http://club.ino.com/trading/2010/03/the-more-things-change-the-more-they-stay-the-same/
March 30, 2010 · By Adam
The more things change, the more they stay the same
Last month, on February 10th to be exact, I shared with you the "52-week Friday rule". This was a rule that I learned over 3 decades ago in the markets.
In case you missed this video, which you can watch here, I show you that when a market is closing at a 52-week high on a Friday, you should go long. The rest of the rules are in this video that you should watch as it has been working with amazing regularity.
Apple fit the rules perfectly last Friday 3/26 at $230.97. This was an all time high close for Friday in this stock. The rules stated in the video say you should exit this market on the opening on Tuesday, the 30th of March. Having done so you have exited at $236.67 for gain of $5.70 before commissions. This represented a little over a 2% gain in just over 6 hours of market time with very little risk.
So when I hear people say that things have changed in the market and that they are completely different from what they used to be, I have to disagree. I think this is a good example why.
I learned this trading secret from a trader named Bill... I am keeping his last name private as Bill is a very low-key guy and shuns any publicity.
Using his special trading technique, Bill made millions and millions of dollars from his office. The best part is that this technique is still working more than 30 years after I learned about it. Now it's time for the next generation of traders to learn Bill's secret.
Bill didn't even have a name for this killer trading technique. I named it "The 52-week new highs on Friday rule".
As always, our videos are free to watch and there are no registration requirements. Have you traded using the "52-week Friday rule"? If so, let us know how it went, but regardless of whether you have or not, leave your comments below.
All the best,
Adam Hewison
President, INO.com
Co-creator, MarketClub
Tuesday, March 30, 2010
Friday, March 19, 2010
Buffett's Top 10 Investing Secrets
Buffett's Top 10 Investing Secrets
By Anand Chokkavelu, CFA
March 18, 2010
"I can say the dumbest things in the world and a fair number of people will think there's some great hidden meaning to it or something."
-- Warren Buffett, the oft-quoted CEO of Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) and unofficial holder of the "world's greatest investor" title.
There's a big risk in listening to someone give advice outside his circle of competence. Listen to a Hollywood actor speak for five minutes if you want proof.
Keeping this warning in mind, I've assembled Warren Buffett's top 10 nuggets focusing solely on his area of unquestioned expertise -- investing.
10. "A ham sandwich could run Coca-Cola."
Believe it or not, that's a compliment to Coke (NYSE: KO). It speaks to why it's Berkshire Hathaway's biggest stock holding. As Peter Lynch put it, "Go for a business that any idiot can run -- because sooner or later, any idiot probably is going to run it."
9. Margin of safety
As with many of his most beloved tenets, Buffett got this one from his mentor, Benjamin Graham. A margin of safety simply means buying in at a price well below your best estimate for a stock's intrinsic value.
In other words, don't just buy names like Visa (NYSE: V) and Johnson & Johnson (NYSE: JNJ) because they are great companies with strong moats (more about moats later). Go the extra step, and only buy them when they are great companies selling for good to great prices.
8. The concept of inner scorecard vs. outer scorecard
"If the world couldn't see your results, would you rather be thought of as the world's greatest investor but in reality have the world's worst record? Or be thought of as the world's worst investor when you were actually the best?"
Those who answer the latter have an inner scorecard. They'll have the ability to be a true contrarian, ignoring the world's judgment and focusing on long-term results.
7. Don't fall into the false precision trap
"We like things that you don't have to carry out to three decimal places. If you have to carry them out to three decimal places, they're not good ideas."
It's important to keep the big picture in mind. A 20-tab Excel model that calculates a company's value on a discounted cash flow basis is useless unless you understand the business enough to feed in good assumptions. When Buffett made a killing on PetroChina earlier in the decade, the mispricing was so obvious that his only due diligence was reading its annual report. Not recommended for mere mortals, but you see his point.
6. A stock is the right to own a little piece of a business
Another Graham idea. We frequently divorce a stock from its underlying company, especially when Mr. Market is delivering up a volatile stock price. Remember, though, that in the long run, a stock is only as good as the company backing it up. Kind of like how a promise is only as good as the person making it.
5. "Intensity is the price of excellence"
When asked what the most important key to his success was, Buffett answered "Focus." Microsoft founder Bill Gates answered the same way.
Buffett reached his current heights not only because of his brilliant mind, but also because of a focus that has had him analyzing stocks for hours on end, just about every day, for decades.
The takeaway for armchair investors is to stick to buying and holding index funds and ETF's, unless you have the time to dedicate to individual stock picking. Even then, indexing should be the core of most portfolios.
4. "I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."
Remembering the Buffett concept of an inner scorecard, and the Rudyard Kipling admonition to "keep your head when all about you are losing theirs," can lead to outsize returns as Mr. Market sways back and forth.
3. "Leverage is the only way a smart guy can go broke."
Debt is dangerous. That's why you can have banks rife with Harvard MBA's (hello, Goldman Sachs and JPMorgan) that are always a few days away from bankruptcy via a crisis in confidence. See also: Lehman Brothers.
For regular investors, buying stock on margin replicates this risk. Don't do it.
2. The concept of a "moat"
Buffett looks for companies with moats, or sustainable competitive advantages. The strength of Coca-Cola's moat (its brand) is why he believes a ham sandwich could run it. The stronger a company's moat, the more likely it will be a leader for decades rather than years.
For examples, see some of the other companies Berkshire Hathaway owns a significant stake in: Johnson & Johnson, GEICO, Procter & Gamble, and Wells Fargo (NYSE: WFC).
1. The Snowball
Buffett's definitive biography, "The Snowball," is titled so because it sums up his life in two words. Over everything else, Buffett believes in the power of patiently compounding over time. In investing, that means starting as early as possible (he started as a pre-teen), avoiding short-term risks even if it means lower possible returns (rule No. 1: never lose money), and letting investing returns build upon itself.
By heeding these 10 lessons from Buffett, we can all turn our snowballs into snow forts.
http://www.fool.com/investing/general/2010/03/18/buffetts-top-10-investing-secrets.aspx
By Anand Chokkavelu, CFA
March 18, 2010
"I can say the dumbest things in the world and a fair number of people will think there's some great hidden meaning to it or something."
-- Warren Buffett, the oft-quoted CEO of Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) and unofficial holder of the "world's greatest investor" title.
There's a big risk in listening to someone give advice outside his circle of competence. Listen to a Hollywood actor speak for five minutes if you want proof.
Keeping this warning in mind, I've assembled Warren Buffett's top 10 nuggets focusing solely on his area of unquestioned expertise -- investing.
10. "A ham sandwich could run Coca-Cola."
Believe it or not, that's a compliment to Coke (NYSE: KO). It speaks to why it's Berkshire Hathaway's biggest stock holding. As Peter Lynch put it, "Go for a business that any idiot can run -- because sooner or later, any idiot probably is going to run it."
9. Margin of safety
As with many of his most beloved tenets, Buffett got this one from his mentor, Benjamin Graham. A margin of safety simply means buying in at a price well below your best estimate for a stock's intrinsic value.
In other words, don't just buy names like Visa (NYSE: V) and Johnson & Johnson (NYSE: JNJ) because they are great companies with strong moats (more about moats later). Go the extra step, and only buy them when they are great companies selling for good to great prices.
8. The concept of inner scorecard vs. outer scorecard
"If the world couldn't see your results, would you rather be thought of as the world's greatest investor but in reality have the world's worst record? Or be thought of as the world's worst investor when you were actually the best?"
Those who answer the latter have an inner scorecard. They'll have the ability to be a true contrarian, ignoring the world's judgment and focusing on long-term results.
7. Don't fall into the false precision trap
"We like things that you don't have to carry out to three decimal places. If you have to carry them out to three decimal places, they're not good ideas."
It's important to keep the big picture in mind. A 20-tab Excel model that calculates a company's value on a discounted cash flow basis is useless unless you understand the business enough to feed in good assumptions. When Buffett made a killing on PetroChina earlier in the decade, the mispricing was so obvious that his only due diligence was reading its annual report. Not recommended for mere mortals, but you see his point.
6. A stock is the right to own a little piece of a business
Another Graham idea. We frequently divorce a stock from its underlying company, especially when Mr. Market is delivering up a volatile stock price. Remember, though, that in the long run, a stock is only as good as the company backing it up. Kind of like how a promise is only as good as the person making it.
5. "Intensity is the price of excellence"
When asked what the most important key to his success was, Buffett answered "Focus." Microsoft founder Bill Gates answered the same way.
Buffett reached his current heights not only because of his brilliant mind, but also because of a focus that has had him analyzing stocks for hours on end, just about every day, for decades.
The takeaway for armchair investors is to stick to buying and holding index funds and ETF's, unless you have the time to dedicate to individual stock picking. Even then, indexing should be the core of most portfolios.
4. "I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."
Remembering the Buffett concept of an inner scorecard, and the Rudyard Kipling admonition to "keep your head when all about you are losing theirs," can lead to outsize returns as Mr. Market sways back and forth.
3. "Leverage is the only way a smart guy can go broke."
Debt is dangerous. That's why you can have banks rife with Harvard MBA's (hello, Goldman Sachs and JPMorgan) that are always a few days away from bankruptcy via a crisis in confidence. See also: Lehman Brothers.
For regular investors, buying stock on margin replicates this risk. Don't do it.
2. The concept of a "moat"
Buffett looks for companies with moats, or sustainable competitive advantages. The strength of Coca-Cola's moat (its brand) is why he believes a ham sandwich could run it. The stronger a company's moat, the more likely it will be a leader for decades rather than years.
For examples, see some of the other companies Berkshire Hathaway owns a significant stake in: Johnson & Johnson, GEICO, Procter & Gamble, and Wells Fargo (NYSE: WFC).
1. The Snowball
Buffett's definitive biography, "The Snowball," is titled so because it sums up his life in two words. Over everything else, Buffett believes in the power of patiently compounding over time. In investing, that means starting as early as possible (he started as a pre-teen), avoiding short-term risks even if it means lower possible returns (rule No. 1: never lose money), and letting investing returns build upon itself.
By heeding these 10 lessons from Buffett, we can all turn our snowballs into snow forts.
http://www.fool.com/investing/general/2010/03/18/buffetts-top-10-investing-secrets.aspx
Friday, March 5, 2010
How to Find Good Stocks Cheap
How to Find Good Stocks Cheap
By Motley Fool Staff
March 4, 2010
http://www.fool.com/investing/value/2010/03/04/how-to-find-good-stocks-cheap.aspx
By Motley Fool Staff
March 4, 2010
http://www.fool.com/investing/value/2010/03/04/how-to-find-good-stocks-cheap.aspx
Wednesday, March 3, 2010
The Best Investor You've Never Heard Of
The Best Investor You've Never Heard Of
By Matthew Argersinger
March 2, 2010
http://www.fool.com/investing/general/2010/03/02/the-best-investor-youve-never-heard-of.aspx
By Matthew Argersinger
March 2, 2010
http://www.fool.com/investing/general/2010/03/02/the-best-investor-youve-never-heard-of.aspx
Tuesday, March 2, 2010
Rules That Warren Buffett Lives By
Rules That Warren Buffett Lives By
by Stephanie Loiacono
Tuesday, February 23, 2010
Warren Buffett is arguably the world's greatest stock investor. He's also a bit of a philosopher. He pares down his investment ideas into simple, memorable sound bites. Do you know what his homespun sayings really mean? Does his philosophy hold up in today's difficult environment? Find out below.
"Rule No. 1: Never Lose Money. Rule No. 2: Never Forget Rule No. 1."
Buffett personally lost about $23 billion in the financial crisis of 2008, and his company, Berkshire Hathaway, lost its revered AAA ratings. So how can he tell us to never lose money?
He's referring to the mindset of a sensible investor. Don't be frivolous. Don't gamble. Don't go into an investment with a cavalier attitude that it's OK to lose. Be informed. Do your homework. Buffett invests only in companies he thoroughly researches and understands. He doesn't go into an investment prepared to lose, and neither should you.
Buffett believes the most important quality for an investor is temperament, not intellect. A successful investor doesn't focus on being with or against the crowd.
The stock market will swing up and down. But in good times and bad, Buffett stays focused on his goals. So should we. (This esteemed investor rarely changes his long-term investing strategy no matter what the market does.
"If The Business Does Well, the Stock Eventually Follows"
The Intelligent Investor by Benjamin Graham convinced Buffett that investing in a stock equates to owning a piece of the business. So when he searches for a stock to invest in, Buffett seeks out businesses that exhibit favorable long-term prospects. Does the company have a consistent operating history? Does it have a dominant business franchise? Is the business generating high and sustainable profit margins? If the company's share price is trading below expectations for its future growth, then it's a stock Buffett may want to own.
Buffett never buys anything unless he can write down his reasons why he'll pay a specific price per share for a particular company. Do you do the same?
"It's Far Better to Buy a Wonderful Company at a Fair Price Than a Fair Company at a Wonderful Price"
Buffett is a value investor who likes to buy quality stocks at rock-bottom prices. His real goal is to build more and more operating power for Berkshire Hathaway by owning stocks that will generate solid profits and capital appreciation for years to come. When the markets reeled during the recent financial crisis, Buffett was stockpiling great long-term investments by investing billions in names like General Electric and Goldman Sachs.
To pick stocks well, investors must set down criteria for uncovering good businesses, and stick to their discipline. You might, for example, seek companies that offer a durable product or service and also have solid operating earnings and the germ for future profits. You might establish a minimum market capitalization you're willing to accept, and a maximum P/E ratio or debt level. Finding the right company at the right price -- with a margin for safety against unknown market risk -- is the ultimate goal.
Remember, the price you pay for a stock isn't the same as the value you get. Successful investors know the difference.
"Our Favorite Holding Period Is Forever"
How long should you hold a stock? Buffett says if you don't feel comfortable owning a stock for 10 years, you shouldn't own it for 10 minutes. Even during the period he called the "Financial Pearl Harbor," Buffett loyally held on to the bulk of his portfolio.
Unless a company has suffered a sea change in prospects, such as impossible labor problems or product obsolescence, a long holding period will keep an investor from acting too human. That is, being too fearful or too greedy can cause investors to sell stocks at the bottom or buy at the peak -- and destroy portfolio appreciation for the long run.
You may think the recent financial meltdown changed things, but don't be fooled: those unfussy sayings from the Oracle of Omaha still RULE!
http://finance.yahoo.com/banking-budgeting/article/108903/rules-that-warren-buffett-lives-by
by Stephanie Loiacono
Tuesday, February 23, 2010
Warren Buffett is arguably the world's greatest stock investor. He's also a bit of a philosopher. He pares down his investment ideas into simple, memorable sound bites. Do you know what his homespun sayings really mean? Does his philosophy hold up in today's difficult environment? Find out below.
"Rule No. 1: Never Lose Money. Rule No. 2: Never Forget Rule No. 1."
Buffett personally lost about $23 billion in the financial crisis of 2008, and his company, Berkshire Hathaway, lost its revered AAA ratings. So how can he tell us to never lose money?
He's referring to the mindset of a sensible investor. Don't be frivolous. Don't gamble. Don't go into an investment with a cavalier attitude that it's OK to lose. Be informed. Do your homework. Buffett invests only in companies he thoroughly researches and understands. He doesn't go into an investment prepared to lose, and neither should you.
Buffett believes the most important quality for an investor is temperament, not intellect. A successful investor doesn't focus on being with or against the crowd.
The stock market will swing up and down. But in good times and bad, Buffett stays focused on his goals. So should we. (This esteemed investor rarely changes his long-term investing strategy no matter what the market does.
"If The Business Does Well, the Stock Eventually Follows"
The Intelligent Investor by Benjamin Graham convinced Buffett that investing in a stock equates to owning a piece of the business. So when he searches for a stock to invest in, Buffett seeks out businesses that exhibit favorable long-term prospects. Does the company have a consistent operating history? Does it have a dominant business franchise? Is the business generating high and sustainable profit margins? If the company's share price is trading below expectations for its future growth, then it's a stock Buffett may want to own.
Buffett never buys anything unless he can write down his reasons why he'll pay a specific price per share for a particular company. Do you do the same?
"It's Far Better to Buy a Wonderful Company at a Fair Price Than a Fair Company at a Wonderful Price"
Buffett is a value investor who likes to buy quality stocks at rock-bottom prices. His real goal is to build more and more operating power for Berkshire Hathaway by owning stocks that will generate solid profits and capital appreciation for years to come. When the markets reeled during the recent financial crisis, Buffett was stockpiling great long-term investments by investing billions in names like General Electric and Goldman Sachs.
To pick stocks well, investors must set down criteria for uncovering good businesses, and stick to their discipline. You might, for example, seek companies that offer a durable product or service and also have solid operating earnings and the germ for future profits. You might establish a minimum market capitalization you're willing to accept, and a maximum P/E ratio or debt level. Finding the right company at the right price -- with a margin for safety against unknown market risk -- is the ultimate goal.
Remember, the price you pay for a stock isn't the same as the value you get. Successful investors know the difference.
"Our Favorite Holding Period Is Forever"
How long should you hold a stock? Buffett says if you don't feel comfortable owning a stock for 10 years, you shouldn't own it for 10 minutes. Even during the period he called the "Financial Pearl Harbor," Buffett loyally held on to the bulk of his portfolio.
Unless a company has suffered a sea change in prospects, such as impossible labor problems or product obsolescence, a long holding period will keep an investor from acting too human. That is, being too fearful or too greedy can cause investors to sell stocks at the bottom or buy at the peak -- and destroy portfolio appreciation for the long run.
You may think the recent financial meltdown changed things, but don't be fooled: those unfussy sayings from the Oracle of Omaha still RULE!
http://finance.yahoo.com/banking-budgeting/article/108903/rules-that-warren-buffett-lives-by
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