How to Pick Stocks Effectively

To make money in stocks you need to have an edge. There are millions of people trying to beat the market - many of them very well educated and intelligent - so what's your edge? You have to develop a process and set of rules that you stick to which run counter to the herd which provide you with the alpha or excess returns to make it worth your while.

Process over Outcome

We reviewed in an earlier article Daniel Kahnemann's Prospect Theory, his latest book "Thinking Fast…

As we've discussed, the weight of evidence suggest that it's possible to systematically beat the…

While the upstart Magnus Carlsen looks a phenomenal talent, in the world of chess few…

Warren Buffett and Charlie Munger's annual sessions at the Berkshire Hathaway AGM are, of course,…

“The better decision maker has at his/her disposal repertoires of possible actions; checklists of things…




Adhere to an Investment Philosophy

Investors such as Warren Buffett, Bill O'Neil or Jim Slater have all made fortunes in their own unique style showing that there are many ways to skin a cat. The point is that they have defined their criteria, honed their process stuck to their method. Here are some introductory articles to the main styles of investing including value, growth, momentum, dividends and others.


Why are dividends so important ? The academic literature suggests that dividends benefit investors over…

Is the trend really your friend? It seem so ridiculous that just because a price…

For many investors, the task of scouring the market for companies that look poised for…

Short selling is a practice with a bad name. In times of financial crisis, regulators…

When it comes to buying stocks, few investors would dispute that finding a bargain is…

The cult of technical analysis and day trading seems to grow and grow. The Web…

In investing circles, value and growth are often juxtaposed as distinct investment strategies. Arguably, though,…

There’s a war at large in the stock market today that may be hurting your…




Improve your Search Process

If you are serious about picking your own stocks, you need an effective search strategy to ensure a constant flow of ideas. Relying on stock tips is a dangerous activity as you never know the incentives of the tipster. Better to focus on stock screens, great investor holdings, forums, blogs and publications. Keeping a watchlist will help you act decisively when the price is right.

While savvy investors may argue all day about which trading strategies work best, few would…

Crucial to any successful investment process is having a good "search" or "origination" strategy, i.e.…




Build Qualitative and Quantitative Checklists

A checklist approach is a useful way to try to marshall acquired knowledge effectively and avoid behavioural biases. A recent bestseller - 'The Checklist Manifesto' - reviewed how many professions have reduced the risk of catastrophic failure by utilising simple checklists. Professionals from airline pilots to open heart surgeons have improved their decision making in pressurised situations by using this basic technique systematically.


After my previous list of ‘What I look for when I look at oil and…

Further to the excellent intro to Philip Fisher here, we recently came across his checklist…

As we've discussed elsewhere, Walter Schloss was one of the most successful investors in history,…

On the subject of investing checklists as an aid to better decision-making, we also noted…

As many will know, Charlie Munger is Warren Buffett's confidant, partner and the Vice-Chairman of…




Be Aware of Stock Market Inefficiencies

Research over the last 30 years has discovered a wide range of ways in which market behaviour tend to violate the once renowned "Efficient Market Hypothesis", from the value effecto to the accrual anomaly. This is meat and drinks to stock-pickers looking to beat the average market return, but it doesn't mean that it's easy - the markets are adaptive and any sure thing is usually bound to be pounced quickly, unless there are behavioural reasons why the inefficiency should persist.


In Brief  An investing screen based on buying stocks that are close to their 52…

One of the most widely studied and persistent stock market inefficiencies ever identified is the…

For much of the last 25 years, most of the investment management world has promoted…




Beware of Common Red Flags

It's worth being aware of certain 'red flags' that can help prudent investors avoid unhealthy companies. The best known of these is the Altman Z-Score (it measures the risk of a potential bankrutpcy), but there are a number of other useful metrics. They aren't always a sure bet on their own BUT they may flag something you've missed and prompt further investigation....

In Brief Created by Professor Messod Beneish, the M-Score is a mathematical model that uses…

Business distress and bankruptcy can spell disappointment or even disaster for investors – and at…

Last week, we looked at James Montier's three-pronged approach to shorting stocks. Following on from…

Warren Buffett’s rule #1 of investing is “Don’t Lose Money" while rule #2 is “Don’t…

Value Investing is all about identifying stocks with unidentified or underappreciated potential and waiting for…




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