I use my purchase of Altisource Portfolio Solutions (ASPS) in late 2009/early 2010 at about $15 a share as an illustration of the value of fundamental analysis. Altisource was spun off from Ocwen Financial (OCN), and I spent about 75 hours researching the company. I devoured the company's financial statements. I had discussions with management and with the company's competition. As well, I spent a great deal of time talking to regulators and bank managements, which would ultimately provide the fuel for Ocwen's and Altisource's profit growth via the necessary disposition of their mortgage-servicing portfolios.
There was no chart at all to deal with when I purchased the shares of Altisource at $15, but I came to the analytical conclusion that the company had the potential to earn $5.00 to $6.00 a share a few years out (2012), or only 2.5x what I was paying for the stock. The rest is history, as the shares rose to over $100 a share in less than three years.
Fundamental research, when done properly is hard work -- done well, it takes time. I research companies, hopefully, in a hard-hitting, analytical way, and I often look to develop variant views from consensus (on both shorts and longs).
I choose not to utilize technical analysis in a meaningful way in my stock selection and decision-making process, however, as fundamental analysis (as a dominant determinant) just works for me. Technical analysts feel the same way in not adopting fundamental analysis, and I respect their views but deeply question decisions that are made solely on a technical basis or that are based on algorithms and/or pattern recognition.
Though technical analysis is only a small part of my investment decision process, I do refer to the charts, and when I do, I want to hear from someone such as
Tim Collins, as few do it better than him. Tim is in the class of my favorites, which also includes the
Helene Meisler, Justin Mamis,
Bob Farrell,
Jeff Hirsch and
Walt Deemer.
I keep charts, algorithms and historical pattern recognition in their proper perspective -- and so should all of you.
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