Roaring Kitty – Investment Style Part 1 of 2 (overview)

hey what's up everybody I wanted to make a video about my investment style like a high-level overview of my investment style and that's because I I feel like some people might join a join the livestream expecting excitement or some day trading hot stock tips or stuff like that and you're gonna be disappointed because it's it's not gonna be like that I'll drop this bomb when you're right at the start I'm a value investor and I feel like some of you are rolling your eyes now and laughing at me you bastards I'm just kidding I don't care it's whatever I'll just say I'll just say this I'm not sure traditional value investor and I jotted down a couple reasons why and the first is I'm not in the can't that things values been underperforming I actually think it's been tremendously successful over the past decade so I just think it's funny when I see those headlines as value dead value dead is it coming back and I try to think about why why everyone thinks that and I'm o sob vyas reason is just because we all lean on those over simplifying ETFs to measure the style success but I mean that's not a good way to measure a bona fide value approach it's um and part of that is because value is so subjective it's not so simple that you can just boil it down to a couple of metrics or something like that so because it's so subjective it's it's difficult to measure its success and I think that's part of the disconnect there and yeah a second way I feel um different is I'm not building no discounted cash flow models don't hurt my during my stream during my process I I'm a huge fan of Damona and go check out his stuff if you want to learn more about valuation but it does it's a waste of my time as part of my process I'm not saying that's the case for anybody I'm sure it serves a purpose for other other people's needs in there's other ways to invest besides my own but for my style it doesn't make any sense I am part of that is because values just one factor I mean I'm value I'm a value guy right and that's where I started my development and I understand the importance of value but the issue is it's just one factor and I used to think it was so important primacy of value right and I'd waited quite heavily but the truth is it just matters a lot less than the many think and so yeah so usually the values I'll frequently be leaning on and you'll see this turn the stream it only takes me a minute or two to calculate and I think what matters many people think that matters like getting an accurate value evaluation right but that's ridiculous like no one cares who KITT no one cares if you can accurately value a stock which is you mean you can't even get an accurate precise value right that's ridiculous but even if you could even if you somehow successfully perfectly measured a stock the value of a stock the market doesn't give a [ __ ] no one cares right what matters is incorporating those values into a framework that you can leverage over time to profit to to to outperform the market I mean that's what matters so unless you offer it's the framework that matters and within that framework value is but one factor right there's other things that matter too and so for that reason I find it's beneficial don't we don't waste so much time valuing one particular stock just get a general idea as to what that valuation is and do it for as many stocks as you can ink as consistently as possible and then you can then you can tap those and incorporate it more easily in my opinion you'll see this something I'm rambling now but you'll see it during the stream and some other videos and stuff fun all right a third way I'm different I use technical analysis right I mean now even the value folks are shaking their heads at me but I don't know what to say the charts do a good job of illustrating the trends prevailing sentiment and even the fundamental events that are unfolding which is frustrating as a fundamentals focus value investor because I've invested in stock in the past and and then after the fact I look back on the charmers thing and damn all that fundamental research I did I could have just been checking the chart and not OTO not always right it's not perfect but the technical analysts know this and and but it's oh it's a good enough shortcut that it should be used now by the same token right many you have many value folks or criticizing charts saying they're if they're falling everything in the technical analyst they do the same thing they're there they think the fundamentals folks that they're all crazy for looking at that stuff in the truth is I I think both sides have a point and and so that's why I'm always can like I think it's beneficial to use both that's part of my edge I feel I'm kind of surprised more people don't but yeah you'll see in mind you'll see more on the stream so yeah that's kind of how I'm different as a value investor what so there's some additional things that would really be useful for you to know about my approach before you check out the stream and the first one is that I currently shoot for 50 to 100 percent annualized returns which is aggressive right and it's so aggressive that I'm I bet that my style it would not be suitable for many people who might be tuning into the stream so just a reminder the live stream and in this channel is educational in nature I just wanted you to see how a legitimate process might might look so you can maybe glean some aspects for yourself but don't think the way I'm approaching the market and even the stocks I'm investing and would be appropriate for you just I'm always gonna say that just to remind you but it's it's really important to understand that but anyway 15 arms them and it's important like when you're striving for returns like that at least as an individual investor it's um it's not you don't get in that every year right it's lumpy returns yeah I had there may be years where I don't get to 50 percent and then but there's gonna be windfall years and every once in a while you start to like is that windfall you're gonna come or those years gonna happen but they inevitably do and I think that speaks to the aspect of value and my part of the reason I think it's gonna persist I mean it's it's grounded in human bias ease which in turn is groans in our evolution like I think that's gonna sustain for a bit I know algorithms and robots and stuff but you got to keep an open mind about this but and I'm biased but anyway sorry I'm going off topic again so while lumpy returns but also I need to I need to take on a lot of risk to achieve routine returns like that and so one way I do that is I mean I'm generally looking for two to four baggers in a typical market in five to ten baggers in a bear market and of course you know that means I'm often dealing and [ __ ] right so I classically speak I mean I'll probably be better classified as a deep value investor right but I uh yeah those would you need to invest in so those those questionable stocks the ones that have a lot of hair on if you want to achieve outsized returns at least I was an individual Wester if you have other ways to do it hasn't individual investor I keep an open mind about this and so share your share your thoughts I'm most things are not sustainable most processes that I come across doesn't mean I've seen everything but um that's how I go about it and him so I say use tactical analysis right my biggest wins are won the shot look at the chart looks like [ __ ] is that probably goes without saying but when no one wants to buy it and it looks like it's going bankrupt or it's dead then you dig in that's when you're really digging deep and you just need to assess is this company going bankrupt can it survive another year because that's when you make the most money when perceptions go from the company's dead to oh [ __ ] maybe it's gonna survive and I'm here too and then boom 3 X 4 X overnight if seemingly alright so I'm always on the lookout for attractively priced call options typically leaps but I find they're almost always overpriced and so because of that I'm really particular about when I buy them I want a catalyst of a certain type of catalyst a business event or something but really my favorite time to buy them is when the markets tanking right the probably goes without saying it's the best time to buy just about anything right but during those times if you're keeping your eyes peeled like 10 to 20 baggers on the options not uncommon at all I try to shoot for 50 baggers look what happens is and you saw this a couple months ago liquidity dries up quite a bit and if you're looking out a few months almost forget about it you need to you kind of make the market but but they're out there you need to keep me to keep your eyes peeled my holding period I don't know how helpful this is for people it ranges from 3 to 24 months is that the hell is that helpful for anybody the point I'm just trying to convey there is that I'm not a day trader I may sell out after a month just cuz I got lucky sometimes I'll hold for a couple years sometimes that's how long it takes a thesis to unfold but I'm not a buy-and-hold investor I'm not holding five ten years or forever but not my style historically I've run a pretty concentrated portfolio like 10 to 25 stocks maybe 35 stocks I forget um but this year a ballooned to over a hundred over 150 I think I even got over 150 right now which is ridiculous right for an individual investor it was for diversification reasons I tend to diversify more during like crises and stuff like that and this was an extreme case and it's probably just temporary I'm probably gonna go back but I'll be honest I'm always tinkering with my approach and trying new things and there's definitely some aspects I like about having so many stocks and in the portfolio but obviously it gets unwieldy right phone some of these stocks we'll see but it will probably come down it's perfect for the stream note because now you get to see a whole bunch of stocks that if invested in so that's great I occasionally short stocks it's becoming a bigger part of my process I'm trying to incorporate it more and more but I still focus mostly on the long side that's definitely because that's how you get the two to four burgers and so forth but you'll see me short sometimes just because I'm bored but yeah I try to sort is the timing of it is so difficult as everyone knows right but we'll see how much I do it during the stream and then at this point of my career a big part of my process just feel like I'd I can't really boil down to strict buy and sell clientele criteria and belief and I tried I mean I feel like all value investors try to do this checklist and everything like that but for me personally it feels like it impedes my education a little bit like i-i've al you learning new things in education quite highly and so if you have strict rules or you just say out of my circle of competence you kind of just block off a whole area of the market and I like to expand my universe of stocks even if I if I have to step out of my circle competence if you will just a little bit not I'm a little bit uncomfortable but that's that's how I learn and I feel so it's been a net benefit to me over the years and it's broadened my horizon and I have it's just a larger universe and yeah so why don't you see me you'll say oh why exactly did you do this I say it comes down to fields a whole bunch of factors that feed into it but yeah anyway I think that covers a lot I hopefully have a better idea as to my investment style I didn't cover everything here I just jotted these down quickly I hope I covered all the important things as soon as I finished this I'm sure I'm gonna say I missed something important so I can touch touch on it in a different video I'll probably do another video to where I talk about like really things I look for in a stock things I'd like to see that would probably be helpful I would imagine but yeah yeah I hope you check out this video before the stream so you have a better idea - as to what I'm doing during it and that's all for this video thanks so much for watching

Channel: Roaring Kitty

Views: 390,922

Rating: 4.9780235 out of 5

Keywords: spreadsheets, stocks, live streams, google sheets, deep value investing, stock market, charting, investment process, michael burry, stock valuation, davey day trader, wallstreetbets, stock charts, day trading, dave portnoy, value investor, warren buffett, google finance, value investing, the big short, insider buying, streaming, technical analysis, investing

Id: 1zi7XVudxME

Length: 10min 41sec (641 seconds)

Published: Mon Jul 13 2020

Reddit Comments

[u/floridabuds]

https://www.youtube.com/watch?v=XUV0aiE4eSI

This 2nd video has his buying criteria.

I hope this sheds some insight into how he picked GME, and stocks overall. Looking at this now, for the first time (I only followed his stream and not the old videos), it can be a good background for before I post my info about the companies. You can learn from HIS philosophy + others and make your own and then criticize whatever stocks that are recommended to you with your own philosophy/strategy.

[u/mediocrejasper]

He talks about how the time period for payoff can be between 1-5 years. Which I think is important to emphasize. It isnt exactly quick momentum trading that the state of WSB is currently now.

[u/DM_If_Feeling_Sad]

So he basically looks for stocks that seem to be dead and see if theres a chance. Or during a breaking point not a crazy good moment for a company. Makes sense.