If all our rules are carefully followed (not just the ones you like), your investment
results should materially improve:
Consider buying stocks with each of the last three years' earnings up 25%+, return
on equity of 17%+ and recent earnings and sales accelerating.
Recent quarterly earnings and sales should be up 25% or more.
Never buy or sell stocks on Tips or Rumours, no exception.
Cut every loss when it’s 8% below your cost. Make no exceptions so you can always
avoid huge, damaging losses. Never average down in price. In a bear market, average
decline of a leading stock is 72%.
Follow selling rules on when to sell and take profit on the way up.
Buy when market indexes are in an uptrend. Three out of every four stocks follow
the market, either up or down. Reduce investments and raise cash when general market
indexes show five or more days of volume distribution.
Buy leading stocks in the leading industry groups. 50% of any stocks move either
up or down is because of the strength or weakness of its Industry Group & its
Pick companies with management ownership of stock.
Buy stocks breaking out in heavy volume from chart patterns like cup with a handle,
flat base, double bottom, etc.
Select stocks with increasing institutional sponsorship in recent quarters.
Current quarterly after-tax profit margins should be improving, near their peak
and among the best in the stock's industry.
Don’t buy because of dividends or PE ratios.
Pick companies with a superior new product or service.
Invest mainly in entrepreneurial companies. Pay close attention to those with an
IPO in the past 8 years.
Check into companies buying back 5% to 10% of their stock and those with new management.
Don’t try to bottom guess or buy on the way down. Never argue with the market. Forget
your pride and ego. Dont back your judgements until the action of the market itself
confirms your opinion.
"Markets are never wrong - opinions often are". Dont let emotions take over, thats
one of the biggest dangers of Investing.
Find out if the market currently favours large cap or small cap stocks.
Do a post-analysis of all your buys and sells. Post on charts where you bought and
sold each stock. Evaluate and develop rules to correct your major past mistakes.