StockFetcher Forums · General Discussion · Reverse Engineer a Master Trader's approach<< >>Post Follow-up
4 posts
msg #91869
Ignore kawiconsulting
4/30/2010 8:58:50 PM

Years ago I worked for a broker who was a brilliant stock picker. At the time the guy managed about $100 million and I think he had not had a losing quarter for more than a decade, was doing about 50% a year just going long stocks. I believe he sold his formula to another broker and retired. I'd love to recreate as much as I can about his strategy, and would be grateful for any ideas on filters.

Here's what I know:

1. He bought value companies with great PE ratios, ROE and low debt. Value/contrarian.
2. He bought them on dips, he had some proprietary formula where he measured the extent of the drop in price against the elapsed time of the drop. He used words like 'speed' and 'price change' and 'time change'.
4. He measured these drops relative to the movement of the stock over the last 16 and 32 days.
5. He tracked institutional movement into and out of stocks. If the big boys were moving into a stock in a substantial way-measured both in the aggregate and relative to their holdings or the float, he followed. I think he paid Thomson a small fortune for this data on a quarterly basis.
6. He held stocks an average of 3-4 months. About 2/3 were profitable, he made a lot more on the profitable ones than he lost on the losers.
7. I remember that when a stock had lost 20% from his entry, he would re-evaluate and either double down or dump it, I guess based on an application of the same principles at the new price.
8. I don't remember what his profit stop was, or whether he had one at all.

I know this sounds like a long-shot but I can tell some of you guys are brilliant with the stuff, and as a newbie I'd appreciate any ideas. Maybe you'll find in this little narrative a $100 million diamond.

4,577 posts
msg #91888
Ignore Eman93
5/1/2010 12:40:57 AM

Thats a pretty straight forward approach.

The hard part is all of the leg work....... researching, knowing how to read financial reports, what good and whats bad. How to spot new trends....

Just because a company has a low PEG and a nice ROE.. there is more to it than that, I don't know what they are........ I think the institutional dollars is what drives the long big moves.

Once you have your list.... wait for a nice pull back and bang your in....

Investors business daily is doing about what you describe.... they have a CAN slim method..... I have the book sitting on my desk haven't cracked it yet.... How to make Money in Stocks by William J. O'Neil.... If you get a subscription they send you the book.

110 posts
msg #91985
Ignore Walid
5/3/2010 1:39:18 PM

Financial statements in their pure format are for IRS and SEC filing. I donít want to bore you with MBA talk but I would argue that spotting investment opportunities based on fundamental analysis takes much Ė much - more than calculating or looking up some ratios. Why - do you think - investors were willing to invest and continue investing in Amazon despite millions of dollars in loses year after year?

I am not against mixing technical and fundamental analysis. All what I am saying is that ratio analysis and financial statements donít give an accurate picture of the potential profitability of any company. For me, I am a trader not an investor. As a result, I am taking all my decisions based on technical factors and despite having the ability to read and interpret financial statements, I almost never do except if I am buying something for my sonís portfolio.

9 posts
msg #92312
Ignore stoxrox
5/7/2010 4:17:05 PM

Could you get the master formula from the retired trader or perhaps buy it from the guy he sold it to?

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