Performance Figures/Graph for the New Investment Ideas section?

[FFHWatcher]

It may be a bit premature or be too complex or be too time consuming or be inaccurate due to multiple purchases at various prices,  but has anyone considered including a graph or chart that tracks the performance of the ideas from when they are first presented in the new Investment Ideas section?

[StubbleJumper]

Why would we want to do that?  An idea is only of value on a prospective basis, not on a retrospective basis.  Having a chart that shows ex post outcomes does not help me make any money.  We have a tendency to remember and celebrate the truly successful ideas anyway (like the FFH options!).

[Myth465]

I agree with SJ.

[FFHWatcher]

Why would we want to do that?  An idea is only of value on a prospective basis, not on a retrospective basis.  Having a chart that shows ex post outcomes does not help me make any money.  We have a tendency to remember and celebrate the truly successful ideas anyway (like the FFH options!).

 

Ok, perhaps you can post your prospective chart when you post your idea?  ;)

 

I understand that value investors look to their calculation/estimation of fair value and the current stock price differently.  I get that.  I am not suggesting that we post a chart of the past stock movement prior to an investment idea is presented but from the date it has been presented until the present.  This will provide a graphical or numerical reference as to whether the stock has moved towards or away from the estimated value of the company.  If the stock has declined, it may suggest that there is even an greater return potential, should the stock eventually return to the estimated fair value.  On the other hand, a lower stock price might suggest that something may be incorrect in their thesis.  Maybe something was missed or maybe the market is simply still missing it.  If the stock price has increased and is now close to the estimated fair value, then perhaps the value has been realized and the future return potential, based on their estimates of fair value have been realized or perhaps the company continues to execute and their estimated fair value should or could be increased. 

 

On the contrary, I believe a chart starting from the post-date forward can indeed show you how to make or perhaps preserve your money.  Perhaps not on that particular stock but perhaps with future similar situations.  It is all about learning for me.  History can indeed teach us something.  If you read a particular 1 year old write up on an investment idea, you agree with the writer and see the value in the company and then view the stock chart over the next 12 months and watch it go to zero and then a Chapter 11 shortly follows, you can go back and look for what you missed.  Perhaps there was a write up on NetFlix in 2008 or a really old one on Apple in 2001, perhaps you didn't see value in those write ups and then you go back and look at the chart and think to yourself, What did I miss in that write up that I shouldn't have missed and that I don't want to miss in the future?

 

You may also be able to identify a particular method of analysis or a particular type of company that seems to be more or less successful than others.  Perhaps an accompanying chart will help you see successful or unsuccessful analysis more easily?

 

That was my thought.

 

 

[twacowfca]

My approach is 180 degrees from the direction of this thread.

 

Rarely, have I found a great stock like LRE that was off the radar entirely on my own or tagged along very successfully immediately after someone first recommended a stock.  More often, the great buys have been stocks bought by outstanding value investors that have tanked after their purchase.  Thus, my biggest winners were big losers with a relatively short time frame of reference from the time the stock was first bought or recommended by someone else.  

 

Here are a few examples of such big winners:  

 

#1 USG.  Made a relatively small buy after WEB bought it.  A few months later, after thorough study, bought 14 times as much after they went into Chapter 11, and the stock price tanked.  Sold at various multibagger prices on the way up.  

 

#2 Nextwave. Recommended by Meryl Witmer at @ $6.00; then the stock tanked about six or seven years ago when the US Supreme Court agreed to hear the FCC's case against them.  Read the briefs, and it became obvious that it was an extremely high probability that they would rule in Nextwave's favor.  Loaded up at @ $2.50 and more later at higher prices as the thesis played out.  Received @ $8.36 when they exited cpt 11.  

 

#3 FFH This story has been told; no need to reiterate.

 

#4 Star Gas.  Monish had bought a lot of their stock, and then it tanked when SGU had to recaptalize.  Monish doubled down in the recapitalization; we bought in for @ $2.50 because they looked much more solid after the recapitalization, and oil prices were moving in a favorable direction.  Sold it about a year later for about a one bagger.

 

The point of all this is not how smart I was; these ideas were all scoped out by some of the best value investors of all time.  All I did was dig deeper to see if their ideas were still valid after those stocks tanked, and then, if so, load up.  :)

[FFHWatcher]

Twacowfca, How is your strategy 180 degrees from this thread? 

 

If you had a chart accompanied by an investment thesis from a value guru (ie. Mohnish, WEB, FFH team, etc.) and attached to that investment idea there was a chart or table that showed a 50% decline after they purchased/recommended it, wouldn't that actually perk your interest and get you to take a closer look, such as USG (WEB), KG (Chou), Star Gas (Mohnish), HNR (Monish), SFK-un (FFH), ICO (FFH) and on and on ..... 

 

Most of my best ideas have been dug up the same way as you (although, not with your success) and I look for steep drops after key value investors have purchased.  A chart would not hurt my process. 

 

I am not looking to rank contributors over the short term, besides, how many have purchased a stock and it seems to always take a pretty big haircut within a short time frame after we purchase it?  Always.  We never get the exact bottom but we also typically don't go all in from the start.  A chart/graph would not hurt me in trying to turn up good ideas at even cheaper prices.  If Mohnish determines that $10. is a good price to start buying and I can start buying at $4-5., than perhaps I should take a closer look?

 

Yet another way that a chart/graph would help assist others.  I just can't see how it would hurt the process of finding value.  If you want to keep your investment ideas a secret, don't want any scrutiny (positive or negative), than you shouldn't really be posting your thesis for others to examine.

[twacowfca]

Good post, FFHWatcher!  I completely agree with you.  My strong disagreement was with the notion that the merit of an idea could be judged by whether or not the price of the stock recommended went up or down soon after the idea was posted.  This is not what you and some of the other posters have implied.  

 

I like graphs, but when I review price graphs frequently, I'm sometimes tempted to nibble at a stock on the way down instead of waiting for a big decline.  What I do instead is take all the good ideas I find and put them in my Bloomberg iPhone app which has a graph of up to 5 years for each stock.  I review these periodically to see if anything looks very interesting.  

 

I think it's a very good idea to review periodically how recommendations have performed, bearing in mind that the best ideas going forward may be among the ones that have performed the worst.  :)

[biaggio]

I think I read it in one of Peter Drucker's book that if you want to get better at making decisions, then it is a good idea to write down your ideas and what you think might happen + then see what happens over time-see if your right or figure out where you went wrong.

 

With a board like this it is good that others can post their opinion.

 

Having the price(or pt on a graph) at the time of the post maybe helpful if we're looking back later to help judge if you re right or wrong or just early (if the price is important to you in the case of buying stock; eventually the price of the stock will be the ultimate judge of the original thesis), Often members of this board will help you avoid a mistake by making you think a little differently. I like what someone posted elsewhere from Ben Franklin- Only a fool learns from experience.

 

I have been keeping a rolling log of various ideas for the last 3 years, with a price at the time whenever I "post" to it,  for instance when  earnings are announced/conference calls etc. I find it helpful

[benhacker]

I think I read it in one of Peter Drucker's book that if you want to get better at making decisions, then it is a good idea to write down your ideas and what you think might happen + then see what happens over time-see if your right or figure out where you went wrong.

 

I just reread the threads I was involved in during Jan - Nov '09 on this board last night to remind myself of what I said and implied and where I was right or wrong.  This very idea is a light topic I'm covering in a letter I'm writing now.

 

It's so important for people to track their thoughts and beliefs because our minds have a way of rewriting history to make us seem smarter or more insightful... we forget the dumb stuff we say and remember only the good stuff.

 

Predicting the future is hard, but interpreting the past isn't a cup of tea either.

 

Ben

[biaggio]

"It's so important for people to track their thoughts and beliefs because our minds have a way of rewriting history to make us seem smarter or more insightful... we forget the dumb stuff we say and remember only the good stuff."

 

So true.

 

I wish I could have started 20 years ago---it would have been interesting to look back to see how my mind was thinking (or not thinking)

[biaggio]

"Most of my best ideas have been dug up the same way as you (although, not with your success) and I look for steep drops after key value investors have purchased."

 

FFHwatcher,

 

have you ever used this site for previous value investor purchases at a discount from what they bought them at:

 

http://www.gurufocus.com/Guru_bargins.php?&p=1

These stocks are down more than 20% since our gurus either bought or recommended to buy. They may be candidates for bargains, as you have the opportunity to buy these stocks at a greater than 20% discount from the prices our gurus bought.

 

[bookie71]

Since each message and reply is dated, you can go to Yahoo or another source and check the price if you need the start price.