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Stephen Eckett. The Harriman Book Of Investing Rules
Publishing details
Acknowledgements
Introduction
Robert Z. Aliber
Books
International markets and capital flows. 1. All propositions about rates of return in financial markets are clichés
2. Financial markets are mean-reverting
3. Currency markets overshoot and undershoot and equity markets overshoot and undershoot
4. Buy and hold strategies generally are less rewarding than trading strategies
5. Watch the capital flows in and out of countries
6. An increase in the inflation rate in a country is likely to be associated with a depreciation of its currency
7. The smaller the country, the larger the impact of capital flows on currency values and stock prices
8. Many firms have ‘fifteen minutes of fame’
9. The national location of the low cost center of production of particular products shifts among countries
10. The size of the investor’s domestic market matters
11. U.S. investors may not need to invest internationally as much as investors from other countries
12. Currency hedging is not useful for all
David Andrea
The auto sector. 1. Invest with the leading economic indicators
2. Invest as a utility model
3. Invest in value stories
4. Invest in growth stories
5. Invest in forward product
6. Invest in cash flow
7. Invest in experience
8. Invest in the best cost structure
9. Invest in established trends
10. Invest in liquidity and visibility
Nick Antill
Books
Company valuation. 1. The most often-repeated mistake in finance is “It doesn't matter - it's only a non-cash item”
2. It is easy to get to a high value for a company - just underestimate the capital investments that it will need to make
3. Valuations must be based on realistic long term assumptions - at best GDP growth rates and barely adequate returns
4. Don't spend too much time worrying about financial efficiency
5. Remember the ‘Polly Peck phenomenon’, especially in countries with high inflation
6. Unfunded pension schemes should be treated as debt
7. Remember to ask: ‘Who's cash flow is it anyway?’
8. Accounting depreciation is a poor measure of impairment of value
9. You can’t judge an acquisition by whether it adds to earnings
10. Operating leases are debt - they just don’t look like it
Martin Barnes
General principles and the role of liquidity. 1. Know when to be a contrarian
2. Don’t use yesterday’s news to forecast tomorrow’s markets
3. Liquidity is key
4. Understanding the inflation trend is critical to success
5. Take a long-run view
6. Allocate a small part of your portfolio to ‘play’ with
7. The stock market rises most of the time
8. Know when you are speculating
9. Have realistic expectations
Richard J. Bauer Jr
Books
Building trading systems using genetic algorithms. 1. Begin by thinking about ‘proof’
2. Think carefully about your constraints
3. Obvious fitness choices probably won’t work
4. Beware of overfitting
5. Put lots of thought into your database design
6. Check results from a theory standpoint
7. Beware of data mining
8. There is a tradeoff between quantity and quality
9. Consider using a portfolio of rules
10. Decide in advance when to bail out
Gary Belsky
Books
Behavioral finance. 1. Every dollar spends the same
2. Control your fear of losses
3. Look at decisions from all points of view
4. All numbers count, even if you don’t like to count them
5. Acknowledge the role of chance
6. Your confidence is often misplaced
7. It’s hard to admit mistakes
8. The trend may not be your friend
9. You can know too much
10. Don’t check your investments too regularly
Bruce Berman
Books
Understanding the value of patents. Introduction
1. Not all patents are assets
2. It is relatively easy to secure a patent - but difficult to predict its future value
3. One patent strategy does not fit every business
4. Licensing royalties help some companies to compete
5. Under or mis-exploited patents can reduce profit and depress shareholder value
6. Communicating patent performance to the right audiences can enhance value
7. People who should know something about patents often do not
8. Never invest in a company on the basis of a single patent
9. Successfully enforcing patent rights sends a message
10. Accidents can be rewarding
11. Business inventors come in different shapes and sizes
12. Some patents have a second life
William Bernstein
Books
Intelligent asset allocation. 1. The portfolio’s the thing
2. In asset allocation, job one is to pick an appropriate stock/bond mix
3. Allocate your stocks widely among many different asset classes
4. It makes a difference where you put things
5. Don’t rebalance too often
6. The recent past is out to get you
7. If you want to be entertained, take up sky diving
8. An asset allocation that maximizes your chances of getting rich also maximizes your chances of becoming poor
9. There is nothing new in investing
10. A portfolio of 15 to 30 stocks does not provide adequate diversification
James B. Bittman
Books
Trading options. 1. Know the difference between using options to speculate and using options to invest
2. Have a plan
3. You need a three-part forecast
4. Be disciplined in taking profits and losses
5. Understand and pay attention to implied volatility
6. Implied volatility has no absolutes
7. ‘Buying under-valued options’ and ‘selling over-valued options’ are not sufficient strategies
8. ‘Selling options’ is not a better strategy than ‘buying options’
9. Trading means buying and selling
10. Trading options is a learning process
John C. Bogle
Books
Common sense investing. 1. There’s no escaping risk
2. Buy right and hold tight
3. Time is your friend, impulse your enemy
4. Realistic expectations: the bagel and the doughnut
5. Why look for the needle in the haystack? Buy the haystack!
6. Minimize the croupier’s take
7. Beware of fighting the last war
8. Sir Isaac Newton’s revenge on Wall Street - reversion to the mean
9. The hedgehog bests the fox
10. Stay the course: the secret of investing is that there is no secret
Lewis J. Borsellino
Books
The ‘ten commandments’ of trading. Introduction
1. Trade for success, not for money
2. Discipline is the one quality that all traders must possess above all others
3. Know yourself
4. Lose your ego
5. There’s no such thing as hoping, wishing or praying
6. Let your profits run and cut your losses quickly
7. Know when to trade and when to wait
8. Love your losers like you love your winners
9. After three losing trades in a row, take a break
10. The unbreakable rule
David Braun
How to make gains from M&A activity. 1. Invest in experienced buyers
2. Back an acquiror with a comprehensive strategy
3. The acquisition of a great company is only as good as its integration plan
4. Ignore the financials
5. The customer is always right
6. When investing in potential takeover targets, do your homework
7. Don’t be duped by a target’s stock that is ‘on sale’
8. An acquisition premium may already be built in to a stock price
9. A receding economy creates novel M&A opportunities
10. Question the Board of Directors before voting to accept an offer
Ian Burns
The chemicals sector. Introduction
1. It’s not for junior Buffetts - be active
2. It may be mature but it’s not a sunset industry, and arguably not one sector
3. “Business is other people’s money” - Mme de Girardin
4. M&A - a route to fortune? Occasionally
5. Look beyond EPS
6. Beware the buzzwords ‘strategy’ and ‘innovation’
7. The benefits of incest! Listen to the industry
8. “Never is there just one cockroach in the kitchen.”
9. Think global
10. Watch the costs
11. Don’t wait for the ‘right’ price
12. “Specious in theory, yet ruinous in practice.”
John P. Calamos
Books
Convertible bonds. 1. The key to building wealth lies in controlling risk - a favorable risk/reward profile is critical to superior performance
2. The upside/downside risk of convertible bonds is different from that of the underlying stock
3. Convertible bonds enhance yield in comparison to common stock
4. Convertible bonds’ credit ratings don’t tell the whole story in evaluating risk
5. The convertible market is not efficient in the short run
6. Any time can be the right time to buy a convertible bond
7. In taming convertibles, remember that they are social animals
8. Consider a convertible portfolio for diverse roles in your asset allocation strategy
9. There’s no free lunch in convertible investing
10. Don’t try this at home - convertible investing is best left to the professionals
Thom Calandra
General principles and the growing importance of debt analysis. 1. Paint a contrarian streak across your portfolio
2. Understand dominant trends - they can make or save you money
3. Don’t trust equity professionals - their research is besmirched
4. Trust the debt analysts
5. Don’t take tips
6. Be very picky with your mutual funds
7. Understand the psychology of investing
8. Got a hunch, bet a hunch
9. Don’t short yourself
10. Be in the game for the long-term - meaning decades
Donald Cassidy
Books
Which stocks to sell, and when. Principle #1: Always force yourself to move toward discomfort!
Principle #2: Avoid the losers’ game of owning favorite stocks for the long term (a.k.a. Heresy #1)
Principle #3: Never buy a stock without simultaneously placing a sell order at your target
Principle #4: Believe deeply in the ‘cockroach theory’ and act on it
Principle #5: Untie that second hand from behind your back: become able to sell short! (Heresy #2)
Tactic #1: Always, always sell all large-cap and high-P/E stocks before earnings are due to be reported!
Tactic #2: Be nimble, or the crowd will surely trample you!
Tactic #3: Gracefully and promptly accept unreasonable profits!
Tactic #4: Rid your decision process of ego’s misguiding influences!
Tactic #5: Watch the wider world for clues that a trend reversal is due
Simon Cawkwell
Books
Advice from a short seller. 1. Never buy shares with high valuations in relation to tangible net asset value
2. Never short-sell stocks when they are going up
3. Always treat any stockbroker who is remunerated with commission as a compulsive liar. 4. Work on the assumption that all regulators are completely useless
5. Be very suspicious of all mining companies run by stockbrokers
6. Accept that all men always lie
7. When a man says that his word is his bond . .
8. If you do not understand an investment, prepare to short it
Edward Chancellor
Books
Lessons from history. 1. ‘Put all your eggs in one basket and watch that basket!’
2. ‘When the ducks quack, feed them.’
3. ‘Markets make opinions, not the other way round.’
4. ‘Buy low, sell high.’
5. ‘When the rest of the world is mad, we must imitate them in some measure.’
6. ‘During a bull market nobody needs a broker. During a bear market nobody wants one.’
7. ‘Every man his own broker.’
8. ‘Markets can remain irrational longer than you can remain solvent.’
9. ‘A mine is a hole in the ground with a liar standing over it.’
10. ‘Be diffident when others exalt, and with a secret joy buy when others think it in their interests to sell.’
Moorad Choudhry
Books
Investing in bonds
1. The oldest rule in the book: diversify. Always have bonds in your portfolio
2. Go with the business cycle, not against it
3. Everyone should have a safe haven for a portion of their savings - hold government bonds like gilts
4. Buy the downgrades, sell the upgrades
5. Heed the credit rating, but look ahead of it
6. The current yield spread is telling you something - heed it
7. Don’t hold corporate debt if you don’t like the corporate equity
8. Don’t invest going into important announcements
9. Corporate bond prices are good bell-weathers of corporate health generally. Use them as a guide for all your investment decisions
10. Look at established names in a slowing economy or recession
11. When interest rates are historically high, buy bonds
12. Don’t look for the bottom of the market, or for that matter the top
Robert Cole
Books
The Tempus ten golden rules. 1. Hail the herd
2. Valuation, valuation, valuation
3. The sentimental journey
4. On time
5. Hedge your bets
6. Costs equal losses
7. Tip top tips
8. Keep a distance
9. A taxing thought
10. Rules are rubbish
Antoine Colonna
The luxury goods sector. Introduction
1. Note the strong correlation between global GDP growth and sales for the luxury goods sector
2. Value for money has always been important
3. Value for money is becoming more important
4. Consolidation is inevitable
5. Control over distribution is a major factor in competitive advantage
6. Traditionally high levels of profitability may come under pressure
7. Japanese consumers are key
8. The internet poses challenges to brand management
Tim Congdon
Economic drivers of asset prices. Introduction
1. Nations cannot make themselves rich by printing more money
2. High inflation is associated with high money supply growth
3. High money supply growth is likely when banks have ample capital and can easily expand their balance sheets by extending new credit
4. Although high money supply leads to more inflation in the long run, it may not do so in the short run for all sorts of reasons
5. For any given rate of money supply growth, a large budget deficit is likely to do more damage to asset prices than a small budget deficit
Laurence Copeland
Books
Currencies. 1. All things in moderation, especially greed
2. Market gurus repeat themselves, but history never does
3. “Ripeness is all” (Shakespeare)
4. The more extreme the conditions, the more efficient the market
5. Fixed exchange rates: the triumph of hope over experience
6. The predictive power of forward rates is more or less nil
7. Long calm spells, punctuated by stormy periods
8. The Anglo-Saxon Block
9. Don’t bet against the dollar . .
10. . . . get a job as a currency guru
Richard Cragg
Books
Demographic investment. 1. Crisis equals opportunity
2. Manners maketh man, but money moveth markets
3. Some age groups can save more than others
4. Goldilocks demographics - not too young, not too old
5. Surfing the demographic waves
6. A demographic road map
7. Selecting the sectors
Anthony Crescenzi
Books
The bond market’s ‘crystal ball’ 1. What are the top indicators to follow for a prelude to a bull market in stocks and a strong economy?
2. What are the ten biggest factors that impact the shape of the yield curve?
3. What is the best way to gauge sentiment in the bond market?
4. How can I become a better Fed watcher?
5. Use of the yield curve to predict economic and financial events?
6. Don’t be bullish just because you’re long!
7. You can’t put being right in the bank!
8. Assess your physical condition when trading!
9. Trade on your terms!
Anthony Cross
The investment attractions of intellectual capital. Introduction
1. Finding good investments should not be easy
2. Look for intellectual capital assets, such as customer relationships and intellectual property
3. Make sure directors and employees own shares
4. Target companies with proven organic growth
5. Beware of companies that claim to be an exception to the rule
6. Declining margins during a time of economic stability are a sell signal
7. Sell when directors make material equity sales
8. Protect the downside
9. Spread your bets
10. Be patient
Lawrence Cunningham
Books
The investing methods of Warren Buffett. 1. Don’t be the patsy
2. Operate as a business analyst
3. Look for a big moat
4. Exploit Mr. Market
5. Insist on a margin of safety
6. Buy at a reasonable price
7. Know your limits
8. Invest with ‘sons-in-law’
9. Only a few will meet these standards
10. Avoid gin rummy behavior
Frank Curzio
Books
Safeguards and buying opportunities. 1. Speculate with a small portion of your funds
2. Do not buy on margin
3. The best buying opportunities usually prevail when a company reports lower earnings and when adverse economic news is widespread
4. Only invest in companies audited by one of the big five accounting firms
5. Watch company credit ratings
6. Exploit institutional window-dressing
Ray Dalio
Systemizing fundamentals. Introduction
1. A deep understanding of the fundamentals so that pricing inefficiencies can be identified
2. Focus
3. Perspective without data-mining
4. Strategy
5. Substantial resources
Alexander Davidson
How to avoid being a victim of stock manipulation. 1. Do not over-trade
2. Never buy only on share tips
3. Be prepared to stag new issues
4. Avoid penny shares in most cases
5. Do not take your broker’s recommendations at face value
6. Never buy from share dealing firms abroad
7. Don’t rely on technical analysis
8. Avoid a poor investment proposition in a fashionable industry
9. Be wary of stock recommendations on internet message boards
10. Always think for half an hour before buying or selling
Nigel Davies
The transport sector. Introduction
1. Buy cyclical stocks - particularly airlines - when next year’s P/E ratio is 50x, sell when 5x
2. The share prices of regulated business are anything but boring and predictable
3. Recently privatised businesses acquire disastrously
4. Americans will stop travelling overseas at the slightest excuse
5. Bottom line sensitivity to a 1% change in GDP growth, a $1 per barrel move in the oil price, and a 1% price increase must be defined
6. Be aware of the extended investment cycle
7. GDP growth has a multiplier effect on the propensity of things to move around more
8. The IT revolution is having a big impact on certain sub-sectors
9. Barriers to entry are critical: these dictate pricing power
10. Detailed analysis of y-o-y change in a company’s net cash position is neglected at one’s peril
Steven I. Davis
The banking sector. 1. Look for strong CEO leadership
2. Be deeply suspicious of claims for strategy-driven deals
3. Be equally suspicious of commercial banks acquiring investment banks and fund managers
4. A good bank investment becomes an even better one when there is a quoted minority/majority held by outside investors
5. The best indication of stockholder value commitment lies in the historical record
6. Problem banks are usually worse than the figures indicate
7. Look for banks with large, established client bases
8. Defendable specialist niches are rare, but when they exist they are extraordinarily attractive
9. In a consolidating banking world, holding the stock of a well-positioned bank gives you a double advantage
Philippe Delhaise
Valuation of Asian bank shares. 1. Standard valuation theories do not apply to Asian banks
2. Do not invest in Asian banks for their book value
3. Published accounts do not tell the truth
4. Banks in Asia have seldom created value for their shareholders
5. Only Singapore and (especially) Hong Kong banks have generally combined good profits with low risk, resulting in real value creation
6. Quite why the shares of so many listed banks in such countries are still worth anything is beyond understanding
7. Asset management companies will transfer wealth from the many to the few: from taxpayers to bank shareholders
Thomas DeMark
Trading with technical analysis
David DeRosa
General principles and the dangers of financial engineering. 1. Don’t confuse trading with investing
2. Avoid investment ‘products’ . .
3. . . . except build your core portfolio with index funds
4. Don’t be fooled by high yields or high coupons
5. Sovereign risk can be just as lethal as private sector risk
6. Never trust mechanical risk models
7. Never make an investment that is predicated on a fixed exchange rate regime’s survival
8. Never try to ‘catch a falling knife’
9. Avoid naked options
10. Be very cautious about the use of leverage
Joe DiNapoli
Trading and the importance of a plan. 1. Loss of opportunity is preferable to loss of capital
2. Use Logical Profit Objectives for all positions
3. Place your Logical Profit Objectives in the market ahead of time
4. Enter markets on retracements
5. Above all, follow your trading plan
6. Trade quietly
7. Don’t carry a sizeable position while traveling
8. ‘You are only one trade away from humility.’
9. Add to your knowledge before attempting to add to your wallet
10. Develop your sense of humour
11. Help other traders whenever you can
Bob Dischel
The weather risk market. 1. Weather is bigger than the Fed
2. The right kind of weather forecast is never wrong: unfortunately, it is never entirely correct
3. People’s opinions may rule weather trading but Mother Nature and Father Time decide who wins
4. A one-season visit to the weather market is a crapshoot
5. Mother Nature may come uninvited to the company picnic but you can keep her out of the shareholder’s meeting
6. Resist taking money off the table from an in-the-money position if it was meant as a hedge
7. Diversity in weather greatly exceeds diversity in weather derivatives
8. Price is important, but value is more important
9. Black and Scholes pricing is valuable in many markets, but in weather, it is simply wrong
10. It can rain on one side of the street and not on the other - so what?
Richard H. Driehaus
Investment paradigms worth avoiding. Introduction
Mistaken Paradigm 1: ‘Buy low and sell high.’
Mistaken Paradigm 2: ‘Just buy stocks of good companies and hold onto them.’
Mistaken Paradigm 3: ‘Don’t try to hit home runs; you make money hitting a lot of singles.’
Mistaken Paradigm 4: ‘A high turnover strategy is risky.’
Mistaken Paradigm 5: ‘An investment process must be very systematic.’
Mistaken Paradigm 6: ‘You must have a value-based process.’
Mistaken Paradigm 7: ‘The best measure of investment risk is the standard deviation of return.’
Mistaken Paradigm 8: ‘It’s risky to place your money with a ‘star system’ manager.’
Dru Edmonstone
Investing in AIM companies. Introduction
1. Only invest in companies with trading records of more than three years
2. AIM stocks can suffer from lack of comparability
3. Stick to simple, short-term forecasts
4. Watch directors and institutional share dealings
5. Stay away from stocks which have less than 25% of their share capital in public hands
6. Research the track record of the company’s advisers
7. Consider sector prospects
8. Detailed appraisals of the management team and their past track records are an analytical necessity
9. Don’t expect dividends!
10. Consider how the company is affected by the economic cycle
Marc Faber
Contrarian advice from Dr Doom. Rule #1: There is no investment rule that always works
Myth #1: ‘Stocks always go up in the long term.’
Myth #2: ‘Real Estate always goes up in the long term.’
Problem rule #1: ‘Buy Low and Sell High.’
Problem rule #2: ‘Buy a basket of high quality stocks and hold.’
Problem rule #3: ‘Buy when there is blood on the street.’
Rule #2: Don’t trust anyone!
Rule #3: The best investments are frequently the ones you did not make!
Rule #4: Invest where you have an edge!
Rule #5: Invest in Yourself!
Frank J. Fabozzi
Bond investing. Introduction
1. Know your benchmark
2. Securities are only appropriate relative to a strategy
3. For bond investors, modeling risk is an important risk that should never be underestimated
4. Hedging is not the same as risk control
5. For bond funds, understand what duration means and how it is measured
6. Yield is not return
7. Understand why a yield spread exists
8. Always perform attribution analysis when evaluating managers
9. Watch with great concern money managers with far superior returns than the rest
Alan Farley
Swing trading. 1. Forget the news, remember the chart
2. Buy the first pullback from a new high. Sell the first pullback from a new low
3. Short rallies, not sell-offs
4. Don’t chase momentum if you can’t find the exit
5. Trends test the point of last support/resistance
6. If you have to look, it isn’t there
7. The trend is your friend in the last hour
8. Avoid the open
9. Price has memory
10. Beat the crowd in and out the door
Niall Ferguson
Lessons from the Rothschilds. Introduction
1. Look for governments in trouble
2. Spread the sugar . .
3. . . . or spread the fear
4. Insider dealing rules
5. Know when to hold back
6. Sell too soon
7. Don’t go bust
8. Be a rich man
Kenneth L. Fisher
Engaging The Great Humiliator. 1. Engage The Great Humiliator without ending up humiliated by it
2. Never forget - you are really Fred Flintstone
3. The Pros are always wrong
4. Nothing works all the time
5. Most investors will go to hell or die not understanding why
6. Heroes are myths
7. Pray to The Luck God
8. Market timing is terrible unless you time it right
9. A bear is bullheaded until you can’t bear it
10. When you get really good: quit
George Fontanills
Attaining a winning trader’s edge
Martin Fridson
A streetwise approach to stock selection. 1. Matching the averages is not a bad outcome
2. Investors will not wake up one day and realize that the stock you’re considering is too cheap
3. The stocks of highly admired companies are not bargains
4. The best oil exploration deals never get sold outside of Texas
5. Beware the stockbroker’s blue light special
6. Meeting a quarterly earnings target does not guarantee that a company is on a good track
7. When a red flag goes up in the area of financial reporting, assume the worst
8. Put a value of zero on a company’s claim to be recession-proof
9. Consider IPOs from the corporate finance point of view
10. There is always a first time
David R. Fried
Profiting from buybacks. Introduction
1. Buybacks increase the value of your shares
2. No-one understands a company better than the company itself
3. But buybacks are not that simple
4. It’s important to understand a company’s motivation for the buyback
5. Not all buyback companies are equal - focus on the value stocks
6. Avoid the companies that announce buybacks, but never follow through
7. Some companies buy back stock only if and when their shares are bargain-priced
8. Follow the companies committed to long-term buyback programs as a way of building shareholder value
9. The corollary to buyback investing is to avoid companies that are issuing additional shares
Foster Friess
Investing in growth companies. 1. Never invest in the stock market; invest in individual businesses
2. Buy earnings, not dreams
3. Prefer modest P/E ratios over high P/E ratios
4. ‘Pigs at the Trough’
5. Don’t buy ‘market leaders’
6. Don’t subscribe to the ‘I Love Lucy’ investment strategy
7. Don’t let the tax tail wag the investment dog
8. Indexing makes no sense
9. Embrace entrepreneurship through teamwork
10. Accentuate the positive
Tony Golding
Interpreting broker research and recommendations. 1. Don’t take broker research recommendations at face value
2. ‘Buy’ recommendations are always in the majority
3. Broker recommendations have always had a strong ‘buy bias’
4. It is an unfortunate fact that investment banking is much, much more profitable than buying and selling shares for investment institutions
5. What is written and what is said are two very different things
6. The larger the investment bank or stockbroking firm that employs the analyst making the recommendation, the less likely it is to reflect what the analyst really thinks
7. When judging the objectivity of recommendations, look at where the fees are earned
8. The bottom line is: the private investor needs to take care
Julio Gomez
Selecting an online broker. 1. Seek and ye shall find
2. Parsimony is paramount
3. Multiple touch points are critical
4. Customer service differentiates leaders from laggards
5. An educated investor is the best investor
6. What you see is what you get
7. The price must be right
8. Jacks or better ante
9. Security starts at the home (page)
10. Character witnesses are critical
Philip Gotthelf
Precious metals trading. 1. Precious metals are not ‘investments’ in the traditional sense
2. Precious metals fall into two categories: monetary and industrial
3. Precious metals maintain parity with currencies
4. If metals are currency, they cannot be traded for profit
5. Metals can fall below production costs
6. Precious metals do not always track inflation
7. Metals are subject to structural change
8. Never seek a predetermined top or bottom
9. Precious metals do not always move in tandem
10. Metals are good business
11. Wonders never cease
Jeremy Grantham
Investment management. 1. Indexing is hard to beat, and relative passivity is not a vice
2. Historically, equity investors have over-paid for comfort and excitement
3. One of the keys to investment management is reducing risk by balancing Newton (momentum & growth) and regression (value)
4. Ability to handle illiquidity is a major advantage for long-term investors
5. Confidence factors are the primary influences on price levels in the U.S. market, not fundamental factors like growth and real interest rates
6. The single most important advantage for traditional investors vs. quants is a tight focus
7. Asset allocators must be picked on faith
8. Investment managers are harder to pick than stocks
Robert V. Green
Handling the emotional side of investing. 1. There is no such thing as a good stock
2. Have a premise
3. Think trends. Buy stocks
4. Know your risk tolerance
5. Don’t average down to feel better
6. Don’t miss the train to shave a dime
7. Don’t buy hot and watch cold!
8. A hold is as good as a buy!
9. Don’t be an inadvertent long-term holder!
10. You will lose money!
Herb Greenberg
Avoiding problem stocks: lessons from Lernout & Hauspie
1. Don’t be fooled by a supposedly hot new technology that is a better story than a business
2. If one analyst drops coverage of a company, veering from a crowded pack, find out why
3. Don’t ignore stories about shortsellers who are raising critical issues about a company
4. Take note if a company picks a public fight with shortsellers and/or refuses to return calls to reporters
5. Beware of companies that say they are immune from issues hurting their competitors
6. Beware of companies that rely heavily on related-party or too-close-for-comfort transactions, no matter how well they’re disclosed
7. Don’t be fooled by companies that boast investments by well-known companies like Intel and Microsoft
8. Don’t get fooled by a rapidly rising stock price
9. Be leery of any company in which the analysts raise their target price while cutting earnings estimates
10. The minute you think you’re a genius - that you have it all figured out - start looking over your shoulder
Bill Gross
Books
Cost reduction and other essential lessons. 1. Where are the customer’s Gulfstreams?
2. Stocks don’t always outperform bonds
3. When you think you’ve found ‘the answer’ – think again
4. The long term is the right term
5. Turn over your portfolio at a snail’s pace
6. Risk and return are Siamese twins
7. “It’s different this time” is generally a losing proposition, but when it is different watch out
8. Beware of the snake oil and its salesmen
9. A guru not busy being born, is busy dying
Steve Harmon
Commonsense lessons on technology stocks. 1. Earnings matter
2. Don’t be wowed with the technology
3. Forget the peaks, study the valleys
4. Listen to what the executives say, but more importantly, listen to what customers say
5. Learn the difference between ‘betting’ and ‘investing’
6. Diversify investments
7. Cash - how much does the tech company have?
8. Stock options
9. Establish buying and selling discipline
10. Never get emotionally attached to a stock
John Hathaway
Investing in gold. 1. An investment in gold should be based on macroeconomic considerations
2. Understanding the internal dynamics of the gold market can be helpful as to investment timing issues
3. Excessive reliance on trading strategies to generate returns can be dangerous and counterproductive
4. Every investor should have some gold
5. Equities of gold mining companies offer greater leverage than direct ownership of the metal itself
6. Watch out for companies that have hedged their gold exposure
7. Don’t get caught up in gold fever
8. Bullion or coins are a more conservative way to invest in gold than through the equities
9. Gold is a controversial, anti-establishment investment
10. Don’t settle for too little
Alan Hicks
Financial spread betting. Introduction
1. Deal outside Exchange market hours
2. FSB prices can be a leading indicator for the underlying
3. Open accounts with at least three FSB firms
4. Understand the forward value
5. Understand the tax considerations
6. Arbitrage opportunities
7. Always ask for a two-way price
8. Show your interest
Yale Hirsch
A stock trader's almanac. 1. As January goes, so goes the year - only three significant errors in 51 years
2. Invest in the market between November and April each year
3. Gains in third and forth years of Presidential terms triple those of first and second years
4. If Santa Claus fails to call, bears may come to Broad and Wall
5. We tend to pay the piper in post-Presidential election years
6. Buy stocks at mid-term election-year lows
7. First trading days of the month sizzle
8. So-called summer rallies are a farce - it is the weakest of all the seasons
9. The only ‘free lunch’ on Wall Street is served in December
10. Down Triple-Witching Weeks trigger more weakness in the week after
John C. Hull
Option valuation and trading. 1. To make money trading options you must take a different view from most other market participants - and you must be right
2. Do not imply the volatility from the price of one option on a stock and use it to price another
3. As a rough approximation, the price of an at-the-money option increases with the square root of its time to maturity
4. When we use the risk-neutral valuation principle we are not valuing options on the assumption that investors are risk neutral
5. Never trade a product without fully understanding it and evaluating the risks
6. When you speculate with options, you are taking a position not only on what will happen but when it will happen
7. Option pricing models such as Black-Scholes are nothing more than sophisticated interpolation tools
8. When uncertainty increases in the market the volatilities of short-dated options increase by more than the volatilities of long-dated options
9. Keep your eyes open for valuable option add-ons
10. Never forget to factor transaction costs into your calculations when considering option trades
John Husselbee
Selecting a mutual fund manager1. Never use an old map to find new countries
2. It’s not all about returns
3. Experience brings its own rewards - let the apprentices practice with someone else’s money
4. You can get a better view from the big house on the hill
5. Elephants can’t gallop
6. Show me what’s up your sleeve!
7. Beware the siren’s call
8. Be sure you understand what you’re letting yourself in for
9. A little knowledge is a dangerous thing
10. Knowing when to sell
Roger Ibbotson
How to manage your asset allocation. 1. Invest in stocks for the long run
2. Asset allocation is the most important of all investment decisions
3. Diversify across and within asset classes
4. Invest globally
5. Minimize costs
6. Limit the impact of taxes
7. Keep a composite record of your total wealth and accounts
8. Evaluate and rebalance your portfolio regularly
9. Plan your investments to cover your liabilities
10. Invest over your life cycle
Mark Ingebretsen
Using the web to perform due diligence on a stock. 1. Create a watch list
2. Find out what people are saying about the stock
3. Get a second opinion
4. Analyze the stock’s sector
5. Determine the trend
6. Know the risk of ownership
7. Develop a plan
8. Monitor your performance
Edmond Jackson
General principles and intrinsic value of companies. 1. Weigh risk/reward to buy and sell astutely
2. Develop a rationale for sectors & stocks - keeping an open mind
3. Look beneath the surface and identify key issues
4. Assess intrinsic value - a dynamic concept
5. Identify market bias - when to back or buck it
6. Growth stocks can deliver hefty gains and losses
7. Turnarounds & cyclicals are valuable when your timing is right
8. Takeovers and divestments offer special opportunities
9. Re-appraise stocks in terms of opportunity cost
10. Have the courage of your convictions - to deal effectively
Simon M. Johnson
The leisure sector. Introduction
1. Be aware of the economic cycle
2. Look for a replicable concept
3. Be aware of fashion
4. Be aware of the costs of refurbishment
5. Allow for the property element
6. Look out for legislative step-changes
7. Buy on consolidation, sell on disaggregation
8. Be wary of claims of ‘synergy benefits’
9. Trust your eyes and instincts
10. Listen to the story with a critical mindset
Philippe Jorion
Value at Risk. 1. Balance returns against risk
2. Use Value at Risk (VAR) for an intuitive sense of risk
3. Risk should be measured in a portfolio context
4. Beware of chasing winners
5. Risk is a double-edged sword
6. There is no such thing as 10% or more excess return with no risk
7. Watch for large short positions in options
Ajay Kapur
Investing in Asian equities. 1. Ride the cycle - don’t freewheel
2. When global growth is low, let the Asia money flow
3. Country beats sector. Don’t go out without your passport
4. Know the price of everything. Don’t pay $1.50 for $1
5. If the barn-door is open, don’t scramble through the skylight
6. Crises don’t just happen. Be a macro maven
7. Don’t follow the herd - it may be heading to the slaughterhouse
8. Cool today is cruel tomorrow. Leave the fads to the amnesiacs
9. When the political wind changes, expect the windfalls to stop
10. Follow the central banks. That’s where the money is
John Kay
Business economics. 1. Myth - ‘Profits are higher in fast growing industries.’
2. Myth - ‘Most industries are concentrating around a few global companies.’
3. Myth - ‘A company can get the middleman’s profit by vertical integration.’
4. Myth - ‘Diversification increases the quality of business earnings.’
5. Myth - ‘New technologies increase profits.’
6. Look at industry specifics, not assertions about trends
7. Competitive advantages come from distinctive capabilities
8. Myth - ‘First mover advantages are key - the early bird catches the worm.’
9. Myth - ‘Market share is key to profitability.’
10. Beware financial engineering
Karl Keegan
The biotechnology sector. 1. The valuation of biotech companies is fraught with difficulty
2. There is no one ‘correct’ way to value the sector
3. Use all the quantitative methods at your disposal
4. Forget tech. Focus on the people
5. Watch out for news flow
6. Understand the technical risks
7. Understand the commercial risks
8. Recognise the different types of biotech business
9. View cash as a tool, not as an indicator of value
10. Don’t be fazed by the technology
11. Be careful not to check in to the Roach Motel
Brian Kettell
Books
Fed watching. 1. Remember the central role of nominal/real GNP quarterly growth
2. Track the yield curve if you want to predict business cycle turning points
3. Watch what the Fed watches - not what you think it should watch
4. Keep an eye on the 3-month Euro-Dollar futures contract
5. Use Taylor’s Rule as a guide to changes in Fed policy
6. Pay attention to what the Fed does - not what it says
7. View potential Fed policy shifts as a reaction to, rather than a cause of, undesired economic/monetary conditions
8. Remember that ultimately the Fed is a creature of Congress
9. Follow the trends in FOMC Directives
10. Fears of inflation provoke faster changes in monetary policy than do fears of unemployment
Max King
General principles and politicians’ promises. 1. Fight the consensus, not the fundamentals
2. Nobody waves a flag at the top (or the bottom) of the market
3. Don’t fight your prejudices
4. ‘It is not strength that determines the survival of the species, or even intelligence, but ability to adapt to change.’
5. ‘History repeats itself first as a farce, then as a tragedy.’
6. Don’t confuse brains with a bull market
7. Keep your distance from management
8. The graveyards of Wall Street are filled with people who were right too soon
9. A long term investment is a short term investment which has gone wrong
10. Don’t invest in politicians’ promises
George Kleinman
Books
Commodities. 1. Overtrading - your greatest enemy
2. When in doubt get out!
3. Never average a loss!
4. Money management is the key
5. The trend is your friend
6. Never let a good profit turn into a loss!
7. The market’s reaction to the news is critical
8. If the market is not confirming your opinion, lose your opinion and listen to the market
9. Pyramid properly
10. Be aggressive …
Richard Koch
Books
Finding your own approach to stockpicking. 1. Do it your way
2. If you don’t succeed, give up
3. Don’t copy Noah
4. Stick to one investment approach
6. Know yourself
6. Go for the breeders
7. Stop losses
8. Gear up gains
9. Gather outsider information
10. Follow the Pleasure Principle
Joe Krutsinger
Books
Trading systems. 1. If you want to keep getting what you’re getting, keep doing what you are doing!
2. While becoming expert, rent expertise
3. If you can’t run with the BIG DOGS, stay on the porch
4. Eagles don’t flock
5. Do the hard thing. Buy High; Sell Higher! Sell Low; Buy Lower!
6. Take the milk with the cream
7. When in doubt, stay out, and if you are IN - GET out!
8. ‘Badges? We don’t need no stinking badges!’
9. Buying a race car doesn’t make you a NASCAR star!
10. Talk is CHEAP; it takes money to buy whiskey!
Mike Kwatinetz
Books
Investing in technology companies. 1. Look for a CEO under fifty
2. Look for a ‘virtual enterprise’
3. Look for an ‘increasing feedback loop’
4. Make sure the product cannot easily be replicated
5. Favour strong brand names
6. Use forward earnings estimates, not historical ones
7. Use the P/R ratio where the P/E ratio is impossible
8. Check for all three growth drivers
9. Put your companies through the stock screener test
10. Check whether the company has met brokers’ consensus earnings forecasts in the past
Dean LeBaron
Books
Habits
Steve Leuthold
Books
Managing your mother lode . . . your serious money. 1. Know thy self
2. Discipline is essential
3. Manage risk as well as return
4. Cash is not trash
5. Market crisis is market opportunity
6. Bonds can be best
7. Stock market new valuation eras have always been temporary
8. Not even Microsoft is forever
9. Short term trading is a loser’s game
10. History is experience ... learn from it
David Linton
Trading and the importance of stop losses. 1. Cut losses, cut losses, cut losses, let profits run
2. Buy stocks that are going up
3. Hindsight is a wonderful thing. Use it!
4. Don’t be eager to buy on buy signals. Be eager to sell on sell signals
5. Know your sectors
6. Don’t trade against the trend
7. Never take a tip. Time them at least
8. Fundamentals are good long term. Charts are better short term
9. Tell me something I don’t know
10. Take the emotion out
Burton Malkiel
Books
Essential truths of risk and reward. 1. Investment rewards can only be increased by the assumption of greater risk
2. Your actual risk in stock and bond investing depends on the length of time you hold your investment
3. Decide how much risk you are willing to take to get high returns
4. Dollar-Cost Averaging can reduce the risk of investing in stocks and bonds
5. Stock prices are anchored to ‘fundamentals’ but the anchor is easily pulled up and then dropped in another place
6. If you buy stocks directly, confine your purchases to companies that appear able to sustain above-average earnings growth for at least five years and which can be bought at reasonable price-earnings multiples
7. Never pay more for a stock than can reasonably be justified by a firm foundation of value
8. Buy stocks with the kinds of stories of anticipated growth on which investors can build castle in the air
9. Trade as little as possible
10. Give serious thought to index funds
Joe Mansueto
Value investing and funds. 1. Apply a private company mentality to public company investing
2. If it’s overly complicated and you don’t fully understand it, avoid it
3. Invest for the long term
4. As long as you don’t lose money, you won’t have to worry much about making money
5. Buy great companies at reasonable prices
6. Don’t worry about forecasting the market
7. Think different
8. Search for a few great managers and stick with them
9. Don’t pay active management fees for passive management by buying closet index funds
10. Consider index funds for all or part of your portfolio
Conor McCarthy
Technology stocks - attractions and dangers. 1. Look out for fallen favourites
2. Calculate annual R & D expenditure per share and compare it to the share price
3. Use Relative Strength to detect significant changes in a stock’s performance relative to the market
4. Never plan to hold a stock forever
5. Recurring revenue streams, the larger the better, are very attractive
6. Watch for management changes
7. If investing in early-stage companies, go for those with a realistic chance of playing a significant role in a fast-developing emerging market
8. Look for medium-stage companies with a dominant share of a high growth market
9. Avoid companies with a sales-dominant corporate culture
10. Look for companies with a PEG (current year prospective P/E divided by the growth rate for the following year) of less than 1
Duff McDonald
Business technology. Introduction
1. We believe in disruption
2. But we also believe in market power
3. We believe in convergence
4. We believe in diversification
5. We believe in being reasonable
6. We believe in a medium-term perspective
Colin McLean
Value investing and the unreliability of share prices. 1. Find your own zone of comfort - and stick to it
2. Share prices are not so smart
3. Focus on the stocks you own
4. Not all sales are created equal
5. Buy smaller companies for growth
6. Be wary of companies with large convertible issues
7. Watch executive share sales
8. Read the annual accounts
9. Don’t use earnings per share to determine growth rates
10. Establish the business drivers and value catalysts
Lawrence McMillan
Books
Axioms for option traders and short-term traders. 1. Always use a model before trading an option
2. Don’t buy more software than you need
3. Trade all markets
4. Use technical analysis to make sure you’re going with the trend
5. Always use a stop
6. Don’t use stop orders with your options
7. Take partial profits
8. Let the rest of your profits run
9. Go against the crowd
10. Most important: only trade in accordance with your philosophy
Rajnish Mehra
The equity premium. 1. The equity premium - what is it?
2. What is the equity premium puzzle?
3. Statistics, damn statistics . .
4. The US and other markets
5. Great fluctuations of the equity premium year-by-year
6. Investment planning with the equity premium
7. Investment planning horizons are key!
8. Time and tide . .
9. The equity premium is dead! Long live the equity premium!
10. Stocks payoff in the long run
Viren Mehta
The innovative therapeutics sector. Introduction
1. Invest globally and across all market caps and stages of maturity
2. Focus on ‘innovative therapeutics’
3. Invest for the long term, but take advantage of near term volatility
4. Find proven management teams
5. Invest primarily in products, and only very carefully in tool-kit or technology companies
6. Invest in products with sophisticated marketing
7. Invest only very selectively in money-losing biotech companies
8. Prepare to invest in emerging markets
9. Double up in good names when the sector goes out of favor
10. Sit out the sector (or short it) when valuations reach silly heights
Paul Melton
Books
Navigating the world’s markets. 1. Chart a course
2. Leave your home port
3. Remember that one port can be as good as another
4. Fish where they’re biting
5. Tack into the wind
6. Limit ballast
7. Check regularly for leaks
8. Maintain the lifeboats
9. Sell your catch before it spoils
10. Don’t give up the ship too soon
Michael Molinski
Books
Global investing and the small investor advantage. 1. Diversify
2. Pay attention to correlation
3. Don’t ignore risk
4. Never forget why you picked a stock
5. Don’t use currency hedges
6. Look under rocks
7. Do your homework
8. Exploit the small-investor advantage
9. Buy bonds
10. Buy mutual funds
Robert A.G. Monks
Books
General principles and Senators from Tennessee. 1. Sometimes it snows in July
2. If you don’t understand the concept, it is not understandable
3. The children (or designated heirs) of a great CEO are about as likely to excel as are any of Beethoven’s children to write great symphonies
4. Sell short the stock of any company with a former or future Senator from Tennessee on its board
5. Before you utterly repudiate ‘short termism’ beware lest ‘long termism’ turns out to be a euphemism for forever
6. Invest in companies where outside directors have large personal stakes
7. Only invest in conglomerates which have ‘genius’ CEOs
8. Do not buy personal service businesses. 9. Wall Street sells better than Main Street buys
10. Affronting the public is bad business
David Morgan
Books
Investing in silver. 1. When all else fails, there’s silver
2. Start small - and keep it simple
3. Boost the buying power of your dollars with mining shares
4. Dollar-cost average to lower your costs - and increase your discipline
5. Don’t get a raw deal from your dealer
6. What’s yours is yours - so keep it that way
7. Silver speculation’s like cough syrup - good in small doses, but too much can make your portfolio sick
8. A little information can mean a lot more dollars
9. Collecting silver is an art - but not really an investment
10. More than 10 percent is too much of a good thing
John M. Mulvey
Books
Portfolio optimization
1. Invest for a purpose
2. Risk is not achieving one’s goals
3. Long-term investors should employ multi-period portfolio models
4. Take advantage of volatility pumping
Figure M1
Figure M2
5. Asset allocation is critical for long-term performance
6. Find robust recommendations
7. Optimal portfolios should make sense
8. Protect the investor’s surplus
9. Avoid computer black boxes
10. Implementing a strategic plan requires persistence
John Murphy
Books
Murphy’s laws of technical trading. Introduction
1. Map the trends
2. Determine the trend and follow it
3. Find the low and high of it
4. Know how far to backtrack
5. Draw the line
6. Follow that average
7. Learn the turns
8. Know the warning signs
9. Trend or not a trend?
10. Know the confirming signs
Alan M. Newman
How to win the stock game. 1. The stock market is like any other game; you have to know how to play in order to win
2. Just like in other games, you are allowed to win when other investors lose
3. Stop playing the game if you are losing!
4. Sometimes, ignore rule #3 - particularly when your gut feeling is that you will be vindicated in the end
5. NEVER average down!
6. Don’t be afraid to pyramid your winning trades
7. Never risk more than 5% of your capital on any trade and always maintain a modest cash reserve to take advantage of a new situation
8. A background in fundamentals never hurts
9. Your best investments may come from your own experience and common sense
10. Winning streaks are fun, but they all end way too soon
David Newton
Books
Investing in small-cap stocks. 1. Today’s youngsters will one day grow up!
2. See through an ‘entrepreneurial perspective’
3. Keep sifting that profile colander
4. “I’ll Be Watching You” - because nobody really is
5. Out of sight, but not out of mind
6. Follow the bread-crumb trail to a great investment pathway
7. Diversity is the spice of your investment life
8. VCs live with losers. You can too!
9. “Hey buddy, can you spare some information?”
10. Hang out with the ‘players’
Victor Niederhoffer and Alan M. Newman
Books
How to win the stock game. 1. The stock market is like any other game; you have to know how to play in order to win
2. Just like in other games, you are allowed to win when other investors lose
3. Stop playing the game if you are losing!
4. Sometimes, ignore rule #3 - particularly when your gut feeling is that you will be vindicated in the end
5. NEVER average down!
6. Don’t be afraid to pyramid your winning trades
7. Never risk more than 5% of your capital on any trade and always maintain a modest cash reserve to take advantage of a new situation
8. A background in fundamentals never hurts
9. Your best investments may come from your own experience and common sense
10. Winning streaks are fun, but they all end way too soon
David Newton
Books
Investing in small-cap stocks. 1. Today’s youngsters will one day grow up!
2. See through an ‘entrepreneurial perspective’
3. Keep sifting that profile colander
4. “I’ll Be Watching You” - because nobody really is
5. Out of sight, but not out of mind
6. Follow the bread-crumb trail to a great investment pathway
7. Diversity is the spice of your investment life
8. VCs live with losers. You can too!
9. “Hey buddy, can you spare some information?”
10. Hang out with the ‘players’
Victor Niederhoffer and Laurel Kenner
Niederhoffer’s Books
Rules for a life-time. 1. Be humble
2. Don’t get fixed in your ways
3. Count
4. Buy-and-hold works
5. Be patient
6. Follow the insiders
7. Read good books
8. Play games
9. Be skeptical
10. Pay attention to wise people
Michael Niemira
Books
The economic backdrop of investing. 1. A roller coaster is no fun for the consumer
2. ‘Technology has mastered the inventory cycle’ - wrong!
3. Don’t believe everything central bankers, economists or journalists say or write
4. Rumors of the death of the business cycle are greatly exaggerated
James W. Oberweis
Investing in very fast growing companies. 1. Look for consistent, rapid growth in sales - preferably internally generated and 30% or greater
2. Look for similar consistent growth in pre-tax income and earnings per share
3. Look at net income, of course, but pre-tax income is also very important
4. Buy stocks whose P/E ratios are not greater than half of the company’s rate of growth
5. Look for companies with products or services that offer the opportunity for substantial future growth
6. Pay particular attention to recent trends in quarterly sales and earnings. Look for companies whose rate of growth is expanding
7. Watch for a reasonable price-to-sales ratio based on the company’s growth prospects and profit margins
8. Carefully review the company’s balance sheet
9. Believe the tape!
10. Diversify
Terence Odean
Lessons for investors from behavioral finance. 1. Trading is hazardous to your wealth
2. Before you trade, consult your wife (if you have one)
3. If you need to sell, sell for a loss
4. Do the things you can do, not the things you can’t
5. When the market is crashing, go to the beach
6. Diversify, diversify, diversify
7. Get 90% of the thrills with 10% of the risk
8. Give your portfolio an annual check-up
Michael O’Higgins
Books
Beating the Dow. 1. Get paid for taking risk
2. If the price of gold is rising, don’t buy bonds
3. When buying stocks, stick to the ‘Dogs of the Dow’
4. Low price ‘dogs’ do even better
5. Asset allocation is your most important decision
Richard Olsen
Books
The trading edge and quantitative tools1.You are your best advisor
2. Be clear about your competitive edge
3. Use quantitative tools
4. Trade in liquid markets
5. Follow a top down approach
6. Build up positions over time
7. Stick to your time scale of trading
8. Watch out for transaction costs
9. Use tactical tricks, such as limit orders and stop losses
Paul Ormerod
Books
Rules for sceptical investors. 1. Be sceptical of macro-economic forecasts
2. Be sceptical of anyone who claims to predict interest rates or exchange rates
3. Be sceptical of arguments that just because an interest rate/exchange rate is high, it is more likely to fall than to rise
4. Be sceptical of track records
5. Be sceptical of analysts’ reports on companies
6. Be sceptical of dynamic, new CEOs modernising and transforming the core elements of a business
7. Be sceptical of arguments that sheer size reduces a company’s vulnerability to new competition
8. Investment is about risk management not prediction
9. Diversify, but make sure you really are diversified
10. Track what the trackers track
Lois Peltz
Books
Selecting a hedge fund manager. 1. Money should just be their way of keeping score
2. It’s like getting a report card every day
3. Look for continuity of organization
4. Require them to eat their own cooking
5. Make consistency a virtue
6. Acknowledge the survival of the fittest
7. Be sure that they are controlling the downside
8. Technology is their friend - or should be
9. When opportunity knocks, do they open the door?
10. Be wary if the manager’s goal is to be the largest hedge fund
Robert Peston
Books
Interpreting the news flow. 1. You will not be awake earlier than the market
2. One per cent of media coverage is pure gold, but which one per cent?
3. The good stuff is really dull
4. Sell all columnists for short term gains
5. Buy columnists for long term advice
6. Socialism rules
7. Strange but true
8. Silence speaks volumes
9. The company declined to comment
10. Irrational exuberance
Thomas A. Petrie
The energy sector. 1. Geopolitics matter
2. Always remember the business is cyclical
3. The best cure for low oil and gas prices is low prices and vice versa
4. Contrarians are periodically highly rewarded
5. Good exploratory well news travels fast; bad news often seeps out slowly
6. High financial leverage with typically high energy commodity price volatility can be a deadly combination
7. Quality of management does matter
8. Technology counts
9. Stock repurchases deserve attention
10. Beware of popularized alternative energy concepts
John Piper
Books
Trading and the second marshmallow. Inroduction
1. Reduce position size to the point where you are comfortable
2. Consider using option strategies - don’t limit your options!
3. Find a trading mentor
4. Use stops which have some meaning
5. Understand the logic of your trading approach
6. Let profits run - wait for the second marshmallow!
7. Be selective
8. Don’t predict
9. Don’t panic
10. Be humble - big egos cost a lot to run!
Mitchell Posner
Selecting emerging market stocks
Introduction
1. Choose performance and valuation measures according to the market you are studying
2. Recognise the limitations of some traditional screening criteria
3. Pay attention to company size
4. Treat liquidity as a primary consideration
5. Check financial strength, but make allowances
6. Be careful not to pick low volatility and end up with low liquidity
7. Don’t rely solely on brokerage reports
8. Get your portfolio balance right
9. Don’t place too much reliance on technical analysis
10. Do not act impulsively on rumors
Henriëtte M. Prast
The emotional investor. 1. Take control of your own investments
2. Don’t be conventional
3. Blame your faults on yourself, not others
4. Dare to be a loser
5. Watch out for starry nights
6. Hip is out: stay away from cascades when you see one
7. Beware the gambler’s addiction
8. Crisis, what crisis?
9. Don’t fall in love with your portfolio - or it will betray you
10. Carpe diem
Robert Prechter
Books
Requirements for successful trading. Introduction
1. A method
2. The discipline to follow your method
3. Experience
4. The mental strength to accept the fact that losses are part of the game
5. The mental strength to accept huge gains
George Putnam III
Turnaround stocks. 1. Be willing to go against the crowd
2. Previous stock prices are irrelevant
3. You can lose just as much money in a $1 stock as in a $50 stock
4. Look for a solid core business
5. Evaluate management’s ability to turn things around
6. Look for someone else to do the heavy lifting
7. Check the debt
8. Avoid stocks of companies in Chapter 11
9. Be patient
10. Diversify
Alfred Rappaport and Michael Mauboussin
Books
Books
Expectations investing. Introduction
1. Follow the cash
2. Forget earnings and price-earnings multiples
3. Read market expectations implied by stock price
4. Look for potential causes of revisions in market expectations
5. Concentrate analysis on the value trigger (sales, costs or investment) that has the greatest impact on the stock
6. Use competitive strategy analysis to help anticipate revisions in expectations
7. Buy stocks trading at sufficient discounts from expected value
8. Sell stocks that trade at sufficient premiums over expected value after accounting for taxes and transactions costs
9. Don’t overlook other significant value determinates that don’t appear in the financial statements
10. Heed the signals sent when companies issue or purchase their own stock
Jay Ritter
IPOs. Buying at the IPO. 1. ‘Increase the price, double my order. Decrease the price, cancel my order.’
2. IPOs are a marketing tool
3. If a broker asks you to buy, stay away from the issue
4. Check out what the web sites are saying
Buying and Holding. 5. Pay attention to valuation
6. The IPO market is never in equilibrium. It’s either too hot or too cold. Buy in the cold periods
7. Avoid young companies in hot industries
8. Beware of the lockup period expiration
9. Don’t confuse growth with profitable growth
10. Evaluate the prospectus, focusing particularly on the management
John Rothchild
Books
Surviving a severe bear market. 1. Long-term may be longer than you think
2. After the bears ruin the party, don’t keep dancing with the same old stocks
3. Don’t be tempted by sucker rallies, unless you can love them and leave them
4. When the last Chicken Little is debunked, the sky finally falls
5. When bears rule the street, it pays to own things that pay you to own them
6. 50 million Frenchmen can’t be wrong, but a consensus of economists can
7. Beware the New Era
8. Even bonds aren’t bear proof
9. Your mutual fund won’t save you
10. Ride with small stocks in post-bear rallies
Anthony Saliba
Books
Trading listed options
1. Speed is more important than accuracy when market-making
2. Price is more important than speed when investing
3. Don’t worry about the put/call ratios, they’re noisy bastards
4. Volatility should be a thermometer for traders and a compass for investors
5. Options vernacular is inside out and upside down
6. Implied volatility is meaningless in expiration week
7. Another way to look at volatility is like a car zigzagging through a highway of news, avoiding/hitting bumps and potholes along its way
8. My favorite: ‘A good spread at bad prices’
9. Getting out of a bad trade: ‘The first cut is the cheapest.’
10. When in doubt, get out!
Thomas Schneeweis
Hedge funds and managed futures investing. 1. ‘Beware of the unknown, beware of hedge funds.’
2. ‘Stocks for the long run.’
3. ‘To know the future look at the past.’
4. Just look at the tracks if you want to know the animal
5. Beware the man behind the curtain
6. When all else fails, manipulate the data
7. ‘Clothes maketh the man.’
8. ‘The Government will protect you.’
9. ‘One always knows the value of one’s stock portfolio but not one’s hedge fund.’
10. ‘Only the wealthy should invest in hedge funds.’
Steven Schoenfeld
Effective international equity investing. 1. An international/non-domestic equity allocation always provides diversification to an investor’s portfolio
2. Don’t define international/foreign too narrowly - you’ll often miss the best action
3. Even as globalization accelerates, national factors/country allocation still matters - a lot!
4. All emerging markets are not created equal - and those with a potential to ‘graduate’ are the long-term winners
5. Domestic multinationals - or even global multinationals - are no substitute for broad international equity exposure
6. Concerns about the currency exposure of international equity investment tend to be overblown - for allocations of less than 15%, the appropriate attitude should be "don’t worry, be happy"
7. Always/only using traditional active management isn’t optimal for international equity exposure
8. Global index investment is anything but passive
9. If you invest internationally ‘a-la-carte’ make sure you use the appropriate vehicles
Lueder Schumacher
The utilities sector. Introduction
1. Watch the use of cash
2. Discounted cash flow valuations can give inflated numbers
3. Utilities require a higher equity risk premium
4. Utilities can behave like bonds
5. Watch out for the conglomerate discount
6. Invest in companies that are restructuring
Charles Schwab
Books
Schwab principles for long-term investing1. Start with the basics for long-term investing
2. Get started now
3. Know yourself
4. Invest for growth
5. Take a long-term view
6. Build a diversified portfolio
7. Consider bonds and cash for diversification and income
8. Minimize your expenses
9. Stay on track
10. Become a lifelong investor
Gary Shilling
Books
Investment strategies for a deflationary era. Introduction
1. Treasury bonds are beautiful in deflation
2. Avoid junk bonds
3. Don’t expect great returns from stocks
4. Risk-adjusted, Treasury bonds will be at least as attractive as stocks
5. Forget global diversification to reduce portfolio volatility
6. New tech winners will be tough to find
7. Avoid old tech companies that produce big ticket consumer goods and services
8. Firms that aid savers and investors will thrive in mild deflation
9. Real estate will suffer
10. Manufactured housing and rental apartments will succeed
11. Commodities will be weak
Jeremy Siegel
Books
Stocks for the long run, and diversification. 1. Stocks should constitute the overwhelming proportion of all long-term financial portfolios
2. Investors worried about equity exposure should consider government inflation-indexed bonds as an alternative
3. Invest the largest percentage - the core holdings of your stock portfolio - in highly diversified mutual funds with very low expense ratios
4. Place up to one-quarter of your stocks in mid- and small-cap stock funds
5. Allocate about one quarter of your stock portfolio to international equities, divided equally among Europe, the Far East, and emerging markets
6. Do not overweight the emerging markets. High growth is already factored into the prices of many of the stocks of these countries
7. Large ‘growth’ stocks perform as well as large ‘value’ stocks over the long run
8. The ‘Dow 10’ strategy of buying the 10 highest-yielding Dow Industrial stocks has outperformed the market consistently over long periods of time
9. Small value stocks appear to significantly outperform small growth stocks
10. Avoid initial public offerings (IPOs) unless you buy at the offering price
Howard L. Simons
Books
Market interrelationships. 1. Do you want to be long (short), or don’t you?
2. Are you hedging the dimes, or hedging the dollars?
3. Own the decision points
4. Smart generals run to the head of the troops
5. Markets move further and faster than we ever believe
6. Being wrong is one thing, staying wrong is another
7. The price is the news
8. ‘Can’t go there’ and ‘can’t stay there’ are two different things
9. The time to buy is when there’s blood in the streets
10. When you trade a sympathetic market, all you get is sympathy
11. When you age bad wine, you get old bad wine
12. Take care of the downside, and the upside will take care of itself
Brian Skiba
The enterprise software sector. 1. Operating leverage is excessive in a software company
2. Operating leverage works against the company in tough times
3. Buy ‘real’ software companies when they gap down
4. People remain the key. Good product is necessary but second
5. If the software and the story sound too good - be cautious
6. News flow in normal times moves prices
7. Valuing a software company is all about forward growth expectations
8. Software valuation movements tend to be highly correlated with the tech sector
Jim Slater
Books
Building a margin of safety. 1. Develop a method that suits you
2. Establish a margin of safety
3. Adjust the margin of safety to your approach
4. Keep an eye on significant share dealings by directors
5. Judge management by their numbers, not by their manners
6. Look for positive relative strength to corroborate your view of a share
7. Run profits and cut losses
8. Never stop learning
9. Be tax efficient
10. Don’t kid yourself
Andrew Smithers
Books
Protecting wealth and valuing the stock market. 1. Never delegate asset selection
2. Learn how to value the stock market
3. Know your aims
4. Remember your age
5. Understand risk
6. Costs are important
7. So is tax
8. Get interested and enjoy it
Joel Stern
Books
EVA as an enhancer of shareholder value. Introduction
1. Rewards based on growth in EPS lead to over-investment
2. Rewards based on size encourage empire-building
3. Capped incentive compensation plans backfire on shareholders
4. The present value of expected future free cash flows is mathematically identical to a firm’s economic book value plus the present value of expected future EVA
5. To provide a superior return, management must bring about increases in EVA which exceed market expectations
6. EVA makes a charge for equity capital
7. EVA discourages excessive off-balance sheet borrowing
8. EVA discourages expensive acquisitions
9. EVA works best when it is used at all levels of an organization
Thomas Stridsman
Books
Building and trading a rule-based strategy. 1. It’s not the goal that’s important, it’s how you get there
2. Garbage in, garbage out
3. One tool, one purpose
4. Learn from the past, don’t dwell in it
5. A well-working strategy is better than a profitable strategy
6. Compare the apples with the oranges
7. Strive for mediocrity
8. Diversify away the risks, not the profits
9. Your worst drawdown doesn’t have to be in front of you
10. Optisize instead of optimize
Alan Sugden
Books
Key questions for stock pickers. 1. Do you like the sector? If you don’t like the sector, don’t invest in it, no matter how good the management may be
2. Is the company under the control of one person or one group of people? If so, other shareholders can be on a hiding to nothing
3. Is the post of Chairman and Chief Executive held by one and the same person? If so take care
4. Are there any ‘prestigious’ names amongst the Non-Executive Directors? If so, don’t rely on them to keep the company out of trouble
5. Do you go to AGMs? Do so whenever you can; they can be very informative
6. If the results of a company seem too good to be true, do you believe them? You shouldn’t
7. Is the annual report designed to inform, or to impress? The latter can be a sign of trouble brewing
8. Do you keep your eyes and ears open for good investment ideas? It’s well worth doing so
9. Do you look carefully at the price-earnings ratio (prospective as well as historic) before buying, and do you avoid astronomical PEs?
10. Do you sometimes get the feeling that the management of a company is a bit ‘iffey’. If so, avoid
Catherine Tan
Investing lessons from the Asian markets1. The only no-brainer is the person who believes in a no brainer. Challenge the consensus
2. The only constant is change
3. Earnings are well and good but cashflow rules
4. Cashflow return on investment (CFROI) matters
5. Balance sheets, accounts and prospectuses are a good source of information
6. Macro matters
7. Know why you are in the stock
8. Take profits. Take losses. Protect NAV (net asset values)
9. Follow the insider
10. Asia is no different to the rest of the world, and the same global rules apply
Paul Temperton
Books
Investing in Euroland1. The trend is your friend
2. Big is best
3. The Americans will shake Europe up
4. Value investing will provide the best rewards
5. Technology-related growth stocks will still be a great area for long-term investors
6. Privatization will continue and the rewards from investing should be good
7. The euro will be a success and will last
8. Don’t bet on the UK joining the euro soon
9. Don’t understimate political determination
10. Europe’s decade
Richard H. Thaler and Russell Fuller
Richard Thaler’s Books
Common mistakes investors make. Introduction
1. Avoid overconfidence
2. Avoid ‘hindsight bias’
3. Avoid compounding your past mistakes via regret
4. Diversify, diversify, diversify
5. Don’t take yourself too seriously
Van K. Tharp
Books
Trading and Position Sizing™ 1. Whenever you enter into a position, always have a predetermined exit point at which you will concede you were wrong about the position
2. The golden rule of trading is to cut your losses short (1R or less) and let your profits run (more than 1R, i.e. a multiple of R)
3. When the total sum of your R-multiples for all of your trades is positive, you have a ‘positive expectancy’ system. You must have a positive expectancy system to make money in the market
4. A low risk idea is an idea with a positive expectancy that is traded at a low enough risk level to allow for the worst possible contingency in the short term so that you can survive to achieve the expectancy over the long term
5. Anti-Martingale position sizing strategies work
6. A simple strategy that will work for everyone is to risk a small percentage of your equity on every trade, such as 1% or less
7. You need to know the R-multiple distribution of your trading system to determine your position sizing strategy
8. Strategies that are designed to achieve only the maximum return (such as optimal f; the Kelly criteria, etc) are foolish and usually result in huge drawdowns
9. Position sizing is the part of your trading system that will help you achieve your objectives
10. Rather than place big bets, scale into positions that go in your favor
David W. Tice
Overvalued stocks and Ponzi schemes1. Study stock market history - recognize where you are in the long-term secular cycle
2. Uniform opinion among analysts about an individual stock is dangerous
3. There are elements of Ponzi schemes in many areas of investment
4. Buy low, sell high - don’t buy high, sell higher
5. Consider selling short to reduce exposure and to create outperformance
6. Be a contrarian and independent thinker
7. Have a long time horizon - it’s the key to riches
8. Look at micro-cap companies. The market is more inefficient, and the profits can be huge
9. Always think about risk vs. return
10. Follow the smartest analysts who are indepedent thinkers
Andrew Tobias
Personal finance tips. 1. A luxury once sampled becomes a necessity. PACE yourself. 2. Pay off your credit cards!
3. Buy in bulk when things are on sale
4. Buy low-expense, no-load fund mutual funds
5. People who buy stocks when they get a bonus and sell when they need a new roof are entrusting their investment strategy to their roofs. 6. If you buy individual stocks, use a deep-discount broker. 7. Don’t buy things that are fairly valued. Buy things that are UNDERvalued. 8. People who try to get rich quick generally get what’s coming to them. 9. If it looks too good to be true, it probably is
10. As Jerry Goodman (Adam Smith) so aptly advised - ‘Don’t fall in love with your stock. It doesn’t know you own it.’ 11. Beware the permanent trend. Nothing lasts forever. 12. Beware spreads
13. Heed the words of Billy Rose, the old vaudevillian: ‘Never invest in anything that eats or needs repairing.’ 14. Be a buyer, not a sellee - figure out what you need, and then shop around for the best deal
15. Diversify - over asset classes, specific stocks, and over time
16. And then the most obvious, and least original: Buy things when nobody wants them; sell when everybody does
Brian Tora
General principles and the dangers of looking back. 1. Define your objectives
2. Take good advice
3. Don’t marry your stocks
4. Be prepared to take difficult decisions
5. Never forget that the price and valuation of a share is a reflection of what other people believe, not just a result of your own opinion
6. Good businesses are dynamic
7. Following fashion is fine . .
8. Don’t job backwards!
Romesh Vaitilingam
Books
How the economy influences markets. 1. The economy is an important driver of the stock market
2. In the short term, it can be hard to discern a clear relationship between the economy and the markets
3. Over the longer term, the relationship becomes clearer
4. National output, inflation and expectations of inflation are the key determinants of movements in interest rates
5. The exchange rate is a further important influence on interest rates and share prices
6. Markets tend to react adversely to falling unemployment, at least when the economy is doing well
7. Rising oil prices are generally good for oil shares but not for inflation
8. The government’s budgetary policy can have a major impact on the markets
9. Many economic indicators provide valuable information for analysing particular sectors of the economy and companies operating within them
10. Trade figures also offer valuable insights into the relative performance of different parts of the economy
Timothy P. Vick
Books
Finding value in the market1. Picture yourself as the owner
2. You win in investing by not losing
3. Keep your eyes off the market - but be prepared to exploit it
4. If you cannot understand it, don’t buy it
5. Rely on yourself, not on the opinions of others
6. Forecasts are useless, especially those about the future
7. Time is your natural friend
8. Don’t diversify - it breeds sloth and mediocrity
9. Know the difference between ‘investing’ and ‘gambling’
10. Calculate what you can take out of the company
Pieter Vorster
The tobacco sector. 1. Tobacco is a controversial industry
2. Cash flows and earnings are fairly predictable
3. Litigation and regulatory newsflow are not predictable
4. Valuations are sensitive to news flow
5. Traditional DCF valuations can be misleading
6. Be wary of earnings disappointments
7. High levels of regulation are not necessarily negative
8. International brands are growing faster
9. Demographic factors are important
10. Don’t forget about pricing
Ralph Wanger
Books
Reasons to invest beyond the USA. 1. Bet on good companies, regardless of what country they’re in
2. Locals always have the edge
3. Don’t keep all your assets in one currency
4. Look for industries where the U.S. has no equivalent
5. Take advantage of less efficient markets
6. Invest for the long term
7. Consider mutual funds
8. Spread your bets
9. Remember why you’re there
10. Final word
Edmond Warner
Investing in a bear market. 1. Flick the switch
2. Pound the streets
3. Read a good book
4. Avoid collateral damage
5. Dust off the abacus
6. Beware false prophets
7. Don’t shoot the analysts
8. Rebase to zero
9. Yield to temptation
10. Look for leverage
Ben Warwick
Books
Searching for ‘alpha’ Introduction
1. Embrace diversification
2. Index the hard stuff
3. Use active strategies in inefficient market sectors
4. Use the credit spread to ‘tilt’ your portfolio toward growth or value stocks
5. Consider the yield curve when buying fixed-income investments
6. Utilize momentum strategies only during periods of economic growth
7. Consider alternative investments
8. Think about taxes
9. Don’t pick an investment manager based solely on past performance
10. Rebalance your portfolio on a regular basis
Henry Weingarten
Books
Ten guidelines for a stellar performance. 1. Ubung macht den meister (Practice makes perfect)
2. Think global
3. Timing is everything
4. Two out of three ain’t bad
5. When in doubt, don’t
6. Make mistakes
7. Dance when the markets are wrong
8. Live on the edge
9. Know when to hold them, know when to fold them
10. Make a profit - don’t be a prophet
Neal Weintraub
Books
Trading
Martin J. Whitman
Books
A fresh look at the Efficient Market Hypothesis. Introduction
1. While markets tend towards efficiency, very few ever achieve instantaneous efficiency
2. There exist myriad markets, not one
3. An efficient price in one market is often an inefficient price in another market
4. If you are an OPMI you should not generally participate in the markets that tend towards efficiency
5. The path to earning excess returns for OPMIs is not to obtain superior information, but rather to use the available information in a superior manner
6. The main item of underused information is the balance sheet
7. The market’s long term tendency towards efficiency will reward purchases at a discount
8. Fundamentals matter
Larry Williams
Books
Short-term trading and survival. 1. It’s all about survival
2. Ultimately this is an emotional game - always has been, always will be
3. Greed prevails - proving you are more motivated by greed than fear and understanding the difference
4. Fear inhibits risk taking - just when you should take risk
5. Money management is the creation of wealth
6. Big money does not make big bets
7. God may delay but God does not deny
8. I believe the trade I’m in right now will be a loser
9. Your fortune will come from your focus - focus on one market or one technique
10. When in doubt, or all else fails - go back to Rule One
Paul Wilmott
Books
Money management. 1. Get into the habit of looking at stock price history, not just at today’s value
2. Think in terms of risk and return. Return is good
3. Think in terms of risk and return. Risk is bad
4. The ‘better’ you think a stock is the more you should invest in it
5. Diversify
6. Be aware of transaction costs
7. Don’t take this business too seriously, it’s only money
8. If a rich friend gives you financial advice, take it
9. Put your stock certificates in a safe place
10. Get out there and create some wealth
Tom Winnifrith
Long-term investing and backing good management. 1. If you don’t want to own a share for ten years don’t buy it for ten minutes
2. Remember that investing is a marathon not a sprint
3. Never back bad management
4. Don’t confuse investment with gambling
5. If you do not understand what a company does, or how it constructs its accounts or generates revenue, don’t invest in it
6. Let the trend be your friend
7. Do not confuse a low price with a cheap price
8. Cash is king
9. If it sounds to good to be true, it is too good to be true
10. If you are wondering when to bank a profit, wait until all the brokers say buy and the stock is tipped in the Sunday Newspapers
Ed Yardeni
Global economic trends. 1. The New Globally Competitive Economy: invest in companies that can sustain above average earnings growth in highly competitive markets
2. The Innovation Revolution: invest in companies with leading edge innovations and relatively little competition, particularly in high-tech and biotech
3. Tech II - Wireless and Wired: invest in companies that provide the infrastructure hardware and software for wireless, internet, and optical fiber networks
4. Productivity for the Masses: invest in low-tech companies that are using technology to cut costs, to increase productivity, and to innovate
5. The Outsourcing Imperative: invest in companies that build B2B systems, and also in outsource vendors
6. The China Challenge: invest in capital goods companies, especially technology and telecom equipment manufacturers
7. Sweet & Sour Deflation: invest in Treasury bonds and interest-rate sensitive stocks, with low exposure to credit risk if possible
8. Demography is Destiny: invest in outsource manufacturing in emerging markets and also in consumer electronics suppliers
9. Jurassic Park: invest in companies that are likely to be acquired, and also in the investment banks that will collect the M&A fees
10. The Meaning of Life: Shopping!
Andy Yates
Getting the most out of bulletin boards. Introduction
1. Lurk and learn
2. No exaggeration
3. Watch out for ‘wise men’ bearing gifts
4. Don’t believe in fairy tales
5. Try not to get hooked
6. Bulletin boards can seriously damage your wealth
7. Go for quality not quantity
8. Open your eyes to the risks
9. Keep yourself posted
10. Don’t get carried away with the hype and hope
Leonard Yates
Books
Options myths and mistakes. 1. Myth 1: ‘Options are too risky.’
2. Myth 2: ‘Options are too complex.’
3. Myth 3: ‘Options are too expensive.’
4. Mistake 1: Thinking of an option like a stock
5. Mistake 2: Buying out-of-the-money options because they’re cheaper
6. Mistake 3: Buying options without regard for the current volatility level
7. Mistake 4: Thinking that covered writing both lowers your risk and increases expected return
8. Mistake 5: Believing that there is a certain option strategy (e.g. covered writing, vertical spreads, horizontal spreads, etc.) that has positive expected returns in the long run
9. Mistake 6: Believing that selling options (naked or covered) has positive expected returns in the long run. (Ext. of Mistake 5)
10. Mistake 7: Lack of preparation and education
William T. Ziemba
Books
Lessons from the theory of gambling. 1. Only bet when you have an edge
2. Those who win on every trade are losers or liars
3. Know what you expect to gain from a trade before you enter
4. Do your research
5. Truly diversify
6. Do not over bet
7. Evaluate the impact of all scenarios
8. Have deep pockets
9. Accept small losses
10. Follow a risk control system
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