How does One Invest in a Company whose Price will Decline? Part 1
This is not the same question as “Does shorting belong in the value investors’ toolbox,” because shorting is only one way to invest in a company that is expected to decline in share price. But it expresses the idea in an understandable way. I think the normal response for most value investors to the shorting [...]
Finding the Best Online Broker for Penny Stocks and the Small Investor
This is really the third in the series of Investing 101, the second of which discussed setting up a Small Investor Portfolio. But the title would have been too long if I left all that in. The first order of business will be to find a good discount online broker. The good news is that [...]
The Chroma Investing Small Investor Portfolio
This is really the second in the series of Investing 101 that I previously started.
It is my intention to start an investing account with just $2000. The reason for this is that it is an amount of money that one could save in a year with less than $200/month. I will add $200/month to the account to mirror what a small investor might be able to do. $2000 is also an amount that you may have on hand, saved from not buying a Starbucks latte every day for a couple of years. O.k., lets not get that extreme. Like all the investments detailed on this website, all trades will be real money, so all gains or losses will be actual and reported on this blog. I will call this the Chroma Investing Small Investor Portfolio.
An account of this size will allow you to hold 3 or 4 equity positions and thus to have a focused value oriented portfolio. Starting with a small amount will also force a certain amount of discipline in buying. Knowing in advance that you will initially only be able to hold 3-4 positions will focus our attention on the quality of the investments to make sure that we are making only the best investment decisions.
The investing philosophy will be straight forward: value investing with an emphasis on NCAV and other deeply discounted asset plays, special situation investments, or other empirically supported value investing approaches, all with an emphasis on maintaining a margin of safety and keeping an eye on understanding the investment risks inherent to each company. I will concentrate on small and micro cap companies, where the smallness of our portfolio is actually an advantage over big money investors. I will look for the best value, and not shy away from Penny Stocks, if that is where the value leads. My intention is to avoid leverage, and any investment involving margins, including options and futures. It is possible in the future that I will develop a value approach that looks at investing against the market or an individual company if I can satisfy myself that such a strategy can be made in a beneficial risk/reward scenario.
I do not intend to invest in mutual funds, ETF’s or bonds. Nor will their be any speculation on commodities, currency or other other bets outside of my ken.
Tomorrow I will begin the search for the best online broker for this account.
Simoleon Sense interviews James Montier
My friend Miguel at Simoleon Sense has conducted another one of his terrific interviews. This time it is with James Montier, who is always someone worth listening to. I have written previously about Montier’s perspectives before. You can check out Montier bitch slaps EFH or Good Decisions, Bad Outcomes. He hails from the behavioral Finance camp, which it is safe to say, the right team to be on.
Mistakes in Investing
As yesterdays post on TGAL shows you, we all make mistakes in investing. The question isn’t whether we will make mistakes but how we respond to the mistakes we make. My response was to sell by position in TGAL this morning. Yesterday’s press release with Q3 financials changed my valuation of the company substantially, from one having a comfortable margin of safety, to one with none. Given that TGAL was also losing money made selling at a loss a cinch. I sold at $1.20/share plus $4.95 commission for a loss of $85. Be clear. I am not saying the stock will continue to go down. But the valuation proposition changes so much that it no longer looked like a good investment. When that happens, even if it is only after a matter of days. I sell. I am not in market to hope a company recovers. I am about preservation of capital first, then appreciation of capital. The important thing is to move on.
MNDO – Mind C.T.I. Why you must mind the details
I was reviewing a stock, Mind C.T.I. Ltd (MNDO), because it came across a screener as a Net Net opportunity. I wondered why it had so recently turned up.
MNDO is an Israeli company that, “a leading provider of convergent end-to-end billing and customer care product based solutions for service providers as well as telecom expense management (call management) solutions.”
Is Diversification still Prudent?
I have never bought into the whole diversify across asset classes theory. It’s one of those dumb ideas that sounds good theoretically, but doesn’t pass the common sense rule, but I will get to that later. I am not much of an economist. Most of them use too much math in an inappropriate way, that does not reflect the real world that I live in.
Beginning Investor Terms – Discounted Cash Flow (DCF)
Discounted Cash Flow is a way of estimating the current value of an investment in today’s dollars based on assumptions of future growth of cash flows discounted back to the present. This is a vital concept to understand for valuing long term investments, not just in stocks but Real estate, businesses, etc. Once you have determined the value for an investment you compare it to the current price to help you decide whether it is worth investing in. One can easily mislead oneself with the incorrect use of DCF.
Discounted Cash Flow (DCF) Spreadsheet for Mac
Strangely, it never it occurred to me that anyone would be interested in a Mac spreadsheet for valuating a company based on DCF. I created my own because I could not find one on the internet, so I incorrectly figured no one really used a Mac in this world, but me. Where as the entertainment business is a Mac dominated industry, finance seems to be PC dominated industry and for good reason. Microsoft sucks ( I am not being harsh) at porting Office for Mac. It stripped out some of the most useful features in the excel version for Mac and has no intention of adding them in the future.
Exploring Premium Services – Opportunistic Investor
Anyone considering investing money in a premium investing service remember should be mindful of two things. For a beginning investor the important item is whether or not a service fits your investment philosophy. In makes little sense to pay money for technical trading tips if you are fundamental investor. Second, and this is important for the small money investor, make sure the service is worth the money
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