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Review of The Wallstrip Edge by Howard Lindzon

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I just got done reading Howard Lindzon’s The Wallstrip Advantage book on my new Amazon Kindle 2. His basic philosophy of investing is to reduce clutter and noise and to ride trends you find on the all time highs list.

He reminds that most news outlets are selling old news (with the bias toward being newsworthy) which clouds your vision and judgement, over-representing trends that already exist or are on their down slope.

Major news and events create trends that shift capital flows and thus underlying stock prices, but you have to think beyond the obvious (everyone already knows the obvious and the market is trying to price that in).

Stocks at or near all time highs are more likely to outperform the markets than beaten down stocks…

  • stocks are a game of supply and demand and price appreciation occurs in part due to underlying value, but also in part to an imbalance of supply and demand
  • the stock market exhibits power law characteristics where the few top performers significantly beat the average
  • growth stocks are the hardest to value (so have a great likelihood of being undervalued, especially if you feel you understand and resonate with the growth story)
  • they have momentum behind them
  • they are what smart money is betting on (giving you free access to their work)
  • the longer they have been trading sideways before breaking out the more upside potential there may be in the trend

Set personal boundaries to minimize risk (ie: give an IPO 6 months before investing in it and only invest in stocks that are at or near all time highs). Take profits as a stock appreciates to lower your risk profile and allow you to ride out the remaining portion longer.

Set a stop limit like a 10 average true range (ATR) to force yourself out of losing trades early, and winning trades that start heading south. you can also set a trailing stop limit of something like 10% on stocks.

Look at macrotrends worth investing in

  • information – market makers and web native companies have excellent growth prospects
  • sins/vice
  • war
  • health/wellness/vanity

In down markets buy brands at a discount that exist in strong lasting growth trends, but avoid spending too much on them in up markets.

Some killer quotes from the book

  • “Never let trades turn into investments, but be willing to let investments become trades.”
  • “The best thing about this information trend is how difficult it is to value. Information leads to knowledge, which leads to wealth. This leads to new power structures.”
  • “While it has never been cheaper to produce content or distribute content, it has never been more difficult to build an audience.”

Some recommended sites from the book

Overall I think this book was pretty good stuff…it helped explain why the winning stocks tend to keep winning while losing stocks tend not to be a great value, despite the psychological trap of looking for a deal.

Written by admin

March 8th, 2009 at 3:26 am

Posted in books

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