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Picking Quality vs. Playing the Market

Comments posted to “Using Seasonal and Cyclical Stock Market Patterns,” by Jeffrey Hirsch, in the June 2013 AAII Journal:

If the data in the Stock Trader’s Almanac is correct, it would appear that the most logical approach to increase total returns would be the exact opposite of that recommended in the “more conservative” recommendation. If one wants to “buy low/sell high,” it would appear to make more sense to shift out of cash and into stocks in the months of May, June, August and September, and sell off stocks and go to cash in January and April. This might make some sense for someone who simply wants to “play the market” and not focus on picking quality stocks for the long haul.

Personally, I think it makes a lot more sense to buy quality stocks at the right price and hold them until there is a proper sell point...which may vary considerably among positions in a properly constructed portfolio.

—David Harned from Virginia

Being Contrarian: Negative or Positive?

Comments posted to “Is the AAII Sentiment Survey a Contrarian Indicator?” by Charles Rotblut, CFA, in the June 2013 AAII Journal:

Am I the only one who is embarrassed to be associated with a group where our collective intelligence is being recognized as a “contrarian indicator”—i.e., wrong? If I were not a life member of AAII, and all I knew about AAII was the Barron’s or Bloomberg sentiment article, what would make me want to join a group of market underperformers?

—Chicago AAII Chapter Member from Illinois

I take the Chicago member’s point, without necessarily agreeing or disagreeing. None of us is a trained bear, trained bull or trained neutral. Rather, we are a group sharing a certain level of commonality, if only as far as desire for quality investment information/education. We all make our decisions independently. We are all influenced by factors determined by our personal histories and environments.

Perhaps the reason groups like Bloomberg and Barron’s find the survey worth the read is that we are representative of a group known to have skin in the game. It is a control sample, if you will, as opposed to a random shot in the dark based on the momentum that talking heads are so fond of pontificating about. Measuring the sentiment of holders of securities necessarily produces different results than analysis of trade volume, direction and momentum, especially these days with all the programmed trading.

Being considered contrarian is neither good nor bad. It is a description, an adjective. Personally, I&rsquo

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—Marc from New Hampshire

Growing Dividend Income

Comments posted to “Lowell Miller’s Best Dividend Screen,” by John Bajkowski, in the June 2013 AAII Journal:

My investing style has evolved over the past 50 years into this basic philosophy. My returns have been greater than the market. It keeps me in the market and reduces stress because I know that I will still have my growing dividend income.

—Tom from New Hampshire

Avoid Following Trends

Comment posted to “Valuations, Inflation and Real Returns,” an interview with Robert Shiller, in the June 2013 AAII Journal:

I read both editions of Shiller’s “Irrational Exuberance” as soon as they were published. The first edition, focused on the stock market, allowed me to avoid the first Internet boom, and to make outsized returns by taking the opposite side of the trade from the trend followers. The second edition, which added the housing market analysis, I pretty much ignored. This cost me a pretty penny, as I found myself with an extra Florida beachfront condo at a very inopportune time.

One piece of wisdom contained in the interview is that the larger companies are followed by very smart people with world-class intelligence-gathering systems. Smaller companies are not ne

—Joe E from Florida


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