Boiler Room: The Official Stock Market Discussion

[Ohene]

7 oclock hit a nail when he mentioned how mgr's may be locked in bad holding positions

On top of that though, I think a lot of them and their analysts might rigid in the way they formulate their investment theses. They probably are so busy and have so many holdings that it is hard to really keep your ear to the street and watch whats unfolding with said companies. Some of the best companies I've chosen have been a result of me seeing certain things with my own eyes; noticing things happening around me. A good example is:

This company franchises many restaurants in Canada (Thai Express, Mr Sub, Country Style Dontus etc.) a lot of the rights were acquired. What tipped me off was Thai Express. I never heard of it until I started working downtown but they started popping up all over the place. Then I saw they owned the other two companies, Jugo Juice (smoothie place) and some others. I noticed the revitalization of Country Style and mr Sub's menus and how a lot more people seemed to be eating there than in prior years. Jugo Juice was popular as hell. That's when I thought i had to look over the financials. shyt went from like 22-32 in the span of a few months after they acquired another franchise (Extreme Pita).

shyt had me

 

[Futuristic Eskimo]

7 oclock hit a nail when he mentioned how mgr's may be locked in bad holding positions

On top of that though, I think a lot of them and their analysts might rigid in the way they formulate their investment theses. They probably are so busy and have so many holdings that it is hard to really keep your ear to the street and watch whats unfolding with said companies. Some of the best companies I've chosen have been a result of me seeing certain things with my own eyes; noticing things happening around me. A good example is:

This company franchises many restaurants in Canada (Thai Express, Mr Sub, Country Style Dontus etc.) a lot of the rights were acquired. What tipped me off was Thai Express. I never heard of it until I started working downtown but they started popping up all over the place. Then I saw they owned the other two companies, Jugo Juice (smoothie place) and some others. I noticed the revitalization of Country Style and mr Sub's menus and how a lot more people seemed to be eating there than in prior years. Jugo Juice was popular as hell. That's when I thought i had to look over the financials. shyt went from like 22-32 in the span of a few months after they acquired another franchise (Extreme Pita).

shyt had me

I agree that the size of the fund puts an unwanted constraint on a fund manager. This can be shown by the decline in Bill millers performance after his Legg Mason fund drew in so many investors. Still, there most likely exists a sweet spot for a portfolio manager where he has the staff of analysts but also has the flexibility that is necessary to maintain profitable positions. Guys like miller are very few and far between though. For an individual investor to match their performance consistenty without the information that he has access to must be quite rare and hes pouring jelly on himself by not working on the street in the first place. All I'm saying is that the odds are stacked heavily against us so why not take the path of least resistance?

 

[7oclock]

Yes. My point is that the difficultly lies in being part of winning 50% year in and out. I've already mentioned that it might be easier to do it when managing a small portfolio, but you balance that against the inevitable informational asymmetry. I'm aware it is possible to beat the market. I have done it for the past year and a half. The way the market is set up, you are at a disadvantage trying to trade against algorithms. There are HFT firms out there that have never had a losing day. If there is an abundance of alpha out there, my bet is that they are going to capture it. When factoring in transaction costs and tax advantages long term, I simply don't see how you can possibly advocate your methods over longterm buy and hold and index fund investing.

Perhaps someone with more experience on the street like @Domingo Halliburton can chime in here on this, but I know firms utilize some kind of statistical analysis to find out if their traders and portfolio managers' returns derived from simple luck or actual skill. I'm going to see if I can find something about it online, but these techniques might be proprietary in some cases.

because buy and hold is assuming the market will rise over your target time frame - that's a loser's bet, the market was in it's infancy and now in it's mature stage you can't expect 30 years from now we will be X% higher than today.

 

[Domingo Halliburton]

because buy and hold is assuming the market will rise over your target time frame - that's a loser's bet, the market was in it's infancy and now in it's mature stage you can't expect 30 years from now we will be X% higher than today.

the modern stock market has always gone up. there are a ton of studies saying the less stocks you trade and the more you buy and hold you do better.

 

[Futuristic Eskimo]

because buy and hold is assuming the market will rise over your target time frame - that's a loser's bet, the market was in it's infancy and now in it's mature stage you can't expect 30 years from now we will be X% higher than today.

There is no strategy that you can say with confidence will work going forward. Obviously, though, the ones that have proven to work in the past are a better bet than ones that haven't.

 

[Futuristic Eskimo]

because buy and hold is assuming the market will rise over your target time frame - that's a loser's bet, the market was in it's infancy and now in it's mature stage you can't expect 30 years from now we will be X% higher than today.

Also, i want to add that the options strategies that I was denouncing before were about directional bets. Obviously, when making non-directional plays, option positions add value. I just dont put any stock in option hedging, stop losses, etc for a non institutional investor.

 

[7oclock]

There is no strategy that you can say with confidence will work going forward. Obviously, though, the ones that have proven to work in the past are a better bet than ones that haven't.

you play the probabilities and there's strategies with higher probabilities of success due to playing with option greeks, risk, volatility etc etc

 

[7oclock]

the modern stock market has always gone up. there are a ton of studies saying the less stocks you trade and the more you buy and hold you do better.

it's not about going up - which is really because of you're looking at a certain index, which is consistently rebalanced (correct? - so you're investing in an index not a pool of stocks because your results would vary if you said buy and held a pool of stocks that had included enron, worldcomm, etc etc).

anyway, it's not about going up, it's about getting a x% that you need to meet your investing needs.


Let's look at "modern" stock market - which i'm defining around 2000 which is when alot of the etrading began etc etc.

If you invested in 2000 S&P you were around 1400-1500

over the course of 10 years, you would have been down, 13 years you would wait to break even and now you would be up 25% 14 years later. Is that your investment profile? Fine - 25%

that's a CAGR of ~3.55% adjusted for inflation ~1.17% (via: CAGR of the Stock Market: Annualized Returns of the S&P 500

(i hand calculated and i got to a CAGR of 1.46% not adjust for inflation, which I think is more correct but you get the point).

if that's what you're looking for continue to buy and hold index funds - if you believe the S&P will have this same trend as pre-2000 then it's a good bet. However, if it continues on it's current trends - you will basically be getting 1980's/1990's money market returns

 

[Ohene]

I agree that the size of the fund puts an unwanted constraint on a fund manager. This can be shown by the decline in Bill millers performance after his Legg Mason fund drew in so many investors. Still, there most likely exists a sweet spot for a portfolio manager where he has the staff of analysts but also has the flexibility that is necessary to maintain profitable positions. Guys like miller are very few and far between though. For an individual investor to match their performance consistenty without the information that he has access to must be quite rare and hes pouring jelly on himself by not working on the street in the first place. All I'm saying is that the odds are stacked heavily against us so why not take the path of least resistance?

Easier said than done lol

 

[7oclock]

Easier said than done lol

most of us are lazy - we wanna look at a few charts and get a one-size fits all strategy and run with it. We have day jobs, school, etc etc. I highly doubt you're putting in the type of hours that the analysts on wall street are (in the beginning) to hone your craft.

I've read through this thread - I haven't seen one person where i was like "wow, homie is really on his shyt" - we are all very mediocre (just being honest) and it's cool to have the discussions, but as far as I can tell there's not one person who is living and breathing this stock shyt, stock screening, option hunting, checking IV, gammas, charting - anyone have access to livpro or any tools that they didn't get free with their online brokerage?

Let's be honest, odds are not stacked against us - we are playing in a competitive field and most people aren't willing to be "gym rats" to reach allstar level...like everything else in life. You guys wanna chart a few things and hope that the double top you just charted holds true or the tip you got on twitter pans out.

Not going in on anyone in particular - I'm in the same boat as well!

 

[Ohene]

most of us are lazy - we wanna look at a few charts and get a one-size fits all strategy and run with it. We have day jobs, school, etc etc. I highly doubt you're putting in the type of hours that the analysts on wall street are (in the beginning) to hone your craft.

I've read through this thread - I haven't seen one person where i was like "wow, homie is really on his shyt" - we are all very mediocre (just being honest) and it's cool to have the discussions, but as far as I can tell there's not one person who is living and breathing this stock shyt, stock screening, option hunting, checking IV, gammas, charting - anyone have access to livpro or any tools that they didn't get free with their online brokerage?

Let's be honest, odds are not stacked against us - we are playing in a competitive field and most people aren't willing to be "gym rats" to reach allstar level...like everything else in life. You guys wanna chart a few things and hope that the double top you just charted holds true or the tip you got on twitter pans out.

Not going in on anyone in particular - I'm in the same boat as well!

i feel you but how hard is it to land a job out of wall street out of undergrad compared to what it needs to be? It's all poltics. If you dont go to X or Y school or have that lineage it can be really tough but being in school and reading isn't going to teach you anything in comparison to being on that trading floor in one of the banks and working under a professional trader with years of experience. You cant tell me that even dudes from Harvard are entering their first day of work and getting millions to work with to trade swaptions, high yield bonds, equities etc. You cant tell me that there are many analysts from Wharton coming into their first day of work and doing a DCF model for a Pinterest IPO or some shyt. They're being honesd.

I am not a trader so I guess this post doesnt relate to me but I've been in I-Banking interviews and there aren't many ways to answer:

"How would you a DCF?" "How do you calculate the WACC or Levered FCF?" etc. etc.

As far as investment banking and equity research is concerned there actually was a point where in my free time I was thinking of possible mergers/acquisitions and doing pitchbooks, DCFs and comparable transaction models to match. Equity research reports as well in my free time I used to post some on here. At that point it was too late though as I didnt get any interviews during my senior year.

Trading i dont know the first thing about though

 

[7oclock]

i feel you but how hard is it to land a job out of wall street out of undergrad compared to what it needs to be? It's all poltics. If you dont go to X or Y school or have that lineage it can be really tough but being in school and reading isn't going to teach you anything in comparison to being on that trading floor in one of the banks and working under a professional trader with years of experience. You cant tell me that even dudes from Harvard are entering their first day of work and getting millions to work with to trade swaptions, high yield bonds, equities etc. You cant tell me that there are many analysts from Wharton coming into their first day of work and doing a DCF model for a Pinterest IPO or some shyt. They're being honesd.

I am not a trader so I guess this post doesnt relate to me but I've been in I-Banking interviews and there aren't many ways to answer:

"How would you a DCF?" "How do you calculate the WACC or Levered FCF?" etc. etc.

As far as investment banking and equity research is concerned there actually was a point where in my free time I was thinking of possible mergers/acquisitions and doing pitchbooks, DCFs and comparable transaction models to match. Equity research reports as well in my free time I used to post some on here. At that point it was too late though as I didnt get any interviews during my senior year.

Trading i dont know the first thing about though

I agree with that, I know hedge funds who would only interview you if you went to an IVY league school.

Doing an analysis of a company and learning the inner workings of wallstreet doesn't mean you can't learn all the things I said above, which are sitting at your fingertips on the net. Not everyone in the NBA went to Duke or UNC. Not trying to overdo the analogies with sports, but while you're right that getting into these programs give you an edge - whose to say these guys would crack it on their own, trading their own money after 5 years? It's one thing to work for a big firm and get salary and bonus by trading other peoples money (win or lose) then it is to sit at home with tools and your capital and do the same. It's a differnt type of investing and there's tools you can use that would make you just as effective as some of the big hedge fund guys on a like for like basis - if you're willing to put the work in.

 

[GoogleMe]

DRL offered a generous bounce on Friday. I have this on watch to see if there will be continuation (volume) this week

These oversold, beaten up charts have been great short-term opportunities.

 

[Futuristic Eskimo]

Easier said than done lol

Breh if you're crushing the market on your own account year in and out, all you need to do is convince some people to invest some money. There are thousands of small hedge funds set up by guys whose only selling point is their track record. There is an abundance of money out there. If you have the skill and the desire, you can make it happen easily.

 

[Broke Wave]

I agree with that, I know hedge funds who would only interview you if you went to an IVY league school.

Doing an analysis of a company and learning the inner workings of wallstreet doesn't mean you can't learn all the things I said above, which are sitting at your fingertips on the net. Not everyone in the NBA went to Duke or UNC. Not trying to overdo the analogies with sports, but while you're right that getting into these programs give you an edge - whose to say these guys would crack it on their own, trading their own money after 5 years? It's one thing to work for a big firm and get salary and bonus by trading other peoples money (win or lose) then it is to sit at home with tools and your capital and do the same. It's a differnt type of investing and there's tools you can use that would make you just as effective as some of the big hedge fund guys on a like for like basis - if you're willing to put the work in.

There's a lot to be said about opportunity cost anyway; I'd rather be a good trader/investor and sit on my ass at home than come in the office at 7 and leave at 9 6 days a week