Replies to post #144217 on Sino Agro Food Inc (fka SIAF)

[surfer44]

Interesting discussion. I don't throw out the charts myself. For example I use charts looking 10 years back for history and when I invest in deep value stocks, let's say SIAF, I will look at a chart for volume and a breakout. If it breaks out I add. And I will always know where I am fundamentally. I might sell at 2X or 3X book. And then again I might not.

[colddecked]

Mark Howards has stated in one of his memos titled "It's Not Easy":

Quote:
Momentum investing works until it stops, at which time the things that have been doing worst - and may be most undervalued - take over market leadership.
and vice versa.

Now you see the dilemma here? It's like you are riding blindly. You don't know where to sell and you don't know where to buy. There is no starting or ending point here, everything is based on hopes that the stock that has been doing good or bad will keep doing so. And is that logical to you?

Momentum isn't perfectly understood - in fact it is far from that. On a high level, it works due to behavioural tendencies of investors like anchoring bias leading them to under-react to new information and herding which causes them to join the pack. And yes, it works until it stops, which is why the maximum drawdown of a momentum strategy is far greater than that of say a value or a high yield portfolio. That doesn't change the fact that the after fee performance of momentum portfolios net of all drawdowns has outperformed the market by a significant margin and it has worked just as long as value has.

Many people pursue momentum strategies without knowing that there could be 80% drawdowns and multiyear underperformances which makes them give up on the strategy. Either that or it represents too much of a career risk for them to use such a strategy (much like how it keeps money managers from using a true value strategy). This is why it is so important to have a strategy you can stick with through thick and thin, otherwise you'd just be chasing performance. Many people don't have a time horizon and temperament that would make a value strategy work. Otherwise everyone would be using the strategy and any potential edge to the strategy would be arbitraged away.

I'm not even aware that there are that many about value investing, do you mind listing some that I probably haven't read yet.

Going purely by the authors you have listed, other books on value investing I would recommend are:

Dhando Investor by Mohnish Prabai
What works on wall street by Jim O'Shaughnessy
Manual of ideas by John Mihaljevic
Quantitative Value by Tobias Carlise and Wes Gray
Any book written by James Montier or Michael Mauboussin
There's plenty more like books by Robert Hagstrom, Bruce Greenwald, and more.

Read some investor letters from prominent investors or research papers from AQR or OSAM. Those are usually more educational than many of the books. I would still encourage you to read literature that could be contrary to your beliefs. You can only learn so much looking from one side.