OMIGSA Value Fund portfolio manager Feroz Basa was asked, according to Chris Blaine of Moneyweb, if he knows anyone that can consistently and profitably trade in the short-term, and says in the Market Review podcast, "I don't know anyone. If I did know anyone, I would give them my money to do it for me."
"But when you look at pictures, when you're trading on technicals, there is lots of momentum involved and it's looking at pictures when things are moving in certain directions. I still don't fully grasp the whole analysis of technical analysis, but fundamentally, shares traded at certain levels - and obviously, they become over priced and under priced at certain levels - but you need a fundamental analysis of a company, understanding the balance sheet, what assets they have on their balance sheet and what returns they generate on that asset, understanding what management teams are in charge of these assets. Are they on this big expansion drive, are they going to take money off per se, their businesses that they're making good profits and plough it into sub-optimal return businesses, are they going to give that cash back."
"I don't know many day traders who actually survive over the longer term - I think more often than not I see that as gambling - you could get lucky if you buy something and an announcement comes out and the share gets taken out and you make 100% quickly - and you think you know what you're doing... I think this is actually dangerous because then you think you know what you're doing and you start trading these shares."
"To me that is more like gambling. Having said that, if you go back a year or just over a year to when the financial crisis hit, we took a view in the value team that there was no clear line of sight, lots of shares were trading way below their intrinsic value and we were accumulating those shares."
"We knew in some instances for example like Lonmin when you bought close to R100 - we knew there was a lot of bad news - they'd restructured their business, they have new management, platinum prices were down, the rand-dollar exchange rate was not in their favour and we knew that for the year they were going to make losses."
"But we accumulated because at R100 they were simply too cheap. We looked at the assets they had on their balance sheet, the rationalisation that took place within the business, and we took a three to five year view that Lonmin was worth close to R250 and we bought lots of Lonmin at the time."
"Now you talk about these day traders and Warren Buffett saying it was a marathon and not a sprint - having said that, we bought lots of Lonmin in December and January and subsequently the platinum prices went up and things look slightly better. In a couple of months time, by March/April the shares had doubled - so this global financial crisis (which was a one in 100 year event) totally unpredictable - is more like we sprinted, but we had a longer term view."
