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Motley Fool Global Gains / GGT: Perfect Global Portfolio


Subject:  Re: Basket cases? Date:  5/11/2011  5:10 AM
Author:  NoFate Number:  134 of 151


"One reason why I think there's still opportunity in this sector for "choosy" investors like us is because the sector is all being treated the same. "

I absolutely agree with that - but I think your argument from the start of your message is getting a bit side-tracked with respect to the assessment of probabilities. What my statement referred to was the assessment of probabilities of the return scenarios for the basket chinese small cap stocks, these have already been positively-selected by the team against the rest of the 'potential fraud cases' (or less harshly, the remaining chinese small caps that offer a less favourable risk/return potential according to your research, familiarity, etc.). It is therefore neither academic, nor is it not real-world -- nor does it imply an equal weight for all chinese small caps when one agrees that as a class (now not just the basket ones) they are high risk. Maybe I wasn't very clear on this in my first message.

To make this practical - let's skip to the end of your message. If you assume that you do have selective ability (though not perfect) [which I do otherwise I wouldn't be a paying subscriber] and so you are choosing stocks that you believe offer better than average (=equal weighting) returns and you further weight them according how comfortable you feel (risk/return, handle on management, etc.) then you are still making at least an implicit assessment of the probability attached to e