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.
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