Potential Investor,
Great to hear from you. Yeah, the age thing definitely is one of the things that I always seem to be up against since most of my peers have a tendency to be predictably unreliable and have a grace of entitlement. My dad is an adjunct business professor and I hear all sorts of stories.
I’ve heard of Epic Advisors before, I believe through covestor; actually. His strategy makes a lot of sense to me and I agree that stock trading isn’t the correct frame of reference, but if you look at it from a business ownership perspective — that’s the way to go.
Off to the questions:
1) Do you have some sort of chart/history of trades made that shows P/L in the last two yrs or so? Something that shows actual profit/loss and preferably the % of times you were right (and wrong), etc.
No. I had been studying stocks loosely and building a mental framework for probably the past 10 years and in the past 4 gotten really serious about it. I found a mentor that was annualizing 25%+ and at the worst of the market crash was still annualizing 15%. I wanted to see companies the same way he and other successful investors do. I’ve built a loose history of Print Screens that show that over the last year I made money in a down market June to June. At the worst, I was down about 60% in a market that was down about 40%. I have been advised to make charts and calculate IRR’s but have been too busy analyzing companies to purchase.
I would say that for all of my investors I have made money for in the last year but I just picked up a very large new client and am down 6% in the last 2 weeks. So, I can’t say it at the moment
I focus on not losing money. You might be interested in some of my lecture material since you are a teacher yourself:
http://www.youtube.com/user/globalspeculation
2) When you trade do you normally use Call Options or does it depend on the stock?
a) What determines when you use a Call Option?
b) What is the percentage of investments do you make using Options?
c) Do you ever use Covered Call Options? If so, when?
This last year I was buying call options as the market was crashing starting around mid-October (10% of my portfolio, 2010 and 2011 leaps). I also bought a round of call options on bank stocks mid-April (10% of my portfolio expiring around December 2009, AIG, BAC, C, HBAN, FITB).
What did I learn? Don’t buy call options. Call options are expensive during a market crash and cannot be justified because the market takes a while to re-value companies correctly, if it ever does. It is a lot easier to just buy and hold the most undervalued companies in the world and wait for them not to be the most undervalued companies in the world, and at that point in time, switch.
I never plan on using covered calls.
3) Do you short stocks ever? How often?
I have no experience shorting anything but US-Treasuries. I recommended shorting them in January 1, 2009 as a way to beat the market in 2009. At this point, I understand that it makes sense to short overvalued companies when things are starting to head south in the underlying fundamentals, but otherwise my stance is long.
4) Do you use margin when you manage accounts?…Or, would you use margin when you managed my account?
I use margin in a couple of my accounts, but I started using it around April and just haven’t taken it off the table. I don’t really like to be heavily leveraged. I’d say 1 of my accounts is $1.6M and has $123K of margin. Another is maybe 0.001% margined (a commission fee).
5) To get a better understanding of what you aim for when you choose a stock I glanced over your analysis of each stock and at times you comment that the stock will double. To me doubling sounds like a big deal. What time period do you have in mind when you comment that a stock will/may double? It seems like you are implying your investments will more than double.
As far as the time frame, not sure. Just because a company is intrinsically worth more than double what the current price is does not mean that it will ever increase in value. That’s why I do my best to own growing companies. As long as the company is growing faster than the market and is priced cheaper than the market, I can confidently say that in the long run, people will discover it and bid it’s price above the market price for that rate of growth.
6) What is the average time frame you see one of your more than double returns on a stock pick? Months, years?
I make decisions with a 5-year time horizon. That said, I’ve had a couple 10-baggers in the last year and proceeded to take some off the table in those cases to roll it into other more undervalued companies. I don’t look for short term gains as most of my investors are in the highest tax bracket and I am perfectly fine rolling into long-term capital gains. That said, in one of my accounts I get to make $3M with no tax consequences and intend to be more aggressive as far as reallocation goes. A couple of my investors expect them and try to get me to play favorites and swing trade some of these companies. That’s just a lot of work for me that doesn’t really justifiably add any significant value to what I do.
I will say that I don’t look for doubles, especially not now. There are so much bigger, easier opportunities out there that a mere double is just not enough to warrant my investment dollars.
I do occasionally arbitrage though. I run across companies that are selling less than cash-total liabilities. Meaning that theoretically, you can buy the company at the current price, take the cash and pay off the liabilities and keep the leftover cash and assets risk free.
Best regards,
Glen Bradford
CEO ARM Holdings LLC
TheStreet.com/Stockpickr.com/Seekingalpha.com
—–Original Message—–
From: Potential Investor
Sent: Monday, September 07, 2009 5:10 PM
To: Bradford, Glen Richard
Subject: ARM Holdings
Hi Glen,
I have been looking over your blog, resume, etc. and I am most interested in possibly becoming a customer of yours sometime in the future. I am just looking for more information about what I am potentially getting into. Although when it comes down to it shouldn’t really be an issue, the age thing makes me pause…22 seems really young to me. I am an instructor at a large university, so it makes me think that if I were to let you handle my money, to some degree it would be like me letting one of my students handle it since I teach students who are roughly your age. However, at the end of the day I just want my money to be well taken care of, so if you could do that, I wouldn’t have a problem handing you the reins over to you. I do have a few questions I was hoping you could shed some light on so I could get a feel for how you trade and if it fits into my comfort level. I am currently with EPIC Advisors (http://www.covestor.com/mbr/epicadv), and Sean has been doing a great job taking care of me. With him, customer service is topnotch. He is great about communication and answering questions. He is the guy you have to steal me away from to get my business. Here are some questions I was hoping you could answer for me as I weigh my options and while I keep in mind the way Sean invests on my behalf:
1) Do you have some sort of chart/history of trades made that shows P/L in the last two yrs or so? Something that shows actual profit/loss and preferably the % of times you were right (and wrong), etc.
2) When you trade do you normally use Call Options or does it depend on the stock?
a) What determines when you use a Call Option?
b) What is the percentage of investments do you make using Options?
c) Do you ever use Covered Call Options? If so, when?
3) Do you short stocks ever? How often?
4) Do you use margin when you manage accounts?…Or, would you use margin when you managed my account?
5) To get a better understanding of what you aim for when you choose a stock I glanced over your analysis of each stock and at times you comment that the stock will double. To me doubling sounds like a big deal. What time period do you have in mind when you comment that a stock will/may double? It seems like you are implying your investments will more than double.
6) What is the average time frame you see one of your more than double returns on a stock pick? Months, years?
Well, I will leave you with those questions for now. If your answers are what I think they will be and my comfort level to transfer my funds to your control is in the green, I look forward to exploring doing business with you in the future.
Thanks for taking the time to answer my questions. I look forward to hearing back from you soon.
Peace,
Potential Investor