Thursday, 14 April 2016

Recent reads: The Next Apple, Bull's Eye Investing


The Next Apple

I find that the strategy that the authors advocate is applicable only in the start of a bull run or in good market times (stable economy) because it's main tactic is to pick stock when it keeps climbing and goes past its 52-week high with at least 50% break out from a technical base. More of a technical read than fundamental. Teaching us how to ride on momentum stocks.

However, it contradicts itself by saying you should buy stocks that fulfilled the momentum criteria when not many people of the public know about the stocks yet (that probably means institutional investors are the ones driving the stock prices up and not so much of retail investors?).

Some take-home points about risk management:
  • pick stocks that have potential to appreciate substantially (think Earnings growth).
  • make sure our inevitable mistakes are not going to hurt our returns too much.
  • stay with our winning stocks long enough to make a difference in our returns.
  • be careful of down crash, use stop-loss (as per usual) - I am thinking of trailing stop-loss though that's not covered.
  • make sure our position sizing doesn't hurt our performance, sleep and confidence.
  • to be active in the market when it is worth being active. To do nothing when there's nothing to do.

"Before every stock reaches 200% return in a year, it is up only 50% at some point in that year."



Bull's eye investing

This is a refreshing read from the boring old FA stuff.
Many times it mentioned that we are in a secular bear market since 2000 (what now?) and talked about how we could tackle it. It also flagged out something we often overlooked in our course of investing - that at different times, different 'trending' stocks push the market up (means at different time points in the stock market centuries, different hot industries drove the economy). Then there's some draggy parts about mutual funds which I skipped.

Interesting bits on investor's psychology here... 6 mistakes of investors:




Rules for value investing (ok some boring stuff do popped up )
  • Cut your losers and let your winners ride.
  • For every stock you buy, set target prices for selling to collect your profit in stages. Set targets.
  • Be patient. Trust your research. (read more at the Graham's number part)
  • Don't try to time the stock,
  • Do not fall in love with your stock.
  • Diversify.
"Numbers don't lie, but you can lie with numbers."

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Here's an example of a secular bear market chart I plucked off google if you don't know what that means:



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This marks the end of my very brief book summary. If you have read them, do share with me what other 'gems' you found inside ok?

Time to pack for my Taiwan trip tomorrow. Ciao~

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