Is this part of Value Investing?

[Temperament]

Which is investing is very, very hard. Finding the occasional mispriced situation where you’re right and the market is wrong very wrong, not a little wrong, very wrong is very difficult and ultimately quite rare. And therefore you should have an extremely high bar before taking your hard-earned money out of your bank account and putting it into something that could be very risky. A stock is risky.
So you don’t want to take that risk unless it’s a slam dunk, unless the odds aren’t 60-40 in your favor. The odds are 95-5 in your favor. And that’s the kind of discipline and patience you have to exercise and so the 20-punch-card analogy is a pretty good one. If you could only make 20 investments in your lifetime, you would think very long and hard and do extra research and have a really high bar before making an investment. So it’s a good principle to follow."

Forbes: Whitney, thank you very much.
Tilson: My pleasure.

95-5 in my favour?
If we follow this advice strictly, when can we find one?
Can we really compete with people like him?
i have my doubts?
To me as long as i can make some money, i am happy enough already.
imo.

[opmi]

95-5??? Too much.
When it is too 'right', it is likely to be wrong.
Or end up waiting for durians to drop. Tan ku ku.

[NTL]

Will 2008/9 considered as a 95-5? I don't think so. This is just theory. How abt 99*1? That will almost risk free!

Anything better than 60-40, or chance of 20% gain is more than 10% loss, I will take.

[dzwm87]

My question is how do you even quantify the odds? What is the distinction between 95-5 and 90-10? Or even between 60-40 and 80-20?

Odds are subjective and dependent on the circumstances. You give the same investment thesis to a room of 10 analysts and each of them can give different 'odds'.

2008/09 on hindsight may seem like a 95-5 but during the circumstances back then, how many people see it as 95-5?

[opmi]

My question is how do you even quantify the odds? What is the distinction between 95-5 and 90-10? Or even between 60-40 and 80-20?

Odds are subjective and dependent on the circumstances. You give the same investment thesis to a room of 10 analysts and each of them can give different 'odds'.

2008/09 on hindsight may seem like a 95-5 but during the circumstances back then, how many people see it as 95-5?

Probability and downside is subjective. Up to you to assign and control.
All depends on your conviction, experience and kung-fu.

Anyway, good risk/reward dont always mean 'bao jiat'.

Even if it is 95-5 odds, need cash or iron rice bowl to pull the trigger.
If worry about job security or fund redemption, super favourable odds also 'bo jeet' to pull trigger.

[NTL]

2008/09 on hindsight may seem like a 95-5 but during the circumstances back then, how many people see it as 95-5?

It will take a lot of guts to commit (not tikam) during that period. Furthermore during a downtrend, what goes down may go down even further. There were a lot of news and talks about a "L-shaped" future. So a hindsight of 95-5 may mean 60-40 or 50-50 then. Who knew then that the recovery was actually a "V"!

If I have "hindsight" as a guide, I will be "committing" every Monday and Thursday, and will not be investing at all.

[weijian]

My question is how do you even quantify the odds? What is the distinction between 95-5 and 90-10? Or even between 60-40 and 80-20?

I think these odds might be more qualitative than quantitative in nature.

I think for investors who have been through many bull-bear markets - having the right temperament and deep pockets - their guts may have unconsciously indicated to them that odds are 95-5 when the opportunity flashes by. I am not one of them, but i do suspect people do possess such intuitive capabilities.

In addition, 95-5 may also be possible on a 'volume-weighted basis' and anchored on a longer time horizon. If one has good risk-management systems (like cut loss) in place and their bigger bets turn out fine or better than expected, they will be doing very close to those odds.

[opmi]

http://www.oldschoolvalue.com/blog/inves...source=rss

13 Proven Ways to Identify Who are Value Investors
about 8 hours ago by JAE JUN
Courtesy of AAII and The Art of Value Investing



What is value investing?

Who are value investors anyways?

Wait, I call myself a value investor but how can you believe me?

According to the following list, I’m nearly there but not perfect.

Do you think you have what it takes?

Go through the list and see for yourself.

Who are Value Investors? Value Investors Typically:
1. Focus on intrinsic value, what a company is really worth: buying when convinced there is a substantial margin of safety between the company’s share price and its intrinsic value, and selling when the margin of safety is gone. This means not trying to guess where the herd will send the stock price next.

2. Have a clearly defined sense of where they’ll prospect for ideas, based on their competence and the perceived opportunity set rather than artificial style-box limitations.

3. Pride themselves on conducting in-depth, proprietary and fundamental research and analysis rather than relying on tips or paying attention to superficial, minute-to-minute, cable-news-style analysis.

4. Spend far more time analyzing and understanding micro factors, such as a company’s competitive advantages and its growth prospects, instead of trying to make macro calls on things like interest rates, oil prices and the economy.

5. Understand and profit from the concept that business cycles and company performance often revert to the mean, rather than assuming that the immediate past best informs the indefinite future.

6. Act only when able to draw conclusions at variance to conventional wisdom, resulting in buying stocks that are out-of-favor rather than popular.

7. Conduct their analysis and invest with a multi-year time horizon rather than focusing on the month or quarter ahead.

8. Consider truly great investment ideas to be rare, often resulting in portfolios with fewer, but larger, positions than is the norm.

9. Understand that beating the market requires assembling a portfolio that looks quite different from the market, not one that hides behind the safety of closet indexing.

10. Focus on avoiding permanent losses rather than minimizing the risk of stock-price volatility.

11. Focus on absolute returns, not on relative performance versus a benchmark.

12. Consider stock investing to be a marathon, with winners and losers among its practitioners best identified over periods of several years, not months.

13. Admit their mistakes and actively seek to learn from them, rather than taking credit only for successes and attributing failures to bad luck.

—John Heins and Whitney Tilson

The Art of Value Investing

[Temperament]

To determine what is the intrinsic value is the most difficult. After this is to determine when the intrinsic value has reached its peak. i think i hardly get it right? The next most difficult part is "guts & patience". If you don't have them, then all bets are off.

[opmi]

intrinsic value comes in many forms. difficulty depends on training and experience.
it ranged from cash to private assets e.g. mines.

Dont know or not sure how much intrinsic value, then
- dont invest
- give a big margin of safety
- tikam a bit.