Article Trading with Fundamentals

SOCRATES

Veteren member
4,966 134
Who is this Kessler chap ? He sounds like an interesting theorytician ? Is he an acredited academic ?
 

chump

Senior member
2,212 274
"Former research analyst and investment banker Andy Kessler ran a successful hedge fund from 1996 to 2001 out of a dumpy, one-room office with cheap desks, above an art store in Palo Alto, Calif., with his partner, Fred Kittler. Kittler, we learn midbook, worked at J.P. Morgan managing tech portfolios while Kessler was an analyst there. "

and makes money with a quirky style of writing on finance...sort of a JK Rowling on Hedge Funds
 

ducati998

Experienced member
1,193 68
Simon Gordon

'Stocks are a voting mechanism, pure and simple. They are a collective vote of expectations of each company's future fundamentals. If investors think business will improve, that earnings estimates rise, then the stock is going up. If investors think the end is near, a company is about to roll over, a stock will go down. It doesn't mean that those fundamentals ever happen.'
While this quote certainly applies to many, it does not apply to all.

Scuttlebutting requires an indepth network of specific industry contacts who can act as an early warning system. But the average investor cannot build such a network due to capital deployment constraints.
I would say due to time constraints, and possibly accessability to some of the sources. I don't see where "Capital deployment" has any real relevance.

chump

"Former research analyst and investment banker Andy Kessler ran a successful hedge fund from 1996 to 2001 out of a dumpy, one-room office with cheap desks, above an art store in Palo Alto, Calif., with his partner, Fred Kittler. Kittler, we learn midbook, worked at J.P. Morgan managing tech portfolios while Kessler was an analyst there. "
And just look at the timeframe............1996 bull market............2001 blowout.
His partner managed tech portfolios.

and makes money with a quirky style of writing on finance...sort of a JK Rowling on Hedge Funds
And those that can do, those that can't teach.
Cheers d998
 

SOCRATES

Veteren member
4,966 134
chump said:
"Former research analyst and investment banker Andy Kessler ran a successful hedge fund from 1996 to 2001 out of a dumpy, one-room office with cheap desks, above an art store in Palo Alto, Calif., with his partner, Fred Kittler. Kittler, we learn midbook, worked at J.P. Morgan managing tech portfolios while Kessler was an analyst there. "

and makes money with a quirky style of writing on finance...sort of a JK Rowling on Hedge Funds
Ah, yes, thank you Chumpy, I now remember this pair, featured in Stocks and Commodities several years ago.
 

Denny

Member
52 1
It is very difficult for the small trader to get any sort of edge using FA (especially with FTSE 100 Stocks) as remember that many of these stocks could have 20 analysts working full time scrutinising the company using FA.
Even then this is no guarantee which way the stock is going to head. I use FA but only to limit my possible losses because a company paying a fairly well covered dividend with other factors being OK is probably not going to sink like a stone, I think of it as a safety net principle. Whereas with a high flying growth stock there is no such safety net.
I still believe that TA tends to even the playing field for the small investor and is the better way of picking stocks. IMHO. What I say is whatever works for you do it. I believe one of the best market forecaster in the USA is Arch Crawford and he bases his forecasts on astrology !!!! Like I say whatever works for you in the stock market there is no right way and wrong way only winners and losers.
 
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chump

Senior member
2,212 274
Quite a bit that I would agree wth there Denny..frankly when it comes to fundamentals I prefer to focus on the wider picture rather than the specific company ..for instance...in the UK at this time the cumulative effect of rising costs (from various directions) on the individuals spending power is as serious as I can remember for over a decade....rising income won't be riding to the rescue any time soon because as tight as the labour market is the individual is still aware that management is applying increases based on govt inflation figures even though those figures are a nonsense...against that backcloth there is a very real expectation that the govt will be applying a further squeeze in it's ever increasing need for funds to support it's planned public spending amongst other things...and if that is not enough (and no I'm not a pessimist)...it cannot have escaped those alert that we are really not able to generate any wealth producing jobs to speak of in the private sector..in fact we are losing them at a disturbing rate...so if this is the wider picture where is the growth coming from that will let UK companies move on from here ? Very few companies will be good enough to rise against a tide like this flowing in the opposite direction hence why I don't focus on fundamentals of specific companies..
 

Simon Gordon

Active member
126 1
D998 - here is a live example.

ATH a coal miner has operations in Scotland and potential sites in France.

Proper FA should mean, I think, I visit as many sites as possible, subsribe to coal industry magazines and attend exhibitions/conferences on the subject. I should also be visiting the competition on the premise that I am an investor with mucho capital who should be given access to board directors.

I should also contact electricity generators to get feedback on ATH - the Drax power station for example.

I could go to the local pub in a mining village and ask the workers how it is to be an employee of ATH - this entails a trip to Scotland.

I would call Coal Pro and seek knowledgable industry bods who can give me insight.

This is just scratching the surface of scuttlebutting and it needs capital and time.

Obviously for the Private Investor this is virtually impossible.

The figures given by analysts and brokers are just that figures and a true fundamentalist would try to dig as deep as possible, for to punt money on the figures is high risk gambling.

The only way to shorten the odds is to dig like hell.
 

ducati998

Experienced member
1,193 68
Simon Gordon

Proper FA should mean, I think, I visit as many sites as possible, subsribe to coal industry magazines and attend exhibitions/conferences on the subject. I should also be visiting the competition on the premise that I am an investor with mucho capital who should be given access to board directors.
Read "Coal Industry magazines".......absolutely, no argument.
Visit sites, attend conferences............possibly, certainly would do no harm.
Visiting the competition........................again no harm.

All this and much more is currently completed by "professional analysts" and their reports are widely available.

I could go to the local pub in a mining village and ask the workers how it is to be an employee of ATH - this entails a trip to Scotland.
You could, and may very well unearth useful information.

would call Coal Pro and seek knowledgable industry bods who can give me insight.
Again, no argument.

This is just scratching the surface of scuttlebutting and it needs capital and time.
It certainly requires time, but much "research" can be done via telephone, e-mail etc, that I'm not sure of the "capital" requirements.

Obviously for the Private Investor this is virtually impossible.
Some may well be, especially if you are working a full time day job. However much is "do-able" if the investor is serious about his investments.

The figures given by analysts and brokers are just that figures and a true fundamentalist would try to dig as deep as possible, for to punt money on the figures is high risk gambling.
To which figures are you referring ?
Or, is it generic ?

However your post illustrates very well a point that many may not be aware of, and that is some of the fundamentally different branches of Fundamental Analysis that exist.

The "Scuttlebutt" form of research was developed by P.Fisher, and he was a "Growth Stock" investor, planning to hold very long term.

Another branch, of which I am a participant, is the "Asset Stripper" or "Liquidator". I look for undervalued stocks, that provide an imbalance within the financial structure of the company that I can exploit for profit. I have no interest in owning the company for the long haul. Just long enough to realise my profit.

The methodologies between these and other fundamentally driven strategies is somewhat disparate.

cheers d998
 

Dispassionate

Member
98 1
That's all very well if markets were rational. They simply aren't because people are not rational. There is no doubt fundamental analysis works, but it does mean you will get to miss out on the greatest opportunities.
Technical analysis coupled with fundamental analysis reminding yourself that markets are not rational? Now you are talking about a powerful comination.....
 

Ken2win

Newbie
8 0
Ken2win: I find the article is very helpful for the understandig who we are and what we are doing trading on Stock Exchange Markets. FA works perfectly on Emerging Markets, just we should not be afraid of them.
 

Jonathon4

Newbie
2 0
Very good, trading by the charts is a complete waste of time you will never make serious money unless you consider what drives the market. G Soras did NOT go by the charts when he shorted the pound, he went by the evidence in the market and won the biggest bet of all time.

JB
 
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