“If It Doesn’t Go Up, Don’t Buy It!”

Al Thomas, author of the book “If It Doesn’t Go Up, Don’t Buy It!” wrote in his weekly syndicated column about the “Attention Deficit Research Disorder.”

Let’s listen in:

"Wall Street has everyone, even the “experts”, believing the myth that research is required to be a successful investor.

Every fact about a company must be known before an investment is made. Find out the P/E ratio, management, cash flow, product quality, market share, etc., etc.


All the figures show the company is a “good” company, but that does not mean the stock will go up. Historical studies show there is little correlation between being “good” and the stock price going up.


After the investor has done his analysis he comes to realize all this information is an agglomeration of stuff that has no wisdom. Suppose you memorized the Encyclopedia Britannica. Would that make you wise? No. You just know lots of “stuff”. The key is you have to know what to do with it, how to apply it.


I make my income from trading. Would it help me to memorize the Morning Star Manual? Not really. It won’t tell me which stocks will go up. If all this “research information” is so valuable why aren’t all brokers rich? As a former brokerage company owner, I will tell you they are not.


Today there is so much information available it is staggering. Then you have to know if what has been found is true. Look at all the false material the financial wizards have been feeding the public.


Furthermore information travels at the speed of light through the Internet to any person who cares to read it. It is very difficult to keep a secret. There are whistle blowers everywhere, not that they are bad people.


Wall Street brokerage companies want you to do nonsense research so you won’t sue them when their “recommendations” turn out to be wrong.


There is only one thing you really need to know and that is the recent direction of the price movement of the stock. Is it going up, down or sideways? Look at a chart of the stock price for the last year or so. On the Internet you will find a chart and it will tell you more in 30 seconds than 30 days of intensive research.


The inundation of facts and figures can have the investor a nervous wreck. There is no need for emotional tribulation when you look at the price movement of the “good” company’s stock. It will be apparent whether it is good, bad or indifferent. If the trend is up, buy it. That is all any investor needs to know.


When it turns down sell it. Find another “good” company whose stock price is appreciating.


Financial research is worthless. If it created wisdom everyone would be rich."

Al's comments definitely fly in the face of conventional wisdom.. Fundamental analysis is a helpful and useful exercise, however, it is not the whole picture; it does not tell us when to invest. Additionally, during the periodic bear market, the market does not care whether a company is good or bad; being a good company will not prevent it's stock from declining.

I believe trend following (technical analysis) and staying on the right side of the market, while employing good stop-loss sell strategies (along with fundamental analysis), is the key to a better and less stressful way of  investing.


Fundamental Analysis


What Does Fundamental Analysis Mean?

A method of evaluating a security that entails attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors. Fundamental analysts attempt to study everything that can affect the security's value, including macroeconomic factors (like the overall economy and industry conditions) and company-specific factors (like financial condition and management).

The end goal of performing fundamental analysis is to produce a value that an investor can compare with the security's current price, with the aim of figuring out what sort of position to take with that security (underpriced = buy, overpriced = sell or short).

This method of security analysis is considered to be the opposite of technical analysis.


Technical Analysis



What Does Technical Analysis Mean?

A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.

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