5/25/2009

Part Science, Art and Personal Goals

A question was asked about a specific idea that recently had positive insider activity.

Link

http://www.shadowstock.com/ss_051509.html

The only reason for providing potential ideas with frequent current positive insider activity with fundamental supporting data is for some investors the idea may fit into their portfolio. Or they may have additional specific insight into the industry or company to go long or concentrate their holdings. How and if an idea fits into your portfolio is personal. Not having a solid reason for buying or portfolio strategy may force the sale or purchase at the wrong time. You may also avoid intelligently adding more shares when the stock is down. Hopefully the direct insider activity with supporting fundamental data will prove useful at times for some readers.

When I’m managing my portfolio I take a highly diversified approach. Value oriented stocks are added slowly. I try to avoid position concentration, most of the time. My emotions can get carried away leading to an overweighting. This highly diversified approach will not be the most successful approach for other investors but for me it fits into my goals.

Famed investor Mohnish Pabrai became a rock star easily crushing the market with a concentrated portfolio of his best ideas for many years. He even bid $650,001 to have lunch with Warren Buffet. His Warren Buffet concentrated portfolio approach was working for several years. But 2008 he was devastated with this approach, down 59% in 2008, and the last half of 2007 was even more destructive.

Thanks to the outstanding noisefreeinvesting.com blog he just posted a recent link to a Columbia university investment class by Mohnish Pabrai. Mohnish discusses how and why he changed his investment style and now takes a much more diversified basket approach and no longer concentrates on just 4-5 of his best ideas.

Mohnish Pabrai
Link

http://www2.gsb.columbia.edu/cis/classrooms/FlashPlayer/CBSplay-nologo.html?video=class_sessions/09s/Greenwald_U412_4-21-09_1745-2045_34068.flv

Link Noise Free Investing

http://www.noisefreeinvesting.com/blog/?p=920


On Friday I mentioned PDII had positive insider activity and was a net/net Ben Graham style stock.

Link


http://shadowstock.blogspot.com/2009/05/insider-micro-cap-value-buying-on.html

The Net/Net attribute and insider activity doesn’t make the stock an automatic buy for all investors. But the information was worth discussing because for some it fits into their portfolio if they want to add to their basket of Net/Net stocks.

For me it was worth adding a tiny piece to my portfolio, less than 1% of my total equities. I believe you must take a basket approach if you want to invest in these Net Net ideas.

No guarantee but I believe there is a margin of safety and so I added a tiny piece until there is more visibility.

http://finance.yahoo.com/q/it?s=PDII

PDII has been proactive by reducing expenses. Hopefully future cash burn will slow. Any positive news the stock may begin to act positive. This is not a recommendation.

Magic formula type micro cap stocks (Joel Greenblatt) with positive insider activity during May. Good companies (High ROA) at a cheap price (High investment Yield).

Link

http://www.shadowstock.com/ss_053009.html


Good Luck
John

6 comments:

Anonymous said...

Great post... I enjoyed hearing your rationale!

ShadowStock said...

Hope you enjoyed the class by Mohnish Pabrai. Mohnish took a tremendous fall but still has many great ideas and useful insight.

IMO no one has a monopoly on the best way to invest. It is personal for many reasons. I’m still amazed that Pabrai admitted for him and only him the concentrated approach does not work.

Anonymous said...

thanks ShadowStock, great blog. it's always about finding what works for each person, what works for one person may not for another, and i appreciate your thought provoking posts as investment ideas.

thanks for your work man,

PS: FACT is an interesting play too imo

ShadowStock said...

FACT is a great looking idea! Seth Kalrman’s Baupost filed a 13d on the stock as I’m sure you know.

More importantly the drug Daclizumab is very promising. Their collaborative work with Biogen on Daclizumab could be huge. I take Tysabri infusions for Multiple Sclerosis and will do more work on this promising drug. Exciting idea, thanks.

Elan and Biogen produced Tysabri the drug is great and both companies mint money with this MS drug.

Carrigaline said...

Hi John,

I know you're a stockholder in ELST and you've probably received your voting papers for the forthcoming AGM.

Are you happy enough to accept all the proposals?

Thanks!

ShadowStock said...

Hi Carrigaline

Hope the market is treating you well.

Yes I do have a position in ELST,
:(

But to be honest I have not looked at voting papers and have no idea of the forthcoming AGM. I have no plans on selling until I see a much higher price.

Best
John