ASA Investment Course 2019

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Bill
Posts: 171
Joined: Thu Nov 03, 2016 10:42 pm

ASA Investment Course 2019

Post by Bill » Tue Jun 11, 2019 1:51 am

This thread is posted for members taking the ASA course “Investing in the Stock Market in a Time of Change”, starting in June of 2019. It provides the history of this trend following system and details of an active investment portfolio based on the trend following system. This backtested portfolio has returned a yearly average of 19% over a 10-year period, with acceptable drawdowns.

Background At the 2018 ASA Sydney Conference, I presented a workshop on investment planning where I discussed a useful backtested, trend following investment system which was developed over several years. It is relatively simply and very profitable. As a sequel to the workshop, this trend following system was posted on the forum as an ongoing active investment portfolio where stock sales and purchases were discussed in detail. This made the system available for review and discussion, where every trade was available for critical analysis/review. The aim was to show how a profitable system was managed and to demonstrate the rigour needed in an investment system to enable profitability.

A copy of the recorded course and details of the trend following system will be sent to all members who are taking the course. Full details of the trend following system may be also be downloaded here.
190528 TF System.docx
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Portfolio details
The portfolio was started in January of 2018 with nominal capital of $100,000. It holds a maximum of 5 stocks and brokerage of 0.2% is paid on every trade. The aim of the original forum thread was to allow members to follow the activity of a portfolio which is fully transparent and includes full details of every trade, including the specific date and price of every trade. If you are interested in the earlier activity of this portfolio, see viewtopic.php?f=7&t=235

This is the equity curve for the trend following system portfolio as of 12 June 2019.
Snap 2019-06-12 at 06.32.41.png
This is a summary of portfolio performance as of 12 June 2019.
Snap 2019-06-12 at 06.46.23.png
Snap 2019-06-12 at 06.46.23.png (17.91 KiB) Viewed 2285 times

Due to constraints of space, the current holdings of the trend following system and past trades are included in the next post in this thread.

Bill
Posts: 171
Joined: Thu Nov 03, 2016 10:42 pm

Re: ASA Investment Course 2019

Post by Bill » Tue Jun 11, 2019 10:07 pm

Follow up data on the trend following portfolio.

The following is a table of the chronological trading history in the portfolio since inception in January 2018.
Snap 2019-06-12 at 06.48.23.png

This table provides the sorted data from the previous table to allow a comparison of wins and losses. To date there have been 8 winning trades and 8 losing trades. The average winning trade is $5230 while the average losing trade is $2526. In any profitable system the average win must exceed the average loss.
Snap 2019-06-12 at 07.47.59.png

These are the current stocks held in the portfolio.
Snap 2019-06-12 at 06.50.06.png

Bill
Posts: 171
Joined: Thu Nov 03, 2016 10:42 pm

Re: ASA Investment Course 2019

Post by Bill » Mon Jun 24, 2019 11:23 pm

The second webinar made reference to the following Excel spreadsheet for recording all trades. It can also be used for the simple calculation of specific risk.
Snap 2019-06-25 at 09.12.04.png

This spreadsheet may be downloaded from here.
190625 Course trading sheet.xlsx
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Please note that this spreadsheet is not protected so care is needed to avoid deleting calculations from cells.

Bill
Posts: 171
Joined: Thu Nov 03, 2016 10:42 pm

Re: ASA Investment Course 2019

Post by Bill » Sat Jun 29, 2019 3:10 am

The following post is an answer to a question on intrinsic value from Tim which was posted on the "Follow this Trade"
topic athttps://www.asaforum.com.au/viewtopic.php?f=7&p=1401#p1401

Hi Tim,
As far as intrinsic value is concerned every data provider seems to have a different method of calculation. I remember several years ago doing a comparison of the intrinsic value of Woolworths which at that time had a market value of $18.50 and the intrinsic values from three different data providers were $16.98, $17.87 and $20.15. This is a large range, varying from an estimate which undervalued Woolworths at the time to estimates that overvalued it. Montgomery’s book Value*able has a chapter on intrinsic value and shows how he believes intrinsic value should be calculated and is worth reading.

The intrinsic value is really important and basic to the method used by the value investor but personally as a growth investor, I take little notice of intrinsic value and place emphasis on the fundamentals and the quality of the trend of a stock. I used the chart of PME (below) in the webinar. It provides an example of why in my opinion intrinsic value has limited value when buying stocks. A value investor would not buy an overvalued stock such as PME but in this market most of the top performing stocks are overvalued and have been for some months.
Snap 2019-06-29 at 12.43.51.png
The best approach is to use only the intrinsic values from one source. While individual intrinsic values may sometimes be incorrect - on average you will have a fair estimate of the intrinsic value of a stock.

Hope this is useful.
Bill

Bill
Posts: 171
Joined: Thu Nov 03, 2016 10:42 pm

Re: ASA Investment Course 2019

Post by Bill » Sat Jun 29, 2019 3:27 am

Replying to a question from Jim who asks, :How do you identify a list of prospective stocks".

There are two different approaches, one starting with the use of technical analysis and the other starting with fundamental analysis. I would refer you to Session 5 of the ASA video series, where in some detail I discussed these two approaches.

When you look at the two approaches, I showed that even though they are very different methods aimed to find the best 5 stocks for the market at that time, the same three stocks were identified using very different approaches. The graphic below shows the results of using both methods.

Please refer to the video to get a full understanding of the methods used.
Snap 2019-06-29 at 13.18.30.png

Bill
Posts: 171
Joined: Thu Nov 03, 2016 10:42 pm

Re: ASA Investment Course 2019

Post by Bill » Sat Jun 29, 2019 3:40 am

Reply to a question by Jim, "How do you define or determine the market upturn or downturn?"

There are a number of methods. One simple approach is the one discussed in the webinar and summarised in the chart below.
Snap 2019-06-29 at 13.30.01.png
This is a daily chart of the ASX200. It shows the 30 day exponential moving average as the red line. When the moving average is turning up then this shows an up market and the converse for a down market.

But the Detrended Price Oscillator gives a better understanding. Simply, when the DTO is negative, this is a down market and we do not buy any stocks. When the DTO turns positive as it did on January 9 of this year, this was the start of the market upturn. This chart is the key to knowing when to buy and when to avoid the market.

This a simple approach to understanding when as investors, we should be in the market and those times when we must not buy any stocks and go to cash as our stops are hit.

I hope that this has been useful.
Bill

BarcooJill
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Joined: Mon Jun 19, 2017 1:11 am

Re: ASA Investment Course 2019

Post by BarcooJill » Thu Jul 04, 2019 2:27 am

Bill - I have just subscribed to Incredible Charts and am on the steep learning curve. Could you tell me what you use to get the 5 green and 5 red trend lines.

jimcam1
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Joined: Thu Jun 20, 2019 4:49 am
Location: Sydney

Re: ASA Investment Course 2019

Post by jimcam1 » Thu Jul 04, 2019 4:27 am

Thanks for the response to my question Bill, very helpful. I enjoyed the webinar which was very informative and well worth attending. It has given me some work to do though! Thanks again. :)

Bill
Posts: 171
Joined: Thu Nov 03, 2016 10:42 pm

Re: ASA Investment Course 2019

Post by Bill » Fri Jul 05, 2019 6:42 am

Jill, Re Incredible Charts.

I see that you are in our Toowoomba group so talk to me at the next meeting on July 15.

Bill

Overflow
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Joined: Wed Jun 26, 2019 2:23 pm

Re: ASA Investment Course 2019

Post by Overflow » Tue Aug 20, 2019 1:11 pm

Hi Bill
An excellent and very informative course! I have subscribed to Incredible Charts and Vector Vest and am slowly learning with all its functionalities based on what I have learnt from you on this course as well as the free online sessions so far up to session 5! Would you consider conducting webinars on using these two software? That would really save me time fumbling around learning all its functionality.

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