Roger Montgommery interview on fundamental analysis

[DeCal]

Roger Montgommery, a well known Australian fund manager now author has conducted an interview with s2t around the theory of fundamental analysis and his advice for students looking to get into the world of analysis. The full interview can be found below:

www.student2trader.com/trader-interviews/fundamental-analysis

Perhaps my favourite parts were:

Can you provide us a specific example of an analysis you were successful on?

I was on the ABC TV towards Christmas 2009 saying that Myer was overpriced before its float, and saying that its value was closer to $2.90 than the $3.90 (the lower end of the pricing range). Indeed I still can't get a value above $2.86 out to 2012. The share price fell from $4.10 to about $2.88 I believe.

and

In the instance of a bad analysis, how do you manage your risks? Where do you set your stops, or how do you know to sell?

I don't use stops at all. Risk is managed at the portfolio construction level by ensuring some diversification and watching covariances (but not tracking error). Risk is also mitigated at the investment selection stage. I only buy shares in companies I regard as the highest quality, they have to rank as one of my A1s to A3s and occasionally a B1 or B2. There are no C5s for example in my portfolio. It gives me the confidence that I would be content, even if the market were closed for a couple of years.

Kind regards
Decal