
Active investing: what's your approach? - cgardn20
For those of you who use Robinhood&#x2F;Etrade&#x2F;etc to invest in stocks, what&#x27;s your approach for finding stocks to buy?
======
bkohlmann
While I don't have any advice for picking stock, make sure you track your
overall return. You may find - as many funds do - that you underperform the
market. And it might be worth it to index.

And if you discover you're better than an index, you know your time was well
spent (although luck may factor into both scenarios).

Either way, quantify your effort. You're already likely putting in a lot of
time to pick the stocks. An incremental bit more will help you track it.

------
baccredited
I'm a self-taught quant, not an 'active' investor, but here's what I do. I use
factors like trend and momentum to develop algorithms. Then I backtest my
algorithms against decades of data. Then I buy/sell stocks based 100% on what
the algorithm says to do.

If you hand pick stocks, you will lose. A simple index fund will destroy you
over, say, 10 years. I'm happy to back up that claim with cash if you will
make your picks public. $1,000 to the charity of your choice.

~~~
hood_syntax
Two questions, if you're up for answering them:

* Where's the best place to get data for testing purposes?

*What kind of trades do you do? Is it mostly buying and selling actual stocks, or do you go after more complicated trades like shorts/puts/options?

~~~
baccredited
>* Where's the best place to get data for testing purposes?

If you open and fund an account at tradier.com they give you access to a REST
API that includes some good stuff. I also pay $50/mo for some additional data
from ycharts.com. But you can also use some free libraries that pull from
yahoo and they sorta work.

>*What kind of trades do you do? Is it mostly buying and selling actual
stocks, or do you go after more complicated trades like shorts/puts/options?

My algorithms are long-only and I buy stocks and hold them for at least one
year. If the algorithm could exceed the high cost of short-term capital gains,
I would hold for a shorter period.

You could also try quantopian.com for some super short term trading. I
personally think that is a poor use of time.

I REALLY wish there was some place I could enter competitions and make my
trades public. I'm using motifinvesting.com for now but would enter trades at
other places if I could.

I played around with instavest.com (a YC company) which was promising for a
while but it stopped working and I suspect they are on life support or
something.

~~~
smartician
What do you think of portfolio123.com?

I'm looking to get my feet wet in quant stuff, but the high price is scaring
me off. Right now I'm running simple momentum models on macro index ETFs using
Yahoo data (monthly trades).

------
Cut_N_Paste
For long-term growth investments, I buy stock in companies that make products
that I use and love. i.e. Coca-cola, General Motors, Apple, etc...

For income, I put a portion into high-dividend stocks, and either draw the
dividend or trade them away pre-dividend for more than the dividend would have
paid... re-buying later after the price drops post-dividend.

For short-term money trades, I look for depressed stocks with what I call
rebound-potential... e.g. something like bad news or earnings miss can depress
a stock 5-20% depending on the day/mood of the market, I buy and hold some of
these I think have a potential rebound in a moderately short-term ( say a week
or 2 ), for a modest profit.

The main thing is to stay diversified, and always keep some cash available to
buy a potential dip, you cannot have all of your money in 2 or 3 stocks and
expect to do well unless you're extremely lucky, and just like in Las Vegas,
luck doesn't always go your way. The more and different stocks that you hold,
the easier it is to sell a winner, and re-invest that profit in the next.

Also, you need to be able to hold through the short-term market flux, and not
sell out of fear... i.e. kim jong shooting fireworks over Japan can shake the
market temporarily, you need to be able to hold steady until the market
recovers, and even better, buy the dip.

------
sp527
Active investing isn’t a great idea unless you’re committing a lot of time and
resources to the effort. And even then, it’s usually still a bad idea. The
vast majority of professional funds underperform the market. It really is
better in the long run to just swallow the humble pill and defer to indexes.

------
hanoz
Buy companies you're an enthusiastic customer of. To my mind this is your only
chance of getting an edge over the efficient market and its heavyweight
players.

------
mrdependable
My approach is basically anchored in the knowledge that a large part of what
happens with the market is emotional and not based on actual numbers. I watch
a stock for a while to get a sense of how it moves. By this I mean, how does
certain news effect the price, what sort of deals are they making, what are
people excited about with the company, what are they disappointed with in the
company. I find what their customers are saying about the company, what people
think of their competitors, listen to the earnings report. I'll do this along
with more technical research of the company until I feel like there's a good
entry point, if at all. I'll have a target price in mind and sell once I get
there. In some situations if I'm feeling especially good about an opportunity,
I'll invest in LEAPS instead, which is about as risky as I'm willing to go.

Doing this right is incredibly time consuming, and I don't do it with the bulk
of my investments. I will usually focus on three companies max, because that's
about all the work I can handle. I've been much more successful since I
started taking this approach, and the percentage returns are much better than
what I get from my investments in index funds, but the amount gained comes out
to about the same because of how I allocate. Trading is only as risky as you
make it, but a lot of people will get sucked into the allure of outsized
gains. Use all the tools and financial instruments at your disposal to protect
your investments, and don't get lazy about managing them.

------
wdroz
I buy stocks from near companies. I keep contacts from people in R&D.

Some companies do partnership on research with universities. So you can easily
network and hear about their public projects.

But be very careful if you intent to create a full portfolio with all
companies in the same place, it's very risky (I do it because Switzerland is a
small country)

------
danieltillett
I am quite a successful active investor (sorry for the lack of modesty).

What I look for is:

1\. Small companies (none of the serious big guys look at small companies so
you have a chance);

2\. and are doing some real and valuable;

3\. and are being ignored because the past management were terrible, but where
the current management has nothing to do with the old management (reverse
takeover, backdoor listings, etc).

On point 3 I am amazed how many investors treat companies like people. They
will continue to punish a company for the sins of the past even when everyone
involved is different.

~~~
dynamic99
How successful has this approach been? Specifically point 3

~~~
danieltillett
Very, but you have to be patient. It seems to take around 18 months for the
market to catch up with reality. It is really hard to pick when the market
will turn, so I just buy and hold until it does.

~~~
dsacco
What does “very” mean? Do you mind quantifying that with a percentage? As it
stands it doesn’t really answer the question: “very” is an imprecise
measurement.

~~~
danieltillett
Very means I have made a lot of money with this approach - far, far more than
I would have using a passive index-based approach.

I am sure you understand that I don’t want to get into specifics in a public
forum.

~~~
mattmanser
How would giving an example hurt? You've given away your strategy, a specific
example of one of your successes wouldn't hurt you as they'd have recovered
their stock price now.

~~~
danieltillett
Investment strategies are like ideas - nobody steals them because everyone has
their own crappy one which they like more.

An example of a company that fits my criteria (and which I have invested in)
is the ASX listed ruby miner Mustang Resources [0].

0\. [http://www.mustangresources.com.au/](http://www.mustangresources.com.au/)

------
tabeth
Don't bother. Index funds will beat everyone but .000001% of people. Even most
of those who beat an index fund lose once you account for the amount of time
wasted (what I mean by this is that if you took the time you spend and
converted that into money and put it into an index fund you would not come out
ahead using the active strategy).

If you insist, from what I've read algorithmic trading, small companies (not
necessarily startups) and companies that have had significant changes, e.g.
new management seem to be popular.

------
EugeneAZ
Helping to make reliable stockmarkets in developing countries like Ukraine,
for instance.

------
Jack000
index in bull market, defensive stocks in bear market. threshold on a few
global parameters and back testing (mostly volatility)

idea is to preserve capital during extended downturns.

been in the index side since 2015 except for a few months during brexit.

------
caspercrf
I use unusual options activity to find stocks. From there I check the charts
and will either go with, against, or pass on the trade. 2-3 trades a year in
my 401k. +38% YTD, +55% YOY.

------
stocktech
Mostly swing trading. e.g CAN SLIM. My biggest concern is whether it's worth
the added stress and time commitment vs passive investing. I do enjoy it, but
it does take an emotional toll.

------
companyhen
[http://coinmarketcap.com](http://coinmarketcap.com) \+ researching the team
and tech

~~~
baccredited
Do you share your ICO investments anywhere? I'd love to read about your
investments.

I've done the following ICOs: filecoin, saltlending, latoken.com,
cobinhood.com, polychain

It is HARD to find info about actually legitimate ICO companies.

~~~
companyhen
Yes, but I'm not a financial advisor. My e-mail is username @ gmail.com if you
want to reach out.

------
johnwheeler
Buy as much Berkshire Hathaway as you can.

~~~
mattmanser
Is that a good long term investment? Honest question, given he's near the end
of his life now.

~~~
johnwheeler
I think the conglomerate is durable. As its size has increased its results
have trended downward, but according to him, that's natural when investing
large sums. Should be the same issue for the next capital allocator. So long
as he doesn't appoint a fool. His track record on managing human nature has
been pretty good though.

------
muzani
Look for catalysts. Make a list of stocks that are undervalued, then buy them
when there's good news.

~~~
yen223
How do you identify stocks that are undervalued?

~~~
muzani
Fundamentals. This is actually quite hard because it's relative. I've seen
'experts' do analyses like "Facebook was valued at $100 per user, this company
is better than Facebook, therefore this company should be valued at $300 per
user."

It sometimes helps to go at it from an untrained perspective and make your own
estimates. Look at assets, cash flow, cash in the bank. Opportunities, market
size. Yes, this does take a lot of work, but you are literally being an
investor here. It's good to be an expert in the field you're investing in.

Draw a line. Find out where the spikes in the data are coming from: are they
catalysts or just hype? I've seen some odd things, like when a certain party
wins the election, shares of the prime minister's relatives go up.

The line would rarely go "hockey stick" when these things happen. Often
they're more of an S-Curve. If they're undervalued, it's just correcting,
meaning that the real line is a lot steeper.

Don't look too closely at profits. A lot of companies reinvest in themselves,
partly to minimize tax. Companies that offer high dividends are often
committed to slow growth.

