Speaking my language

Some people say, "I can't sell that stock because I'd be taking a loss." If the stock is below the price you paid for it, selling doesn't give you a loss; you already have it - William O'Neill.

It's nice to see somebody else speak your language. I was reading this week's BRW and there was an interview (pg.78-82) with a hedge fund manager named Karl Siegling. Below are some of the things he had to say about the way he trades. His fund's gross return is up 75.98% over the last 15 months (inception) and about 32% for the last 6 months for Australian shares.

"A falling share price is not a buying opportunity, but a clear warning from the market that something is wrong. Repeated new highs for a stock are not evidence of a missed opportunity or an overpriced company, but rather an invitation to buy more shares."

"I believe that there is no sense, no matter how compelling our fundamental belief may be, in buying into a stock as it is falling in value."

"I believe that the words "contrarian investor" are often used out of context, and that a contrarian strategy of constantly buying and adding to a falling position and constantly selling or shorting a rising market leads an inexperienced investor into making costly mistakes."

"The market can be irrational and sell down a stock for no reason - no reason based on the fundamentals of a business. But it's not for us to say when the market will stop being irrational."

"I will buy shares at, for example, $1, then $1.10, and then $1.12, but if I have just paid $1.12 for a stock then I will not pay $1.10 if the price falls a few days later. That's because I like buying shares that are going up."

So do I, Karl!

Based on these sounds principles, his strong performance comes as no surprise.