Page 466 - How to Make Money in Stocks Trilogy

336 INVESTING LIKE A PROFESSIONAL

outstanding Ivy League universities, are quite often wrong when it comes to
making and preserving money in the stock market.
The same situation repeated again in 2008 when we put Schlumberger
on the sell/avoid list at $100 on July 3. It closed below its 10-week average
and fell to $35 in eight months. Most of the oils were removed from our
list on June 20th and they all slowly began their topping process as a
group. Many institutions, on analysts’ recommendations, bought the oils
too soon on the way down because they seemed a bargain. Oil itself was
midway in the process of collapsing from $147 a barrel to its eventual low
of $35.
In August 2000, a survey showed many analysts had high-tech stocks as
strong buys. Six months later, in one of the worst markets in many years,
roughly the same proportion of analysts still said tech stocks were strong
buys. Analysts certainly missed with their opinions. Only 1% of them said to
sell tech stocks. Opinions, even by experts, are frequently wrong; markets
rarely are. So learn to read what the market is telling you, and stop listening
to ego and personal opinions. Analysts who don’t understand this are des-
tined to cause some substantial losses for their clients. We measure histori-
cal market facts, not personal opinions.
We do not visit or talk to any companies, have analysts to write research
reports, or have or believe in inside information. Nor are we a quantitative
firm. We tell our institutional subscribers who have teams of fundamental
analysts to have their analysts check with their sources and the companies
concerned to decide which of our rather unusual ideas based on historical
precedent may be sound and right fundamentally and which are possibly
not right. Institutions have always had a prudent personal responsibility for
the stocks they invest in. We make our mistakes too, because the stock mar-
ket is never a certainty. But when we make mistakes, we correct them rather
than sit with them.

The Bowling Boom Tops in 1961
Beginning in 1958 and continuing into 1961, Brunswick’s stock made a huge
move. The stock of AMF, which also made automatic pinspotters for bowl-
ing alleys, gyrated pretty much in unison with Brunswick. After Brunswick
peaked in March 1961, it rallied back to $65 from $50, but for the first time,
AMF did not recover along with it. This was a tip-off that the entire group
had made a long-term top, that the rebound in Brunswick wasn’t going to
last, and that the stock—as great as it had been—should be sold.
One practical, commonsense industry rule is to avoid buying any stock
unless its strength and attractiveness are confirmed by at least one other