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How to Pick Quality Shares

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OLTB
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How to Pick Quality Shares

#310062

Postby OLTB » May 19th, 2020, 7:15 pm

Evening all.

I have just ordered the above book by Phil Oakley in an attempt to improve my share picking. I need to stop trying for the quick returns in the small caps market and go for quality. It will arrive in a couple of weeks (Amazon is out of stock).

If anyone has read it and is willing to offer comments, that would be appreciated.

Cheers, OLTB.

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Re: How to Pick Quality Shares

#310663

Postby 1nvest » May 21st, 2020, 2:00 pm

Picking your own stocks is the opinion that you can better the 'Index' returns, where the mathematical manner of how that index is managed has evolved over time to/towards the best method. IIRC that betters 80% of other methods.

The way the broader Index tends to rise is as a result of one/few exceptionally good performing stocks that uplifts the overall average. Not so much a case of a room of 10 people, one 5' tall, eight 6' and one 7' ... yielding a overall average of 6' such that most match that average, but more a case of one 5', eight 6' and one 12' that yields a 6'6" average such that nearly all fall below that 'average'.

More often the few exceptional good/great stocks are surprising - unpredictable.

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Re: How to Pick Quality Shares

#310689

Postby jackdaww » May 21st, 2020, 3:34 pm

it may be more a matter of simply AVOIDING dud shares .

:)

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Re: How to Pick Quality Shares

#310692

Postby doug2500 » May 21st, 2020, 3:43 pm

I've not read it, but as you like books one of my recommendations would be 'The most important thing' by Howard Marks.

OLTB
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Re: How to Pick Quality Shares

#310920

Postby OLTB » May 22nd, 2020, 10:34 am

doug2500 wrote:I've not read it, but as you like books one of my recommendations would be 'The most important thing' by Howard Marks.


Thanks doug2500 - I will order that as well as I do subscribe to the memo from Oaktree Capital.

Cheers, OLTB.

OLTB
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Re: How to Pick Quality Shares

#310924

Postby OLTB » May 22nd, 2020, 10:39 am

1nvest wrote:Picking your own stocks is the opinion that you can better the 'Index' returns, where the mathematical manner of how that index is managed has evolved over time to/towards the best method. IIRC that betters 80% of other methods.

The way the broader Index tends to rise is as a result of one/few exceptionally good performing stocks that uplifts the overall average. Not so much a case of a room of 10 people, one 5' tall, eight 6' and one 7' ... yielding a overall average of 6' such that most match that average, but more a case of one 5', eight 6' and one 12' that yields a 6'6" average such that nearly all fall below that 'average'.

More often the few exceptional good/great stocks are surprising - unpredictable.


Thanks 1nvest - I have a rough third of my pension in index funds, a third in ITs and third in HYP - the small cap stuff is some 'play' money that was a small percentage, but I have somehow contributed more over the last few years thinking I could do better. Evidently not and I know why - it's my own fault for not putting in the hours with research. Hopefully, this book that explains how to read the annual reports will, along with some robust discussions here, will make my choices more successful. I'll be staying away from AIM from now on, that's for sure.

Cheers, OLTB.

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Re: How to Pick Quality Shares

#311514

Postby monabri » May 23rd, 2020, 5:28 pm

https://books.google.co.uk/books/about/ ... edir_esc=y


Sample of 47 pages to see if you like the style.

Just found this on YT..not listened to it ( annoying background muzak :roll: )
https://youtu.be/2gc15Ycb_rw

I guess that by having a clue what is good, then one can avoid the dogs masquerading as stars?

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Re: How to Pick Quality Shares

#311523

Postby monabri » May 23rd, 2020, 5:38 pm

OLTB wrote:Evening all.

I have just ordered the above book by Phil Oakley in an attempt to improve my share picking. I need to stop trying for the quick returns in the small caps market and go for quality. It will arrive in a couple of weeks (Amazon is out of stock).

If anyone has read it and is willing to offer comments, that would be appreciated.

Cheers, OLTB.


..£ 16.78 ( you could cancel the Amazon order).
https://www.ebay.co.uk/itm/How-to-Pick- ... ect=mobile

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Re: How to Pick Quality Shares

#311529

Postby scrumpyjack » May 23rd, 2020, 5:46 pm

I'm sceptical that a couple of books are going to enable the average PI to beat the market consistently.

I gather tests have shown that a monkey throwing darts at the FT does better than the average active manager, and they are supposedly the professional experts (the active managers not the monkeys, or perhaps it's the other way round?)

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Re: How to Pick Quality Shares

#311552

Postby OLTB » May 23rd, 2020, 6:29 pm

scrumpyjack wrote:I'm sceptical that a couple of books are going to enable the average PI to beat the market consistently.

I gather tests have shown that a monkey throwing darts at the FT does better than the average active manager, and they are supposedly the professional experts (the active managers not the monkeys, or perhaps it's the other way round?)


Thanks scrumpyjack and given my past experience, I can pretty much guarantee that I won't best the market consistently! The vast majority of my pension funds are in both passives and ITs - this book is for my far smaller ISA savings. The vast majority of my ISA savings are in Scottish Mortgage (SMT), but I do like to dabble. However, this dabbling has resulted in bad choices so I just want to scratch the itch, try and make some money (instead of losing it) and also learn some new skills.

Cheers, OLTB.

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Re: How to Pick Quality Shares

#312326

Postby Charlottesquare » May 26th, 2020, 1:23 pm

OLTB wrote:
scrumpyjack wrote:I'm sceptical that a couple of books are going to enable the average PI to beat the market consistently.

I gather tests have shown that a monkey throwing darts at the FT does better than the average active manager, and they are supposedly the professional experts (the active managers not the monkeys, or perhaps it's the other way round?)


Thanks scrumpyjack and given my past experience, I can pretty much guarantee that I won't best the market consistently! The vast majority of my pension funds are in both passives and ITs - this book is for my far smaller ISA savings. The vast majority of my ISA savings are in Scottish Mortgage (SMT), but I do like to dabble. However, this dabbling has resulted in bad choices so I just want to scratch the itch, try and make some money (instead of losing it) and also learn some new skills.

Cheers, OLTB.


Apart from selecting the correct shares one needs to hold them for the correct time, whilst a lot of selection issues can be sorted by reading accounts the timing issues still tend to subsist.

For instance I had a chunk of Braemar Shipping, I was down over 40% so decided to partly cut my losses and sold half on 30.4.20 at a loss, today they have jumped back up 26%; whilst I exhibited a poor first choice buying them (though seems to be more Covid than Company) I exhibited a second poor choice selling when I did.

Personally I usually find getting timing right more difficult than buying the wrong shares, I tended to buy right dogs when I was younger, age and experience has reduced their number but has done nothing for my ability to time purchases and sales (and accountancy is how I earn my living)

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Re: How to Pick Quality Shares

#312337

Postby scrumpyjack » May 26th, 2020, 2:17 pm

Charlottesquare wrote:
OLTB wrote:
scrumpyjack wrote:I'm sceptical that a couple of books are going to enable the average PI to beat the market consistently.

I gather tests have shown that a monkey throwing darts at the FT does better than the average active manager, and they are supposedly the professional experts (the active managers not the monkeys, or perhaps it's the other way round?)


Thanks scrumpyjack and given my past experience, I can pretty much guarantee that I won't best the market consistently! The vast majority of my pension funds are in both passives and ITs - this book is for my far smaller ISA savings. The vast majority of my ISA savings are in Scottish Mortgage (SMT), but I do like to dabble. However, this dabbling has resulted in bad choices so I just want to scratch the itch, try and make some money (instead of losing it) and also learn some new skills.

Cheers, OLTB.


Apart from selecting the correct shares one needs to hold them for the correct time, whilst a lot of selection issues can be sorted by reading accounts the timing issues still tend to subsist.

For instance I had a chunk of Braemar Shipping, I was down over 40% so decided to partly cut my losses and sold half on 30.4.20 at a loss, today they have jumped back up 26%; whilst I exhibited a poor first choice buying them (though seems to be more Covid than Company) I exhibited a second poor choice selling when I did.

Personally I usually find getting timing right more difficult than buying the wrong shares, I tended to buy right dogs when I was younger, age and experience has reduced their number but has done nothing for my ability to time purchases and sales (and accountancy is how I earn my living)


Yes timing is vital but less important the longer you hold the share. I hardly ever sell. I too made some serious errors in my younger days (and older ones too!) but at least you can't lose more than 100% of your investment whilst the real winners can multiply many times. As I get older I go far more for investment trusts and ETF trackers. Fortunately my largest IT by far is SMT, having never taken a profit on it but just let it be.

I too was an FCA

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Re: How to Pick Quality Shares

#313564

Postby jackdaww » May 30th, 2020, 9:00 am

Charlottesquare wrote:
Personally I usually find getting timing right more difficult than buying the wrong shares, I tended to buy right dogs when I was younger, age and experience has reduced their number but has done nothing for my ability to time purchases and sales (and accountancy is how I earn my living)



==============================

same here .

my selections have mostly been good but my timing has been bad .

:oops:

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Re: How to Pick Quality Shares

#313583

Postby johnhemming » May 30th, 2020, 9:49 am

In one sense once a company is big enough you are investing in a fund. However, I much prefer investing in stocks than in funds. It does take a lot more work analysing things. However, that is the route towards getting better returns than the index. It is when it is clear that something is happening, but that this has not fed into the figures that there is potential of a good return.

One mistake, however, that I made recently was to assume that iron ore prices will go down. I still expect that, but the price has remained essentially in a consistent range.
https://markets.businessinsider.com/com ... -ore-price

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Re: How to Pick Quality Shares

#313584

Postby simoan » May 30th, 2020, 9:50 am

I've read the Phil Oakley book and it's pretty good. It will help you find companies that have similar characteristics to those Terry Smith favours for Fundsmith i.e. High ROCE, High Op. Margins companies with a moat and excellent conversion of earnings into free cashflow. The latter is pretty much all that matters to me these days for long term holdings; earnings can be manipulated, cashflow can't. This is essentially the approach I have used for several years to find quality small cap companies, so much of the book was not new to me. Some of the later chapters just go into too much detail for me so I skim read them only - I think you have to be careful to avoid "paralysis by analysis". If you don't want to buy the book you can probably still find the basics of Phil's approach on the Sharepad website where he used to write articles.

Charlottesquare wrote:Apart from selecting the correct shares one needs to hold them for the correct time, whilst a lot of selection issues can be sorted by reading accounts the timing issues still tend to subsist.

For instance I had a chunk of Braemar Shipping, I was down over 40% so decided to partly cut my losses and sold half on 30.4.20 at a loss, today they have jumped back up 26%; whilst I exhibited a poor first choice buying them (though seems to be more Covid than Company) I exhibited a second poor choice selling when I did.

You can't time the market. The future is always unknowable and it's just not possible to buy at the bottom and sell at the top. If you think you can time the market then you're kidding yourself! The sooner you admit this to yourself, the less energy it will consume and you can concentrate your efforts on something more productive.

Let's take your example of Braemar Shipping... why did you first buy it and why did you still hold it on 29th April? And why then, did you decide to sell it on 30th April, because there was no news from the company on that date? In fact there was a business update on the 23rd: https://www.investegate.co.uk/braemar-s ... 00035671K/ and yet you sold 6 days later.

I'm just curious because if you ask yourself these types of questions on a regular basis and react to news, rather than just getting out the wrong side of bed and buying or selling, it may improve your "timing".

All the best, Si

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Re: How to Pick Quality Shares

#313595

Postby Alaric » May 30th, 2020, 10:23 am

simoan wrote:You can't time the market. The future is always unknowable and it's just not possible to buy at the bottom and sell at the top. If you think you can time the market then you're kidding yourself! i


There's an approach which some investors use, for buying anyway. You identify a share that you would like to hold in the longer term. You then buy it only if its price drops below £ X or equivalently its yield exceeds y%. It's a bit like a strategy for buying goods that have a long shelf life from a supermarket . You know from past experience that they will periodically be on special promotion, so you only buy when the prices are good.

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Re: How to Pick Quality Shares

#313603

Postby simoan » May 30th, 2020, 10:32 am

Alaric wrote:
simoan wrote:You can't time the market. The future is always unknowable and it's just not possible to buy at the bottom and sell at the top. If you think you can time the market then you're kidding yourself! i


There's an approach which some investors use, for buying anyway. You identify a share that you would like to hold in the longer term. You then buy it only if its price drops below £ X or equivalently its yield exceeds y%. It's a bit like a strategy for buying goods that have a long shelf life from a supermarket . You know from past experience that they will periodically be on special promotion, so you only buy when the prices are good.

I'm really sorry but this is nonsense. Buying anything other than bonds based on "yield" or price=X is proven to be a losing strategy long term. Have you tested this approach over a number of years? Are the results any better than coin tossing? Does it beat the market? And more importantly does Phil Oakley suggest this approach in his book? I'd suggest the answers to the last three questions are "No".

All the best, Si

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Re: How to Pick Quality Shares

#313703

Postby dealtn » May 30th, 2020, 3:30 pm

Alaric wrote:
simoan wrote:You can't time the market. The future is always unknowable and it's just not possible to buy at the bottom and sell at the top. If you think you can time the market then you're kidding yourself! i


There's an approach which some investors use, for buying anyway. You identify a share that you would like to hold in the longer term. You then buy it only if its price drops below £ X or equivalently its yield exceeds y%. It's a bit like a strategy for buying goods that have a long shelf life from a supermarket . You know from past experience that they will periodically be on special promotion, so you only buy when the prices are good.


A post more apt for Investment Strategies than Books and Reading!

Not sure I would hold much faith in it. Price falls like this for quality companies are more likely in my view for when they become non-Quality. That is to say the story has changed. That kind of approach might work for cyclicals, but by their nature wouldn't be shares I would identify as being ones I would "want to hold in the longer term".

If you know differently it would be an interesting thread to start (but not here).

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Re: How to Pick Quality Shares

#314623

Postby OLTB » June 2nd, 2020, 7:19 pm

simoan wrote:I've read the Phil Oakley book and it's pretty good. It will help you find companies that have similar characteristics to those Terry Smith favours for Fundsmith i.e. High ROCE, High Op. Margins companies with a moat and excellent conversion of earnings into free cashflow. The latter is pretty much all that matters to me these days for long term holdings; earnings can be manipulated, cashflow can't. This is essentially the approach I have used for several years to find quality small cap companies, so much of the book was not new to me. Some of the later chapters just go into too much detail for me so I skim read them only - I think you have to be careful to avoid "paralysis by analysis". If you don't want to buy the book you can probably still find the basics of Phil's approach on the Sharepad website where he used to write articles.
Si


Thanks Si - yes, I have finished it now and having read through, made notes and signed up to Sharepad, have made the tentative thoughts of investing in Paypoint (PAY).

Let's see how that goes! The Sharepad site looks very detailed by the way - I've only just scratched the surface I'm sure.

Cheers, OLTB.

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Re: How to Pick Quality Shares

#314659

Postby Dod101 » June 2nd, 2020, 10:46 pm

So, OLTB, you can now give us a definition of a 'quality share'. I look forward to that.

Dod


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