"Think and Grow Rich"

23rd Apr '17 by Ken Lowes

15 comments 10719 reads

It was around fifty years ago when I read the book of that title, written by Napoleon Hill. He studied the activities and thinking of a large number of successful people the inference being, that if you thought the way they did you would be a success. He published his book in 1937 and it is still in print today. But that wasn’t the book that drove me on, my guru wrote his book ten years later and twenty years after, whilst wondering around the library looking for inspiration I found it. I was confused and disillusioned; I was on my way to a successful career but didn’t know it. Since that time I have read, listened to and watched, lots of self-help material, but it was Frank Bettger’s book that did it for me. “How I Raised Myself From Failure to Success” he showed me the way, he was a guiding light, the magic of his words came to life when he wrote “if you sell for money you will have a dollar sign imprinted on your forehead which only the prospective client can see”. It is rare that you come across a book or a person that leaves you so inspired that you know it will change your way of life.

It has happened again.

Having spent virtually the whole of my life in the investment business, I am by nature cynical and distrusting of the motivation of those who promote their get rich quick schemes and systems, and that goes for Stockopedia. But without Stockopedia and its team I wouldn’t have found my new guru so perhaps the path to enlightenment is not what you hear or see but how you perceive what you hear or see. Now isn’t that the truth?

My very first Blog on this site asked the question “When do you sell” I never really got an answer. It is perhaps the hardest question of all, unless of course you buy and hold and if that is the case then clearly you are an investor, which is a different world to that of the speculator / trader. Having come from the world of the investor I thought that speculator and trader were dirty words, used for investment spivs and fools who would soon see their capital depleted. I didn’t think of myself as a spiv when…

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Benson212

24th Apr '17

Hi Ken,

After reading Minervini's book, I've also been inspired by his strategy to become a growth/momentum trader. Minervini's approach is very similar to William O'Neil's CAN-SLIM approach. I've read "How to Make Money in Stocks" and he also suggests ignoring value and purchasing high flyers with rapid growth characteristics. So if anyone is looking to gauge the success of a Minervini trading strategy on the UK stock market, its worth looking at the CAN-SLIM guru screen.

http://www.stockopedia.com/screens/william-oneil-can-slim-esque-screen-11/

I've tried to create my own Minervini screen which focuses on explosive Micro/Small caps which, if held long enough, could multi-bag and break into the mid-cap territory like Boohoo.com and Fevertree Drinks.

Keeping my fingers crossed!

http://www.stockopedia.com/screens/actual-204858/

Ken Lowes

Thanks BH please don’t be offended but your last couple of paragraphs reminded me of so many people who failed going for the big one. I will guarantee that if you forget about Fevertree BOO and the like and concentrate on simply making a profit and analysing why you made a loss, you will be far more successful. Microcaps are more dangerous than swimming with sharks, for every success there are many failures. Even Paul Scott who is a genius at analysing small caps gets it wrong and has been honest enough to say so. If he can be almost wiped out what chance the rest of us?
When you think about it, we are in the profit business and the only way to make profit is to have momentum. Quality and value are part of momentum. You can have quality without momentum, you can have value without momentum, but if you want to make a lasting profit in a short time period momentum is a must, it is the fuel for the journey.
Thanks for the screen, I will now get to work on analysing the results and who knows what will happen next. As an aside I haven’t a clue why the markets have risen today, yes the French are going to anoint one of two extreme candidates, can that really be a good thing? I have seen this activity before very often at the top of a bull market. Time to keep the powder dry perhaps!!

ISAallowance

Macron isn't regarded as an extreme candidate, he's a centrist Euro-friendly ex-banker who is forecast to finish miles ahead of Le-Pen in second round voting.

The nightmare scenario exiting the first round (for the markets, no political commentary intended) was Melenchon vs. Le-Pen getting through to the second round, essentially the communists vs. the far right. The markets have risen because this has been avoided.

djbilywiz

+1 for Minervini. You can create something close to to his SEPA screen in Stocko, you do have to replace the 150dma for the 130dma used in the CAN SLIM screen though. I have made a request to be able to screen for the price vs 150dma.

I would also recommend Stan Weinstein's book "Secrets for Profiting in Bull and Bear Markets" as mentioned in Minervini's book.

Thanks ISA
Would you not agree that it is extreme for someone to come from nowhere This morning Proactive Investor said ( "Okay, so the hard-right euro-sceptic Marine Le Pen is into the run-off. However, France’s establishment (and the electorate) look likely to back the independent centrist who came from nowhere, a chap called Emmanuel Macron" ) I think with the way things have turned out Brexit Trump and now an unknown President it is extreme plus it is a little early for celebrations-- but when you build all of this unusual activity into a mature bull market one has to start to think about possibilities. It was suggested on the Today Program that Macron is going to play hard ball over Brexit, how does that benefit the UK market? Lets see how it turns out.

Regards Ken

No offence taken. I apppreciate there are risks with my strategy so I hold all six stocks as part of a diverse portfolio of stocks, bonds, cash and peer-to-peer lending. I also deploy a strict risk strategy to cut losers early and I dont use gearing.

KR,
Ben

Cisk

25th Apr '17

Ken, I'm pretty sure I have a 40 yr old copy of think and grow rich from my mother. I'll dig it out and read it!

Meanwhile, one of the activities I do a few times a year is go through the transactions screen and see what the price is now of shares I've sold. Not to beat myself up, but to understand if I'd continue to hold would I be up or down?

Obviously very specific, but generally the quality stocks continued to do well. Oil and gas continued to lose money. But the moral for me is to hold the good stuff and sell the rubbish. That's how you hear stories of old dears who held stock xyz for 60 years and they left a portfolio worth a few million. Ok this is the opposite of trading, but it's an approach. The point is we are wired to do something, to over trade whereas the best approach is often to do nothing and see what happpens.

Mike888

I have a few trading methods. I choose the word "trading" deliberately, I am not an investor, I am fearful of holding a stock for long periods as I have seen the risk of doing so. I am in and out, and will happily take between 5-10% price movement per trade. I know this is contrary to what many investors do, including the most celebrated luminaries, but I am a trader not an investor. One of my methods is momentum trading, it is by far the least risky of the approaches I take and is reasonably reliable.

Without going into the detail, my method follows three very basic rules. Firstly ensure you pick a stock that has proven momentum; secondly determine its head room based upon its own history, obviously support and resistance may not be appropriate to momentum stocks so you need to develop other methods, you could use current and historic PE with caution as a basic measure, however I wouldn't advocate this on its own. And finally I trade it, I don't invest in it.

By trade it, I mean buy on the dips and sell on the peaks, but also for every trade understand my stop loss and religiously hold true to it.

Determining peaks and dips is the most challenging element, but it is very do-able, the thing to remember is that it is better to exit a trade at a profit than loose it all on greed, the right hand side of a chart is a dangerous place and nobody knows what the next days candle will show, so take your profit and be content that you have one, and can therefore live to trade again.

Stop losses on momentum stocks are key, as once the momentum fails these stocks can decline rapidly.

Once out, determine the criteria for re-entry, and then repeat.

Thanks Cisk-- I created a virtual sold portfolio so I could monitor the decision on an ongoing basis. Irrespective of the amount sold I "buy" the sold stock in units of £10000 at the price sold. I monitor the folio daily as I may wish to buy it back on a retracement and also to see how my judgement is working out. If I rebuy then any profit or loss remains within the Folio. Since January I have sold eighteen stock and "here is the interesting bit" eight are up and eight are down and two have been repurchased. The end result including yesterdays rise is I would be £1617 better off if I hadn't sold, but I would have £167000 tied up in a portfolio going nowhere. I am happy to lose the 1% and be invested in a portfolio I have faith in.

Thanks Mike We share the same sentiments it is all about making a profit. If you haven't read Minervini, it is well worth the effort as you will find you are on the same wave length which I an sure will help make the trades even more profitable. Just reading the risk management chapters are worth the cost of the book.

Thanks BH It is terrific when you find like minded people.

OK Ken, no I haven't read it, I'll take a look.

26th Apr '17

Thanks again Ben for posting your screen I thought it covered many of the Minivini bases and I tweaked it slightly came up with 17 potential investments, I then ran it against one of my screens which I use as a check list of essential criteria and 9 passed the audition. However when I then checked against my graph screens all of them are at the top of the trend, which of course they could still keep crawling up, but I have a rule only to buy at the bottom of the trend, so in effect after a two or three month correction/consolidation. My final check is to check news, business activity, share buying /selling the next report or dividend date , just in case I am walking into trouble. I have set up a portfolio of the results to see if they continue the rise or correct back to the lower trend line. My check list is here http://www.stockopedia.com/screens/fundamentals-only-199086/ I have often wondered if I have any conflicting items in the screen so I would be happy to hear yours or anyone else's opinion.
Thanks again Ken
http://www.stockopedia.com/screens/fundamentals-only-199086/

Sorry Cisk I gave you the wrong information re the Sold Portfolio I buy back the number of shares sold at the selling price, not units of £10000-- that way I know the amount of money gained or lost by the decision. I make up all of my other test portfolios in units of £10000. Today is Friday isn't it?

No problem, I don't mind sharing ideas/screens with others here at Stockopedia.

I'm pleased to see some of my holdings pass your stringent fundamental checklist. I don't tend to place too much emphasis on balance sheet strength though. Balance sheet strength is great if you plan to hold stocks through thick and thin, but I will revert to cash during bear markets so it's less of a concern.

Growth stocks tend to be highly cash generative, so they're likely to have a strong balance sheet too. System1, Somero Enterprises and dotDigital (LON:DOTD) have all qualified for my screen and received high praise from Paul Scott.

However, I think the fundamental checklist you use is a very good starting point for finding the high flyers!

FYI - below is a link to another Minervini-esque screen which uses specific technical criteria rather than the Momentum rank. (I'm not sure which one is best to use but they seem to produce the same qualifying stocks).

http://www.stockopedia.com/screens/minervini-final-200844/

Ben

"Think and Grow Rich"

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Ken Lowes

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