Fat-Pitch Strategy:
- look for wide-moat companies
- always have margin of safety
- don't be afraid to hold cash
- don't be afraid to hold relatively few stocks
- don't trade very often
Avoid behavioral finance like overconfidence, active trading, mental accounting
20 stock investing tips
- keep it simple (company with economic moats, margin of safety, long time horizon)
- have the proper expectation
- be prepared to hold for a long time
- tune out the noise (focus on company performance instead of market price)
- behave like an owner
- buy low, sell high (but how?)
- watch where you anchor (avoid behavioral finance)
- remember that economics usually trump management competence (economy is more important than management ability)
- be careful of snakes (poor management, principal-agency problem)
- bear in mind that past trends often continue
- prepare for situation to proceed faster than you may think
- expect surprises to repeat
- don't be stubborn (sell when you make mistake or situation not as expected)
- listen to your gut
- know your friends, and your enemies (who buy with or sell against you)
- recognize the signs of a top
- look for quality
- don't buy without value
- always have a margin of safety
- think independently
Graham's simple formula:
implied growth rate g = (P/E ratio - 8.5)*(1/2)*(100%)
Fisher's 15 points for growth stock
- does the company have products or services with sufficient market potential to make possible a sizable increase in sales for at least several years?
- does the management have a determination to continue to develop products or processes that will still further increase total sales potentials when the growth potentials of current attractive product have largely been exploited?
- how effective are the company's research-and-development efforts in relation to its size?
- does the company have an above-average sales organization?
- does the company have a worthwhile profit margin?
- what is the company doing to maintain or improve profit margin?
- does the company have outstanding labor and personnel relations?
- does the company have outstanding executive relations?
- does the company have depth to its management?
- how good are the company's cost analysis and accounting controls?
- are there other aspects of the business, somewhat peculiar to the industry involved, which will give the investor important clues as to how outstanding the company may be in relation to its competition?
- does the company have a short-range or long-range outlook in regard to profits?
- in the foreseeable future, will the growth of the company require sufficient equity financing so that the larger number of shares then outstanding will largely cancel the existing stockholders' benefit from this anticipated growth?
- does management talk freely to investors about its affairs when things are going well but "clam up" when troubles and disappointments occur?
- does the company have a management of unquestionable integrity?
Fisher's 3 reasons to sell a stock
- you have made a serious mistake in assessment of the company
- the company condition deteriorate
- could reinvest the money in another far more attractive company (but can you sure one good company is certainly better than another good one? )
