< How Sam uses ShareAnalysis to manage his global share portfolio
“ShareAnalysis uses a method I understand and trust deeply, and which has proven to work for me. It does all the hard work involved in finding stocks of quality and value, so that I can focus on the more important things.”
Sam Eder is a global share investor and currency trader. He runs SpoonFed Investor and is the author of the 20-part Share Investing Course for Smart People. Sam has used ShareAnalysis to uncover global stocks to buy since 2013.
Here Sam shares how he invests and why, when investors focus of risk management, everything else just seems to fall into place.
I am a risk manager first and an investor second. I also believe that using the right strategy for the current market conditions should be your first priority, followed by stock picking. So I focus my investing in this order:
- Risk management: take it slow and small
- Strategy: the right strategy for the right market type
- Stock selection: use ShareAnalysis Global
Here is how Sam brings it all together
Take it slow and small
Firstly, I buy very slowly at a rate of two stocks a month, with only one per cent of my capital invested in each stock. This mitigates two types of risks:
- A sudden market crash. If you allocate all your capital in one go and the market crashes, you could lose a lot. No need to rush if you have a 10-50 year time horizon.
- A stock going bust. If the stock gaps or goes to zero you have lost a maximum one per cent of your portfolio. By allocating one per cent to any individual stock, my portfolio is significantly protected from single stock risk.
Each stock then has a 10 per cent stop-loss (or a bit greater for high risk/reward small caps) so that if the market or a single stock falls, I will only suffer a minor loss to my portfolio. To achieve this, I only buy stocks that are going up (I’m not using ShareAnalysis to bottom fish).
After about two or three years, I end up with a portfolio of about 50 high quality stocks, many of which are in profit. I also trail the stops to lock in profit, or close a position if the market tells me I should. (The other 50 per cent of my portfolio is allocated to long/short index funds, and bear market strategies to guard against tail risk. The market is capable of huge drops (like Black Monday in 1987), and it’s important to have safeguards in place.)
The right strategy for the right market type
I only want to be using this strategy at the right time.
To achieve this, I use technical charts to check that we are still in an uptrend. For example, you can see from this chart we are clearly still in an uptrend. If the market starts to crash, I lock in profits, stop buying stocks, and start running bear market strategies instead.
I use macro analysis to determine how fragile or robust the market is, which can impact the pace at which I buy stocks. If we do get a crash, for example, and the market starts bottoming, I want to be buying quality stocks at a quicker pace than two per month. This is where experience comes in handy.
I am looking to employ my capital in the best global markets at any given time, so I am consistently making judgments and determinations as to which regions offer the best investment opportunities. I consider currency movement, and look to earn a windfall profit from currency gains. Don’t underestimate the importance of these gains. I estimate they increased my returns by 10 per cent or greater on some stocks last year.
Then I move onto stock picking.
Thanks to ShareAnalysis, Sam has an army of analysts behind him
Imagine, if you would, a hedge fund manager who wanted to employ an approach like this. When they need to expand their market coverage, they go and hire an analyst. If they still need more expertise, they go and get another one. These analysts will do the heavy lifting, leaving the manager free to run the strategy, focus on risk management and position-sizing, and make the final call about the composition of the portfolio.
This is how I treat ShareAnalysis – like I have an army of analysts behind me. ShareAnalysis uses a method I understand and trust deeply, and which has proven to work for me. It does all the hard work involved in finding stocks of quality and value, so that I can focus on the more important things.
This has been particularly true with ShareAnalysis Global, as investing globally has provided me with a significant advantage in terms of returns, compared to if I was only investing in ASX stocks.
Don’t be afraid to get your feet wet in a global market; it will be worth it.