I started buying and selling stocks in March of 2003, generally
following the CAN-SLIM system (that’s a mnemonic for desirable
stock and market attributes) developed and promulgated by William
S. O’Neil, the publisher of Investor’s Business Daily. I
learned a lot. I wrote several columns about my experience.
How did I do? In about 18 months, I made and lost the same
$6,000 some half dozen times. Good thing it was a bull market. At
least I made the six grand first before losing it.
Some common sense set in, and I sold out and quit for a while.
Quite a long while, actually, the better part of a year. I bought a
few exchange-traded funds (ETFs), representative of the larger
indexes, and I left them alone, and they ultimately didn’t do all
that much.
Investing systems can seduce you into thinking you can figure
things out — even good investing systems, like CAN-SLIM. But
investing isn’t about figuring things out. It’s about understanding
how you yourself feel about money.
I was scared to death, apparently. I was way too twitchy, way
too fast to buy, and way, way too fast to sell. My records are a
joke, dozens and dozens of stocks bought and sold. I don’t even
want to know how much I racked up in commissions just to end up
“even.”
WHAT IT WAS THAT MADE ME think I could do better, I don’t know.
Maybe it was a good long spell just looking at the market itself,
not at individual stocks. That’s what the “M” in CAN-SLIM stands
for, and I’ve come to think Mr. O’Neil should have found himself an
acronym that started with the M. (Wordsmith.org’s anagram generator
yields only MAC LINS, which doesn’t really ring in the ear. Check
out ALMS INC and SCAM NIL!) He points out again and again that
three out of four stocks will do what the market as a whole does,
so it makes sense to buy when the market’s going up and sell when
it’s going down.
There are, of course, waves within waves, and “up” and “down”
may be defined variously depending on your time horizon. But at
least in the current market, I began to get the sense that “up” and
“down” happened in spaces of two to ten weeks, and I thought I
could handle that.
In addition, I realized that I had been overwhelmed with
information. I read IBD, I subscribed to two
CAN-SLIM-based advisory services (both good, gotta give ‘em that).
I simply had too many stocks to choose from.
So I settled for what the newspaper gave me. Then I picked only
low price-earnings ratio stocks — this, in the growth stock
universe, eliminated 95 percent of what I looked at. For reasons of
my own, I preferred flat chart patterns. I wanted a high return on
equity (ROE) and a low P/E growth ratio (promising growth).
So I started making stock lists, picked a few, bought them, and
then didn’t even look at my account for several weeks. That was
last spring and summer. Checking my records just now, I see six to
eight stocks bought at that time, with modest losses on all but
two. Tenaris, a seamless steel pipe producer in Chile, I bought at
$62 and sold at $100. Toyota, $62 to $90. When the market got
twitchy toward the end of the summer, I sold out everything. I
should have kept both Toyota and Tenaris; they’re up since, Tenaris
to over $150.
BUT ALL IN ALL, I felt good. I had been up as much as $5,000 in
that particular wave, had read its crest correctly, and had managed
to keep $3,500. I’ve bought into two bull waves since, and have
managed pretty much the same result. I was up 21 percent for 2005,
investing only since April.
I could still get my head handed to me. I can’t claim to be an
expert on anything but how I feel about my money. And, within the
limits that allows me, I have learned how to do what I can.
