Chance would be a fine thing

Image result for chance would be a fine thing shakespeare
Still from the Peep Show – Image may be subject to copyright – found at this link

One of the great things about England is the turn of phrase that the locals enjoy. “Chance would be a fine thing” is a good example of language that is perplexing to the new arrivals. It is the sort of saying that sometimes crops up in the UK that has a meaning that is not entirely obvious.

In context, someone in England would utter this phrase in response to a comment from another that sets up a desirable scenario – but the retort “Chance would be a fine thing” is said to indicate that it is not likely to happen! Further context can be found in the great tribute by David Mitchell to insecure managers in the short but very fine Peep Show “Chance” sketch at this link. Youtube Autoplay will reward the brave with another great character from the show  -“Alan Johnson”,  the crude and aggressive management guru in the following Youtube clip – But Language Warning with Alan – I Digress! (… but still giggling!)

I like the “chance” phrase, it reminds me of the enormous part that luck plays in the building of a share portfolio – but it is the very opposite of how I think when I buy a stock! I do not buy stocks often and a buy is usually at the end of some good research where I have convinced myself that the stock is growing and is just about to take off when the rest of the market catches up to my brilliant thinking. Bitter experience and keeping good records over 25 years has shown my abilities in picking winners at around the 55 -60 % mark.

At first glance this looks a pretty poor record of stock judgement – However, by keeping my losses relatively small (through monthly stop losses), owning a diverse range of companies (see Portfolio Page), and letting my rising shares rise, and luck, the Slack Investor has done alright – Five year compounded average growth rate (CAGR) for my audited SMSF portfolio of 16.9% p.a..

The luck of stock selection has always been acknowledged by Slack Investor, but it was brought home to me when my son asked, in December 2017, for advice on where to put $5000 in the share market. You would think that this would be an easy thing for Slack Investor who has spent almost 30 years studying the vagaries of the market. 15 months ago I went into a lather and researched very hard and came up with two growth stocks that I thought were not overpriced and had reasonable growth prospects – but I still had a bit of trepidation as, he is my son, and this was his hard earned savings from a part time job -and,  I wanted him to continue with the allusion that his Dad knew what he was talking about!

With the usual combination of research and luck, the two stocks that I presented him with were stocks that I already owned – Fisher and Paykel Healthcare (FPH) and Altium (ALU). I gave him the choice after a brief overview of each company (… spread the risk … give him ownership!). The former are world leaders in surgical instrumentation and pumps. and Altium has something to do with printed circuit board design and the “internet of things”. With the wisdom of youth, he picked Altium to put his savings into. I am relieved to say that both stocks have done extremely well in the past 15 months but the weekly charts tell a story – with my son’s choice, ALU, the clear winner (+177%).

Fisher and Paykel Healthcare (FPH) Weekly Chart – From Incredible Charts

 

Altium (ALU) Weekly Chart – From Incredible Charts

Do you think Slack Investor could come up with another Altium as a choice for share investment the next time my son asks me for advice?

Chance would be a fine thing!

February 2018 – End of Month Update … and the upside of slack

Slack Investor remains IN for US, UK (Just!), and Australian index shares.

… a very volatile month and a test for the fainthearted.  The monthly overall declines do not tell the whole story – rapid declines then recovering. The Australian Index (-0.4%) had the best recovery and the US index (-3.9%) and UK index (-4.0%) had similar overall monthly falls.

Thanks Alexas_Fotos Pixabay

Slack Investor is already off the couch and is still on alert for the US Market considering its high valuation and its recent 10.2% correction. The UK market is also under watch as it is very close to its monthly stop loss (See UK  Index page).

The Upside of being Slack

Some of the time there is a price to pay for being Slack – and only making sell decisions on a monthly basis. But it is not this day!

From Source

… A day may come when the courage of men fails, when we forsake our friends and break all bonds of fellowship. But it is not this day. Excerpt from Aragon’s  Sons of Gondor speech – Lord of the Rings – Wikiquote

Well, … quoting from Tolkien’s The Return of the King is perhaps is a little dramatic but this post is a bit technical and needed a picture of Viggo Mortensen just to brighten it up.

There are many share traders who set automatic stop losses with their brokers that trigger a sell order when the price moves below a designated value. This technique can be good when you want to set a stop loss and forget about it – But there are pitfalls. Slack Investor has tried this method before and has found that the automatic sells are sometimes triggered by a particularly volatile day and your automatic sell order  may trigger at $3.00 but at the close of the day the stock may have recovered to $4.00.

More common (and disappointing!) is when a rapidly falling price jumps below your automatic stop loss without triggering the sell. You then would sell the stock manually – usually at a lower price.

There are many traders who, like Slack Investor, set there stop losses manually … but act on them on a daily basis.  The chart below is a daily chart of the US Index S&P 500. As a refresher, each vertical line represents the daily price range for the S&P 500. A red line indicates that the price has dropped during the day, and a blue line shows a daily price rise. Clicking on the chart will increase the resolution and you can then make out little tabs either side of the vertical daily line. The tab on the left represents the opening daily price and the tab on the right the closing price for the day. A daily trader might act on his stop loss immediately the S&P 500 falls below the stop loss (e.g. big red arrow). This technique can be a very good thing if there are further falls! However, in this case, the recovery from the 10.2% correction has rewarded the Slack Investor’s slackness.

S&P 500 Daily Price chart – From Incredible Charts

 

S&P 500 Monthly Cart – From Incredible Charts

Slack Investor does not like the daily grind of decisions. He likes to do most of his trading based on monthly charts (See left) … where each vertical line represents a month of price movement for the US Index S&P 500. At the end of February 2018, the right hand tab of the last vertical red line indicates a closing price of 2713 – well above the stop loss of 2557 (for now!) so my trading method says to hang in there.

Sometimes there is a price to pay for this slackness – For instance, when there is not a recovery in the stock price! But the delight of only making monthly decisions outweighs this concern for me. My monthly trading method together with diversification (~20 stocks) and a bit of effort in selecting growth stocks has proved to be sound so far.

All Index pages and charts  have been updated to reflect the monthly changes – (ASX, UK, US).