Price / Earnings Hybrid Strategy

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Old Jun 28, 2005, 4:45pm   #1
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Price / Earnings Hybrid Strategy

We've just published a new T2W article called "Price / Earnings Hybrid Strategy" by Grant Macdonald.

Quick Summary: An investment strategy that combines a fundamental approach with a simple technical filter.

PS. Don't forget to rate the article after you've read it and share your comments on this thread.
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Old Jun 28, 2005, 5:10pm   #2
 
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Interesting article and thank you.

I think this type of strategy should be deployed for wealthy private investors who are not keen on individual stocks and don't want to buy mutual funds because of the high charges that eat capital in a low return environment.

Many UK investors buy into mutual funds that charge a 5% entrance and 1% to 2% in annual fees.

ETF's are the perfect place for these investors.

Perfect for your auntie!
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Old Jun 28, 2005, 5:33pm   #3
 
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nice hat, and interesting article.

super long term stuff though!
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Old Jun 28, 2005, 7:09pm   #4
 
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Yes, perfect for your Auntie, not my Auntie. Very Good Advice. Very Wise. Good Luck.Click the image to open in full size.

Last edited by SOCRATES; Jun 28, 2005 at 7:30pm. Reason: Second thought ~prudent exclusion of my auntie from all this.
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Old Jun 28, 2005, 9:13pm   #5
 
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FC

You like the hat.
As regards long term, short term, some will work out quite quickly ( months ) some will take longer ( years )

However, the maximum seems to be about 2 yrs.
If you were just moderate in your expectation, and took a 50% return, thats still 25% / annum, which is ( 24% ) what the research found.

It is aimed at people who have tried the daytrading, tried the futures, etc, have not had the results that they expected or wanted, but still feel that they want to use the market to generate wealth.

Thus as a minimum risk, minimum level of knowledge required, minimum effort ( time ) this provides returns that will probably exceed the majority anyway.

cheers d998
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Old Jun 28, 2005, 9:31pm   #6
 
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Good article ducati.


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Last edited by the blades; Jun 28, 2005 at 11:28pm. Reason: in hope Barjon will give me my star back:-)
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Old Jun 28, 2005, 9:37pm   #7
 
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Simon G & the blades

Thanks chaps.
At least those who actually trade have found it interesting if nothing else.

cheers d998
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Old Jun 28, 2005, 10:02pm   #8
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Ducati,

You would have been better off telling us how to pick the next Google, that is what the people here want to know and hear about. What is the next sector that will provide 10 baggers to all and sundry regardless of how good they are at trading. Talk about fireworks and then you will have everyone's attention and praise and be considered an unadulterated genius. Instead of that, you have chosen to share a recipe for steady, consistent and virtually risk free profits. Shame on you.

That is a very good article and goes to show that there is money to be made in all types of markets (bull or bear) provided one is prepared to do some homework and be patient. What I find interesting is that a lot of people mock returns of 24% per annum on average, yet they confess to losing money. Unless I am missing something, the markets must be made up of a lot of dumb participants (I am not interested in doing a handful of trades a year and making 24% risk free as I can do 25 trades a week, sit in front of my computer all day long and lose a large percentage of my capital in the process).

The sad thing is that the message will be lost on most readers because it is too simple, many believe that the more complex a strategy/method the more money they make. Simple charts or analysis are not sufficient or engaging enough. The hare and the tortoise theory do not sit well in financial markets.

Keep up the good work.
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Old Jun 28, 2005, 11:14pm   #9
 
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Please excuse my fat moderating finger, but this thread is dedicated to discussing a Knowledge Lab article and will itself form part of that permanent archive. It is, therefore, more important than usual that it stays on topic and does not become yet another vehicle for jolly - and not so jolly - jousting. So I'm editing/deleting off-topic content and hope that you will respect the thread. Thanks.

jon
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Old Jun 29, 2005, 1:05pm   #10
 
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Interesting and simple approach, nice to see the highlight of ETF's, they can be a great way to achieve diversification within a sector.
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Old Jun 29, 2005, 1:11pm   #11
 
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I am very sorry Joules, I disagree with you completely, because what you are explaining is back to front.

Now, the first thing to do is to establish whether it is a bear market or a bull market, by examining the condition of the market from a technical viewpoint, with particular reference to what is in the background and the reasons why.

Having established this, now the direction is ascertained for the long pull, then stock selection is the next step.

The P/E ratios as printed in the newspapers are not reliable.

The P/E ratios have to be calculated by mining into the accounts and transposing this against the current market price of the stock. In this way a truly accurate figure can be achieved.

Only then can a proper assesment be made, but only if a proper chart is available, showing open, close, high, low and volume, on a daily basis and an hourly basis that captures the period of the range.

And then, finally, this scenario has to be carefully inspected to ascertain whether the given stock is in sync.
This means whether it is harmonius to the market as a whole or whether it is not, whether it is being accumulated or distributed, or just capped or supported.

So you see there is a lot of work to be done which is not mentioned, and in real practical terms not so simple.
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Old Jun 29, 2005, 2:03pm   #12
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There is no link of market P/Es to subsequent returns, no matter how you measure the ratio and no matter over how long (up to five years) you measure returns.

Not my words but from an article written by Ken Fisher, see link below.

For every view point there is an alternative.

www.forbes.com/global/2002/1111/074asia.html
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Old Jun 29, 2005, 2:46pm   #13
 
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Quote:
Originally Posted by Tuffty
There is no link of market P/Es to subsequent returns, no matter how you measure the ratio and no matter over how long (up to five years) you measure returns.

Not my words but from an article written by Ken Fisher, see link below.

For every view point there is an alternative.

www.forbes.com/global/2002/1111/074asia.html
I have read it, and I concur with his viewpoint.

Prices are not driven by Fundamental forces, they are driven by Supply / Demand imbalances.

Now, the assesment of the extent and cause of these imbalances is what serves to baffle nearly everybody.

You put your finger on the button by saying that for every viewpoint there is an alternative.

This is why this topic attracts so much argument.

I look upon all this in quiet contemplation and with wry amusement because all of it is obvious, yet the majority overlook the significance of the patently transparent.
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Old Jun 29, 2005, 2:54pm   #14
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ducati998

Thank you for an interesting article.

Do you calculate the p/e ratio from company accounts, if not from where do you obtain it?

Trust this meets with approval from the fat moderator.

Regards

bracke
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Old Jun 29, 2005, 3:17pm   #15
 
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Quote:
Originally Posted by bracke
ducati998

Thank you for an interesting article.

Do you calculate the p/e ratio from company accounts, if not from where do you obtain it?

Trust this meets with approval from the fat moderator.

Regards

bracke
Oh ! Hello Bracke ! There you are. Nice to see you posting again.

May I tactfully suggest you say fat finger instead of suggesting corpulence as this may unjustifiably offend.

Now carry on, we are interested to see what response your question will elicit.

Mind you, if you look at my post above, you will see how I have explained it.

Clear as mud it is, but I am certain you are able to clock it.

Kind Regards As Usual.
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