YOU ARE NOT AS CLEVER AS YOU THINK YOU ARE?

18th Jan '20 by Tonysaparito

8 comments 1017 reads

Dear Stockopedia,

I ,and I believe many subscribers, read the excellent personal article written by Paul Scott;the heart rendering article( published in the festive period) where he wrote about his journey from amateur investor , where he turned a £180k capital sum into several millions but then over a period of time managed to lose it....made some more, lose it and ended up with a pretty miserable personal life for a few years...…...eventually joining the team of Stockopedia, as a writer.

The follow up from the Stockopedia community was excellent, illustrating that everyone loves a good story, especially if it is true.

I only joined Stockopedia some 6 or so months ago , not sure of the exact time but in that time I have now gained access on my screen of info that I did not know was readily available at an affordable price to amateur investors such as me.

For me, I do have a sizeable portfolio invested but could never compare myself to the professional fund managers who do and have done the business for me. Of course I want to get 10 baggers on every share and have had them before but believe now my good fortune then was based on a rising tide and of selecting the right shares which got caught in the waves of the rising tide

The shares I selected then were companies I understood and liked because I had an interest in their area of operation .For example, I bought thousands and thousands of shares in Arena Leisure , because my area of expertise was betting and horse racing and Arena Leisure had the ownership and rights to run racing at their tracks, which at that time was Lingfield, Wolverhampton and Southwell..now these tracks might just be tracks to you but in those days before the Dot com boom, racing and betting was in its infancy on the internet, compared to what we know and understand today , however, Arena leisure tracks were all on sand and this meant that during the worst Winters, racing still took place and not surprisingly, Arena Leisure got due reward for this because Racing paid handsomely to any track which raced, because in previous Winters it could result in weeks with no racing and no betting turnover to support racing, jockeys, owners, bookies etc.etc.

I forget what I originally paid for the shares but I think it was around…

Unlock with Email

Unlock with Google

Already have an account?
Login here

William K

19th Jan '20

Fascinating reflections Tony. Thanks for sharing. Some of my best stock purchases were made 4 years ago when I knew even less than I know now. I bought Microsoft because I used Windows and Hotmail, Apple because I had an iPhone, Google (Alphabet) because I googled a lot and McDonalds because I used to buy Chicken Nuggets for my kids. These are pretty hideous reasons for buying a stock, but these early purchases have proved to be fantastic investments with a collective compounded return >20% pa. Now that I'm wiser and smarter, my collective compounded return is around 10% pa although I'd argue that my current portfolio is better balanced and more bulletproof than my early portfolio as a result of my increased knowledge.

It is debatable how much learning one needs to be a successful investor. My advice to a beginner today would be to buy an equally weighted basket of at least 10 shares with a Stockopedia stock ranking about 80 and hold them for at least 5 years. And above all, don't try to get rich quick. Instead, get very rich slowly.

Blissgull

"My advice to a beginner today would be to buy an equally weighted basket of at least 10 shares with a Stockopedia stock ranking about 80 and hold them for at least 5 years."

I think the second part of that advice, "hold them for at least 5 years." is questionable.

The stockranks are partly based on momentum, which is actually a negative indicator over the long term , it tends to revert to the mean. Also shares with a high value rank might be better sold once the value is outed.

There's nothing wrong with looking for shares which will be good long term investments but the stockranks might not be a good way to find them.

Good points Blissgull. I confess I'm influenced by Warren Buffet's advice that the best holding period is forever (not that he necessarily adheres to it absolutely). Perhaps QV rank is more appropriate than Stock Rank as it eliminates the momentum factor which is a source of risk. I guess we're debating trading vs investing, although the borders between the two can get blurred.

Tonysaparito

Dear Wilkonz..Thanks for your excellent reply.I hope you are still holding the likes of Mircosoft, Apple, Google and co as the point you make about these companies and their products is often lost on the typical professional investor or trader, from my experience...and the fact that you made such a good compound return indicates you were on the button...there are millions of investors who would love to have been involved with these companies 4 years ago...
Like you I feel I feel I am wiser and smarter but with a small w and a small s ..I agree wholeheartedly with your current philosophy but I fear the world in which we live is all about trading to make big bucks now.
Stockopedia is excellent but from my experience when investors become more informed or more experienced on all matters to do with investing , they actually become risk adverse..What do you think?

Effortless Cool

An interesting read, Tony, although I am not sure that I would equate 20% p.a. returns with "get[ting] rich slowly"!

Dear Blissgul and others..
Thanks for your replies and to prove another point and pose a few questions we are all asking at this time , I am interested in the value of information around us for companies we know well and when we have the information to evaluate them...but decide to do nothing .
For example, I am a subscriber to SCSW, which I have read for many many years before i took any action and when I did take some action , the shares I bought fell by up to 30%...I do not blame anyone but myself for these losses but like in horse racing, you can learn more about your decisions from your losers than you can from your winners .
Anyway, I digress because I read here over the months about Games Workshop Games Workshop (LON:GAW)...and using the available info on stockopedia it looked like a share to take a position in but I could never really tell if it was correctly priced, over priced or simply expensive and the wrong share to invest in. Obviously those investors , who have been invested for at least a year or more or 5 years or more have had a fabulous return on their investment.

So in early December last, I decided to seek out the Warhammer store in Carmarthen West Wales..the store was not easy to locate and was quite small and tucked away in a quiet side street..I entered the store to be warmly greeted by the store manager who I learnt was the only store employee and he was at a large table painting models that he had made, he shared with me that he had been with the company 17 years and that his job was to encourage local Warhammer enthusiasts to come into the store to play their games, paint and make models and try and encourage more potential clients to do the same.. I made it clear that the reason for my visit was to learn more about Games Workshop (LON:GAW), as I was thinking of buying some shares for my SSAS.
The manager was incredibly helpful and whilst he did not share with me any sensitive company information it was clear this business was truly unique, odd and unusual .For example, the company were introducing one new model per week and that hordes of their loyal customers were lining up to buy them.
The day of my visit was a Monday and by the time I left, I decided this was a share to take an interest in, the problem is to date they have increased by about 20% plus and seem to me that if I am hoping they will slip back in price, the level of momentum behind the stock is such that , it is not going to happen..The store manager told me the trading period to early December had been a good period and that the constant delivery of new models ensured , Warhammer enthusiasts , kepy buying.

Therefore, with a company like Games Workshop (LON:GAW), it seems to me that based on the run they have had in the last 5 years which is truly astonishing, in that every £1000 of shares is now worth just over £14,000...how can any investor accurately assess if the company is fully valued or still a bargain , as these type of scenarios are what separate the winners from the losers?.
Naturally, I am still considering the shares but this type of situation is one we are all posed with and I am eager to learn from others how to assess the future direction of the shares..For what it is worth, reading between the lines from the trading update issued last week, the shares still have more oxygen in them, as the potential in USA and the Far East is at an early stage.
I look forward to replies

20th Jan '20

Useful piece of scuttlebutt, Tony. Thanks. Games Workshop (LON:GAW) is a problem for me and I'm dithering. I'd like invest, but I'm not sure if this is the correct moment. The recent price surges are almost parabolic and that's usually a bad time to buy. The QV rank is 59 and momentum is 98. Value is only 17. I suspect there's a lot of FOMO (fear of missing out) going on here and there could be a retracement - although I feel there's a good probability that the share price will at least double over the next five years even at the current level. So I'm sitting on my hands for the time being.

Hello wilkonz...You have hit it on the nail...Its a difficult share to evaluate and I agree with all you have written , as there are many other similar shares ...I am also sitting on my hands

YOU ARE NOT AS CLEVER AS YOU THINK YOU ARE?

Unlock the rest of this article with a 14 day trial

About the Author

Tonysaparito

8 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...