The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Bonds & Fixed Income Investments

URL:  http://boards.fool.com/quotinvest-then-investigatequot-30486145.aspx

Subject:  "Invest, Then Investigate" Date:  1/15/2013  11:31 AM
Author:  globalist2013 Number:  34679 of 35400

No doubt you’ve heard the expression, “Invest, Then Investigate”. Supposedly, it is attributed to George Soros. So I went looking on the Web to see what I could find out. Investopedia says of the phrase:

An investment strategy where investors purchase a stock first and do research and due diligence second. 'Invest, then investigate' - or investing first and researching next - is a risky and speculative approach to making investment decisions. This method is often used by individuals who have either an unfounded hunch that a security's price will move in a particular direction, or who are acting on impulse. Any research or due diligence is performed after the position has been opened and the individual decides to either hold or close the position. This is the opposite of the "investigate, then invest" approach to investment decision making. http://www.investopedia.com/terms/i/investtheninvestigate.as...

OTOH, in their next paragraph, they nearly reverse themselves:

Some investors may utilize this strategy to "test the waters" of a trade. If the position is profitable, they can add to it and potentially increase profits; if it is unprofitable, the position can be closed for a loss. Famous investor George Soros is known to invest first and investigate later to avoid missing rapidly changing market opportunities. Many investors would view this method of investing as gambling and prefer, instead, to investigate potential positions first and then risk money to test the theory (investigate, then invest).

I like Investopedia a lot. Their coverage of investing topics is broad, and I generally don’t argue with what they say, nor in this instance, do I quarrel with them. Putting on a position before one does due-diligence really is speculative. But does ‘speculative’ necessarily translate to ‘irresponsible’ or 'gambling'?

Yep, you guessed it. I went long one of Alberstosn’s bonds just now just to see if I could get in under the 'min-five' requirement at better than the min-five price [which did happen]. So now I need to do my due-diligence. ROTFL. But the situation isn’t as irresponsible as it seems. I’m already long their debt, some of which I bought at far cheaper prices than present and on which I’m up as much as 39% from my entry. So my question to myself this morning was this.

“Do I add on the basis of recent, favorable news (for still having less than a full position relative to AUM), or do I sit tight (and let things work themselves out)?”

As you can see from the chart, prices have run up hugely. http://cxa.gtm.idmanagedsolutions.com/finra/BondCenter/BondD... So the question becomes, “Do they have further to go?” Frankly, I doubt it. If you pull their current offering-list, you’ll see that the yield-curve for the long-dated stuff is flat, which is Never a Good Sign. Traders are pricing the debt based on a Chapter 11 workout. But the price of the 7.75’s of ’26 was ‘attractive’ (though not ‘compelling’) even at current levels. So I bought one lottery ticket. Now I wait to see if the trade was correct and scramble to do some 'due-diligence'. (But later, after more important things, like 'breakfast'. ROTFL

Charlie

-------------------------------------

Cpn Due Price YTM
7.500 11/15/14 100.550 0.2
8.000 05/01/16 99.590 8.1
7.020 07/21/17 89.263 10.0
7.000 07/21/17 89.100 10.1
7.750 06/15/26 66.700 13.1 <<=== my choice, and I got in at 66.950 at IB compared with the 67.590 I would have paid at ET.
7.110 07/22/27 62.600 12.9
6.530 04/10/28 60.026 12.4
6.520 04/10/28 62.100 12.0
6.625 06/01/28 61.100 12.3
6.630 06/02/28 62.090 12.1
7.450 08/01/29 64.100 12.7
8.700 05/01/30 68.663 13.4
8.000 05/01/31 65.600 13.0


Note: Prices assume a commish of $1/bond which would only happen if ten were purchased, unless, of course, the trade were done at Fido, where the ticket would be $8, not $10.
Copyright 1996-2014 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us