I am totally on a roll tonight and the words are just flowing forth from the Wheelie Fountain - and I haven’t even been near the Old Speckled Chicken !!
I just wrote a really good first draft of the blog about ‘Is it possible to be too Cautious’ (which should appear on the Website in coming weeks) and when I looked at the clock it was still only 11pm and I had bashed that one out in a little over an hour - so I decided that I might as well crack on with this one because it is another Blog that has been on my brain for some time and while I am spewing out words like this I might as well take advantage of it !!
I remember after doing one of the early Podcasts with Justin, the question arose about “how do you manage so many Stocks?” - I can’t actually remember if Justin asked me this or whether it came about from a Reader/Follower afterwards but that doesn’t matter - the point is that I don’t think I have ever actually got around to answering it and this Blog hopefully will put that major deficiency to rights. On top of that, it actually fits in a treat with some Draft Blogs I am working on about ‘Cutting out Noise’ and my original intention was to include it as a Part of that Blog Series but then I decided it was so important that it deserves its own Blog. So here it is…….
At the moment I hold about 55 Stocks - 41 in my Main Trading ISA, 12 in my Income Portfolio and 2 Unit Trusts (if you go to the ‘Portfolios’ page you can see details on all of these). When I boil it all down, for each Stock I hold, there is sort of 4 Steps to my process/how I manage them over time:
1. In depth, thorough, Analysis - As you will know if you have read any of my ‘Buy Rationale’ blogs, I like to dig deeply into any Stock I am thinking of buying and I want a thorough and profound understanding of what I am buying. If I cannot understand what the Company does and how it makes money or if certain attributes like Debt Levels, Valuation, Perceived Risks, Cashflows, Director Credibility, Chart Trends, Sector Trends etc. do not stack up in a way I would like, then I do not invest. This is a critical part of my Stock Management Approach and it cannot be short circuited or done in a slap-dash manner - this is perhaps the most important step.
2. Keeping up with new Information primarily from Company RNS Statements - every morning my first task of the day as soon as my eyelids open is to grab my Smartfone and 7” Tablet and to start looking at the RNS Statements that my Stocks have put out for that day. This is another crucial step and what I am doing here is adding to my understanding/knowledge of the company and I am constanty reassessing my decision to Buy the Stock and whether I should buy more or perhaps sell some or all of my Position. Again, this is not a step that can be skipped and skimped over, I thoroughly read everything that my Companies put out and I read all of a Results Statement and Trading Update etc. - I suspect few people do this and most just read the first few paragraphs - I am pretty sure this gives me an Edge over 90% of Investors. This thorough reading of Primary Source material helps to add to my understanding of the Company and I see this as much more important than anything I read from ‘Secondary’ Sources like Tips and Newspaper articles and various Opinion pieces from elsewhere - as I will probably go on to mention in my ‘Cutting out the Noise’ Blogs, this is something I have focused more on in recent years and I am taking less and less notice of the views of other writers etc., unless they are from the few Sources I really trust.
3. Gleaning information from Secondary Sources - in complete contradiction of what I have just written above, there is some value in this part of my Stock Management process. However, I see this as perhaps the least important bit but I do get value from reading what Investors Chronicle and Shares Magazine (if I can see a copy) and some others like Paul Scott, Tempus and iii.co.uk have to say about my Stocks - but I do not put too much weight on these opinions - I question everything. Apart from Investors Chronicle which is a regular and robotic part of my Week, starting with ripping the plastic off on Saturday afternoon usually, these things are much more on an ‘ad lib’ basis and it is more a case of when I trip over them rather than actively going out to find them. Again, this kind of information just helps to deepen my understanding of a Company and is part of my constant assessing and reassessing of the Stock and whether or not it should be in my Portfolio and whether I should buy more or trim what I already hold - it is a constant and never ending Process until I finally sell all my Stock holding. And my default stance is to never Sell a stock !!! In addition, I probably find Secondary Sources more valuable for seeking out interesting companies to consider as part of my ‘Little Black Book’ process than for assessment of Stocks I already hold.
4. ‘Reading’ the ShareScope Charts and continual reassessment of the Valuation - anyone who follows me on Twitter will know this implicitly. Every night around 10pm I run the Daily Data Update on the ShareScope software I subscribe to and this 5 minutes or so process updates all the Charts with the data from the day just gone and also updates the ‘Details’ Screen which contains all the Fundamental Valuation and Financial Data for each Stock. I have separate Portfolios set up in my ShareScope system for my Main Trading ISA and my Income Portfolio and my Unit Trusts (all 2 of them !!) and once I have run the update and gone through the Index Charts and the Commodities Charts (I often write up a ‘Technical View’ based on these observations and put it at the top of the ‘M3 Manifesto’ page on the Website) I then start looking through each of the Charts and Valuation numbers for each of my Stocks. This is something utterly robotic and habitual for me - I have probably worked in this way for a decade now and the only change is that since starting WD a couple of years back, I now Tweet out anything I see that I think is relevant with regards to the Chart Patterns, Candles, Techncial Indicators or Valuation aspects and sometimes stuff like Ex-Dividend and Results dates. I look at the Charts and Indicators like RSI, MACD, MAs, Bollinger Bands, Heiken Ashi Candles etc. for each of my Stocks (if you see my regular Weekend Charts Blogs on the Indexes and stuff then you should be familiar with the Technical Analysis tools I use - I apply the same ones to every Asset I deal with) and I also flick across to the ‘Details’ Screen which shows me the Earnings per Share consensus forecasts and the forecast Divvys and the Debt and stuff - I use this to quickly work out the Forward P/E and Forward Divvy Yield as these are the 2 most important metrics for me that I constantly use to assess the value very quickly - I use a Calcluator from the raw numbers and never trust the printed P/E ratio, PEG number etc. With regard to the Charts, I am looking for Buy Signals like when a Price breaks out over a certain Level to the upside or for things like Hammer Candles after a prolonged Sell-off - also I am looking for strong Resistance levels where Sellers are likely to come in - if a Stock is looking overvalued and I am thinking of Selling or TopChopping, then I might sell at such Resistance Levels particularly if the Stocks tends to move in a defined Range. On the Valution side of things, as a Stock moves up, if I feel I am underweight and I want to buy more, then I am assessing the Forward P/E in particular and trying to figure out if it still represents good value and if there is upside to go for. If I have been in for a while and the Stock is up really high, then I am assessing the Valuation to see if it is starting to get over-cooked and perhaps if I should be Selling - however, my current thinking is that if something looks Toppy in terms of Valution (forward P/E over 20 or something) then rather than selling the whole lot, I will just TopChop some off, especially if it is a Stock I really like in a strong Uptrend and with a good record of postive Earnings updates and forecast upgrades. I recommend Readers look at the Blogs I wrote about Valuation - there is a link below. I very rarely make a snap decision to Sell a Stock or even to buy one or TopUp or TopChop a Stock - all my trading decisions tend to evolve over weeks and gradually I move towards the decision as I do these constant reassessments every day.
Right, that’s it really - hopefully this explains my process for managing nearly 60 Stocks and it is worth bearing in mind that I am a Full Time Investor and apart from writing this cr*p for you lot, I don’t actually do much !!
As a slight aside, I just dug out the Links to the Blogs below and I find the easiest way (apart from trying the Search Boxes) is to look at the ‘Blog Index List’ and find the one you want and take a note of the date it was published and then to look at that Month and Year under the ‘Archives’ bit on the Blog page. There are Click Buttons on both the Blog page and the Blog Index List to switch between them quickly. If you still can’t track down one you want, then feel free to contact me via Tweet or Email or something - I may not respond straightaway but I will get back to you.
How to Value a Stock ones - there are 4 parts (despite the titles !!) and here are links to them all:
A day in the life of:
How I find potential Stocks to invest in:
This one is related to the one just above:
Welcome to my Educational Blog Page - I have another 'Stocks & Markets' Blog Page which you can access via a Button on the top of the Homepage.
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