Winning on Wall Street

Author: Yang Chaojun
Publisher:
Publish Date: 2002-01-01
Features: A Practical Investment Bible---For retail investors, reading this book will help them learn the basic methods and techniques of stock investment, avoid major mistakes, and ensure reasonable profit targets. For professional investors, reading this book serves to establish a correct investment philosophy, determine investment style, and improve investment analysis skills. Based on mastering the fundamental logic of the book, they can develop a unique investment style that aligns with their personal strengths, enabling them to achieve excellent investment performance in their long-term securities investment career.
Chapter 1 Introduction to the Contemporary U.S. Wall Street Securities Investment Analysis School The world of Wall Street securities investment practices is diverse and rich, with various schools and approaches. We can only categorize and introduce some of the more significant and influential schools at a certain level.
Chapter 2 Winning on Wall Street One of the most outstanding investors on Wall Street, Martin Zweig, shares his investment philosophy. His flexible application of fundamental and technical analysis techniques, along with his "super model," holds strong practical value, especially in predicting market trends.
Chapter 3 The Art of Stock Investment for Wealth William O'Neil, a successful senior investor on Wall Street, presents the C-A-N-S-L-I-M investment rule, which focuses more on fundamental analysis, micro-stock selection, and buying/selling timing.
Chapter 4 The Game of Investing in High-Tech Stocks Jeffrey Moore, a leading authority on high-tech stock investment in the U.S., excels at analyzing the industrial structure and characteristics of high-tech companies, capturing how their competitive advantages translate into stock prices. He helps people make rational and wise choices regarding entry timing, direction, investment criteria, holding periods, and information processing.
Excerpt: Strategies and Techniques for Stock Selection/Section 2 Two Methods of Stock Selection In the stock market, there are many wrong ways to play, but there are also more than one right way. The so-called "right way" refers to methods that can achieve better long-term returns than the market itself. We can divide stock selection methods into two distinct categories.
Category 1 We call this the "machine gun method," which involves systematically collecting large amounts of public stock data and then screening these stocks based on pre-set criteria to select the ones you want. With this method, you can cover almost all stocks while spending very little time on each. You can diversify your risk by building a portfolio, such as buying 10, 20, or even 30 stocks. However, the drawback of this method is the inability to conduct in-depth research on any single company and the potential for unexpected mistakes.
Category 2 We call this the "rifle method." This approach requires studying only a small number of listed companies and carefully selecting and thoroughly analyzing each one. During this process, you do not rely on the surface value of publicly available data. Instead, you can delve into the company's internal accounting methods, management changes, core business trends, changes in tax laws, or other economic variables that affect listed companies. By combining this information, you can select stocks that outperform the market. This method is more practically dependent on the intrinsic value of the company. Its drawback is the need for comprehensive market research, which is not very realistic for retail investors. Although many Wall Street analysts and fund managers choose this method, the returns derived from it depend heavily on the analyst's ability, and the differences can be significant. We do not believe the "rifle method" is suitable for retail investors, hence we tend to prefer the "machine gun method." With this method, our error rate is approximately 3/8, meaning that among the 8 selected stocks, only 3 underperform the market. This is a 63% success rate, which is not a poor average success rate. In the following sections of this chapter, we will focus on how to use the "machine gun method." In our stock selection process, we will involve variables such as:
- Rapid growth in company sales and profits;
- A reasonable price-to-earnings ratio given the company's growth rate;
- Insider buying or at least no large-scale selling of the company's stock by internal personnel;
- The stock's relative strong price performance.
In other words, we tend to buy strong stocks and sell weak ones.