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Hi All
Link to an egoli feature on sector & ASX performance/rest of market.
It's why I'm certain that sector rotation is the way to go.


The best performing sectors over the year to 31 March 2001 were Energy (+46.0%), Infrastructure (+44.0%), Health & Biotechnology (+39.0%), Alcohol & Tobacco (+36.4%) and Building Materials (+34.4%). The worst performing sectors over the same period were Miscellaneous Industrials (-41.1%), Telecommunications (-36.6%), Media (-32.9%), Chemicals (-16.1%) and Developers/Contractors (-8.2%).

http://www.egoli.com.au/feature/feature.asp


JR

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Yes, but if it was that easy to pick the sectors, then all the analysts would be relaxing in the tropics somewhere with a banana daquiri in there hand.
Let's see how you go Jono. Which will be 4 of the 6 best performing sectors over the next 12 months?
Don't get me wrong, I am not disagreeing with you, I like top down/bottom up investing. It's just that I take a longer term view with it than 12 months. In and out too often just triggers a capital tax event and therefore reduces your float and compounding.
The more I read about Buffet, the more sense he makes.
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Let's see how you go Jono. Which will be 4 of the 6 best performing sectors over the next 12 months?

No need for me to try & predict the future index charts are read the same as individual charts. In each sector you should realise that not all stocks move at the same pace this is a given & for me = $.

As far as the long term v's short term debate I'm full of it I think it has been well aired on this & other boards & can see not point in going down old roads, we believe what ever we wont to believe.

I'm glad that Buffet has given you something, but if he was that good
I'm sure followers would also be downing banana daquiris.

Just a point when you look at the last 12months in the tele sector you notice that although the sector overall was down big TLS was only down 10%,cla +48%, ntg +12%(both not full year) others like dvt-95% one-75%
etc a hell of a lot lost over 70%.



JR




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I'm glad that Buffet has given you something, but if he was that good
I'm sure followers would also be downing banana daquiris.

Seeing as I am a Buffett devotee I couldn't let this one slide to the keeper without comment.

many Berkshire shareholders are downing banana daquiris metaphorically.

Lets run through the list that I know about just from sitting here in sunny Qld.

Warren Buffett: $29billion ( no inheritance, no options, no cheap vendor shares, no free executive ownership plan shares. All shares purchased on the market for cash from a salary of $100k)

Charlie Munger: $1.2billion (ditto above)

Otis Booth: $1billion bought shares after being involved in business with Munger.

Stewart Horejsi: $360million. Welder who started buying shares in the early 80's and never sold.

Ernie Williams: $250 million. Stockbroker who met Buffett for 15 minutes and kept buying shares after that meeting.

Carol Angle: $300 million. Doctor still working and an original investor.

Neil McMahon: $2.3million. Fireman who bought a few shares in 1982 and never sold.

Saved the favourite for last
Donald Othmer: $ 800 million. This guy was a professor at University and lived a very modest life and no-one had a clue he had any money until he died and left the $800 million to his emloyer. All Berkshire stock bought over the years.

Buffett has said we won't know how much wealth he has created until the shareholders start dying but estimates are there are at least 30 people in Omaha alone worth over $100 million in Berkshire stock.

So yes the shareholders (and I am as well) are drinking banana daquiris and we haven't stopped yet.

The second comment about market rotation I won't dwell on too much except to say that while it may be a current investing technique, probability theory alone would tell you it can't be a successful long term strategy.

Buffett himself has stated that over 90% of his wealth has been determined by less than 20 investments. He's a genius and a lot of us aren't. Make it easy on yourself and increase your chances of succcess by making fewer decisions.

I for one don't know the economincs of each sector on the stockmarket and judging by the Funds performance neither do they.

Sorry about the rant so I am going to take some deep breaths and go back to reading my Berkshire Annual Report.

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many Berkshire shareholders are downing banana daquiris metaphorically.
Well they are stock holders not punters who have folowed Buffets investing style to make their own Millions. It's been a great stock esp if you brought in 82,,, Jeez thats nearly 20 years.

The second comment about market rotation I won't dwell on too much except to say that while it may be a current investing technique, probability theory alone would tell you it can't be a successful long term strategy

It's been a investment strategy for ever nothing new about it, what probability theory are you talking about? I think that is only your opinion V's fact. If I'm wrong then why do sectors not all move at the same time & amount? The fact is sector rotation is/has been praticed for ever by smart traders.
You just can't get dif movements without money going out of one sector & into another & sorry but that is just simple.

Maybe check your Bershire holdings it's a mixed bag my friend not a fund that is in only one sector ask yourself why?

I contend that very few investors can invest the Buffet way, to take control of a company the way he does is just not open to most.

Bershire shareholders that have jumped on the guru train in the last couple of years have little hope of the kind of returns that you highlighted & I'm sure I don't have to but I will mention other co's like Microsoft that have returned much more than Berkshire for a similar term investment.

We can talk about the stock the man or the investment style but please lets not mix it all up.

Yes Buffet is a legand & I'm sure many will benefit from his writings, I doubt however very few will be able to use his investment tech to make big money, you & me just can't get the same knowledge that he gets from companys both for new investments & controling current ones.

One last thought to leave you with how many of the Bershire co's
were private when brought?

JR



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Interesting thread on sectors. Good comments from all.

I was wondering how to make use of this sort of information when you HAVE to sell some shares in the next few weeks for use elsewhere.(not shares) So even if you wanted to hold onto them for the longer you have to sell some..
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Don't really recommend it , but you could use margin if it's conservatively used - say less than 40% gearing. That way you will get to keep the shares and sell when or if you ever want to.
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Jono202 I accept in this forum that what I have said is my opinion and I am not denying sectors move in diffent cycles offering investmnet opportunities at any given time. My point is that I don't think myself or most other investors have a sufficient knowledge base, or skills, to sit here today and determine which sectors will move in which direction over the next 12 months.

Sorry if I misunderstand your question about probability theory, but this theory was developed in the late renaissance period by Fermat to solve a gambling problem that had puzzled people for many years. It is now taught as part of any university statistics course (and maybe high school these days as well). Bernstein's book "Against The Gods" does a very good job of showing how it works in financial markets.

To combine these 2 thoughts in an analogy:
Every Saturday in Sydney, Melbourne and Brisbane there are race meetings with 8 races on the card. 24 races in total with an average of 15 horses per race making 360 horses going around - about the same number of sectors but about 1/3 of the number of companies on the sharemarket.

As a punter do I bet on every race knowing for a fact there will be 24 winners or do I only bet on races where I truly believe I understand the chances of each horse winning - and in particular the one/s I have backed??

I don't know enough about all 360 horses and the 24 races to make the bet so I stick to following a particular horse and when he is in a race where he is not properly priced by the bookmakers then I make the bet (and I bet significantly).

To take the analogy 1 step further consider
- the bookmakers = stockbrokers
- jockeys = CEO's
- Turf Club = ASX
- Treasurer = the starter and marshall of the course
- Reserve Bank = curator/groundsman
- punters =

As an aside I am in an investment club of approximately 60 people made up of traders and long term investors so this topic is a continual debate. It is good natured and we all have a laugh knowing that neither party is going to change their strategy, a strategy they feel comfortable with.

So I accept that in this forum neither of what you or I say will change each others minds and we should agree to disagree, besides there are much bigger issues in this world to worry about.

respectfully
Wayne
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Wayne
First your thoughts are welcome as are everyones.
I have no desire to convert anyone to my way of thinking.

so I stick to following a particular horse and when he is in a race where he is not properly priced by the bookmakers then I make the bet (and I bet significantly).
You can't be sure that the horse is going to ever produce the form that it did before that made you like it.
Well I aint no virgin in the betting ring.
As a Punter I know.
-Most races are won by favourites.
-The numbers 1,2,3 are the most likley to win or run a place.
-Horses draw from barrier 12 or beyond are less likley to win or run a place
-2 year old races are risky to bet on as no form history or very little exist's.
-Maiden races are risky to bet on cause no ones ever one before.
-Horses that have run 1,2,3 in each of thier last 3 or 4 races in similar company have a much better chance of winning or placing.
-Horses carring more than 57kilo farther than 1600 often struggle.
-A fav that is seperated in betting by more than 1/2 by the majority of ring bookies from it's closest rival is a very good bet.
& then you got form knowledge, jockey considerations, weather, trainer considerations, etc

Sector rotation in stocks happens when investors,traders etc sell stocks in one sector and buy in another it really has nothing to do with betting on horses or probability theory. It is humans that make those decisions based on 6 month projections.It's crowd mentality stuff.

determine which sectors will move in which direction over the next 12 months
Well thats not what I do.
But do you think you have the skill to be able to pick one company out of the all the contenders that will give you Berkshire like returns over 20 or even 10 years?

I'd rather put the odds in my favour, reduce risks & remove my winnings from the table. Using the sectors to see were the money is going & deciding which stocks in the sector are strongest & likley to return the most.

JR


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Jono regarding sector investing, how far out ibnto the future do you think "the money" is projected when sector rotational investors (for want of a better term) place their bets? 3 months, 6 months, 12 months, any longer? To illistrate my quetsion II'll use Amcor as an example..a classic "cyclical" stock I know a liitle about. Having a bit of a run lately..yet the ecomony is in a dowturn. Is the run in anticipation of an economic turnaround 6months 12 months ahead?...get my drift?

AB
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AB
A certain amount of money would come from the six month economic outlook crowd. But to get a sustained bull run in sector or stock you need the general crowd to come to the party. The mantra starting to get around that the punter ought to get into stocks like CSR,AMC,BOR,FBG etc
will become a roar soon enough.Good income consistant overseas growth & good market share, stock brokers & the like will rec them more & more as the price keeps going up.

I like AMC if I was forced to be a ltbh AMC would be in the Port.
PPX might offer a better return I'm watching both.

APL, GTP, TIM
While not comparable with amc & ppx in many ways,they are still in the sector loop & are worth considering.
The TA side of all 3 I'm keen on I'll get stuck into one & tickle the other two.

IMO sectors like xbm,xat,xdi have been in bull runs for six months other sectors like Xpp,xfh,xre are looking like they about to start another bull run.

The thing is most sectors, stocks make their ultimate bases when bad news fails to push the stock/sector to new lows.

JR
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