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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