Reminiscences of a Stock OperatorClick to enlarge is the fictionalized version of Jesse Livermore's life. Livemore is a very well known trader who traded with extreme leverage, went bankrupt, and later committed suicide after making $100 million in the crash of 1929.
Very few pieces of art, music, books, plays, etc. stand the test of time, and this is one of those. Today's great music composers have all listened to Mozart, and in the investment world, great investors have all learned the lessons of Jesse Livermore.
This book was originally published in 1923 and should be read by all investors. Here are a few lessons, with my commentary:
Book: I know from experience that nobody can give me a tip or a series of tips that will make more money for me than my own judgment. It took my five years to learn to play the game intelligently enough to make big money when I was right.
Gupta: If you haven't already encountered it, your research in stocks will inevitably lead you to people who want to give you tips. I've been given tips from many people - board members, CFOs/CEOs, major holders, etc. Often times, these come from the most genuine of people, but you have to continually question it at all costs. When tech stocks rose 1000% in a matter of months around 1999/2000, did you hear any Directors state that their stock was overpriced?
Book: It was never my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight! It is no trick at all to be right on the market.
Gupta: AAPL shares hit a low around $80 a year ago. I was buying when it fell to $100 originally, had an investment thesis that still stood, and bought more when it fell to $80, and once again around $90. I was able to exit my position around $130 when my investment thesis had been completed. If I had not been able to sit tight, I might have been tempted to do something detrimental, like sell my position as it moved down. Sitting tight was what helped me once I made my decision.
This is a book that I strongly recommend. Just as Mozart is still listened to by musicians, the lessons from Jesse Livermore's life teach investors today more in a few hours of reading than we can learn from months of investing.
Disclosure: As a Seeking Alpha contributor, I received this book for free. The Amazon link to this book includes a referral code that sends me a kickback if you decide to buy the book - you do not pay anything extra for this.