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Focussed vs Diversify
Rank: Member Joined: 2/12/2008 Posts: 345
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Hi.. This is becomin a constant serious nagging thought every night i go to sleep. Selling everything i got..put it all in 1counter..talk to fellow partners n side kicks...will come up with slightly under 22m..put it all in equity...or Access... or KQ at 42...or NIC at 52.50... or Kengen at 22.. etc.. One counter..spread out buyin and use an m a week...will take on long past cooperative's ipo..and probably 2 or 3 corporate actions(there is some credence to talk of access kenya's probabl rights..just rumour picked up at the actual NSE floor. Brokers actually tryin to find the truth as i write)
1counter..probably equity. I kno it can work..just need ur thoughts..what am i missing here? Am not an idiot so don't advice me as one. Thanx. Let's see what this will do.
'I have heard of You,O Lord. Now mine eyes have seen thee! Baal Perazim..the Lord of the Breakthrough!'
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Rank: Member Joined: 3/20/2008 Posts: 503
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@jammo,
My take is that you are better off speculating as you've been doing though its worth a try if its on yo mind. If you do decide to focus,I'd say the key is to focus on a share you don't mind owning to perpetuity (which might just be equity right now)...just in case it goes belly up.
Wonder how many opinions you'll get that don't mention the 'all eggs in 1 basket' quip.
beware the irrational exuberance on the NSE
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Rank: Member Joined: 2/12/2008 Posts: 345
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Am thinking question would be to diversify or not. If i put all my funds in Old Mutual....or Baam..or Zimele..or any fund out there..it would be touted as 'a very wise move'..yet the fund..as a counter is JUST ONE!! ..but diversified in products,target of investments..and may be industry. What's the difference from puttin my whole cash stock in Equity? One counter yes..but diversified products..and yes..areas of investing....bankin,micro financing..mortgage..custodial services,..probabilities for this bank are as immense as could be!! Mutual funds especially those with offshore reach are not exempt from international decline in stocks world wide...plus they hide behind a veil of havin 'experts' handlin the funds..yet some of us hav beaten their annual returns just by readin thro posts on SK!!..find out Who's invested in a fund 6months ago? ..the returns are good yes..but try sell ur units today..u'l be sorry coz unit prices are far much down today than when u bought IN! I'v been investing..and yes..tradin for close to 3years...guys who beat my returns over the period either had more cash than i did to take advantage of opportunities i couldn't take..or just concentrated on one counter. Do the math..if all cash u got was put in one solid counter with good probables..1 counter u do not mind holding forever....eg Access,Equity... nic,EABL,scan group.. KCB,...options are many. After all..Buffet put all his cash in Berkshire H.! Put all eggs in one basket and WATCH THAT BASKET!!
'I have heard of You,O Lord. Now mine eyes have seen thee! Baal Perazim..the Lord of the Breakthrough!'
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Rank: Member Joined: 6/17/2008 Posts: 294
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What does Buffet do! The guy,put almost all his eggs in one basket and watches that basket with a keen eye! Barkshire Hathaway as in investment company owns other stocks/companies/business like Washington Post,CocaCola,GEICO,Clay Works,etc. He buys a given share in bulk ( as in Millions). I guess that could be called concentration. I want to believe that it works and does real well,than scattering your wealth all over the place,doing a guesswork,that if this counter looses,this will gain. Its utter nonsense! Investing in growth companies,will in turn give great dividents,great capital gains,case in point,Google,Equity,Barkshire,Access,etc. Assume that you have a magnifying glass,or a lens in a hot sunny day,like today and you want to burn a piece of paper,will moving the lens achieve some result?Your guess is as good as mine,Concentrate the sun's rays and the paper will burn faster. Proverbs says,'A rolling stone gathers no moss',I guess it applies in stocks as well. Grab a website,visit www.thedoxa.net
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Rank: Member Joined: 9/26/2006 Posts: 409 Location: CENTRAL PROVINCE
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I always put my money in one stock that promises sustained growth in profitability.Once the growth rate slows(or the stock becomes grossly overpriced with little upside),i move on to the next fastest growth stock.This is informed from simple logic:With growth,the share price rises usually propotionately to the growth.With this strategy,i have constantly outperformed the 'fund managers' who have to spread their portfolio as a legal requirement(which Jammo you can circumvent as yours is not a registered fund).When i say the fastest growing company on the NSE,that should tell you what my returns for this year are......The same share is goin to sustain this momentum for at least another 3 to 5 years(compute a conservative 70% annual increase in share price+dividends for at least 3 years).The strategy has inherent risks which am sure you are familiar with but how else will you aggresively build wealth?I plan to use the strategy till am about 40yrs(am 28yrs) when i'll aggresively diversify to minimise risk.
Recommended reading:Read the Dyer and Blair Banking survey research report 2008 at their website(www.dyerandblair.com).An interesting well written analysis.
Happy hunting
Stocksmaster-For well researched market analysis
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Rank: Elder Joined: 6/27/2008 Posts: 4,114
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@jammo - Here is a simple rule of thumb that has always worked: SUCCESSFUL COMPANIES SPECIALISE; SUCCESSFUL INVESTORS DIVERSIFY The question is; Which one are you? Nothing is real unless it can be named; nothing has value unless it can be sold; money is worthless unless you spend it.
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Rank: Member Joined: 2/12/2008 Posts: 345
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@mukiha... Let's just say i'm bored trading..don't trust mutual funds..need a break..and most efficiently diversified portfolio last 12months hav so far managed to preserve capital or grow marginally...gains in equity,access bein offset by fall in cables Mumias etc...... Just an ILLUSTRATION please. Remember a comparison u drew to me some time back between peter lynch and Warren? I think the main argument behind diversifyin is spreadin risk especially where uncertainty is and not fully informed. I like what part of portfolio held in Equity,Access and NIC has done for me...especially equity.. My thinking is if i kno what am doin..si its ok? Funds are shoppin for stocks to pick. Tell me what that portends for growth stocks? Especially since funds spread their buys.....over time?...thus reducin effect of probable fluctuations. Question i gues,should then be... Any one with doubts where equity will be a year from now?..not share price..share value? What about NIC or Access. This is happening.
'I have heard of You,O Lord. Now mine eyes have seen thee! Baal Perazim..the Lord of the Breakthrough!'
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Rank: Veteran Joined: 11/21/2006 Posts: 1,590
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This is must be the biggest coincidence of all. As from end of June,I've decided to reduce my portfolio from 9 counters and move 75%+ into one counter for the next 3/4 years and then 25% to hold into 2 or 3 others (at least one with solid dividends). My logic is simple,if my stock picks are any good,diversifying means averaging down my gains not reducing risk. www.mjengakenya.blogspot.comSehemu ndio nyumba
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Rank: Member Joined: 6/16/2007 Posts: 36
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My take is you should always diversify!
It has been noted that the stock prices do not always follow the fundamentals closely. For example,during a bear run,the prices drop by an unnecessarily high margin (even for fabulous counters) which makes good counters grossly underpriced.
Anyway,putting all your eggs in one basket can turn out to be a dangerous move. The info that you have of the co. ain’t ‘perfect’ and even with insider info,s*** still happens!!
If you diversify,you benefit from spreading your risks and also,you benefit from gains made in the economy by different companies. As pointed out earlier. Warren Buffet despite havin all his 'eggs' in berkshire,berkshire still holds a lot of companies so he is well diversified. I strongly believe that you can still make good gains from different counters. Also,constantly re-align your portfolio. Be patient. After all,you get the chick by hatching the egg not smashing it!!!
Rule No 1: NEVER Lose any Shareholders' money.
Rule No 2: NEVER Forget Rule No 1!!!
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Rank: Member Joined: 6/16/2007 Posts: 36
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I had mentioned this in an earlier post but its relevant to this.....My max cap on any one investment is approx 25%. That guards against any errors that i may have made,issues unforeseen/arisen issues in the economy and stock market such as an unexpected bear run.
Rule No 1: NEVER Lose any Shareholders' money.
Rule No 2: NEVER Forget Rule No 1!!!
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Rank: Member Joined: 2/12/2008 Posts: 345
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@cowpoke...if it was the 1st time u came got the NSE and someone told u to put the 10k u'v worked hard to save in one counter u'd be reluctant..same way buyers of minimum Safcom ipo where SHOPPING FOR ANOTHER COUNTER to put in 7500.. A few years later after consistent investing when someone comes to you with 30000 u can easily recommend ONE counter. ..same thinkin here. If i came seekin opinions for half an m...u could easily give a diversified portfolio... But if th 0.5m is part of a bigger cash outlay of may be 5m..u'd point out 1counter to buy. Think the same of 1m a month...
'I have heard of You,O Lord. Now mine eyes have seen thee! Baal Perazim..the Lord of the Breakthrough!'
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Rank: Elder Joined: 2/11/2007 Posts: 1,680 Location: nairobi
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22m at 26!
now its your turn...YES!
keep smiling
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Rank: Member Joined: 6/16/2007 Posts: 36
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Not quite. Initially,i'd do that as a first time (or advicing a first timer),which i still think it is not a wise idea,contrary to the advice proferred. But the subsequent one(s)/advice,i would be put in other counters. Spliting th initial investment may prove to be difficult unless th guy has a nice wad of cash. If someone came to me with 500k,i would actually recommend 3-4 counters to put their money in. Which is basically diversifying. Since the amount at hand is a nice tidy sum,you should have it in like 4 counters at th very least. (BTW,as mlefu has pointed out,you have 22M @ 26?? or is it a fund that you belong and/or manage?? If its urs,How th heck did u do it?? Not in detail but a few,general ideas/tips for us all who are striving hard to get there!!)
Rule No 1: NEVER Lose any Shareholders' money.
Rule No 2: NEVER Forget Rule No 1!!!
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Rank: Elder Joined: 6/20/2007 Posts: 2,037 Location: Lagos, Nigeria
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Can the popular and notable Jammo the chief Speculator in Nairobi reason like this ? Speculation is attractive if you have a small portfolio as there there might be the urge to perform a miracle of turning 20K bob to 200K bob in one year !!! But with the portfolio like yours (a whole 22m Ksh) I think 20 %- 40% appreciation is more than enough for you so why speculate ? ON FOCUSED & DIVERSIFY In my own case I am focused on very few counters (max 4) in my country and elsewhere but diversify by investing in other stock exchanges. That is why I invest in Nairobi and other exchanges so far it has paid off. Take a look at this Jan - Jun 2008 Nairobi +21 % S/Africa (Aquarious Platinum AQP) +35% Nigeria (my country) - 7% (I mean minus 7 the market has been bearish) Ghana (equity Fund) +13% Australia (BHP) +28% HNK (ICBC) +27% Canada (Barrick Gold) +33% etc etc etc On the whole Jammo you are a good guy doing a good job but for speculators only. Cheers AFRICAN INVESTOR The wazua spirit as members is to educate and inform and learn from others within the limit of what we know in any chosen area irrespective of our differences in tribes, nationalities, etc. .
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Rank: Member Joined: 2/12/2008 Posts: 345
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Its not about the cash. If u made a client really ...i mean really happy..some how when u say 'jump!'..they teleport! Anyway..i kno someone.. alot of 'someones' who know totally nothing about stocks..and prefer someone else knowing.. and some have lost,some hefty amounts in shares..till we met. They are more than just willing to put up some cash...kind of nondescretion invstment club...i call the shots.....plus I'v been managin their accounts..they kno what i can do. Raise funds same case as eli tryin to though am putting up my own too..rise financiers for his plan. But that's besides the point. Please can we talk what counter u could buy over next 22weeks..consistently..bila waverin..within the bracket of Kq,Safcom,access,KCB,equity,nic,kenya re,arm,cables,kengen..Mumias.. ..especially GROWTH counters...... Use this as thinking..200day movin average with long term Safcom bein pegged at atleast 7.50...a million shares hav quite a nice return? My argument is that the market is based out and its the best time to buy..within a 22week window. Thing is..why make so much in Equity and loose substantially in centum and cables..within last 22weeks...it where better to hav Equity,Access or KCB..which we have and could hav got more but psychological 'diversify' mode made us write off counters already gotten! Insistin on portfolio of 55% financials,25%industrials,15% commercials and 5% agricultural. Appropriate diversify..but is that the best? I think note. This is just a phase....concentrate next 22weeks..it works..cool. I'l even write a book. It doesn't work..well..i'll be stuck with an excellent counter.
'I have heard of You,O Lord. Now mine eyes have seen thee! Baal Perazim..the Lord of the Breakthrough!'
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Rank: Veteran Joined: 11/21/2006 Posts: 1,590
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If its growth they/you are after,why not sort the counters in the order you think grow at for the next 3/4 years plus average dividends so far then put that next to what you think is reasonable/achievable annual NSE return (20-30%) and then just pick the ones or one most likely to do so? The only caveat is you may need to have a price target that will allow you to get those gains e.g. below Ksh300 for Equity,below Ksh50 for NIC etc. www.mjengakenya.blogspot.comSehemu ndio nyumba
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Rank: Member Joined: 7/9/2008 Posts: 21
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@ jammo
You are beginning to sound like a real fortune teller. You know the kind that ask you a few questions and then give you a sweet twisted answer that make you feel like your problems are over. forgetting that you provided the information to start with. If you have done good reliable reasearch why do you need to reccomend five or ten counters. why not just one that will maximize your returns (like you are asking here). or simply say a certain counter is taking the plunge so keep off. i mean something that looks like real certainty. i think you dont need my answer. just do your research.
kama huwezi kula,lamba.
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Rank: Member Joined: 6/16/2007 Posts: 36
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Since you have decided to go ahead to put your eggs in one basket,I would advise you purchase these:
1. KCB: Effects of the rights issue will be felt in the next few months. The 5.5B will allow them to take on more deposits,lend more and open up more branches to reach more clients…..etc leading to greater performance in short run.
2. Safcom: it is still a good counter and small fluctuations in price will have good margins/ROI. With your large money-chest,you can ride the fluctuations every week/fortnight and make a crazy return by EOY.
3. KQ,Access Kenya,equity Kengen,Kenya re….etc are all good counters but I do not think they offer great short term opportunities in s-term (by EOY) esp. considering the amount you have to invest. My main basis for this is: They will rise beyond the shadow of a doubt but when that will happen,I am not sure/cannot tell.
4. Remember,the Co-op IPO is about to take place and it may have an impact on existing stocks. The other option is to buy counters are likely to drop and off-load before the IPO. Then,buy the counters that drop due to the IPO and sell after (hoping that they will drop.) The drop may not happen esp. going by the safcom ipo where banks financed people to purchase and hence did not need to sell to raise additional funds to allocate to the IPO.
As indirect as the advice has been,I Hope that this has been beneficial to you!
Rule No 1: NEVER Lose any Shareholders' money.
Rule No 2: NEVER Forget Rule No 1!!!
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Rank: Member Joined: 12/29/2006 Posts: 4
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@Jammo,
You have built up your wealth through speculation and that is the game that you know well. However,the cake has become very large and hence your reasoning whether to focuss or diversify. The way I see it is that you can still have your cake and eat it! Focuss is pure speculation but in a mall market such as NSE,it can be managed. Divide your investment into 3 portions. One,buy treasury bills. One buy diversify. One focuss and actively manage it. But again,I am sure you might have thought of this already.
THE PATH OF DUTY IS THE WAY TO GLORY
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Rank: Member Joined: 6/23/2008 Posts: 12
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jammo,the declared trader (aka speculator) par excellence,wanting to become an investor? I hope you haven't taken a debilitating hit,aka 'wipeout'. Your best strategy depends on whether you want to continue being a trader or convert to an investor; never confuse the two. In trading you can keep one kiondo,not in investment. Serious investors almost always diversify. Hopefully,you'll make billionnaires out of your millionnaire clients without cracking up.
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