Hi Harvey,
We had an investment club in those years (while attending GMI in Flint Michigan. Ted came to visit both myself and Dan Plouffe - we had originated the investment club.
During those years Ted had a monthly investment letter. It was a one to two page letter, in which he listed his "Dogs". We tracked his universe of dogs and discovered that Ted had recapped the advances of the Dogs, but did not subtract the stocks that disappeared (went BK or got delisted). During that time we met Ted and we even got his phone number in Redondo Beach California.
Ted was appreciative of our analysis and allowed us to call during general market sell offs. We usually got a scolding for "watching the market too closely". <smile>
It DID provide a long list of beaten down stocks during the 74 general market sell off. All of the students at GMI back then were GM employees and a daily newsletter was published by a club (which always quoted the horrible stock price performance of GM at the time.
In 1974 I was a Junior and had a class in "Financial BusinessDecisions (which was a case study of past good and bad decisions made by corporations. During that course my professor announced he had taken out a second mortgage on his residence to buy up more depressed GM stock. He declared that by the time of our graduation (1976) he would have his residence completely paid off. By 1975 he had fulfilled his claim early.
During those days, Ted instructed all of his newsletter subscribers to subscribe to M.C. Horsey's monthly stock chart services.Most of Ted's "Dogs" came from that service.
Ted's limited education did not include an accounting knowledge. Sadly some of his dogs were exactly that. They went broke and disappeared.
One of those stocks was Clabir. It had done a nice double and then had a double bottom. During the double up I got very pumped about it. In 1978 I got married and we bought our first new home. Upon selling the condo we had before, we invested the money into Clabir. Clabir had a CEO named Henry Clark. During the time between the double Henry had decided that its first business (which made tank ammunition) was not a good business. He took on debt and bought an ice cream company (that made Isaly ice cream bars still can be found in the frozen ice cream section). Well the tank business lost money and the ice cream bar debt took Clabir down into bankruptcy. My seed money and the condo equity went to zero! It was a huge lesson for me.
I vowed never to buy a stock unless it had a solid balance sheet!
There are cheap stocks that do well out there.
In this day of inflation, you had better have some ebitda to keep you viable.
That rule has resulted in a lot of public coorporations to disappearfrom exchanges.
I've learned to invest in stocks that have limited debt and cash balances.
IF a stock has that, and is in a cyclical business, there is a solid thesis for a possible turnaround.
Those are most oftem the 6 baggers.
I now find more of those stocks to be the high level consolidations.
The dogs that are less than 5 bucks are very susceptible to disappearing. IMO
Not that there are not good stocks out there.
BUT THEY BETTER HAVE NO OR LITTLE DEBT and LOTS OF CASH!
This is my experience with Ted's dogs.
Every time I sell out of a stock, I "Thank Ted" as he was a huge mentor to me.
I, like Ted have owned more shares of a stock than the board of doirectors own.
If I ever get a triple, I sell one third and let the rest run on the market's money - especially if it pays a dividend. That becomes my forever buy and hold annuity.
The central most important lesson that I totally agree with Ted on, is that with many stocks a final shakeout will occur just before a substantial rise. This depressing price action is when many sell out. It is the fear created from that price action that allows the insiders (who more often than not are not board directors - but merely investors with large positions who are doing the price manipulation).
When you see that price action watch RSI. Often when RSI dips low and then price goes even lower, while RSI goes up - then do you buying and pay the ask, as it won't last long at that low ask - it is being bought by the smart money who sold into the market and caused the final shakeout.
There is software out there that deals with harmonic trading and it is incredible. I do not use it but am aware of it. SI has a trader named Qone0 who is incredible at using it.
All of the above is just my opinion and things I've learned the hard way over the 50 years I've traded and knew Ted.
Ted's approach has surely helped me obtain the finer thingte on my copy of his books of our capitalist system. It is an excellent place to start learning and gain experience from all of the trades one makes - some good and some bad. LOL
As an Investolator you should succeed! (that is what Ted wrote on my copy of his book when he visited us at GMI.
As a side note I have 3 hardcopies of his book and 2 softcopies. I loan them to my close friends in the hope it helps them achieve greater wealth.
Hope that helps!
Bob |
