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Real-Money Stock Picks / Messed-Up Expectations Portfolio


Subject:  Re: More thoughts on discount rates Date:  12/13/2010  4:29 PM
Author:  TMFGebinr Number:  100 of 1282

Hi tj,

Thanks for your comments.

Yes, exactly, you pass over some good investments

Oh, certainly. But I'm not trying to find all the good investments. Honestly, nobody can. I'm trying to find enough that the market thinks very poorly of that actually are likely to do better than expected, and then ride the share price up as the market readjusts its expectations. If I manage to pick only winners (defined by rising stock prices after purchasing), nobody will be more surprised than me.

but what is worse is that this method will select the riskiest stocks. That can be very dangerous. Your screen will pick all the value traps and then you have to manually sift out the ones that are not "traps".

Yes, that is a concern. You always have to ask, "Why is this company disliked now?" And you can find yourself in the position of convincing yourself that it's "better than that, really!" That's where the due diligence comes in, asking questions about the accounting, the management, and the situation the company is operating in (e.g. Transocean). And that's also where my position sizing will play a role. For those that are most