The club's future - a proposal

Discussion of the proposed Cashback Investment Club

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Beachboy
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Re: The club's future - a proposal

Post by Beachboy » Sat Feb 17, 2018 6:48 pm

I am fully supportive of the general idea of improving the effectiveness of the CIC and so really welcome a healthy debate over our future operations and the time and thought spent by Richard to kick start this.

At the moment I do not have time to write a long spiel in one go highlighting all my general observations, comments with regards the proposal and some of the subsequent discussions so will drip feed them in topic by topic to stimulate more member debate and possibly even persuade me differently on some topics. I will start with the Top Tipsters Table.

I only really see this a bit of fun and a gimmick and whilst have no issue whatsoever with its existence I do not think we should be basing how we actually run the CIC on whether it fits in with Top Tipster Table. My reasons for this view include the fact that the table only tells one small part of the story – the decision to purchase. After that it takes no account of when someone has voted to or might have wished to sell a share. I know for instance I suggested selling ITV probably 12 months ago for a far higher price than they are now but didn’t get sufficient support for a vote. That is fine and I accept that because that is how the democracy of the CIC works but as far as being on the ‘tipster table’ it means in this instance I am saddled with this languishing share value. That is just one example and I am not alone I am sure – many members voted to sell Carillion recently and so again if they were involved with supporting the purchase decision out the outset they will be punished in terms of the ‘tipster table’ by others not wanting to sell.

Also unless there is a way of making the table more sophisticated (e.g. a past decision is weighted or erased over time) the top tipster data will always be skewed by one or two really good or bad decisions. For example as it stands any member that was involved in supporting either of the Carillion decisions will have that hanging around them like a ball and chain indefinitely. That was such a massive catastrophe that even decent returns on every other investment will probably never wipe out the negatives in the Top Tipster Table associated with those decisions.

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Re: The club's future - a proposal

Post by richard@imutual » Sun Feb 18, 2018 9:52 am

Thanks for the feedback :thumbup:

I was actually going to create a separate thread for how the Top Tipster table should operate, because I think my proposal about the buy/sell process makes sense even if we didn't have a Top Tipster table

It may or may not just serve as "a bit of fun", but even fun is worth doing properly :D

Beachboy wrote:it takes no account of when someone has voted to or might have wished to sell a share
Totally agree with this, and the new process will allow the table to reflect the wisdom of "sell" decisions just as much as "buy" decisions

On the general process I described at the beginning of this thread, if most members are comfortable with this we could now create separate topics to discuss the finer details e.g. how do we go about selecting 3 shares to buy/sell every 2 months

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Re: The club's future - a proposal

Post by kevinchess1 » Sun Feb 18, 2018 10:20 am

Yes
More Threads :thumbup:
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Re: The club's future - a proposal

Post by richard@imutual » Sun Feb 18, 2018 10:38 am

See here for my further thoughts on the Top Tipsters table
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Re: The club's future - a proposal

Post by Chadwick » Mon Feb 19, 2018 8:42 am

Beachboy wrote:I only really see [the Top Tipster Table] a bit of fun and a gimmick and whilst have no issue whatsoever with its existence I do not think we should be basing how we actually run the CIC on whether it fits in with Top Tipster Table.
I was thinking the same over the weekend. The mechanics of the club should be based around ease of making sound buy/sell decisions. The Top Tipster Table should be a 'bolt on', and adjusted to suit the club, not vice versa.
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Re: The club's future - a proposal

Post by Beachboy » Mon Feb 19, 2018 1:48 pm

Following on from previous comments - another observation regarding the proposal which is an issue of purchase and selling prices. I share a similar view to that highlighted very well in my opinion by Chadwick above in this tread. The buy and sell price is crucial and what a difference between profits or losses. If we have fixed buy/sell points in the year we are putting these down to complete chance as to what the market is doing at that particular point in time.

Aligned with that is that we might want to hold shares for the longer term (e.g. for dividend yield), so potentially having them ‘put up for sale’ just because we have a ‘buy/sell decision point’ could be a real own goal. Conversely if hypothetically we agree that these do not get put to the vote (because they are long term holds) this means that if we only hold a small number of shares (I think 6 has been suggested*) then this leaves even less to be considered and we increase the risk selling one of these at wrong time, just because we have created a situation where we have to sell something yet the market value does not support this at all.

*NB based on current track record I do not think the argument for a smaller portfolio has been made, in fact I think based on what I have observed so far having a small number of different shares has been one of biggest downfalls and not been a positive for the CIC and so would like to understand how it is felt that having less will help us. Anyway I will write more about that a later point – need to get back to work now!

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Re: The club's future - a proposal

Post by kevinchess1 » Mon Feb 19, 2018 7:56 pm

Beachboy wrote:

*NB based on current track record I do not think the argument for a smaller portfolio has been made, in fact I think based on what I have observed so far having a small number of different shares has been one of biggest downfalls and not been a positive for the CIC and so would like to understand how it is felt that having less will help us.

Really!
You think that we are doing okay so far then?
This policy we have of buying something/anything when we have the money and not selling anything at a loss
Yes that work REALLY well so far
IF
we had sold Carrilion when it first collapse to 40p+ a share
or
When we had the vote we would have more money than we have now
If we had put a Stop/loss tracker on it at the start we would have even more money
This policy of focusing on Dividend shares hasn't worked either
In fact i feel the club been a disaster all found and we need to do something
Richard's plan may not be perfect but I say we give it a go
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Re: The club's future - a proposal

Post by Beachboy » Mon Feb 19, 2018 8:22 pm

kevinchess1 wrote: You think that we are doing okay so far then?
No I have never said that, but I do not think the case that having a smaller portfolio will do us any better has been made yet. Based on our current performance our portfolio could quite feasibly consisted of six shares including Carillion, Greene King, United Utilities, ITV, GlaxoSmithKline, but instead of the amounts we held currently have invested we might end up having even more (based on the fact that we will hopefully have more money in the CIC to spend as more members join and there is more money for purchases). It is only diversifying out into other shares and having a wider portfoilo (such as Barclays) that we have anything positive currently to show from our recent investments.

Also it is not like the whole sectors in which each of these shares exists has collapsed and so perhaps if we had bought different shares from the same sector (or shares in completely different sectors) rather than loading all our hopes in one share by doubling up we might have performed better.

My question is just that - why is it felt that limiting the number of shares in the portfolio will have better results? I fully support the need for a better process but just keen that we understand the rationale the proposals being made. I am quite open to being convinced that this is the best approach.

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Re: The club's future - a proposal

Post by garindan » Thu Feb 22, 2018 12:12 pm

So I have waited to put in my view on this one until some other replies had come in. My issues with the Club's operation are as follows:

- It is difficult to get sufficient suggestions for shares to invest in, which means the selections to choose from when we do have a vote are normally put forward by the same few members. Quite often I had to do plenty of the work, which doesn't seem fair and leaves us open to a notice investor (me) suggesting what we do :oops:

- Richard proposed the same way of running the Club at the beginning as he has proposed now. It was similar to how the old rpoints club used to work and that didn't do that well I am led to believe, not that we are doing that well either... I also thought it sounded like buying and selling shares for the sake of it rather than having any particular strategy. I thought we should do something a little more intricate, based on some insight and a strategy - hence why the Club was set-up in the way it was when we started.

- I don't think we are currently, or have been since we started for that matter, investing in particularly favourable conditions. Whilst the FTSE100 might have risen to all-time highs it does mask some particularly worrying volatility caused by BREXIT.

- I think small portfolio size is a red herring for us. We are working with very small investments and trying to learn. If we held 6 different shares, but with more money in each it would potentially expose us more than if we had the same amount split over more sectors and different companies.

- We have had two really bad performers since we began in NCC and Carillion. In both cases we were misled in our selection due to company reports being "less than honest". We managed to escape with a profit at NCC as the fundamentals were actually still there for the company. With Carillion it was a different matter and we lost everything. There are three lessons from this - stick to the plan (i.e. don't invest beyond what was agreed like we did with NCC), do not invest in any shorted shares (Carillion, NCC and ITV were/are....) and take a view on the amount of loss acceptable before we bail out (or make a sale for profit).

- There is a fascination from members that a limit would prevent loss. In our case when the news of NCC and Carillion hit the drop in price would not have meant we sold at the amount of loss we thought would be acceptable, had one been in place. The likelihood is we'd have sold, if selling was even possible, at a very much reduced price that was well below our sell price. We have never taken a general view if that would be acceptable or not. In both cases we had a vote and decided to keep both NCC and Carillion. In one case it worked well and in the other it did not. I can understand why the vote went the way it did in both cases. In the case of Carillion - we'd lost ~£800-£900 and had about £400 equity left in them. It was a case of risking losing the remaining £400 against potentially recouping some of the loss. The "good" NCC experience might have given us more confidence of a turnaround than it should have.....

- Top Tipsters to me is a red herring. I don't see any merit in it apart from being a bit of fun that doesn't really mean a great deal.

- The way we have currently selected and voted for shares doesn't seem to work that well, I don't personally think Rich's suggestion makes this situation any better (in fact I think it puts even greater stress as we'd need to not only select which three shares to choose from to sell but additionally identify three more new shares to vote to buy, every agreed period - which is more often than we currently have to make decisions).

I could go on but the long and short of this is: I think we need to think more out of the box about a workable solution that is in-keeping with what investing in shares is all about.
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Re: The club's future - a proposal

Post by AAAlphaThunder » Thu Feb 22, 2018 12:41 pm

If we categorise the shares into long-term, medium-term and short-term holds then we can set a different stop:loss for each category. A greater margin for long-term and smaller margin for short-term?

Thoughts?
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