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Brian Burns is an investor, option trader, and author of "Trading Stock Options". He holds a BS in Business Finance. He currently works as an accountant and auditor for a private CPA firm. His background in accounting influences his investing style as he focuses on valuing stocks from... More
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  • Top 3 Reasons Why Investing Is Like Golf

    1. Amount of Useless How-To Books on the Subject:

    Anytime I see a large amount of how-to books on any subject it means two things to me: Being successful at the topic isn't easy and most people aren't any good but will still do it anyway.

    Do a search for books about investing or trading stocks on Amazon.com (AMZN) and you'll be overwhelmed by the choices. There are investing books for dummies, complete idiots, morons, and people who will without a doubt lose money no matter what they do. There are books for beginners, teenagers, the elderly, and probably ones for small pets and farm animals. But are those authors pros at investing? In other words, do they make the majority of their living investing or trading stocks? When I read the author bio's it's clear to me that these authors are professionals - Professional Authors.

    The market for investment books is there. People lose money in the stock market and then start looking for anything with a catch phrase or any book with the implication that once read they will be endowed with investing knowledge that is only disclosed in that one book. If someone had a juicy investment or trading secret why would they tell anyone? If everyone was doing it, it wouldn't work.

    Do the same search for golf and you'll find an abundance of material. You'll find everything from fixing your swing to how to master the "mental" game of golf. Sound familiar? It should because there are plenty of books about the "mental" side of investing as well.

    Sure, it might help to seek advice on how to play from a professional but most of those books aren't written by the pros. Two books that were on the first page of the search results on Amazon.com (NASDAQ:AMZN) were written by Psychologists. Either golf is so hard that it is driving people mental or most of the members on the PGA tour are actual PhD's.

    I won't say that every book is useless as there are some good investing and golf books out there. A couple of my favorites on the investing side are: The Intelligent Investor by Benjamin Graham, One Up on Wall Street by Peter Lynch, and A Random Walk Down Wall Street by Burton G. Malkiel. A couple of good golf books that I recommend are: Five Lessons by Ben Hogan and How I Play Golf by Tiger Woods.

    2. Everyone Talks About Their Best Shots Months or Years After They Occur

    People that I know, usually people at work, all have a golf story where they shot under par here, or at par there, or just over par on this course. They will also have a list of amazing shots that they've hit in their lifetime. It's curious that these things always happen when you're not around. Plus, it isn't until you're playing with them on a course when it comes out, "On this hole about a year ago, I drove it about 275 from the tee and hit an incredible 2nd shot that just rolled into the hole". However, this time around it takes him 5 shots to the green and a sweet four put to hole out.

    And it's always those same people who will tell you how much they've made on a stock after it's already doubled but will never tell you what they are going to buy today. I remember telling a particular co-worker about 3D Printing Systems (DDD) back in March 2013. He asked what I was buying and I told him that I liked DDD for the following reasons: The company was expected to release new products in the coming months, their sales and revenue numbers had increased throughout the recent years, they had positive cash flow from operations, and didn't have much debt. He said it was too risky due to the usual metrics that are pointed out, such as the P/E ratio being too high, and would probably buy something else. Throughout the months he asked me on and off how DDD was doing. By the time DDD had more than doubled in November 2013 I heard him spouting off to a co-worker about how great DDD had done this last year and he had bought some, "a long time ago".

    This is the same type of person who, when Google (GOOG) was $500 back in June 2011, would tell you that GOOG is overvalued but when once it reached $1000 they've been shareholders from the start. I'm sure you all know someone like that and if you don't then you might just be that person...how can you live with yourself?

    3. Tools and Training Aids are Everywhere

    There are countless ways to throw your money away on golf training aids. There are swing tempo trainers, wrist guards that will "cure your slice", knee braces that "lock you down", swing jackets, some weird net things that you stand in, aligning rods, and even a bag. Yes, for $25 on Amazon you can buy a bean bag looking cushion that you swing your club into; it's an impact training tool and I'm not joking. That bag has a 4 out of 5 star rating on Amazon. I usually know if I took a good swing by looking at where the ball went but that's just me.

    Do a web search for investing/trading aids and you'll have no problem finding companies willing to sell you any type of trading software; some will only cost you about $5,000 to get started. There are trade stations, academies, signals, ect. Most of the companies that sell the systems will let you sit in a webinar of "real-time" trading to see the software in action. If the software is so great, why is this guy working there? Shouldn't he just use the software to make millions instead of trying to get the people in the webinar "Pumped Up"?

    Now most brokers have all types of trading tools and software available for free to their clients, and why wouldn't they want to inspire you to trade? After all, the brokers make much of their dough on commissions. The last 10-k for TD Ameritrade (AMTD) listed revenue from commissions to be 42% for the year of 20131. It makes sense for them to spend some money to give you "Advanced" charting tools so that when you run a screen for charts with a Double-Bottom, Untied Shoe, or even Loch Ness then you'll know what to do: Give them about $10 per trade.

    Sources:

    1TD Ameritrade 2013 10k Accessed on 1/8/14 from:

    http://www.sec.gov/Archives/edgar/data/1173431/000119312513451360/0001193125-13-451360-index.htm

    Disclosure: I am long DDD, . I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Jan 13 10:50 AM | Link | Comment!
  • Stock Screeners that Beat the Market
    There are no shortage of stock pickers out there; you may be overloaded with stock suggestions from brokers, analysts, or your buddy Joe from the office. Turn on CNBC and you'll see analysts giving their two cents, and even CEO's appearing to tell you that their stock is the one you should put in your account.
    The amount of information out there kind of reminds me of golf; everyone seems to have a swing tip and most people are getting their tips from someone else.
    If you are a fan of Jim Cramer you are probably aware of his TV shows and books. While I don't agree with everything he says I do emphatically agree with him when he says that you have to put the time in and do your own homework.
    What I have been striving to do is to focus on finding quality stock names, not by listening to an analyst or CEO on TV, but by listening to the performance of the company. In your day to day life I'm sure you don't have time to sit down and research the countless stock names that are dropped into your lap.  The fastest way to find quality names is to set criteria that you think is important and focus on those stocks.
    I ran a screen at the close of the market on 9/8/10 using the screeners provided by IMetrix. I set the criteria as follows:
    1. Quarterly Earnings Momentum (Change in quarterly earnings growth rate) at greater or equal to 50%.
    2. Daily Average Trade Volume at greater or equal to 100,000.
    3. Pre-Tax Return on Equity (Trailing 12 Months) at greater than or equal to 30%.

    4. Next Quarter Earnings Growth Over Same Quarter of Last Year at greater than or equal to 50%.

    5. Gross Margin (Trailing 12 Months)at greater than or equal to 50%.
    The Screen yielded 36 names. Some of these I have heard of while others were new to me. The names included Herbalife (HLF), Priceline (PCLN), Hanson Natural Corp (HANS), United Parcel Service (UPS), and American Beverage Company (ABV).
    I tracked the performance from 9/8/10 to the close on 1/14/11. The best performer in this screen was Zagg Inc (ZAGG) with a gain of 168%. The worst performer was YRC Worldwide Inc (YRCW) with a loss of -51.9%. Out of 36 stocks, 6 (16.6%) finished in the red while 30 (83.3%) closed above where they were on 9/8/10.
    If you had simply run this screen and spread $10,000 (equally weighted) into these names you would have had a gain of 27.5% from 9/8/10 - 1/14/11. The DOW gained 13.5%, Nasdaq 23.6%, and S&P 500 17.7% during this same time period.
    I would say more time is needed to track the  performance of these stocks in a down market. The screen should also be used as a starting point for further research. The purpose is to weed out the majority of names and focus your energy on researching the few instead of the many. Below is the complete list of names included in the screen:
          Screener Results































    Disclosure: Long shares of PCLN.

    Disclosure: I am long PCLN.
    May 08 1:19 PM | Link | Comment!
  • A Simple Screen to Beat the Market
    There's no shortage of stock pickers out there; you may be overloaded with stock suggestions from brokers, analysts, or Joe from the office. Turn on CNBC and you'll see analysts giving their two cents, Jim Cramer giving out 30 recommendations a day, even CEO's appearing to tell you that their stock is the one you should put in your pocket.
    The amount of information out there kind of reminds me of golf; everyone seems to have a swing tip and most people are getting their tips from someone else.
    What I have been striving to do is to focus on finding quality stock names, not by listening to Joe, Cramer, or some CEO but by listening to the performance of the company. In your day to day life I'm sure you don't have time to sit down and research the countless stock names that are dropped into your lap.  The fastest way to find quality names is to set criteria that you think is important and focus on those stocks.
    I ran a screen at the close of the market on 9/8/10 using my favorite research site IMetrix. I set the criteria as follows:
    1. Quarterly Earnings Momentum (Change in quarterly earnings growth rate) at greater or equal to 50%.
    2. Daily Average Trade Volume at greater or equal to 100,000.
    3. Pre-Tax Return on Equity (Trailing 12 Months) at greater than or equal to 30%.

    4. Next Quarter Earnings Growth Over Same Quarter of Last Year at greater than or equal to 50%.

    5. Gross Margin (Trailing 12 Months)at greater than or equal to 50%.
    The Screen yielded 36 names. Some of these I have heard of while others were new to me. The names included Herbalife (NYSE:HLF), Priceline (NASDAQ:PCLN), Hanson Natural Corp (HANS), United Parcel Service (NYSE:UPS), and American Beverage Company (ABV).
    I tracked the performance from 9/8/10 to the close on 10/22/10. The best performer in this screen was Zagg Inc (NASDAQ:ZAGG) with a gain of 120%. The worst performer was YRC Worldwide Inc (NASDAQ:YRCW) with a loss of -13.8%. Out of 36 stocks, 5 (13.8%) finished in the red while 31 (86.1%) closed above where they were on 9/8/10.
    If you had simply run this screen and spread $10,000 (equally weighted) into these names you would have had a gain of 14.5% from 9/8 - 10/22. The DOW gained 7.1%, Nasdaq 11.2%, and S&P 500 7.6% during this same time period.
    I would say more time is needed to track the performance of these stocks in a down market. The screen should also be used as a starting point for further research. The purpose is to weed out the majority of names and focus your energy on researching the few instead of the many. Also, I am testing some changes to the screen and will be posting the tracking performance of that screen shortly. Below is the complete list of names included in the screen:


    Disclosure: No positions in any of the stocks mentioned.


    Disclosure: No positions
    Oct 23 2:13 PM | Link | Comment!
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