Thursday, September 15, 2011

Money Show, Benj Gallander

Benj Gallander is from Contra the Heard Investment Letter. His speech is entitled “How to Guarantee (Almost) Stock Market Losses. This is an interest approach to talking about investing in the market.

He says one of best ways of not making money or not making much is to over diversify. You over diversified if you have more than 25 stocks. He says the problem with mutual funds is that they are in too many areas and too many stocks. Stocks go into indexes because of their trading volumes.

He thinks that by the time a stock is in the TSX60, all it best days are probably behind it. It gets into the index because it is doing unusually well. If something does unusually well, then it will tend to go back to the average (or the mean). He thinks the more interesting stocks are the ones that get kicked out of an index.

Mutual Funds may not lose much, but neither do they make much. Part of this has to do with their high MERs. The average MER in Canada is 2.2%. The problem for investors is win or lose, the Mutual Fund takes their fees. Most Mutual Funds do not match stock market averages.

Another problem he sees is group think. That is people just following the herd. This is a problem also with mutual funds.

Is gold a mania now? He is selling.

You should hold stocks for at least 7 years. One of the reasons is because of taxes. Is it better to pay taxes every year or every 7 years? After you pay taxes, you have less to invest. If you pay taxes every year, you will have less to invest every year. That is, active trading, costs you money.

He does not buy any company that has not been around for 10 years. And, they certainly do not buy IPOs. Most IPOs are down after a year. He likes companies with at least 10 years of history. He also likes ones that are lower now than they have been in the past and hopefully, they will regress to the norm.

He feels that you should be patient with stocks. There is no time frame when he buys a stock. He waits patiently for a stock to hit his target price. The only exception is when a stock’s fundamentals get worse.

We do not have efficient markets. This is a fallacy. Part of the reason is they everyone looks at the same information in different ways.

You can lose money in the stock market by having advisors. They take money for their advice. You can make mistakes in the money and still make more money by investing yourself.

Another way to lose money is not read financial statements and to ignore financial ratios. (He is currently reading a book called The Great Short, by Michael Lewis and he highly recommends this book.)

He looks at technical charts. If the charts say that a stock generally bottoms out in October, 9 times out of 10 times, he will buy it in October. He tends to buy in November and December. He never sells in December. If he wants to sell a stock, he usually sells in January. In January, stock market usually goes up ½% and he will get to delay taxes for an extra year.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

1 comment:

  1. Hi,

    Thank you very much for your comments about Gallender's approach. I am not able to attend the Moneyshow tomorrow in Vancouver so I really appreciate your blog.