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Jul 7, 2007 10:33 pm

There is no way in the world you can manage a portfolio SIMPLY by using technical analysis.


No way.


Being a portfolio manager requires a lot more.  Insight, intuition, balls of steel, a thorough understanding of what companies are in high demand or low demand at different points in the business cycle.  P/E ratios, Growth rates, ROE, Profit Margin, all type of things.


If someone came to me and wanted me to manage their money using a "technical analysis system" I would laugh.


BUYING STOCKS on technical parameters is not worth bank-rollling your portfolio on.


Jul 7, 2007 11:47 pm

And what does portfolio management have to do with being a financial advisor? There's a reason most retail financial advisors work with a portfolio of portfolios, leveraging the specialized expertise of other dedicated professionals.

Jul 7, 2007 11:50 pm

Exactly



Jul 8, 2007 12:13 am

Freelunch -


You don't know what the hell you are talking about.  There are a ton of successful quantitative models that trade via technical analysis only.


I am a portfolio manager that utilizes technical analysis only.


Jul 8, 2007 12:45 am
maverick/goose:

Freelunch -


You don't know what the hell you are talking about.  There are a ton of successful quantitative models that trade via technical analysis only.


I am a portfolio manager that utilizes technical analysis only.



So what you are saying is that you pay no attention to earnings reports, P/Es, management shifts, and the business cycle.


Hmm.


Why?

Jul 8, 2007 12:57 am
FreeLunch:
maverick/goose:

Freelunch -


You don't know what the hell you are talking about.  There are a ton of successful quantitative models that trade via technical analysis only.


I am a portfolio manager that utilizes technical analysis only.



So what you are saying is that you pay no attention to earnings reports, P/Es, management shifts, and the business cycle.


Hmm.


Why?



Maverick makes sense and FreeLunch you just will never understand it, and not many people do.  Many of the stocks we invest in don't have positive earnings.  They are on the verge of something, and once it has been recognized, the stock will take off.  What good do fundamentals have there?  If two stocks have the same technicals, then, yes, we will look at some of the fundamentals. 

Jul 8, 2007 1:08 am

Free Lunch, I agree with you entirely.


I am definitely a fundamental analysis stock picker.   I look at a company's stock as an investment for my client's in the same way that I looked at businesses when I was a commercial lender, (which I was for many years prior to this incarnation).  My anaysis was based on realities, not charts or Ouija Board gymnastics.


Loaning money to a company as a banker or investing in stocks seems to me to be the same thing.  My recommendations of stock picks  or asset allocation is based on fundamentals of economics and not charts.


My criterion when deciding to lend the financial institution's money is the same as my clients when investing.


Why do I want to give/lend money to this company?


Is there a good chance that I would be repaid: or will they default on the loan?


Is there a high possibility of return on my money?


What is the competition to the prospective company I am giving money to? 


How is this company going to beat their competition?


What are the business dynamics of this industry, business company and how are they going to benefit or not by these dynamics?


What is the caliber of the management and their ability to run a business?  


What is the track history of the business in relation to other comparable companies?  Do they lag or exceed?


How much cash flow comparable to liabilities do they have?  Short term or long term liabilities. How do they compare to other companies in the same industry for capitalization?


Bottom line is: would I put my Mother's money in this investment?


A fancy chart means doo squat in the real world.  What is more important is performance.


Jul 8, 2007 11:33 am

My personal opinion is that Technical Analysis should only come in to play LAST.


My criteria is as follows (generally) 


Relatively low PEG ratio.


Attractive P/E and growth rates


Low Debt/Equity, high Return on Equity, High Profit Margin.



THEN, only then do I screen them on technical parameters.


Dust Bunny - I like your approach

Jul 8, 2007 3:36 pm
FreeLunch:

My personal opinion is that Technical Analysis should only come in to play LAST.



Why?  There are plenty of cheap stocks out there that you can buy, only to later realize that they are fundamentally cheap for a good reason.

Technical analysis is nothing more than the use of a graphical reprentation(i.e. the chart) to determine the dynamics of supply and demand for a particular stock or ETF.  In the short term(and arguably in the long term) the ONLY reason a stock goes up is that there are people who are willing to keep buying it(not sell it) at successivly higher prices.

So why not use technical analysis(which btw can be far more time efficient) to determine which stocks have this favorable supply/demand balance, and THEN use fundamental analysis to determine which ones are most attractively priced?

It's worked well for me....

Jul 8, 2007 3:43 pm

At least, the idea is some good CFP material.


My question is, if you are running a full service "planning" shop, how much value do you really add by becoming a stock picker?


It may be fun, it may be logical, I've had better results focusing on other aspects of the financial planning process. That's just me, though.

Jul 8, 2007 5:10 pm
joedabrkr:


Why?  There are plenty of cheap stocks out there that you can buy, only to later realize that they are fundamentally cheap for a good reason.

Technical analysis is nothing more than the use of a graphical reprentation(i.e. the chart) to determine the dynamics of supply and demand for a particular stock or ETF.  In the short term(and arguably in the long term) the ONLY reason a stock goes up is that there are people who are willing to keep buying it(not sell it) at successivly higher prices.

So why not use technical analysis(which btw can be far more time efficient) to determine which stocks have this favorable supply/demand balance, and THEN use fundamental analysis to determine which ones are most attractively priced?

It's worked well for me....


That's a good point Joe.  In the short term, you are right.  My experience with technical analysis has shown me when a stocks demand is coming back into play.


overbought, oversold, sellers are losing, stocks bottoming, peaking, etc...


don't get me wrong, I LOVE technical analysis, and to each his own.  Everyone is making some good points.  I just believe that it can be relied on exclusively b/c there are too many variables out there. 


Take a look at this stock, and its UPWARD trend.  PCP - Precision CastParts.  There is a Technical Buy and I HAVE been loading up and will continue to until it breaks that technical uptrend.


But you know what I just thought of?  If something happens within the company (negative) - it'll typically turn into a TECHNICAl sell anyway once massive selling occurs.


I guess, if you've got a style and it works, don't change it - have 100% conviction.


But, you Can't IGNORE fundamentals.  I guess thats what I'm getting at.

Jul 8, 2007 5:10 pm
GolFA:

At least, the idea is some good CFP material.


My question is, if you are running a full service "planning" shop, how much value do you really add by becoming a stock picker?


It may be fun, it may be logical, I've had better results focusing on other aspects of the financial planning process. That's just me, though.



I've always thought that anyone can get a balanced mutual fund on their own.  If they wanted near index returns, it's not that hard.  If part of their "financial plan" is to have a portion of their assets get significant returns, then we as stock pickers can have a significant impact.  We've all seen average investors in their Scottrade, Etrade accounts and what have you, make poor stock choices or buy hi and sell low.  Many of them don't have the time, interest, nor knowledge to do the research and pick the stocks.  There is a ton of value we can add.  If you have multiple people on a team, one devoted to picking stocks, another for outside money managers and "planning" it can be a very capable approach that meets many of the clients needs.  Thats what we do, kind of like a ying yang thing I guess.  One of a million ways to do it.

Jul 8, 2007 5:17 pm
FreeLunch:
joedabrkr:


Why?  There are plenty of cheap stocks out there that you can buy, only to later realize that they are fundamentally cheap for a good reason.

Technical analysis is nothing more than the use of a graphical reprentation(i.e. the chart) to determine the dynamics of supply and demand for a particular stock or ETF.  In the short term(and arguably in the long term) the ONLY reason a stock goes up is that there are people who are willing to keep buying it(not sell it) at successivly higher prices.

So why not use technical analysis(which btw can be far more time efficient) to determine which stocks have this favorable supply/demand balance, and THEN use fundamental analysis to determine which ones are most attractively priced?

It's worked well for me....


That's a good point Joe.  In the short term, you are right.  My experience with technical analysis has shown me when a stocks demand is coming back into play.


overbought, oversold, sellers are losing, stocks bottoming, peaking, etc...


don't get me wrong, I LOVE technical analysis, and to each his own.  Everyone is making some good points.  I just believe that it can be relied on exclusively b/c there are too many variables out there. 


Take a look at this stock, and its UPWARD trend.  PCP - Precision CastParts.  There is a Technical Buy and I HAVE been loading up and will continue to until it breaks that technical uptrend.


But you know what I just thought of?  If something happens within the company (negative) - it'll typically turn into a TECHNICAl sell anyway once massive selling occurs.


I guess, if you've got a style and it works, don't change it - have 100% conviction.


But, you Can't IGNORE fundamentals.  I guess thats what I'm getting at.



FreeLunch, that will occasionally happen to us, where it technically looks great, but something happens, such as a negative verdict in a court case.  The stock could go down 20+%, and at that point we wait for it to come back.  Sometimes we have to wait 2-3 years, but because our clients are very diversified, it is ok.  Usually the stock will at least fill the gap down and we can get out for even money.  It is very seldom that such negative things happen, but of course once in a blue moon is inevitable.  Things can happen to the best of stocks, technically sound and fundamentally sound...

Jul 8, 2007 5:25 pm
FreeLunch:
joedabrkr:


Why?  There are plenty of cheap stocks out there that you can buy, only to later realize that they are fundamentally cheap for a good reason.

Technical analysis is nothing more than the use of a graphical reprentation(i.e. the chart) to determine the dynamics of supply and demand for a particular stock or ETF.  In the short term(and arguably in the long term) the ONLY reason a stock goes up is that there are people who are willing to keep buying it(not sell it) at successivly higher prices.

So why not use technical analysis(which btw can be far more time efficient) to determine which stocks have this favorable supply/demand balance, and THEN use fundamental analysis to determine which ones are most attractively priced?

It's worked well for me....


That's a good point Joe.  In the short term, you are right.  My experience with technical analysis has shown me when a stocks demand is coming back into play.


overbought, oversold, sellers are losing, stocks bottoming, peaking, etc...


don't get me wrong, I LOVE technical analysis, and to each his own.  Everyone is making some good points.  I just believe that it can be relied on exclusively b/c there are too many variables out there. 


Take a look at this stock, and its UPWARD trend.  PCP - Precision CastParts.  There is a Technical Buy and I HAVE been loading up and will continue to until it breaks that technical uptrend.


But you know what I just thought of?  If something happens within the company (negative) - it'll typically turn into a TECHNICAl sell anyway once massive selling occurs.


I guess, if you've got a style and it works, don't change it - have 100% conviction.


But, you Can't IGNORE fundamentals.  I guess thats what I'm getting at.



If you want to "top tick" the stock that everyone else is chasing, then I guess PCP is a great way to do that!

Jul 8, 2007 5:30 pm

People aren't chasing PCP


PEG ratio is still right at 1


The Forward P/E is = Estimated Growth Rate


You can chase this one another 25% at least.


Jul 8, 2007 5:30 pm
joedabrkr:
FreeLunch:
joedabrkr:


Why?  There are plenty of cheap stocks out there that you can buy, only to later realize that they are fundamentally cheap for a good reason.

Technical analysis is nothing more than the use of a graphical reprentation(i.e. the chart) to determine the dynamics of supply and demand for a particular stock or ETF.  In the short term(and arguably in the long term) the ONLY reason a stock goes up is that there are people who are willing to keep buying it(not sell it) at successivly higher prices.

So why not use technical analysis(which btw can be far more time efficient) to determine which stocks have this favorable supply/demand balance, and THEN use fundamental analysis to determine which ones are most attractively priced?

It's worked well for me....


That's a good point Joe.  In the short term, you are right.  My experience with technical analysis has shown me when a stocks demand is coming back into play.


overbought, oversold, sellers are losing, stocks bottoming, peaking, etc...


don't get me wrong, I LOVE technical analysis, and to each his own.  Everyone is making some good points.  I just believe that it can be relied on exclusively b/c there are too many variables out there. 


Take a look at this stock, and its UPWARD trend.  PCP - Precision CastParts.  There is a Technical Buy and I HAVE been loading up and will continue to until it breaks that technical uptrend.


But you know what I just thought of?  If something happens within the company (negative) - it'll typically turn into a TECHNICAl sell anyway once massive selling occurs.


I guess, if you've got a style and it works, don't change it - have 100% conviction.


But, you Can't IGNORE fundamentals.  I guess thats what I'm getting at.




If you want to "top tick" the stock that everyone else is chasing, then I guess PCP is a great way to do that!


Joe I agree with you.  It's already broken out.  It's had such a good move since mid-2006 that the risk is to the downside in my opinion.

Jul 8, 2007 5:33 pm
wallstreeter:

Joe I agree with you.  It's already broken out.  It's had such a good move since mid-2006 that the risk is to the downside in my opinion.




EARNINGS EARNINGS EARNINGS


Plus - if you are a technical guy, what more can you look for?


1% Short, IMPRESSIVE FUNDAMENTALS, huge demand for product, Cheap P/E


Classic case where ignoring fundamentals is a mistake!

Jul 8, 2007 5:40 pm
FreeLunch:
wallstreeter:

Joe I agree with you.  It's already broken out.  It's had such a good move since mid-2006 that the risk is to the downside in my opinion.



EARNINGS EARNINGS EARNINGS


Plus - if you are a technical guy, what more can you look for?


1% Short, IMPRESSIVE FUNDAMENTALS, huge demand for product, Cheap P/E


Classic case where ignoring fundamentals is a mistake!



Ignoring fundamentals?

Cyclical stocks are usually appear cheapest at their peak valuations.

How's that for ignoring valuations.

For your sake I hope I'm wrong.  Either way we shouldn't be commenting on a specific stock on a public board, so I'm done with this thread.

Jul 8, 2007 5:41 pm
wallstreeter:
GolFA:

At least, the idea is some good CFP material.


My question is, if you are running a full service "planning" shop, how much value do you really add by becoming a stock picker?


It may be fun, it may be logical, I've had better results focusing on other aspects of the financial planning process. That's just me, though.



I've always thought that anyone can get a balanced mutual fund on their own.  If they wanted near index returns, it's not that hard.  If part of their "financial plan" is to have a portion of their assets get significant returns, then we as stock pickers can have a significant impact.  We've all seen average investors in their Scottrade, Etrade accounts and what have you, make poor stock choices or buy hi and sell low.  Many of them don't have the time, interest, nor knowledge to do the research and pick the stocks.  There is a ton of value we can add.  If you have multiple people on a team, one devoted to picking stocks, another for outside money managers and "planning" it can be a very capable approach that meets many of the clients needs.  Thats what we do, kind of like a ying yang thing I guess.  One of a million ways to do it.



Sure, nothing wrong with you being the person who takes the management fee. So yeah, I can combine low cost large cap value ETFs with higher cost actively managed international funds, say the Fidelity team, and achieve alpha or at least justify my costs at blended index performance levels.


I just think at the end of the day, it comes more down to the sizzle you are selling, at the retail financial services level. We can all kind of nod and wink about that one. If you are really doing what you say you are, don't waste your time in retail, 'cause guys like me will buy and blend in some of your product.


I like to tell prospects, " What are the chances that some broker in downtown Atlanta is going to be a great stock picker, versus the specialized managers on Wall Street? Let's just delegate that function, and you can come to my office in the burbs and save yourself a trip to the expensive skyscraper downtown. "


But that's just my niche.

Jul 8, 2007 5:44 pm
FreeLunch:
wallstreeter:

Joe I agree with you.  It's already broken out.  It's had such a good move since mid-2006 that the risk is to the downside in my opinion.




EARNINGS EARNINGS EARNINGS


Plus - if you are a technical guy, what more can you look for?


1% Short, IMPRESSIVE FUNDAMENTALS, huge demand for product, Cheap P/E


Classic case where ignoring fundamentals is a mistake!



I understand what you are saying, but I think there are BETTER bets out there.  That's all I am saying.  I would rather look for something that is about to break out rather than something that has already moved over 100% in it's last big move.  Maybe our technical research could have found it at 65 when it broke above the high around 63 or 64 where as your fundamentals are finding it at 122.  We may get in earlier and make more money.  Anyways, looking at the long term chart, it's gone straight up and has significant downside potential.  It looks like any tech stock in 1999 right now on that chart, not that it will crash, but it's moved way too much for me to even think about.  Hope it works out for you though