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Diversified mechanical investing vs. Focused research-driven for a beginner


Patmo

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txitco, do you mind if I ask how long you've followed that strategy and what your returns have been?

 

I used an old Ben Graham method for a little while, buying stocks under 10x earnings with an equity/asset ratio above 50%.  I made money but lagged the market.

 

Well, the last version of the method, which I started implementing at the end of 2012, and which adds a mild momentum indicator, has yielded  about 68% since the start of 2013, in euros. I caught things like SQI, Montupet, Mondo TV, Mota Engil, etc. before they went up like a rocket. As a comparison,  European small caps have probably gone up by 20% during the same period. I try to buy only in countries with CAPE < 18, the last few months European stocks have started to disappear from the top of the screen and I am buying stuff from Australia and Singapore. The "value buddies" forum somebody tipped me about here has become very useful.

 

Hi Txitxo..

 

what screener do you use to screen for these stocks?  I am in the USA, and most screeners I can find only give info about US based companies

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I had my investing career in the reverse of most people - starting out with focus driven research to diversified mechanical investing with qualitative factors.

 

Its one of those things when I have to ask myself whether I really know that much more about a certain industry or business than the management who've been in it for decades.

 

That being said, I do think focused research does make you a much better diversified mechanical investor... just because it helps you sift out the obvious value traps and outright frauds.

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I have an idea.

 

Why not do both? I personally don't understand the idea of artificially limiting yourself to one particular style...

 

I actually do both, but mechanical (with 90% of my portfolio) clearly dominates.

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