on the Internet, but this is the site I've been subscribing to for soon 2 years and it made me believe I can achieve results. Plus, I get a dedicated, honest and cheap financial adviser, like you can't find anywhere else!

So, why don't you all losers get the hell out and unsubscribe, noone is going to make you rich but yourselves, IF you can.

Remember, you pay for an advice, not for a guarantee for your next Porsche to be there. By the way, on the money I made so far at 3sof I bought a nice BMW here in Massachusetts and feel very happy about it.

So, suck your thumb and let David do his work. \

Au revoir.

Quote from: berloga on July 01, 2007, 01:28:39 AM
.......
Remember, you pay for an advice, not for a guarantee for your next Porsche to be there. By the way, on the money I made so far at 3sof I bought a nice BMW here in Massachusetts and feel very happy about it.

So, suck your thumb and let David do his work. \

Au revoir.

c´est tres formidable, toutes mes félicitations  :D

Salut
Oliver
L´ allemand

J'espère que je peux acheter mon propre BMW aussi. ;D

Yesterday I was feeling melancholic about JASO, SILC, NTES and other stocks that are currently above my selling price, so I made a quick study on the stocks I've sold this year and was surprised by the end result:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=38827;image)

Of the 31 stocks sold, 16 are lower now and 15 are higher. The average decline of the stocks sold that went down after the selling is 19.12%, and the average advance of the stocks that rose after I sold them is 17.6%. The sum of all differences is -21%.

So, on average, stocks that were sold are now lower than what they were when I sold them.

But, of the 31 stocks sold, 4 are 20% or more higher than my selling price, and they are MCZ, JASO, EXM and SILC.

I've been thinking that, since we learn so much about a particular stock while I make the daily updates and with your comments and questions, I should keep paying attention to stocks that were sold, not on a daily basis, but periodically or according to a price trigger.

It is easier to understand a stock that was previously covered than a new one. A stock that goes down 30% from my selling price may actually be cheap and attractive again. And a stock that goes up 20% from my selling price perhaps had a change in fundamentals that will lead to a much higher share price (or it demonstrates that my reading of the fundamentals was wrong when selling).

So, from now on, I'll review the stocks I sell that go down more than 30% or that go up more than 20% from my selling price, taking a fresh new perspective, hopping to find attractive investment opportunities that I know well.

David,

thanks for your work on the sold stocks. I had also been thinking "I wish we would have kept JASO" but after looking at your analysis I'm glad I stick very close to your picks. I'll take a 20%( hopefully more by years end) every year without regrets!
Brad

Great work David!

I agree with you that working with something you know is easier than working with the unknown!

cheers,

tera

Very nice. Actually I have kept a record like this  ;D

You can not be right each time, and in the long-run, statistically you will come out way ahead with your hard work. There is no need to agonize on a missed trade or two.

Statistics always keeps things in perspective.  ;)

Good thoughts, David!

If you look in your table, mostly all picks that you've made can bring you profit (of course you have to be a profet to take the profit for sure  :))

It is not easy to develop an exit strategy that will work universally. For instance, if you held on to TBSI 2 days longer you'd be making ~5% more, but since the yesterday's news, the stock shook off the top.

So I believe, selling for a cause is OK, so long as you return to re-evaluate the stock and critique your own decision afterwards to make sure the decision was made correctly.

 Good strategy, carry on!

I fully agree & applaud, David!

On that thought, REDF

Broke out of a coil pattern, could follow the steps of BIDU in its climb & could be a double or better, in short order.  Charts shows a possible high target of $60 (a triple)

willey

Thank you for your great work, David.
Most of the picks are great picks, even those went down 5% or 10%, or maybe even 20%, we might just missed the selling point, and it has nothing to do with the most of the picks. Thus, I think your 3sof strategy could work on them again. Let the profit run!

QuoteI fully agree & applaud, David!

On that thought, REDF

Broke out of a coil pattern, could follow the steps of BIDU in its climb & could be a double or better, in short order.  Charts shows a possible high target of $60 (a triple)

willey

Technically...it's a very impressive breakout. It's probably due to expectations that it's revenue trend will continue. Fundamentally, I'm not sure...I just checked the numbers on REDF and I have it valued at around $6.48. It's probably because the company is more efficient than everyone in its industry by exceeding higher in everything (profit margins, eps, P/E etc.) than its competitors. The company by itself looks very impressive (valued at $17.71 w/o industry comp), but when comparing it to the industry...I feel it'll correct back to industry averages. However, this company definitely seems to be the best in its industry.

David STEC is a great stock to invest in  :)

Next week will confirm the bullish treend for the stock don't miss it ...

David,
You should also revisit your decision on not adding to current positions. GIGM is approx 20% lower in the weeks and is a good time to add here.
Nick

Quote from: nicknite20 on July 12, 2007, 08:21:15 AM
David,
You should also revisit your decision on not adding to current positions. GIGM is approx 20% lower in the weeks and is a good time to add here.
Nick

Hi Nick, you know I love GIGM probably as much as you do, but that money management rule is what keeps the Main Portfolio always balanced and diversified. It doesn't allow me to go nuts for one single stock and increase risk dramatically.

I also like to see the weight of a single holding in the portfolio decline when the stock goes down and up when it goes up.

Trying to achieve the highest possible return is great, but my primary motivation is to preserve capital.

Thanks for your suggestion :)

Regarding REDF, took fast profits just now.  Too much too soon & probable short term topping action!

Nice-nice bucks, though!  Will revisit after its expected pullback & consolidation.

willey