Stock Market Wizards by Jack D Schwager

Author:Jack D Schwager [Schwager, Jack D]
Language: eng
Format: epub
ISBN: 9780061857188
Publisher: HarperCollins
Published: 0101-01-01T00:00:00+00:00

* * *

When I arrived, Minervini was in his office, looking at a stock chart on his computer screen and timing the entry of a trade. After hanging up the phone he commented to me:

“I hope I don’t get a good fill.”

Come again?

A good fill is a death blow. The average investor who puts in a buy order when the market is at 27 is thrilled if he gets a fill at 26¾. I would probably just turn around and get out of the position. Stocks that are ready to blast off are usually very difficult to buy without pushing the market higher. If I put in an order for ten thousand at 27 and the floor comes back to me and says, “We can only do three thousand at 27. The market is at 27¼. What do you want to do now?” it reinforces my belief that the timing of the trade is right.

What was the motivation for the stock you just bought?

The motivation is always the same. Although I may hold the position much longer, I am buying the stock because I think it will go up within hours or at most days.

Yes, but what gives you that conviction?

You mean besides seventeen years of experience? The starting point is a quantitative screen based on the characteristics of the stocks that witnessed the largest and most rapid price advances during the past century. A good book on this concept, which may be out of print, is Superperformance Stocks by Richard Love.

What are some of the common denominators of stocks that share this rapid price gain characteristic?

They tend to be less familiar names. More than 80 percent of the stocks are less than ten years old. Although many of these stocks are newer companies, I avoid low-priced stocks. Stocks that are low are usually low for a reason. Typically, the stocks I buy are $20 or higher, and I never buy stocks under $12. My basic philosophy is: Expose your portfolio to the best stocks the market has to offer and cut your losses very quickly when you’re wrong. That one sentence essentially describes my strategy.

What are some of the other characteristics of the largest winning stocks?

One thing that would surprise most people is that these stocks typically trade at above-average price/earnings (P/E) ratios, even before they become big winners. Many investors limit their selections to stocks with low P/E ratios. Unfortunately, avoiding stocks just because the P/E seems “too high” will result in missing out on some of the best market moves.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.