Reblog: Seth Klarman: Investing Requires A Degree Of Arrogance Tempered With The Humility Of Knowing We Could Be Wrong


Several years ago Jason Zweig did a great interview with Seth Klarman titled – Opportunities for Patient Investors, which was published by the CFA Institute. While the entire interview provides a number of value investing insights, one answer, in particular, provides a unique insight into Klarman’s psychology towards investing saying:

“In investing, whenever you act, you are effectively saying, I know more than the market. I am going to buy when everybody else is selling. I am going to sell when everybody else is buying. That is arrogant, and we always need to temper it with the humility of knowing we could be wrong—that things can change—and acknowledging that we have a lot of smart competitors.”

Here is an excerpt from that interview:

Zweig: In a Forbes article in the summer of 1932, Benjamin Graham wrote, “Those with enterprise haven’t the money, and those with money haven’t the enterprise, to buy stocks when they are cheap.” Could you talk a little bit about courage? You make it sound easy. You have great clients and great partners. Was it easy to step up and buy in the fourth quarter of 2008 and the first quarter of 2009?

Klarman: You may be sceptical of my answer, but, yes, it was easy. It is critical for an investor to understand that securities aren’t what most people think they are. They aren’t pieces of paper that trade, blips on a screen up and down, ticker tapes that you follow on CNBC.

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Reblog: What Investors Need to Know About Investing in Low PE Stocks


Man and woman in business attire happily looking at computer screen
Value investing starts with low PE stocks, but it shouldn’t be an investor’s only financial metric.

What do Warren Buffett, Ben Graham, Seth Klarman, and Peter Lynch all have in common? Besides being wildly successful investors, they’re all are adherents to value investing, a method where one attempts to buy securities that have a higher intrinsic value than their current price.

One of the most basic forms of value investing is to find stocks with low price-to-earnings (PE) ratios. The PE ratio is a simple ratio that divides the current price per share of a company by the earnings per share over the trailing-12-month period. The logic behind buying low PE stocks is simple: As an investor, you are ultimately entitled to a pro-rata portion of company earnings, so paying the lowest cost, or multiple, for those earnings is preferable than paying a higher multiple. Essentially, your dollar is buying a larger portion of company earnings than it would with a high-multiple stock.


Sensex cracks another 341 pts on Friday as banks, IT drag; YES Bank falls 9%


The benchmark indices settled around 1 per cent lower on Friday, led by a fall in the banking, information technology (IT) and fast-moving consumer goods (FMCG) stocks amid weakness in the Asian markets, which fell to a 20-month low.

The S&P BSE Sensex ended at 33,349, down 341 points, while the broader Nifty50 index settled at 10,030, down 95 points.

Among the sectoral indices, the Nifty IT index fell 1.9 per cent due to a fall in the shares of Infosys, Tata Consultancy Services (TCS) and HCL Technologies. The Nifty Bank index, too, declined 1.6 per cent weighed by YES Bank which fell 8.7 per cent after the private lender posted a fall of 3.8 per cent in net profit for the September quarter. The Nifty FMCG index settled 1.4 per cent lower dragged by ITC, which fell even as the company reported 11.92 per cent rise in standalone net profit to Rs 29.55 billion for the quarter ended September 30, 2018.

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Reblog: Ascending Triangle Chart Pattern (Trading Strategy)


Here’s the deal:

I’m not a chart pattern trader.

However…

The Ascending Triangle chart pattern is one of the few patterns I trade.

Why?

Because when other traders get stopped out, they help “push” the market further in your favor.

In short, you EXPLOIT the stop-loss orders of losing traders — and that’s why it works.

And because this is so powerful, I’ve created a new trading video on Ascending Triangle chart pattern.

You’ll learn:

  • What is an Ascending Triangle chart pattern and why does it work
  • You should always go short when the price is at Resistance, right? Wrong! I’ll explain why…
  • How to better time your entries & exits when trading the Ascending Triangle
  • When is the best time to trade Ascending Triangle (and why)
  • How to find high probability breakout trades with the Ascending Triangle chart pattern

You ready to learn this powerful chart pattern?

Then go watch this video below now…

Now, here’s a question for you…

How do you trade the Ascending Triangle chart pattern?

The original post by Rayner Teo appears on tradingwithrayner.com and is available here.


Reblog: The Four Fundamental Skills of All Investing


In his book Succeeding, John Reed wrote one of the smartest things I’ve ever read:

When you first start to study a field, it seems like you have to memorize a zillion things. You don’t. What you need is to identify the core principles – generally three to twelve of them – that govern the field. The million things you thought you had to memorize are simply various combinations of the core principles.

This extends beyond those learning a new field. I think it’s most relevant for those who consider themselves experts. The root of a lot of professional error is ignoring simple ideas that seem too basic for those with experience to pay attention to.

Having seen the investing world from several different angles, four skills stand out as governing most of outcomes.

1. The ability to distinguish “temporarily out of favor” from “wrong.”

The two strongest forces in investing are “This investment looks broken because that’s how opportunity presents itself” and “This investment looks broken because it’s actually broken.” It’s hard to tell the difference in real time. Distinguishing between the two relies on accurately calculating the odds that something will eventually come along to heal or promote the market or company that looks broken. And since those odds are always less than 100%, it can take a while to tell if you’re any good at it, because even when the odds are in your favor the outcome can go the wrong way. It’s hard to do. But worse, and more common, is forgetting that a distinction needs to be made in the first place.

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Sensex slides 464 points; NBFCs plunge, India VIX surges 11% on Friday


Benchmark indices Sensex and Nifty ended over 1 per cent lower on Friday, dragged by fall in blue-chip companies such as Reliance Industries (RIL), Infosys and YES Bank amid muted global cues. The S&P BSE Sensex ended 464 points or 1.33 per cent down at 34,316 while NSE’s Nifty50 index settled at 10,303.55, down 150 points or 1.43 per cent.

Among individual stocks, RIL dipped as much 7% to Rs 1,073 on the BSE in the intra-day trade after a mixed bag results for the quarter ended September 2018 (Q2FY19) with its retail and digital services (telecom; Jio) businesses continuing to post strong growth, while its core refining business performance was a bit disappointing amid high expectations. The stock ended at Rs 1,102 apiece on BSE, down 4 per cent.

YES Bank also dropped as much as 8 per cent in the intra-day trade on Friday after the Reserve Bank of India (RBI) on Wednesday once again rejected the lender’s request for extending the term of MD & CEO Rana Kapoor, and reaffirmed the February deadline for finding his successor. Shares of the lender ended at Rs 218, down 6 per cent.

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Happy Dussehra


May this Dussehra bring you loads of joy, success and prosperity, and may your worries burn away with the effigy of Ravana. Wishing you a year full of smiles and happiness. – Team StockArchitect


Reblog: Walter Schloss: What Kind Of Stocks Do We Look At For Investment


In 1993 Walter Schloss gave a great presentation called – Upper Level Seminar In Value Investing, at the Columbia Business School. Schloss’ notes for the presentation included a number of timeless investing lessons including the kinds of stocks he looks at for investment, how to scale into an investment, and how to manage a stock portfolio.

Here is an excerpt from the presentation:

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Reblog: Three Lessons for Investors in Turbulent Markets


The global stocks roller-coaster of recent days reminded me of three lessons I learned many years ago as an investor in emerging markets. If well understood and applied, these precepts can turn unsettling volatility surges into longer-term opportunities.

  1. Long periods of market calm create the technical conditions for violent air pockets. Until last week, the most distinctive feature of many market segments was historically low volatility, both implied and realized. Although several economic and corporate reasons were liberally cited for this development (including the convergence of inflation rates worldwide and eternally supportive central banks, as well as healthy balance sheets and synchronized growth), an important determinant was the conditioning of the investor base to believe that every dip had become a buying opportunity, a simple investment strategy that had proven very remunerative for the last few years.The more investors believed, the greater the willingness to “buy the dip.” Over time, the frequency, duration and severity of the dips diminished significantly. That reinforced the behavior further.The economist Hyman Minsky had a lot to say about the phenomenon of prolonged stability breeding complacency as a precursor to instability. This phenomenon is reinforced by the insights of behavioral finance and can lead markets to embrace paradigms that ultimately prove unsustainable and harmful (such as the idea well more than a decade ago that policy making had totally overcome the business cycle, and the notion that volatility had been flushed or hedged out of the financial system). Continue Reading

Sensex rises 732 pts, Nifty ends at 10,472; India VIX eases 8%


The benchmark indices ended over 2 per cent higher on Friday after the rupee rose against US dollar amid firm Asian markets.

The S&P BSE Sensex ended at 34,734, up 732 points (2.15 per cent), while the broader Nifty50 index settled at 10,472, up 238 points (2.32 per cent).

The rupee strengthened against the US dollar on Friday, rising 53 paise to 73.58 against the greenback in intra-day trade.

Among sectoral indices, the Nifty Auto index settled 4 per cent higher led by a rally in shares of Mahindra & Mahindra and Maruti Suzuki India. The Nifty Bank index, too, rose 2.5 per cent led by IndusInd Bank and ICICI Bank.

However, the Nifty IT index slipped 1 per cent lower led by a fall in Tata Consultancy Services (TCS), which fell 3 per cent to Rs 1,920 on the NSE after the company reported a lower than expected revenue growth of 3.7 per cent in constant currency (CC) terms in September quarter on the sequential basis. The Street was estimating revenue growth of 4 per cent in CC terms for the quarter.

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