Starting a mutual fund - Page 6

maxtower · #51 07-26-2007, 04:21 PM

Shoe,

Can you let us know when you start publicizing picks? Should be interesting at the very least.

Make sure that when you make a pick, you have a clearly written analysis of why you want to own that stock, and why you think the company will do better than the market average. Understand the risks.

Don't just say "buy Nintendo because its hot." You need to "know" why it will outperform. This will help you understand how these businesses work, and make you a better investor in the future even if you don't become a famous fund manager.

Shoe · #52 07-26-2007, 07:54 PM

Thank you for the advice. Currently, I am sure that I do not have nearly as much analysis as people would like, but one thing nintendo has going for them is they are very conservative with their estimates, and management keeps upping their expected results, but are only upping their estimates conservatively. I expect them to continue to outperform for the forseeable future. I expect this trend to continue.

Also, both the DS and Wii are dominating the market. If that changes, I feel I will be able to notice that early before the market adjusts (or just as it is starting to adjust), as I am very in-tune with the video game market and trends.

PRE · #53 07-26-2007, 07:59 PM

[ QUOTE ]
Currently, I am sure that I do not have nearly as much analysis as people would like, but one thing nintendo has going for them is they are very conservative with their estimates, and management keeps upping their expected results, but are only upping their estimates conservatively. I expect them to continue to outperform for the forseeable future. I expect this trend to continue.

Also, both the DS and Wii are dominating the market. If that changes, I feel I will be able to notice that early before the market adjusts (or just as it is starting to adjust), as I am very in-tune with the video game market and trends.

[/ QUOTE ]

You really shouldn't be giving anyone advice.

Evan · #54 07-26-2007, 08:02 PM

[ QUOTE ]

Also, both the DS and Wii are dominating the market. If that changes, I feel I will be able to notice that early before the market adjusts (or just as it is starting to adjust), as I am very in-tune with the video game market and trends.

[/ QUOTE ]
Being really in touch with a market can actually be a bit of a disadvantage in evaluating the market as a whole. For instance, I read a ton of technology media and I often overestimate the penetration of certain products/technologies/etc. When you surround yourself with people and ideas that are very far removed from the mean (as anyone who's really in touch with anything is) it's easy to lose track of what's actually normal. Not saying you can't (although I don't really think your have any ability beyond the market to make reasonable estimates about a certain product's sales cycles), just worth thinking about.

Shoe · #55 07-26-2007, 08:10 PM

[ QUOTE ]
[ QUOTE ]
Currently, I am sure that I do not have nearly as much analysis as people would like, but one thing nintendo has going for them is they are very conservative with their estimates, and management keeps upping their expected results, but are only upping their estimates conservatively. I expect them to continue to outperform for the forseeable future. I expect this trend to continue.

Also, both the DS and Wii are dominating the market. If that changes, I feel I will be able to notice that early before the market adjusts (or just as it is starting to adjust), as I am very in-tune with the video game market and trends.

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You really shouldn't be giving anyone advice.

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What would you advise?

Shoe · #56 07-26-2007, 08:13 PM

[ QUOTE ]
[ QUOTE ]

Also, both the DS and Wii are dominating the market. If that changes, I feel I will be able to notice that early before the market adjusts (or just as it is starting to adjust), as I am very in-tune with the video game market and trends.

[/ QUOTE ]
Being really in touch with a market can actually be a bit of a disadvantage in evaluating the market as a whole. For instance, I read a ton of technology media and I often overestimate the penetration of certain products/technologies/etc. When you surround yourself with people and ideas that are very far removed from the mean (as anyone who's really in touch with anything is) it's easy to lose track of what's actually normal. Not saying you can't (although I don't really think your have any ability beyond the market to make reasonable estimates about a certain product's sales cycles), just worth thinking about.

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Thank you, good advice. Definitely gives me something to think about, and to try to take a look at the market from an outsider's perspective (not sure how good i'll do at that but will definitely try).

DesertCat · #57 07-26-2007, 08:48 PM

[ QUOTE ]
Thank you for the advice. Currently, I am sure that I do not have nearly as much analysis as people would like, but one thing nintendo has going for them is they are very conservative with their estimates, and management keeps upping their expected results, but are only upping their estimates conservatively. I expect them to continue to outperform for the forseeable future. I expect this trend to continue.

Also, both the DS and Wii are dominating the market. If that changes, I feel I will be able to notice that early before the market adjusts (or just as it is starting to adjust), as I am very in-tune with the video game market and trends.

[/ QUOTE ]

Real analysts actually visit many stores, develop contacts within the company and it's partners/sales channels, interviews scads of potential customers, and make complex models of the target business.

For example, analysts made detailed forecasts of the IPhone's first two days of sales, as high as 600k units. AT&T only activated 180k (though Apple sold closer to 300k). All that real work, with real data and contacts, and they were still off by over 50%. So how accurate will your golden gut be vs. actual leg work?

Do you really think that because a game gets more popular with some of your friends, that data point is more accurate/valuable than the information derived from multiple focus groups with customers recruited to match the geographical and age groups of the potential market?

Then add to that discrepency your the ability to model and value a business. So even if you get a market trend right, you have to accurately determine how it will change a companies valuation. Apple thinks it will sell 1M Iphones this quarter, does that mean they are currently overvalued or undervalued?

It's a lot harder than you seem to understand. It's great you have the motivation, but you have a lot of hard work ahead if you want to translate that desire into real ability.

Shoe · #58 07-26-2007, 09:10 PM

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Real analysts actually visit many stores, develop contacts within the company and it's partners/sales channels, interviews scads of potential customers, and make complex models of the target business.

[/ QUOTE ]

How much money do you need to be investing to be able to develop serious contacts at a company? If I am only buying a few shares are they still going to give me any time of day?

Thanks for the great post. Definitely gets me thinking about where I am and where I need to be headed, and what I should be thinking about.

DesertCat · #59 07-26-2007, 10:20 PM

[ QUOTE ]
[ QUOTE ]
Real analysts actually visit many stores, develop contacts within the company and it's partners/sales channels, interviews scads of potential customers, and make complex models of the target business.

[/ QUOTE ]

How much money do you need to be investing to be able to develop serious contacts at a company? If I am only buying a few shares are they still going to give me any time of day?

[/ QUOTE ]

It's really a time and effort thing. Anyone can call the CFO and ask questions, in most cases the CFO will actually return your call. But what you need to do is visit stores, meet product marketing managers, sales people etc, and talk up people in the organisation and sales channels and make them your friends. Maybe buy them free lunches, send them your newsletter for free, etc. It's all about using your noggin to be creative. Just don't break the law (offer bribes, sneak into offices, etc).

If you talk to a dozen managers at various Toys-R-Us who are having trouble selling or getting enough of a certain product, that's an interesting data point. If you know a marketing manager he might guide your forecasts to be less optomistic or pessimistic.

Of course it helps to be representing a large hedge fund or investment bank, because you have more resources. Maybe you invite your contacts out for golf, let them invest in your fund, etc. But even the small investors can do "scuttlebutt" research if they are creative.

prohornblower · #60 07-27-2007, 10:15 PM

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Also, both the DS and Wii are dominating the market. If that changes, I feel I will be able to notice that early before the market adjusts (or just as it is starting to adjust), as I am very in-tune with the video game market and trends.

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lol. This is...like...how I thought the market worked when I was like 8 years old. "OMG everyone I know (8 people) drinks Sprite, I wish I owned Sprite right now!!!"

Seriously man, you're going to get destroyed, absolutely destroyed buying stocks like this. And that is coming from a 28 year old who knows like 1% about the market. At least you are now recognizing that Wii are all just trying to help you not get killed.