Value investing vs technical analysis

Discussion in 'Trading' started by jlryan87, Sep 16, 2011.

  1. jlryan87

    jlryan87

    Although a lot of people seem to believe that value investing is superior than TA, I can't help but think that value investing also shares the same weakness as TA. Namely, both assume that past performance is indicative of future performance.

    An example for TA will be: if closing price crosses a certain moving average, the price will have a tendency to rise. A similar problem with value investing, is that, if the fundamental is good for the last few years, and the stock is not expensive, then stock price has a tendency to rise. The problem I see is, the company may not carry on having the same awesome performance in the future. Also, the stock price may just stuck on the same level for a long time.

    What do you make of this?

    By the way, I wonder if anyone comes across any research papers that focus on debunking Buffett or value investing.
     
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  3. jlryan87

    jlryan87

    I am aware of Buffett's recent move away from his long time mantra of value investing. I am just curious how he managed to get so good with value investing many years ago, given what I have highlighted. But maybe he didn't, and he might have been pulling the same trick just like these days. It's just that there wasn't any medium (the internet) to expose him many years back. I am actually looking for some research papers which prove that value investing doesn't work as commonly claimed. For example, value investing could have been debunked if you can find value stocks (with similar metrics to Buffett's stocks) that didn't rise much.
     
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    Trend Following ET Sponsor

    He is a great businessman. Easy to salute him. That said, these days it seems like political favors and access are his bread and butter. That's fine, just time for the "gee aw shucks Leave It to Beaver" routine to be less believed.
     
  5. Lornz

    Lornz

    Why limit oneself?

    I do both...
     
  6. Even if you could find such a document, why do you need it?

    Seems pretty obvious that the long term trend is extreme volatility. It's my opinion that buying stocks as a long term hold "investment" was a con job setup many years ago by stock holders trying to dump some worthless holdings. The trouble is the trick caught on so they named it "investing" and the individuals names themselves brokers (of the worthless holdings).

    Let's face it, Buffett's announcements and analysis are a ponzi scheme anyway. He amassed his great fortune when for the most part the market was fairly smooth. He greatest fear today is mass hysteria and then everything he "owns" is worthless stock certificates filling up vault space. That's why he's buying banks. Sure it adds to his holdings, but if he could he'd buy Greece just to keep things on an even keel.

    What does this point to - people have more faith in a person or persons than the securities they hold. The securities they hold continue to have value for the most part as long as the person they have faith in says "keep the faith". That exactly what happened in 1927 - 1929. The industrial giants (Warren Buffett's) of the day were publicly buying up everything to create stability.
     
  7. +1. the followiong quote is paraphrased from something i read online (if you find the citation pls post so they get credit).

    "if he didn't look like everyone's grandpa (and try to act like it) he'd be despised as a greedy hedge fund manager bent on taking advantage of our great companies".

    oh btw saying derivatives are weapons of mass destruction while at the same time writing BILLIONS in otm puts is the definition of being a hypocrite.

    he also again by definition doesn't have an exit strategy (my favorite holding period is forever). looking back at the bubble during '99 and the beginning of '00 he admitted he should have sold some of his stocks b/c they promptly lost 50% (and they were "conservative" plays like KO). and this has nothing to do w/ "hindsight is 20/20" b/c ANY sell discipline would've got him out w/ huge profits even after giving some back on the decline. something as simple as selling if price is below the 50 DMA would've saved so many people so much money.

    anyways, all being said he is a great investor so i'm giving him full credit for that so pls don't take this post as only critical (we could all do better and that def includes me!). just trying to show that while he's a great investor we shouldn't try to do exactly what he's done to be successful.
     
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    That quote was mine.
     
  9. Buffett is a businessman. ie "cash flow"

    His compounded annual return from 1956 to 1969. for his partnership was roughly 26% per annum. However. that's skewed by his purchase of American Express in 1964, after the salad oil scandal, and with disregard for position size.

    Is bottom fishing value investing?

    He's had plenty of fuck ups including Munsingwear, US Air, and a 900 million whack from foreign currency exposure. I'm too lazy to research the details

    Then there's the sweetheart deals you and I can never be a part of. LVLT preferred comes to mind.

    He's a businessman. Here in Omaha, Nebraska Furnture Mart, Borsheim's throw off cash. Nationwide, Geico does. That excess cash goes where?

    Into the stock market.

    Add a secular bull from 1982 to 2000, and stir.
     
  10. bone

    bone ET Sponsor

    This is simple to explain.

    1. Perform your favorite technical study (s) on your market (s) of choice.

    2. Enter trade upon signal, and for the winners, those become smart system trades for you like the big swinging dick you are. You are such a quant. Pat self on back repeatedly.

    3. For the stinkers, those become "value investments".

    Glad to be of service.
     
    #10     Sep 17, 2011