I have been a self-directed stock investor for over 15 years. It doesn’t seem that long. Over the years I have subscribed to countless newsletters, and stock recommendation websites. Heck, I can use all the help I can get. I have also been taking courses, and trying things on my own. I am big into Technical Analysis, (reading charts. Stock not star) and have come to believe that investing takes a combination of technical analysis, looking at financial statements, and investigating management teams. I call it combo analysis.
I find looking after my money fun, educational, and profitable. Yes, it is stressful at times. The last two weeks have not been a banner time for my paper investments. But that is part of learning to actively invest. A month when 3 out of 7 tenants don’t have the rent on time, is equally as stressful. NO type of investing is without its ups and downs.
I have given up on most of the newsletters and stock recommendation sites. I still have a couple. I have one that sends out emails every day. I keep that one because it makes good reading if you want an off the wall point of view. But it also gives stock recommendations. When they hype a stock, and say that they are putting 25% of their portfolio into it, you think maybe they know what they are talking about. They are putting their own money on the line. At least they say they are. I have stopped buying the recommended stocks. I have lost money on every one of them. If they actually put 25% of their own money into it, by now, they should be broke. But the letters and recommendations keep coming. Credibility??? Not much. But I still love the commentary.
I have realized that the day he recommends a stock you need to buy it, and not hold it for very long. No more than a couple of weeks at most, often, not more than a few days. Some take a few months to really bottom out. Here are some examples. CXXI Recommended at $2.10, sold Friday at $0.48. SPP recommended at $0.25, sold Friday $0.27. Note 2 weeks ago it was at $0.15. WRLD at $0.20, sold Friday at $0.04. I watched another recommendation. PURE that was recommended at $0.20, and went down to about $0.08. I bought it at $0.095 and it closed Friday at $0.12. The chart says it may continue at that level, as there is some increased buying. I have my sell set at $0.13 and $0.11.
I have realized that hyping a stock that has gone up 200% sounds exciting, but what makes you think it will go up another 200%? I need to know about it BEFORE it starts going up. That is a lot harder to do.
I use Stockcharts.com for my charting. They allow you to write my own stock scan programs. That has been fun and educational. Having been in automation for 30 years, writing a program is not new. Learning the language takes some time, but Stockcharts.com has fantastic assistance with that. I have 5 programs that I am testing. I record the stocks selected each day, then check their performance, 1 week, then 1 month later. I am trying for 60% accuracy. I have been doing this for a year. I have gotten to 55% for one month, on one scan, but the next month it was down to only 43%. Not there yet.
There are a ton of indicators that you can use, and finding the right combination has been a challenge. If the chart of my scanned stocks indicates that a stock may be on the way up (not when it is already there) I then look at the financials, and the insider trading. Nobody knows more about a company than the people in the front office. They are not stupid people. If the stock has been going up for several weeks and then they start to sell, you probably should as well. If the stock is down, and the insiders are buying there is a good chance the stock is undervalued. Just a word of caution, their time frame may be longer than yours. They are getting a salary as well, so if it takes a year for the stock price to go up, they are still covered.
Tesla stock may be out of your price range, but what about the companies that make, or mine, the materials that electric cars need. Like Batteries, Lithium, Cobalt, DC motors, etc. That piece of advice came from Kevin O’Leary. Seems like a pretty smart guy. The same applies to new green technologies. The companies that actually make the products will probably become more profitable, driving the stock prices up, but what about the companies that supply the parts. As the demand for finished products goes up, so will the demand for parts.
I am a big believer in doing your own research. If you don’t know how, learn! You can’t go back on a company that recommends a stock, and ask for your money back, if the stock under performs. So, you might as well learn how to depend on yourself. You don’t actually have to spend money on a stock to test your theories. You just monitor the stocks you think you should buy, and see if your analysis was correct. If you get good at it, then maybe invest some actual money.
I recommend doing that for at least a year. Don’t get cocky. Just because 2 of your picks when up, don’t think you’re a genius. Everybody gets lucky sometimes. Profits come from consistency, not blind luck. Though if you get lucky, take the profit! Never try and time the market. That is a straight luck play. If you buy at 20% of the low, and sell at 20% of the high, you MADE MONEY. Warren Buffet says that he made most of his money, by selling too soon. As soon as you buy, you set an exit point. SELL AT THAT POINT. Yes, tomorrow it may come up 5% but the next day it can continue the drop and go down an additional 20%. Conserve your cash.
Newsletters and website recommendations are a great place to get IDEAS. Research is where the money is made. There are many companies out there who make a living off of hyping stocks. They get paid to do it. The stocks seldom last long. I got a hot stock tip from a company out of Texas. Why would a complete stranger from Texas call me with a hot stock tip??? Nobody is that generous. I took the chance, but watched it like a hawk. I bought it at $0.95 cents, held it for 6 days till I saw it level off. I got a call from my new “Friend” who told me not to panic it would keep going up. Next morning, I put in a sell order that if the stock moved up 3 cents to sell it. It sold at $1.65. The stock went as high as $1.98 over the next 2 days. The 3rd day it dropped to $1.58. 4 days later it was selling back at $.06. When I called to tell my new “Friend” that I had made out OK, the number was no longer in service.
If I had not have been watching it, I could have lost most of my money. There is an old stock market saying at applies here: Bulls and Bears make money, but Pigs get slaughtered.