Trading Vs Investing

[Stockbear]

Can you provide an example/scenario of some with good trading skills, volume traded and frequency, somewhat similar to what SpecNomics did?

This will help a novice like me. I am learning as we go along.

[SpecNomics]

I have pointed out in early posting that every Investment Idea should ideally have a maturity date, or else you believe the growth is infinte.

While hindsight is Einstein, Bonus Issues in Nigeria, due primarily to the shallow i.e. limited nos of listed stocks in comparison to Investable Cash, seem to always led to a rise in Market Value contrary to the theoretical fall as total nos of o/s shares increases whilst Market Value remains thesame.

On this basis a sophiscated trader that was aware of this anomaly, and believed that the fundamentals supported a further rising in Flour Mills pre-bonus issue, would hold on to the position until he thought the stock was over valued and expected a fall. He would thus know the peak and take his profit at the Peak. A chap like this would be Mr. Black

Mr Brown on the other hand, has been fortunate, chances are the likes of him would have taken PRofit at N36 a shr, by then his holding would have doubled in value.

And if he was greedy, unlike Mr Black he would not know when the stock has peaked since he has no incline to the intrinsic value of Flour Mills, and if unfortunate enough, e.g. Flour Mills where found to be cooking their books, he could well end up with a position of 0.

The key thing here is that the Active Trader is not SPECULATING, as most people think, but he enters when favourable and exits when he sees decline coming. In the words of Benjamin Graham, "he buys from the pessimist and sells to the optimist" at all times knowing what he considers to be the intrinsic value of the asset, something Mr Brown is unlikely to know.

RE Tax, as long as he his making GRoss returns superior to MR Brown, his Net Return should always be greater.

P.S. if Mr Brown was a PAssive Investor, as described i.e. invests and goes away, he could not have identified that Flour Mill was a good buy at N19 and could definetly not have anticipated the exponential Capital GRowth witnessed even post a bonus issue. Though he was fortunate to have been at the right place at the right time, this niether TRADING or INVESTING, its simply SPECULATING, he could have lost his money as well.

[Stockbear]

Thanks for the info SpecNomics, its obvious you are a sophisticated trader. It would help newbies like me if you simplified your explanation. How do I go about detecting an anomaly? How do I learn to identify when a stock is about to peak?
To take advantage of the highest profit?

Thanks for sharing and enlightening.

[c kenneths]

We all need more enlightenment to avoid getting our fingers burnt.

[SpecNomics]

Sophisticated Trdr!!! Not me, I am a student like everyone in the forum. However I would attempt to answer the questions posted soon.

"How do I go about detecting an anomaly?"

"How do I learn to identify when a stock is about to peak, to take advantage of the highest profit?"

[Stockbear]

@ SpecNomics

When you do reply could you use a current stock like Zenith? I am trying to figure out the best time to sell, which would be determined by if and when its supposed to peak.

Many thanks!

[forumasto]

Thanks for all the info guys.

I stumbled onto this site Nov 2006 and was delighted. After reading every single post (LOL), at that time. I decided to venture into stocks and my very first buy was a disaster.

Some stockbroker came and gave his sales pitch and i registered and gave instructions to buy N300,000 worth of Guiness (@ N96). The chap bought N3M worth @ ~N100 .

I would still like to invest in stocks but i would like a good recommendation of a broker with online presence as i dont entirely trust my current broker (i want to be able to monitor my portfolio online).

Please advice.

[paragon]

On when to exit, lice Specnomics said you need to ahve a limit within which you act. Of coursem this limit is based on projected earnings and profits which would reflect in the share price. The stock market is not for the greedy but for the wise. Always live to fight another day.

[c kenneths]

Forumasto,
Instead of relying on others to give you tips on what to buy and when to buy them, why not invest more in information as to how to do it yourself. Stocks react to a lot of information which,most of the time are within our reach. These are the same information that drives the market. There is the need for us to investigate what goes on behind the scenes. Do you even know that some brokers do not even have research and analysis units in their stockbroking firms. Many that do have are so incompetent that they are mind blowing.

I will also commend the works of CTSL, CASHCRAFT,ZENITH SECURITIES etc.

[bwalaman]

Do not underestimate what you know…or the information that is next to you. One of the Buffett ways, invest in companies- not shares (of course you buy a piece of the company through their shares).

Example, are you a Medical Doctor/Pharmacist/Nurse? Or anyone in the family. You would be amazed to find out the stock of information these people have on the Pharmaceutical Sector. Anyone a Banker or an insurance agent? The same applies…

Invest in information like C Ken recommends, and he gives you some good pointers in that regard…

Pay attention to the ordinary information that is readily available. Example USA recently announced that they will establish an African Command (military stuff)… this tells us the Gulf of Guinea will be different in 2/3 years (I believe will be fixed) and by extention GAS should be a hit. More international airlines flying to Nigerian Airports- NAHCO will continue to do well. AFC and Nigeria and “economic giant” initiatives sound companies with sub-regional perspective will do well. Basically collect ordinary information and connect the economic dots.

Then there are “Bellwether Brands”- First Bank, PZ, Guiness, NBC, Ashaka, Portland, Julius Berger – and two or three others that in my opinion you can ride annually or if you are a serious mid-long term investment or you should have…

Dangote is joining that class and seems like anything Dangote is linked to does well- as a Plc, much of this is exuberance (word of caution). But having said that, Dangote deals in needs, Sugar, Salt, Cement…(other foods) and is a dominant player in those fields.

Invest in what you know, and believe me you know a lot…

[Stockbear]

It is one thing to seek for tips on stocks to invest in and another to know how to maximise your profit/gain.

This very thread is a must read for every budding investor! There is so much to be gained from the valuable contributions therein.

Let all those who initially made these valuable contributions continue to enlighten us all.

E.g: C Kenneths, Paragon and Specnomics.

In order to keep this thread at the forefront it will require frequent postings.

Please contribute.

[c kenneths]

This topic is very enlightening, especially now that activities are heating up in the market. Quick trades are very profitable but I do advice traders to leave a section of their portfolio as a never to be touched area, in order to avoid confusion.

Like I remarked earlier, never mix your trading money with other stocks in your portfolio. This is very important.

Also when this argument came up with some friends, they reminded me that the greatest investor in the world, Warren Buffet never sells his stocks.
He buys for the long term only. Others are insisting that here is not USA.

The Nigerian market has its own differencies that seems to support short time trades, at least we dont pay any tax on capital gains unlike our American friends.

[babs]

very informative tread. Agrred that we should all be active in our trades either long-term or short-term.
I've experienced otherwise b4 and have tried to correct re-occurrence again.
Need to understand the company u're buying into and set a time/ profit limit as a guide.

As at today.. DSR is down to 47+ and remebered it once picked at 56+. In my view, I'll hold on till summer time when I know activities abound and hopefully it'll surge past the 56 mark point. Alternatively, i could hold on till 2008 when DSR will be exporting sugar outside the country. Just my 2 cents.

[babs]

very informative tread as well. Agrred that we should all be active in our trades either long-term or short-term.
I've experienced otherwise b4 and have tried to correct re-occurrence again.
Need to understand the company u're buying into and set a time/ profit limit as a guide.

As at today.. DSR is down to 47+ and remebered it once picked at 56+. In my view, I'll hold on till summer time when I know activities abound and hopefully it'll surge past the 56 mark point. Alternatively, i could hold on till 2008 when DSR will be exporting sugar outside the country. Just my 2 cents.

[c kenneths]

Yeah, but some people who kept close tabs sold at 56 (the peak) and are hanging around now to see the lowest dip, they will then buy again, probably more quantity, only to sell them again when the price hits 60 after the summer.

How do you like that?

[paragon]

yeah Dangote sugar will rise. The fall is temporary and is due partially to the mark down for quaterly dividend payment. Also, people are grabbing their gains and this is pushing down the price.

The stock is a N100 and above stock due to the monopolistic advantage it has in Nigeria and Africa as a whole. Expotation will further boost its profitability.

If you ask me, i will not sell now to buy later because you will not get it on the floor of the exchange that easily. Institutional investors are mopping up the shares because of the inherent value.

What makes an intelligent investor is the ability of foresight. Do not be blinded by what you see now because the company is SOUND.

[Royal]

hi guys,
Thank you all. this is a wonderful thread. just joined the forum and am learing quite a lot very fast. been investing in shares for about 5 years now. after reading Rich Dad Poor Dada. started small but now I have thrown in quite a lot. Dangote was a blast for me and i hope i catch more waves like that.
if i have to post everyday to keep this thread in the fore i will!
Regards.