Emphasize discipline over daring
This has to be the longest blog Bullish Thoughts has done in some weeks. One key lesson of this particular blog is DISCIPLINE. Bullish Thoughts is trying to apply it to self by making sure that the column is consistently run every fortnight at least.
Paul My Foot!
Word has it Paul the Octopus did predict Yakubu Aigbeni’s historic 2010 World Cup miss. Only that he went on to have predicted Yakubu Aigbeni would be given a RED CARD for the miss. No doubt many Nigerians wish the red card had been handed to Yakubu. That’s new football. French referees no longer blow the whistle for handballs after Thierry’s Ireland game misdemeanor. So Fabiano decided to do rugby against Didier Drogba’s Team.
Messi can’t speak any English?
Well, maybe Cesc Fabregas won't be joining Barcelona after all. Too bad for him! Or good for him because he was gonna warm the bench like he did for Spain.
Without him Barcelona will still be the best club in the world (or La Liga World at least) and Arsenal, well, they'll remain where they belong: 3rd place in the English Premier League.
Barcelona was reportedly willing to give Lionel Messi to Arsenal but a language barrier stopped it? That has to be the stupidest thing I've read in a while.
Enough about soccer save to say; “Does anyone know anything about the Major Soccer League or New York Red Bulls?”
To outsmart the market, emphasize discipline over daring
Back to equities which perhaps Bullish Thoughts knows better. In the beloved field of equities literature Bullish Thoughts discovered that there are two things that are the downfall of most investors: a lack of discipline, and overconfidence.
Being disciplined is fully 50% of the job of trading or investing. No matter how good your system is, without the discipline needed to follow it you don't have much of a chance for meeting your goals. It doesn’t matter how great a planner or organiser you are, without discipline your plans will most likely fail to bear fruit. Discipline involves self-control.
Unfortunately a vast array of psychological research suggests that our ability to use self-control to force our cognitive process to override our emotions is limited.
Another thing … we are hardwired to be confident because if we weren't we might never be able to make a decision.
However, we are often too confident in our own abilities. We suffer a great deal from overconfidence. For example, we believe that our own selected lottery ticket has a better chance of winning than someone else’s selected ticket even though all of us know that the odds are the same for everyone. But when asked to give your ticket up for someone else’s, the response is usually — “No way!”
This fact has been tested over and over with the same conclusion: that we believe our own cognitive skills or our own luck is better than other people’s. In the investment world, the path to ruin is full of disasters caused by this sort of overconfidence.
So, when you see a stock with huge upside it may be a good idea to remind yourself to take care of the downside first, before thinking about the upside potential. Just because a stock looks really undervalued as shown by a few numbers or by who else is buying shares, doesn’t mean it’s going to turn out well.
The ZSE board is littered with such stocks some of which have come off by more than 90% on a YTD basis. Just out of interest, on which table did your discipline or lack of it thereof land you?
| Top Risers YTD | | Top Fallers YTD | ||||
| Counter | Price (Usc) | ∆% | Counter | Price (USc) | ∆% | |
| Chemco | 80 | +77.78 | Zeco | 0.1 | -90.00 | |
| Zpi | 0.55 | +37.50 | Redstar | 0.05 | -83.33 | |
| Zimplow | 3.20 | +28.00 | African Sun | 2.80 | -76.67 | |
| M&R | 21.00 | +20.00 | Pioneer | 0.07 | -76.67 | |
| Tsl | 7.00 | +14.75 | Gulliver | 0.18 | -70.00 | |
Bullish Thoughts is going to let you be the jury.
The good news is that we continue to make brain cells pretty much throughout our lives. Our brains aren’t fixed forever, we can rearrange the neurons. We aren’t doomed — we can learn. Unfortunately, it isn’t easy!
The role that emotions — such as hope and fear — play in trading
The average man or woman buys commodities because they hope they will go up, or somebody advises them they will go up. This is the most dangerous thing to do. Never trade on hope. Hope wrecks more people than anything else. Study the market and determine the trend. Face the facts, and when you trade, trade on facts, eliminate hope.
Fear causes many losses. People sell out because they fear things are going lower, but they often wait until the decline has run its course and sell near the bottom. Often when they have been out of the market for some time, they get in because they fear it is going higher.
Never make a trade on fear.
You will never succeed buying or selling when you hope the market is going up or down. Hope will ruin you because it is nothing more than wishful thinking and provides no basis for action. Fear might save you if you act quickly when you see that you are wrong.
The fear of the market is the beginning of wisdom. Only knowledge that you obtain by deep study can help you succeed. The more you study past records the surer you are to be able to detect the trend in the future.
Love to win or hate to lose?
There’s a big difference between loving to win and hating to lose, which has a lot to do with one’s approach to risk. Someone who loves to win is willing to take a lot of risks because the euphoria of winning outweighs the bad outcomes. If you hate to lose, though, any bad outcome is not acceptable. To be a great investor, I think you really have to hate to lose — Jon Jacobson.
Overcoming the Neanderthal
Your brain has not changed much from the time of the Neanderthal man who hunted wild animals for food and ran from the beasts and neighbouring tribes that threatened his survival. That “rat” brain is still within you — as powerful as it was thousands of years ago. The history of panics and crashes in the financial markets since the inception of trade reflects this ever-changing cycle of fear, greed and hope. To master the art and science of trading requires counterintuitive thinking and a good understanding of your own psychology. The journey within is the most challenging of your trading career. Only when you can recognise the emotions of fear, greed and hope that come up for you, and you are able to resist them, can you begin to trade with authenticity and purpose. It requires discipline and practice.
Don’t let anyone tell you it’s easy. It just plain isn’t. Simple? Yes. But not easy.
How judgments about company management character affect investment success
Below are some quotes that investment gurus know will influence and should influence equities investment decisions.
· Making judgments about management is important to us and something I think value managers tend to underweigh. You can analyse something statistically, but if you expect to own it for 10 years, management is going to make thousands of decisions you can’t predict and may never even know about, which collectively make earnings compound at a rate more or less than they would have otherwise. Those things can add up over time. — Boykin Curry
· The hardest thing is to find management that actually behaves in shareholders’ interest as opposed to their own interest. It’s not what they say, it’s what they do. Take the company that says they are focused on EVA (economic value added) … until they don’t hit their targets and then the board gives management their bonuses anyway, saying “it wasn’t their fault, the economy was bad, why should they get penalised for that?” So you’re looking for managements and boards that actually act in shareholders’ interest, and there aren’t many. — Bill Miller.
· We look first for intellectual honesty. It drives me crazy when you meet with management and there are real issues and they act like they aren’t there. Also important is a contrarian bent, a confidence to go against the prevailing trend. — Jeffrey Ubben
· One red flag is when management sits down with us and right off asks, “What do you think is wrong with our share price?” Any implicit or explicit focus on the share price rather than the business is a bad sign. — Edward Studzinski
· How management communicates about mistakes is very important. No one is mistake-free — as investment managers, about 40% of the stocks we buy end up underperforming the market — and I’d be concerned about any company where shareholder communication doesn’t include a candid assessment of mistakes. — Bill Nygren
· Character is best judged in the proxy statement — what do they pay themselves and how? Is their financial self-interest truly aligned with mine as a shareholder?
· I have absolutely no problem with the people running huge, complicated, global businesses making a lot of money. The big problem we have now is that you’re seeing a lot of superstar compensation for only minor- league performance. — Thomas Gayner
While they won’t always admit it, most investors hold a special place in their hearts for successful and honest corporate managers. That’s primarily driven by the significant role strong management plays in their investments’ increasing in value.
Bullish Thoughts
A Product of Faith Capital (Pvt) Ltd
Tel: 04-292 7658
Cell: 091 344 1674
Email: bulls@bulls.co.zw
Web: www.bulls.co.zw
Skype: Bulls.Bears
G-Talk: zse.bulls
Twitter: http://www.twitter.com/BullsBears2010
Blog: http://bullsnbearszimbabwe.blogspot.com/
DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of Faith Capital (Pvt) Ltd for general information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The information contained in this report has been compiled from sources believed to be reliable, but no representation or warranty is made or guarantee given as to its accuracy or completeness. All opinions expressed and recommendations made are subject to change without notice. Securities or financial instruments mentioned herein may not be suitable for all investors. Securities of emerging and mid-size growth companies typically involve a higher degree of risk and more volatility than the securities of more established companies. Neither Faith Capital nor any other member of Bulls ‘n Bears nor any other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents or otherwise arising in connection therewith. Recipients of this report shall be solely responsible for making their own independent investigation into the business, financial condition and future prospects of any companies referred to in this report.
No comments:
Post a Comment