[Spidey]

I always like to hear from people who think outside the box and utilize different strategies than the typical balanced approach. For example, I find Rickson's strategy of concentrating almost entirely on solid balance sheets and investing almost entirely in one sector while for the most part ignoring big picture prognostications (eg. concern about currency differences, inflation, economic trends, industry trends, etc.) to be intriguing. (I think I've summed up his strategy, he can elaborate if I've misrepresented it.) I also heard on another forum a lady who planned to invest her entire portfolio (I believe of about $200,000) in 5 emerging market ETFs covering a range of countries from Israel to China. Her strategy was to leave the portfolio for about 25 years and emerge as a millionaire. Of course, she was mostly lambasted by other posters, but I found her strategy to be gusty and probably a reasonably good bet over that length of time.

So do any of you have what you consider to be a unique investing style that you could elaborate on? Or have you heard of unique investing styles that have intrigued you?

 

[furgy]

I've switched to 100% Canadian REITs , which is working out VERY well so far for me.

With most income funds facing conversion and potentially smaller payouts , bonds not paying as well as they used to , GICs etc. , paying virtually nothing , I feel that investors seeking bigger returns will be flocking to REITs big time.

So far the rise in most REIT unit prices , as well as the number of new issues and IPOs in the REIT sector lately , would indicate I'm not the only one who feels that way.

Going by past experience I find that the so called "rule of diversification" , while it does tend to lower risk somewhat , only brings about mediocre gains , unless one gets lucky.

It's just my opinion , but is so far is paying me very well for the risk involved , for instance , if you had bought Retrocom REIT as I did , when at all time lows (march 09) , you would now be getting almost 35% return on investment , that is one of the better ones , but others are paying extremely well also.

This may seem risky to many others , But I feel I am being fairly compensated for that risk , up almost 30% in the last 6 months or so with a 15% average return , I'm sticking with this approach until I see some flaw in it , or the general market heading in some other direction.

I also fully expect payouts to increase as unit prices go up and the markets return to something closer to "normal".

 

[Berubeland]

I am solely invested in warrants on the TSX.

There are about 139 warrants and I figured it would pretty easy to get to know this little corner of the stock world.

The biggest buyer of warrants are the banks. They buy in large quantities. So you can make money just because of volume periodically.

You can also look for warrants trading under par like this one here.

http://www.newswire.ca/en/releases/archive/October2009/06/c4508.html

TORONTO, Oct. 6 /CNW/ - Middlefield Group, on behalf of Pathfinder Convertible Debenture Fund ("Pathfinder" or the "Fund"), is pleased to announce that it has filed a preliminary prospectus in relation to the initial public offering of Combined Units at a price of $12.00 per Combined Unit. Each Combined Unit consists of one Unit of the Fund and one Unit purchase Warrant. Each Warrant entitles the holder to purchase one Unit at a subscription price of $12.00 on or before 5:00 p.m. (Toronto time) on November 30, 2010 (the "Expiry Time"). Warrants not exercised by the Expiry Time will be void and of no value.

PCD.UN-T is trading at $12.16
PCD.WT-T is trading at $0.15

So basically you make one cent just for buying it and plus there is a premium on the warrant.

Now I'm not sure why this is but it takes a while for the different brokerages have a lag between the time the warrant is listed and trades on all the different brokers. Now I can buy this one on Questrade but on Itrade it doesn't show up yet as a security.

I also buy warrants at .005 and wait for them to trade at .01 and double my money.

Since August when I started learning about warrants I have doubled what I initially put into the market over the last 3 years. But I had previously lost 2/3 of my initial investment. So since August I am up around 600%. I started with very little capital thought. So I am looking forward to doing it some more.

Warrant because of the low cost and low volume lend themselves to many small investments. Sometimes I wait for months for a trade and another several months for a sale. I keep the amount of capital involved in every trade small so if I have losses I can minimize them. I also learned not to buy warrants with a close expiry date. I lost $300 buying warrants that expired.

So warrants have been good to me they paid for Christmas this year. The process of trading warrants can be a little like watching paint dry thought I have to wait on the buyer's side and on the seller's side to trade sometimes. The attribute most required for trading warrants is patience.

 

[humble_pie]

the pro approach would be to buy the warrant, exercise wt & sell the shares, all within 2 minutes.

without looking this up at all, and without knowing one iota about the stock, my guess is that there's no volume in the underlying, so it's impossible to sell the shares in the quantity that would be necessary to make real money on the in/out deal. (If the gain is only one penny per share, you'd need 100,000 sh to even earn $1000, and this nebbishy stk probbly doesn't trade 100,000 sh in a month.)

that's why the pros don't work this deal. They know stk won't move. Stk could drop. This would put wt out of the money.

i wouldn't follow your approach, because i have other approaches up my sleeve, but it has a wonderful appeal. Folkloric. Rakish. Robin Hood lurking in the forest for the big banks to come riding by. You do realize, i hope, that you are functioning as the arbitrageur, and a self-taught one at that. Châpeaux. Hats off to you.

 

[osc]

My investments are divided in two. One is a classic balanced portfolio and one is basically gambling in the futures market. I designed the gambling part to potentially produce very high returns. The downside is that it also has the potential to lose all money. I am planning to constantly balance my investments between the two.
Last year I made the normal 25% with the balanced portfolio and 500% with the gambling part. At the start of this year I moved a substantial portion from the gambling part to the balanced portfolio. I expect the balanced portfolio return for this year to be 5%-15% and the gambling one -90% to 300%.

 

[ssimps]

My investments are divided in two. One is a classic balanced portfolio and one is basically gambling in the futures market. I designed the gambling part to potentially produce very high returns. The downside is that it also has the potential to lose all money. I am planning to constantly balance my investments between the two.
Last year I made the normal 25% with the balanced portfolio and 500% with the gambling part. At the start of this year I moved a substantial portion from the gambling part to the balanced portfolio. I expect the balanced portfolio return for this year to be 5%-15% and the gambling one -90% to 300%.

Great gambling!

2009 was probably the year to gamble; cards stacked against the house. 20/20 hindsight says I should have gambled more myself in '09. It's always easy to say 'I should have....' though hey.

It will be interesting to see what happens for your strategy in '10 / '11, but with a 500% return it in 1 year, it may not matter much to you anyhow.

 

[Oldroe]

I went all in in div. stock inside and outside of rrsp from Oct 08 to March 09. Then bought a couple growth stocks.

My wife pension is look after.

 

[Berubeland]

Thanks humble pie.

I am more than happy to pick up the crumbs that the big boys leave behind. I rather like it and I find it really funny actually. I get immense satisfaction knowing that I double my money or more every time an impatient frat boy working for Goldman Sachs puts a market order in on a warrant I trade.

Pennies add up. A lot.

Oh and Humble Pie thanks for not falling asleep during my description of what I do to make money on the stockmarket.

 

[dogcom]

The key is you found something comfortable and is working it for you berubeland and that is the key so good for you.

I like to buy and sell penny stocks that I believe have potential and are low in price compared to where they have been. I find I can get good returns with little money at risk, while most of my funds are in cash, so if they don't do well I have the cash and if they do well I get a better overall return.

Most people would call us idiots while they sell into market crashes and lose money on their great stocks. But they forget we are happy with what we own and are very aware of the risks. Of course this is not where all my money is and it is only a small portion of it. When the market gets destroyed again then I will get serious about being fully invested.

 

[mutant guppie]

I am solely invested in warrants on the TSX....

Thanks Berubeland. You've peaked my interest.

 

[Spidey]

Compared to you other guys, I guess I'm a little boring. I stick basically with a mixed portfolio and like the general strategy laid out by William Bernstein. I do try to look for long term trends and try to imagine what an industry will look like 10 years out, rather than a year or two. This has lead me towards energy, health care, some REITs, Candian banks and pipelines. However, I always try to keep an open mind to new ideas.

Mutant Guppy - This is your opportunity to provide your market timing strategy. (Not an attempt to trap you, I'd actually be interested in hearing about it.)

 

[leslie]

I am solely invested in warrants
PCD.UN-T is trading at $12.16
PCD.WT-T is trading at $0.15
So basically you make one cent just for buying it

Although off topic something must be said to protect anyone reading that. The math here is wrong. The valuation of importance is NOT the PCD.UN. The .un will quickly become irrelevant. It is the net asset value of the packed unit (.un plus .wt) that is important. This is especially so when the dilution from warrants is so high - like here at 50%.

The NAV will be equal to the market value of the underlying portfolio PLUS the ( $12*units o/s ) exercise price of the warrants. Divide that by double the number of shares currently o/s because after exercise there will be twice the number of shares.

So to re-work the example. The value of the underlying securities portfolio is actually $11.56 (per issuer). The value per diluted shares after exercise of the warrants would be:
50% weighted by the portfolio at $11.56
50% weighted by the exercise of the warrants at $12.00
-----------------------
equal average value $11.78. So the warrants are trading at a premium, not a discount of $0.37 (because their NAV is negative <$0.22>)

This is all important for the people buying the .un shares as well. 50% dilution from warrants means that the 50% of the portfolio's ups and downs will be going to the warrant holders, NOT the .un owners. Their returns will be FAR muted from the changing value of the underlying securities. See for yourself what will happen if the underlying securities increase in value by 10% from the initial $12.00.

50% weighted by the portfolio at $13.20
50% weighted by the exercise of the warrants at $12.00
-----------------------
equal average value $12.60. That is only a 5% increase for the .un owners. The website will probably quote a NAV ($13.20) for the .un as well as a Diluted NAV ($12.60). The market is not efficient because so many retail investors don't understand this stuff. So it may be that the .un stock trades FAR above its true value (towards the $13.20).

On some of the market data sites where the premium/discount is calculated for closed ended funds, the discount is calculated on the (wrong) NAV . It should be calculated on the Diluted NAV. The value of the warrants will always equal the difference between the NAV and Diluted NAV quoted.

I just looked at the Middlefield site. It does not disclose the Diluted NAV. Not everyone can be trusted to do the right thing. And the units are now valued below the $12.00 issue, to the OP's arguments based on market value are WAY wrong.

 

[Berubeland]

I buy the warrant not the stock. I have never bought a warrant with the intention of exercising it. I buy it because it is an unusually good deal.

Here is an article talking about what warrant are.
http://www.investopedia.com/articles/04/021704.asp

This website lists all warrant and values of those warrants calculated properly.

www.canadianwarrants.com

So currently the warrant I bought should be trading at 0.80. Warrants have both an intrinsic value and a time value. Intrinsic value is linked to the difference between the strike price and the market value of the stock. In this case .16. The time value is linked to the amount of time you have the right to buy the share. So a warrant that has a longer time value should be worth more than a warrant the expires next week.

I also like warrants because their value is linked to a much more stable stock than a similarly priced stock. (in this case .15)

I do not have a buy and hold strategy, I don't care about the underlying security too much, I just take advantage of volume effects on the market and as humble pie said occasional arbitrage errors such as this one.

I spend about an hour per day examining the prices and looking for these types of errors. There are only 130 or so warrants on the TSX so I know my section fairly well to make money.

 

[DavidJD]

I like some gambling too. One strategy that gets criticized a lot is using a HELOC to invest. I prefer this to a Margin account. I held units that provided a 50% margin amount. I bought more of the same units on margin. The units' yield was 14% at my book-value and the margin acct was prime+one. The spread was fantastic and made for major gains.

TDW called my margin! The units were posting higher earnings, acquisitions etc. TDW decided to reduce their margin amount to 0% as they were involved in aviation. (Who saw that coming??) Otherwise a low-risk use of a margin acct. So I had to sell and repurchase on my HELOC (did not max this out so I am not going to lose my home. TDW made high fees (was below the $100K threshold for low trades at the time) and I had to buy and sell and 10-15% higher purchase prices.

However now the units have gone from a value of $11 to $13.5 and pay the same dividends (yield of 11%). I transfer the dividend into the HELOC which is also at prime+one, and I expect can be written off.

I feel very comfortable doing this - borrowing to invest - and think some people should do similar, as part of their investment strategy. Cautiously selecting what they invest in.

Anyone else surprised this is frowned upon so much more than the risks deserve?

 

[ssimps]

I feel very comfortable doing this - borrowing to invest - and think some people should do similar, as part of their investment strategy. Cautiously selecting what they invest in.

Anyone else surprised this is frowned upon so much more than the risks deserve?

I'm adverse to debt of any kind; only time I have had any was my first house mortgage, which I paid off ASAP. It is a comfort thing to me; perhaps I could make more $ leveraging my LOC or other leveraging techniques, but I would rather make less and be happy knowing I owe no one anything $ wise. It is a personal preference I guess.

Now if the markets dive 50% and/or hit 10 - 12 year lows again, then I would consider (definitely would period maybe) using my LOC to invest for the first time ever, because I think the medium term risks in such a case would truely be low and yields for div. paying long track record companies would be high again.

That is not the present though; using my LOC to buy more stock at today's prices for good quality div. yielding stocks, and with my knowledge level and / or luck for cherry picking high flyers (lack of that is), is just something I am not willing to do.

Save, then invest, if you are comfortable with it IMO.

 

[mutant guppie]

I take a straight forward approach to most everything and don't waste alot of time on things that work too slowly or don't work at all. It's rubbed some slow people the wrong way. My apologies, but really I don't care.

I day / swing big blocks and rely heavily on mulitiple TA indicators, fundamentals for the direction of the wind. Something as simple as a broken
trend line, macd etc are indicators that maybe it's not seeding time. Somewhere in all that noise is a picture. It's for that reason
I made 400% in 2009. Even still I've made a number of dumb trading mistakes, and for that reason I've sought out/ found coaches
who have shown me better ways of finding/ butchering kobe cow. Now, those guys surgically carve out large juicy profits with nothing more than a butter knife, truly amazing to see them work.

What got most people in 2008/ 2009 is blindly trusting following those institutions over a cliff ( i.e. caisse de depot). I followed my convictions and took money off the table and avoided the lemming ride. Now if more people looked out the window instead of relying on the weatherman then maybe...

 

[humble_pie]

leslie you are so not getting this story. This is not an OCD exercise about computing-discounts-to-nav-into-the-twilight-zone.

this is a story about a resourceful woman who built a small investment income for herself in the most challenging of circumstances. She learned how to make money in the stock market with almost no capital whatsoever.

it's a grameen bank story. It's a 21st century eliza doolittle, selling lavender and warrants to rich gentleman bankers in the covent garden nook of the toronto stock exchange.

ps in my humble experience the drop in sh price tends to occur when the secondary offering-w-wts is announced, not when the warrants are exercised.

 

[Spidey]

My apologies, but really I don't care.

This is meant to be taken in the spirit of helpful advice and not as an initiative to start a debate or argument. It's better to offer no apology at all than to offer this type of apology. Relatonship skills will probably contribute much more to your happiness than financial ones.

 

[mutant guppie]

My apologies, but really I don't care.

This is meant to be taken in the spirit of helpful advice

Good thread.

Relatonship skills will probably contribute much more to your happiness than financial ones.

Criticism/ sarcasm/ opinion in any investment forum comes with the territory. Grow a thicker skin.

 

[Spidey]

I tried . . . . You will have to find out some things on your own. Good luck to you.