- First goal should be a strong defense : preserve capital ! Never lose money.
-Fundamental research has been no more successful than technical analysis. This is because forecasting is the most important factor in security analysis. However, research analysts forecast poorly. This will mean some earnings misses for some stocks in some quarter on another. Higher p/es are punished more and one miss can devstate the price.
- Just how much information a person can handle effectively has come under intense scrutiny in recent years, with striking results. One is that investor's comprehension of large amounts of data about companies, industries or teh economy may not always give him or her that extra "edge". In fact ingesting large amounts of investment information can lead to worse rather than better decisions. People, when swamped by information, may select ony a small portion of the total, and reach a dramatically different conclusion than what the entire data would suggest. Not unlike juggling, each factor is another ball in the air, increasing the difficulty.
- Rule 2 : Respect the difficulty of working with a mass of information. In-depth information does not translate into in-depth profits.
-Under conditions of anxiety, uncertainty and too much information, the market becomes a giant Rorschach test. The investor sees any pattern he wishes.
-In extensive studies, was found that analysts estimates were way off mark, even though they were made less than three months before the end of the quarter for which earnings were reported. The average error was 44%
- Earnings surprises of even a few percentage points can trigger major price reactions. (especially for high p/es)
-Rule 6 : Analsyts forecasts are usually optimistic. Make the appropriate downward adjustment to your earnings estimate.
-Rule 8 : It is impossible, in a dynamic economy to use the past to estimate the future.
-The more data you get, the less information you have.
-Surprise helps unpopular stocks (with low P/Es) and hurts popular ones (with high P/Es)
- Take advantage of the high rate of analyst forecast error by simply investing in out-of-favor stocks.
-Rule 13 : Favored stocks underperform the market, while out of favor companies outperform the market, but the reappraisal often happens slowly, even glacially.
-Avoid stocks that experts or crowds are recommending.
-Sonjoy Basu published a study that found that annual returns decline as one moves from low p/e to high p/e.
-Rule 18 : Invest equally in 20-30 stocks, diversified among 15 or more industries.
-Rule 19 : Buy medium or large sized stocks.
-After picking low P/E, P/B, P/CF or P/Div, don't abandon Security analysis entirely.
1) Check that strong financial position.
2) As many favorable operating and financial ratios as possible
3) A higher rate of earninsg growth than the S&P and the likelihood this will not plummet in the near future.
4) Earnings estimates should always lean to the conservative side.
5) An above average dividend yield which the company can sustain and increase.
Dreman dound indicator 5 above improved performance when used with low P/Es.
-Rule 20: Diversify across industries. Buy the least expensive stocks within an industry regardless of how high or low the general price of the industry group.
-P/E of S&P in 97 was 24.2, P/CF 18.1, P/B 5.4 and yield 1.6%. As a rule of thumb try to use a 20% discount for the first three measures and a yield of atleast 1%. P/CF, P/E and P/B should be available in Value Line.
-Rule 21 : Safest approach is to rely on mechanical guidelines, which filter out much of emotional content. Sell a stock when its P/E approaches that of the overall market, regardless how favorable the prospects may appear. If it reaches that point, grit your teeth and get rid of it. It will probably go higher but why be greedy? Youve made a good gain and that's the whole point.
-How long to wait for a stock to work out? I would say 2.5-3 years or 3.5 years for cyclicals. If after this time the stock still disappoints, sell it. Another important ruke is to sell a stock immediately of the long term fundamentals deteriorate. No matter how much research, things can go wrong. Iam not talking of a temporary surprise or a poor quarter from which a stock will snap back from, but major changes that weaken a companies prospects. Under these conditions, I have found that taking your lumps immediately and moving on results in the smallest loss.
-
-Fundamental research has been no more successful than technical analysis. This is because forecasting is the most important factor in security analysis. However, research analysts forecast poorly. This will mean some earnings misses for some stocks in some quarter on another. Higher p/es are punished more and one miss can devstate the price.
- Just how much information a person can handle effectively has come under intense scrutiny in recent years, with striking results. One is that investor's comprehension of large amounts of data about companies, industries or teh economy may not always give him or her that extra "edge". In fact ingesting large amounts of investment information can lead to worse rather than better decisions. People, when swamped by information, may select ony a small portion of the total, and reach a dramatically different conclusion than what the entire data would suggest. Not unlike juggling, each factor is another ball in the air, increasing the difficulty.
- Rule 2 : Respect the difficulty of working with a mass of information. In-depth information does not translate into in-depth profits.
-Under conditions of anxiety, uncertainty and too much information, the market becomes a giant Rorschach test. The investor sees any pattern he wishes.
-In extensive studies, was found that analysts estimates were way off mark, even though they were made less than three months before the end of the quarter for which earnings were reported. The average error was 44%
- Earnings surprises of even a few percentage points can trigger major price reactions. (especially for high p/es)
-Rule 6 : Analsyts forecasts are usually optimistic. Make the appropriate downward adjustment to your earnings estimate.
-Rule 8 : It is impossible, in a dynamic economy to use the past to estimate the future.
-The more data you get, the less information you have.
-Surprise helps unpopular stocks (with low P/Es) and hurts popular ones (with high P/Es)
- Take advantage of the high rate of analyst forecast error by simply investing in out-of-favor stocks.
-Rule 13 : Favored stocks underperform the market, while out of favor companies outperform the market, but the reappraisal often happens slowly, even glacially.
-Avoid stocks that experts or crowds are recommending.
-Sonjoy Basu published a study that found that annual returns decline as one moves from low p/e to high p/e.
-Rule 18 : Invest equally in 20-30 stocks, diversified among 15 or more industries.
-Rule 19 : Buy medium or large sized stocks.
-After picking low P/E, P/B, P/CF or P/Div, don't abandon Security analysis entirely.
1) Check that strong financial position.
2) As many favorable operating and financial ratios as possible
3) A higher rate of earninsg growth than the S&P and the likelihood this will not plummet in the near future.
4) Earnings estimates should always lean to the conservative side.
5) An above average dividend yield which the company can sustain and increase.
Dreman dound indicator 5 above improved performance when used with low P/Es.
-Rule 20: Diversify across industries. Buy the least expensive stocks within an industry regardless of how high or low the general price of the industry group.
-P/E of S&P in 97 was 24.2, P/CF 18.1, P/B 5.4 and yield 1.6%. As a rule of thumb try to use a 20% discount for the first three measures and a yield of atleast 1%. P/CF, P/E and P/B should be available in Value Line.
-Rule 21 : Safest approach is to rely on mechanical guidelines, which filter out much of emotional content. Sell a stock when its P/E approaches that of the overall market, regardless how favorable the prospects may appear. If it reaches that point, grit your teeth and get rid of it. It will probably go higher but why be greedy? Youve made a good gain and that's the whole point.
-How long to wait for a stock to work out? I would say 2.5-3 years or 3.5 years for cyclicals. If after this time the stock still disappoints, sell it. Another important ruke is to sell a stock immediately of the long term fundamentals deteriorate. No matter how much research, things can go wrong. Iam not talking of a temporary surprise or a poor quarter from which a stock will snap back from, but major changes that weaken a companies prospects. Under these conditions, I have found that taking your lumps immediately and moving on results in the smallest loss.
-
