Reblog: 39 Powerful Trading Tips by Ed Seykota That Will Rock Your Trading


ed seykota

Heard of Ed Seykota?

He was featured in the book Market Wizards and returned 250,000% over a 16 year period. Comparable to the likes of Warren Buffet and George Soros.

A little background:

Ed Seykota has an Electrical Engineering degree from MIT and is a systematic trend follower.

His trading is largely confined to the few minutes it takes to run his computer program, which generates signals for the next day.

If you want to get into the mind of one the best traders around, this is your chance.

Here are the 39 best things said by Ed Seykota.

Quotes by Ed Seykota

Technical analysis

1. In order of importance to me are: (1) the long-term trend, (2) the current chart pattern, and (3) picking a good spot to buy or sell. Those are the three primary components of my trading. Way down in very distant fourth place are my fundamental ideas and, quite likely, on balance, they have cost me money.

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Reblog : Warren Buffett – “It’s Not What You Look At That Matters; It’s What You See.”


Warren Buffett provides a great lesson for all investors in the book – The Warren Buffet Way, by Robert Hagstrom. The lesson is that investors can spend weeks and years reading and analyzing information on prospective companies, but according to Buffett, “It’s not what you look at that matters; it’s what you see.” The lesson learned by Buffett happened during his investigation of IBM back in 2011.

Here’s an excerpt from the book:

Buffett confessed that he came late to the IBM party. Like Coca-Cola in 1988 and Burlington Northern Santa-Fe in 2006, he had been reading the annual reports for 50 years before his epiphany. It arrived, he said, one Saturday in March 2011. Quoting Thoreau, Buffett says, “It’s not what you look at that matters; it ’s what you see.” Buffett admitted to CNBC that he had been “hit between the eyes” by the competitive advantages IBM possesses in finding and keeping clients.

The information technology (IT) services industry is a dynamic and global industry within the technology sector, and no one is bigger in this industry than IBM. Information technology is an $800 billion-plus market that covers a broad spectrum of services broken down into four different buckets: consulting, systems integration, IT outsourcing, and business process outsourcing.

The first two, combined, contribute 52 percent of IBM ’s revenues; 32 percent comes from IT outsourcing; and 16 percent from business process outsourcing. In the consulting and systems integration space, IBM is the number-one global provider—38 percent bigger than the next competitor, Accenture. In the IT outsourcing space, IBM is also the number-one global provider—78 percent larger than the next competitor, Hewlett-Packard. In business process outsourcing, IBM is the seventh-largest provider, behind Teleperformance, Atento, Convergys, Sitel, Aegis, and Genpact.

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Reblog: Risk Is Not High Math


Smead Capital Management letter to investors  titled,”Risk Is Not High Math.”

Dear fellow investors,

Long term success in common stock ownership is much more about patience and discipline than it is about mathematics. There is no better arena for discussing this truism than in how investors measure risk. It is the opinion of our firm that measuring a portfolio’s variability to an index is ridiculous, because it is impossible to beat the index without variability.

We believe that how you measure risk is at the heart of how well you do as a long-duration owner of better than average quality companies. In a recent interview, Warren Buffett explained that pension and other perpetuity investors are literally dooming themselves by owning bond investments that are guaranteed to produce a return well below the obligations they hope to meet.

Buffett defines investing as postponing the use of purchasing power today to have more purchasing power in the future. For that reason, we see the risk in common stock ownership as a combination of three things; What other liquid asset classes can produce during the same time period, how the stock market does during the time period, and how well your selections do in comparison to those options. Why would professional investors mute long-term returns in a guaranteed way? The answer comes from how you define risk.

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Reblog: Bill Nygren: Value Investing Principles and Approach


Bill Nygren is a fund manager at Oakmark Funds. He is also Chief Investment Officer for U.S. Equities at Harris Associates. He’s particularly well-known for being a value investor who doesn’t fear the technology sector.

This post summarises key takeaways from his talk at Google in December 2017. While he reinforces many core value investing principles, he also challenges us to think differently.

The difference between gambling and investing

A value investor recognizes there are different ways she can put capital at risk and the difference between gambling (negative expected value) and investing in stocks (positive expected value)

Buying stocks like you would buy groceries

Bill observed the way his mother shopped for groceries by buying more of something that was on sale and deferring her purchase of something that wasn’t yet on sale

Smart money is not always smart

He spent two years as a research analyst at Northwestern Mutual Life where he pitched ideas of companies that he found were trading below their asset values. However, the portfolio managers chose not to buy such stocks until after they were recommended by 2-3 Wall Street analysts, by which time the price had moved to above asset values.

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Reblog: Charlie Munger – How to Develop Your Own Investing Style


When it comes to the world’s best investors, Charlie Munger (Trades, Portfolio) is in a league of his own. For most of his career, Munger has been the right-hand man of Warren Buffett (Trades, Portfolio), which has, to some degree, limited his impact on the world of investing (although not by much). When people think of Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B), it is Buffet, not Munger, who first comes to mind.

But that does not mean Munger has no investment skill. Indeed, before he joined Berkshire, he ran his ownq partnership where returns we as good as, if not better than, those of Buffett.

Still, for the past several decades, Munger has been known as Buffett’s right-hand man, so it is extremely likely he has had more influence on Buffett’s strategy than anyone else.

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Reblog: Charlie Munger on Getting Rich, Wisdom, Focus, Fake Knowledge and More


“In the chronicles of American financial history,” writes David Clark in The Tao of Charlie Munger: A Compilation of Quotes from Berkshire Hathaway’s Vice Chairman on Life, Business, and the Pursuit of Wealth, “Charlie Munger will be seen as the proverbial enigma wrapped in a paradox—he is both a mystery and a contradiction at the same time.”

On one hand, Munger received an elite education and it shows: He went to Cal Tech to train as a meteorologist for the Second World War and then attended Harvard Law School and eventually opened his own law firm. That part of his success makes sense.

Yet here’s a man who never took a single course in economics, business, marketing, finance, psychology, or accounting, and managed to become one of the greatest, most admired, and most honorable businessmen of our age. He was noted by essentially all observers for the originality of his thoughts, especially about business and human behavior. You don’t learn that in law school, at Harvard or anywhere else.

Bill Gates said of him: “He is truly the broadest thinker I have ever encountered.” His business partner Warren Buffett put it another way: “He comes equipped for rationality… I would say that to try and typecast Charlie in terms of any other human that I can think of, no one would fit. He’s got his own mold.”

How does such an extreme result happen? How is such an original and unduly capable mind formed? In the case of Munger, it’s clearly a combination of unusual genetics and an unusual approach to learning and life.

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Reblog: Popularly Followed Investment Philosophies


Legendary investor Warren Buffet laid the ground rules for investment philosophy when he set two rules for investing. Rule Number 1 of investing according to Buffet is never losing money and Rule Number 2 is Don’t forget Rule Number 1.

But that is easier said than done, especially for a retail investor or a novice investor. In order not to lose money in the market is to pick up stocks which are close to the bottom. No fund manager, not even Warren Buffet has been consistently able to pick the bottom. But what differentiates a professional to a rookie is the ability to patiently wait and stick to their well-defined set of rules. It is not important to pick the bottom to make money, but as far as the price is right all that is needed to sit on the investment and patiently watch it grow. As the saying goes in the market it is not the brain that brings home the profit but its stomach to hold through the times.

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Reblog: How to Build a Warren Buffett Portfolio


Warren Buffett is recognized as the greatest investor of all-time because of his discipline and conservative approach to investing.

Instead of focusing on the short term, Warren Buffett focuses on the long term.He also has a low appetite for risk, buying companies that active traders would find boring beyond all belief.

Buffett once described his investment style as, “I’m 85% Benjamin Graham.” (Benjamin Graham is known as the godfather of value investing. His book, The Intelligent Investor, is respected as a classic on Wall Street.)

Just look at Warren Buffett’s company Berkshire Hathaway’s (BRKA) stock price appreciation over the past 20 years. And yes, you are reading that correctly, the stock currently trades for over $260,000… per share.

Berkshire currently holds a market cap of approximately $430 billion, making Warren Buffett the third richest person on the planet.

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Reblog: The Illusion Of Risk


When we find an attractive stock to invest in, we outlay money, aka invest, to earn an attractive return and the investment will involve a degree of risk.

One of the most dangerous, commonly accepted and ill thought out concepts in investing is the risk / return trade off.

That is: high returns equals high risk.

Unfortunately, Investopedia continues to spread this type dogma, as you can see by the graph below.

Illusion Of Risk

Volatility (standard deviation) is not risk!

The appropriate definition of risk is from the Oxford dictionary (or any other branded non-financial dictionary) as: Exposure (someone or something valued) to danger, harm, or loss.

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Reblog: A Real Life Example of the Philip Fisher Scuttlebutt Approach


One of the greatest investors of all time, a man named Philip Fisher, developed a famous approach to investing research known as the “scuttlebutt”. He said that there was a lot of knowledge about a company that could give insight into its investment merits if the investor could merely find it out and synthesize it into a somewhat accurate and cohesive view of an entire corporation. Peter Lynch, arguably the greatest mutual fund manager in history, engaged in this when he was jumping on beds at La Quinta and driving around town checking out a new food chain known as Dunkin’ Donuts.

My husband and I drove quite a distance to check out some companies that had finally hit our “severely undervalued” targets after years and years of watching the stocks. One of the firms happened to be a confectioner. We spent the day speaking with a small business owner who had extensive experience with this particular company and bought more than $500 worth of products to take back to our office, have analyzed, and compare to the other manufacturers in the industry. We learned a great deal about the business that is common knowledge to those who work in the sector but you can’t necessarily glean from the regulatory filings such as the 10-Kand annual report.

For instance, there appears to be a struggle at headquarters between two factions: Those who want to dilute this particular brand and sell it through mass distributions outlets and those who want to keep it a premium product sold through a chain of heavily-controlled storefronts.

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