复制成功
  • 图案背景
  • 纯色背景

Gene Marcial's 7 Commandments of Stock Investing

下载积分:1000

内容提示: From the Library of Melissa Wong G e n e M a r ci a l’ s7commandments ofstock investingFrom the Library of Melissa Wong Vice President, Publisher: Tim MooreAssociate Publisher and Director of Marketing: Amy NeidlingerExecutive Editor: Jim BoydEditorial Assistant: Pamela BolandDevelopment Editor: Russ HallDigital Marketing Manager: Julie PhiferMarketing Coordinator: Megan ColvinCover Designer: IngredientManaging Editor: Gina KanouseCopy Editor: Karen A. GillProofreader: Erika Millen Indexer: Lisa Stumpf...

文档格式:PDF| 浏览次数:4| 上传日期:2013-02-27 09:20:56| 文档星级:
From the Library of Melissa Wong G e n e M a r ci a l’ s7commandments ofstock investingFrom the Library of Melissa Wong Vice President, Publisher: Tim MooreAssociate Publisher and Director of Marketing: Amy NeidlingerExecutive Editor: Jim BoydEditorial Assistant: Pamela BolandDevelopment Editor: Russ HallDigital Marketing Manager: Julie PhiferMarketing Coordinator: Megan ColvinCover Designer: IngredientManaging Editor: Gina KanouseCopy Editor: Karen A. GillProofreader: Erika Millen Indexer: Lisa StumpfSenior Compositor: Gloria SchurickManufacturing Buyer: Dan Uhrig©2008 by Pearson Education, Inc.Publishing as FT PressUpper Saddle River, New Jersey 07458This book is sold with the understanding that neither the author nor the publisher is engagedin rendering legal, accounting, or other professional services or advice by publishing this book.Each individual situation is unique. Thus, if legal or financial advice or other expert assistanceis required in a specific situation, the services of a competent professional should be sought toensure that the situation has been evaluated carefully and appropriately. The author and thepublisher disclaim any liability, loss, or risk resulting, directly or indirectly, from the use orapplication of any of the contents of this book.FT Press offers excellent discounts on this book when ordered in quantity for bulk purchasesor special sales. For more information, please contact U.S. Corporate and Government Sales,1-800-382-3419, corpsales@pearsontechgroup.com. For sales outside the U.S., please contactInternational Sales at international@pearsoned.com.Company and product names mentioned herein are the trademarks or registered trademarksof their respective owners.All rights reserved. No part of this book may be reproduced, in any form or by any means,without permission in writing from the publisher.Printed in the United States of AmericaSecond Printing May 2008ISBN-10: 0-13-235461-6ISBN-13: 978-0-13-235461-5Pearson Education LTD.Pearson Education Australia PTY, Limited.Pearson Education Singapore, Pte. Ltd.Pearson Education North Asia, Ltd.Pearson Education Canada, Ltd.Pearson Educatión de Mexico, S.A. de C.V.Pearson Education—JapanPearson Education Malaysia, Pte. Ltd.Library of Congress Cataloging-in-Publication DataMarcial, Gene G.Gene Marcial’s seven commandments of stock investing / Gene G. Marcial.p. cm.ISBN 0-13-235461-6 (hbk. : alk. paper) 1. Stocks. 2. Speculation. 3. Investments. I. Title. HG6041.M353 2008332.63’22—dc222007044777From the Library of Melissa Wong To Kristi, for her love, support, and encouragement.From the Library of Melissa Wong This page intentionally left blank From the Library of Melissa Wong vContentsForeword . . . . . . . . . . . . . . . . . . . . . ixAcknowledgments . . . . . . . . . . . . . xiiiAbout the Author . . . . . . . . . . . . . . xivTo the Reader . . . . . . . . . . . . . . . . . xvIntroduction . . . . . . . . . . . . . . . . . . xviiCommandment 1: Buy Panic . . . . . . . . . . . . . . . . . . . . . . 1Uncontrolled Fear . . . . . . . . . . . . . . . . . . . 3Expect the Unexpected . . . . . . . . . . . . . . . 5Buying Stocks in Trouble. . . . . . . . . . . . . 10Distress Investing. . . . . . . . . . . . . . . . . . . 14Commandment 2: Concentrate. Diversify Not . . . . . . 21Cruise-Control Strategy. . . . . . . . . . . . . . 22Basic Research Is Vital. . . . . . . . . . . . . . . 23When Should You Sell? . . . . . . . . . . . . . . 26Rewards of Concentration . . . . . . . . . . . . 28Best Buy: Is It Ever!. . . . . . . . . . . . . . . . . 30Don’t Catch “Falling Knives” . . . . . . . . . 33U.S. Steel: Definitely a Big Steal. . . . . . . 34New Century Financial—an Early Catch . . . . . . . . . . . . . . . . . . . . 35AMR: Up High in the Sky . . . . . . . . . . . . 37Northwest Airlines: Still Northbound . . . 40From the Library of Melissa Wong viGENE MARCIAL’S 7 COMMANDMENTS OF STOCK INVESTINGCommandment 3: Buy the Losers . . . . . . . . . . . . . . . . 43Winners Disguised as Losers. . . . . . . . . . 45Watch the High-Profile Stocks . . . . . . . . 47Homebuilders: Ripe for the Picking . . . . 50The Price Earnings Ratio Puzzle. . . . . . . 54RIMM: A Stock in Motion . . . . . . . . . . . 57Time Warner: The Giant Has Awakened . . . . . . . . . . . . . . . . . . . . . . . 61Merck: A Prescription for Winning. . . . . 68Other Fallen Angels Ready to Fly. . . . . . 73Ford: Not Destined for the Scrapyard . . 74GM: Not in No Man’s Land Anymore. . . 78Motorola: Will It Recover Its Mojo? . . . 80Commandment 4: Forget Timing . . . . . . . . . . . . . . . . . 85Market-Timing Technicians. . . . . . . . . . . 87Timing: Underwhelming Results. . . . . . . 90Institutional Investors Love Timing . . . . 91Retail Stores: Not Necessarily Bargains . . . . . . . . . . . . . . . . . . . . . . . . . 92Banks: Banking on Some . . . . . . . . . . . . 93Citigroup . . . . . . . . . . . . . . . . . . . . . . .94Bank of America . . . . . . . . . . . . . . . . .100The Peter Lynch Principle. . . . . . . . . . . 101Commandment 5: Follow the Insider . . . . . . . . . . . . . 103The Insiders’ World . . . . . . . . . . . . . . . . 104A Case of Insider Trading . . . . . . . . . . . 106Keep an Eye on Insiders’ Pals . . . . . . . 109The Warren Buffett Watchers . . . . . . . . 111Warren Buffett Wannabes . . . . . . . . . . . 114Pressure from Big Stakeholders . . . . . . 117Wild Oats Markets, Inc. (OATS) . . . . . . 119PriceSmart, Inc. (PSMT) . . . . . . . . . . . . 120Oakley, Inc. (OO) . . . . . . . . . . . . . . . . . . 120From the Library of Melissa Wong CECO Environmental Corp. (CECE). . . . . . . . . . . . . . . . . . . . . . . . . 121Kos Pharmaceuticals (KOSP) . . . . . . . . 122Ferreting Out Takeover Targets . . . . . . 122Commandment 6: Don’t Fear the Unknown . . . . . . . .125The Far-Flung Markets . . . . . . . . . . . . . 126China’s Booming Market . . . . . . . . . . . . 128Cutting in on Undervalued Stocks . . . . 130Mutual Funds. . . . . . . . . . . . . . . . . . . . . 131Exchange Traded Funds (ETFs) . . . . . 132American Depositary Receipts (ADRs) . . . . . . . . . . . . . . . . . . . . . . . . . . 135The Biotechs. . . . . . . . . . . . . . . . . . . . . . 138How the Pros Check Out the Biotechs . . . . . . . . . . . . . . . . . . . . . 142Scrutinize the Managers . . . . . . . . . . . . 143Biotech ETFs . . . . . . . . . . . . . . . . . . . . . 144Advanced Neuromodulation Systems (ANSI) . . . . . . . . . . . . . . . . . . 145Cleveland BioLabs (CBLI) . . . . . . . . . . 146MedImmune (MEDI) . . . . . . . . . . . . . . 147Some Unrecognized Attractive Biotechs . . . . . . . . . . . . . . . . . . . . . . . . 148Enzo Biochem (ENZ) . . . . . . . . . . . . .148Rosetta Genomics (ROSG) . . . . . . . .150Access Pharmaceuticals, Inc. (ACCP) . . . . . . . . . . . . . . . . . . . . . . . .153Commandment 7: Always Invest for the Long Term:Seven Stocks for the Next Seven Years . . . . . . . . . . . . . .157The Innovative Apple. . . . . . . . . . . . . . . 164Boeing—The High-Flying Super Machine . . . . . . . . . . . . . . . . . . . . . . . . 166CVS Caremark Corp: The Number-One Value Drug Store Chain. . . . . . . . . . . . 168CONTENTSviiFrom the Library of Melissa Wong Genentech: The Biotech Behemoth . . 169JPMorgan Chase & Co.: Up on Wall Street and Main Street . . . . . . . . 171Petróleo Brasileiro S.A.: An All-Around Energy Play . . . . . . . . . . . . . . . . . . . . . 174Pfizer, Inc.: The King of Big Pharma . . . 178Epilogue . . . . . . . . . . . . . . . . . . . . 187Index . . . . . . . . . . . . . . . . . . . . . . . 193viiiGENE MARCIAL’S 7 COMMANDMENTS OF STOCK INVESTINGFrom the Library of Melissa Wong ForewordGene Marcial and I have something in common: We wake upevery morning and go to sleep each night thinking about stocks.When you are as focused and obsessed as we are, you develop certaintenets about investing.Obviously there are a lot of ideas about how to make money inthe stock market, some more serious than others. I always got a kickout of reading various theories that have popped up—especially someof the wackiest that assume you can predict the overall market direc-tion. One of my favorites, which is probably thirty years old, is thehemline indicator, also known as the “bull markets and bare kneestheory.” Supposedly when hemlines go up, so do stocks. When theygo down, so do stocks.I’m a big football fan, so the old Super Bowl indicator is anothergem. It says when a team from the American Football League (AFL,which is now AFC) wins the championship, it’s going to be a downyear. If a National Football League (NFL, which is now NFC) teamwins, the market will be up, up, up.Popular theories can also apply to individual stocks. During themadness of 1929 and its aftermath, investors “watched the tape” reli-giously. Common wisdom was that if a stock declined it should besold, quickly. If it went up, it should be bought. In 1934 a book calledSecurity Analysis by Graham and Dodd offered an escape from thecrowd sentiment. Instead of viewing stocks as pieces of paper, BenGraham and David Dodd saw them as shares of a business whosevalue, over time, would correspond to the value of the enterprise.They urged investors not to pay attention to the tape—but to focus onthe businesses beneath the stock certificates. Ben Graham laid out amethodological basis for picking stocks. He looked for businesseswith a margin of safety—he said an investor should insist on a big gapbetween what he was willing to pay and his estimate of what a stockwas worth. These two pioneers invented the profession of securityixFrom the Library of Melissa Wong analysis, in which I was trained. Studying under these “hot shots” in1950 was the seminal event for another investor, Warren Buffett, whoreaped great benefits from adhering to their principles.What Gene Marcial has done in this book is to capture his ownexperiences from listening and writing about stocks for 30 plus years.This period has seen bad markets, good markets, and volatile markets.Graham and Dodd personified the capricious movements as “Mr. Mar-ket,” who shows up every day to buy or sell. “Mr. Market” is a strangefellow, subject to all sorts of unpredictable mood swings that affect theprice at which he is willing to do business. Gene shares with us his sevencommandments that are a practitioner’s handbook, honed by his wealthof experience, and that will help navigate around “Mr. Market.”These are solid, well-developed commandments that have reapedsubstantial benefits to those who have adhered to them. By doing theresearch, removing the emotion from your investment decisions,focusing on your best ideas, being a long-term investor, not timing themarket, and buying businesses at a discount to their intrinsic value,you will improve your chances of financial success. We call this intrin-sic value the Private Market Value, and we focus on a catalyst, orevent that will help surface the value in the company.There are many catalysts, but a telling one, which Gene mentionsin this book, is the repurchase of shares. When management is buyingback stock, the analyst questions what the rationale is. Is the repur-chase to offset dilution from stock options? To share with sharehold-ers some form of compensation? Or are they buying below theirestimate of intrinsic or what we at Gabelli call Private Market Value?So tracking a company or an individual’s purchase of shares, particu-larly when done without the threat of greenmail or the threat of atakeover, can prove to be a very practical approach to begin theprocess of looking at an idea.Gene is also a student of market history. Momentum investorshave at times made tons of money, but at other times have been flattened in some classic bubbles. I never understood the rush toinvest in index funds. Supposed “investors” would continue to buyregardless of the price—and without even knowing the names of thecompanies they are investing in! From my experience, long-term, fun-damental stock selection is the key to creating wealth or preserving it.xGENE MARCIAL’S 7 COMMANDMENTS OF STOCK INVESTINGFrom the Library of Melissa Wong Gene has a great nose for stocks. We had been long-term holdersof Aztar for our clients. We owned enough to require it to get regis-tered with the Nevada Gaming authorities. The company operatedthe Tropicana Casino and Hotel in Vegas and Atlantic City. Our focuswas its crown jewel, the 34 underutilized acres on the strip in LasVegas that we thought would be attractive to other gaming operators.Gene was right there in June of 2005 and included Aztar in his col-umn. Noticing the takeover activity in gaming stocks, he picked up onAztar’s takeover potential and recommended it at $31.50 per share.On March 13, 2006, the following year, Pinnacle Entertainmentoffered $38 cash per share and a bidding war ensued. Three otherbidders kept topping each bid over the next two months, and Colum-bia Entertainment ultimately bought the company for $54.00 in cashper share.Gene’s goal is to change individual stock investors’ mind-sets tohelp them to take advantage of opportunities. Armed with his sevencommandments, an investor can go confidently and intelligently intothe market. Let his wisdom of over three decades help you become asuccessful investor.—Mario GabelliChief Investment Officer of Gabelli and Co.Chairman and CEO of Gamco Investors Inc.Member of the Barron’s RoundtableFOREWORDxiFrom the Library of Melissa Wong This page intentionally left blank From the Library of Melissa Wong xiiiAcknowledgmentsMy thanks to my many trusted reliable news sources on WallStreet who helped make this book a sharp advocate of intelligent,realistic, and gutsy market maxims for the individual investor.I am very grateful for the support of my close friend and mentor,Seymour Zucker, a former senior editor at BusinessWeek magazine,who encouraged this endeavor from the start. He was kind enough toread the first draft of this book. He was my supervising editor at Busi-nessWeek, prior to his retirement in 2005, who steered the “InsideWall Street” column to where it is today. I credit him for inculcatingmore energy and judicious perspective into the column. He has donethe same for this book. Special thanks to John A. Byrne, executive editor of Business-Week, for his early support. I could not have proceeded with confi-dence with this book without his kind encouragement.I also want to acknowledge the support of Jim Boyd, executive edi-tor of Pearson Education, Financial Times Press, and Wharton SchoolPublishing, whose advice and assistance very much contributed to thecompletion of the book. He encouraged me several years ago toembark on this project, and I am grateful for it. I also want to expressmy appreciation for the kind and expert assistance of some of theother editors at Pearson, FT Press, and Wharton School Publishing,among them Amy Neidlinger, Russ Hall, Julie Phifer, Gina Kanouse,and Betsy Harris.A special thanks to Patricia O’Connell, who was among the firstwho helped spark the idea for this book. I am also indebted to JohnCady, Susan Zegel, and Yvette Hernandez for their invaluable assis-tance in helping me in my information and data research. —Gene G. Marcial, November 2007From the Library of Melissa Wong xivAbout the AuthorGene G. Marcial is a senior writer and columnist at Business-Week where he writes the market-moving column “Inside WallStreet.” Prior to that he wrote the Heard on the Street column for theWall Street Journal. He is also the author of the book Secrets of theStreet: the Dark Side of Making Money (McGraw-Hill, 1995), a can-did exposé of the machinations of Wall Street insiders. Marcial worksand lives in New York City. From the Library of Melissa Wong xvTo the ReaderI have been avidly analyzing the stock market for more than 30years, first as a market columnist for The Wall Street Journal for sevenyears, followed by 26 years at BusinessWeek magazine, where I con-tinue to write the “Inside Wall Street” column. Fortified with all thatexperience and seasoning, I felt I had to write this book for investorswho have been bewildered and frustrated by Wall Street. I joined BusinessWeek on August 3, 1981, purposely to write the“Inside Wall Street” column after its previous writer resigned to join aWall Street firm. I would not have left The Wall Street Journal, whereI was a happy camper, had I not been offered the opportunity to writeBusinessWeek’s premier market column. In The Journal, I was one ofthree who wrote the columns “Heard on the Street” and “Abreast ofthe Market.” Previous to writing for The Wall Street Journal, I was acopy editor at the Associated Press-Dow Jones Economic Report forthree years.This book is a summation of what I have observed about the stockmarket in all those years—interfacing with hundreds of analysts,investment managers, financial consultants, brokers, and professionalinvestors. I have compressed my experience and observations intoseven maxims that I believe sum up what investors should understand—and should do—about the market and picking stocks. I am sharing with you the novel ways I use in my column to beatthe market. I write about 150 to 170 stocks every year. Not all of themcome out winners, of course. But, on average, they have outper-formed the pros hands down. In the past ten years, since 1997 whenBusinessWeek started tracking the performance of the weekly “InsideWall Street” column, my picks bested the S&P 500, Dow JonesIndustrial Average, and Russell 2000. The idea of writing this book had been kicking around in my headfor several years, following the publication of my first book, Secrets ofthe Street: The Dark Side of Making Money, in 1995. The market From the Library of Melissa Wong xviGENE MARCIAL’S 7 COMMANDMENTS OF STOCK INVESTINGcontinued to move so fast, however, that it was quite fanciful to thinkI could come up with another timely and relevant book amid thesharp changes happening in the marketplace and on Wall Street,which had inspired a flood of books about the market. Nonetheless, watching the market gyrate through all kinds ofhoops and hoopla that drove investors into great panic—as if theworld were coming to an end—finally convinced me to get on withthis book. It is no secret that fear and greed rule the market. Whenfear mounts, most people panic, and they go into an uncontrolledselling mode. And when good news pervades, the greed factor takesover, and people chase after stocks for fear of being left behind. Ihave witnessed this fear-and-greed syndrome time and time again. Knowing how to use the fear-and-greed factor is the first step tomaking money on Wall Street. But it is only the first step. A carefulreading of this book provides the investor with the know-how to beatthe market.—Gene G. MarcialNew York CityJanuary 14, 2008From the Library of Melissa Wong xviiIntroductionThere are plenty of ways to make money in the stock market, butclinging to mainstream thinking or so-called conventional wisdom isnot one of them. This book’s seven commandments are definitely out-of-the-mainstream thinking, aimed at conditioning your mind toalways look at the stock market as a market of opportunity. Theseseven commandments should clear your mind of old market clichésand encourage you to jump on hidden opportunities to make money. Panic is the enemy of the investor. The stock market offers greatchances to make money when the big institutional investors are run-ning for the exits and driving stock prices down. Ditto, when the insti-tutions are driving up stock prices as they go on a buying rampage.That, in essence, is what the first commandment of this book is all about. The second commandment addresses most investors’ favoritestrategy: diversification. It has universal investor appeal. Most folksfeel safer when their portfolios sport a diversified, “low-beta” look,consisting of stocks of every stripe. My advice: Don’t. Do not diver-sify. Instead, concentrate the bulk of your stock market capital in afew stocks to reap robust profits. Diversification might make you feelsafe. After all, that is what the many market mavens have beendrilling in your head all these years. But what diversification guaran-tees are mediocre returns. The banks are a safe place to store money.The stock market is not. To reap rich rewards from the stock market,you must bear some risks. My third commandment goes against the widely accepted normof going with the winners. My view: Let the winners gallop into thesunset without you. Instead, go after some of the prominent stocksthat have stumbled or fallen. When a company’s stock has crashed,the market almost invariably has discounted all of the bad news. And that’s just the time when you can pick up real bargains from thecasualty list.From the Library of Melissa Wong The fourth commandment rejects the popular notion that “timingis everything.” That might be valid in other aspects of life, but it’s notin the stock market. Timing the market can screw up your portfolio. Idebunk the concept that investors should time their entry or with-drawal from the market based on the economic cycle or seasonal orhistorical events. Timing is part of the “herd mentality” syndrome,which, more often than not, leaves an investor in negative territory. The fifth commandment: Nobody wins like an insider does. Bythinking and adopting the ways of an insider, an outsider can also winbig. This book provides a formula for trading on the inside and unrav-els the mystique surrounding insiders. My first book, Secrets of theStreet: The Dark Side of Making Money, revealed the clever waysinsiders use to make millions. They were mostly of the illegal kind.But there are ways to get valuable information like an insider withoutgetting enmeshed in illegal trading. Adopt the insider’s ways—and win.The sixth commandment tackles the unknown—the investors’fear of what they aren’t familiar with. Little-known companies, likethe biotechs, as well as the shares of foreign companies, offer greatopportunities. This sixth maxim familiarizes you with the world ofhidden stocks, where many still-undiscovered opportunities have notbeen brought to light. The pros who focus on this universe of practi-cally invisible stocks make their pile when they attract liquidity orbuyers to them. Don’t fear the unknown. Know and understand it asa real opportunity.The final chapter’s seventh commandment advocates long-terminvesting. It is, after all, the best investment strategy. This chapterlooks at how the pros profit from their long-term investing, and it rec-ommends seven “sweet stocks” for the next seven years. One principle that underlies the entire book’s seven command-ments is the widely known but seldom followed adage, “Buy low, sellhigh.” Even hard-nosed investment pros dismiss that advice becausethey consider it too simple. The truth is, that strategy is difficult toput into effect. It is more complex when you attempt to execute andtranslate it into reality. It requires all the guts and courage to practiceit—to know just when a stock is actually selling at a low price—and tohave the discipline and conviction to buy it. xviiiGENE MARCIAL’S 7 COMMANDMENTS OF STOCK INVESTINGFrom the Library of Melissa Wong This book is not about predicting the direction of the market orforecasting the next meltdown or “melt-up.” It exposes the basic mis-conceptions that have victimized investors all these years. Despite theflood of books published every year and the stream of countless news-paper and magazine articles and market newsletters, unrealistic concepts still saddle multitudes of investors with losses. This book can help you avoid being victimized and make you a winner in the market.January 14, 2008INTRODUCTIONxixFrom the Library of Melissa Wong This page intentionally left blank From the Library of Melissa Wong Buy Panic“Buy only what is being thrown away.” —John Templeton, legendary investor and founder of theTempleton Funds Welcome to the world of panic, the big generator of market melt-downs. It is tsunami-like: When panic grips the stock market, wavesof selling overtake practically every stock. There is panic on theupside as well, which drives up stocks in a frenzy. This chapter givesyou an idea of how to react to such meltdowns. It explains howinvestors should confront panic in the marketplace. The thesis: Paniccan be your ally.When investors jump on the bandwagon of fear in times of panic,don’t be a follower. Investors should not join the running of the pan-icky bears or bulls. Panic begets loss of logic. And when logic goes,investors become vulnerable to jittery mob mentality. That is a surepathway to pain.On February 27, 2007, when the Chinese stock market crashedalmost without warning, U.S. investors went into a panic, causing theDow Jones industrial average to plunge 416.02 points, or some 3.3percent, to 12,216.24. Many of the investors I called the next day fora reaction had one common answer: “We sold.” Panic was in the air.COMMANDMENT 11From the Library of Melissa Wong In less than a month, however, the market regained much of what ithad lost. The Dow had trekked back up to 12,481.01 on March 23,2007. The market gained more energy and continued to climb, hit-ting an all-time high of 14,000.41 on July 19, 2007. The bulls ruledagain. However, as the sub-prime mortgage problem appeared toworsen, fresh fears mounted over concern that the sub-prime melt-down appeared to have infected credit markets around the world.Again, panic gripped the market on August 9, 2007, driving down theDow Industrials 387 points, or 2.8 percent, to 13,270.65. The bearstook control—but not for long. On September 18, the Dow posted itsbiggest one-day percentage gain since 2003, soaring 335.97 points, or2.51 percent, to 13,739.39. The Federal Reserve Board was behind the big bounce: It cut thefederal-funds rate by half a percentage point to 4.75 percent, whichexceeded most economists’ prediction of a quarter-point cut. The two market crashes during February and August of 2007were followed by robust rallies, which were tremendous opportuni-ties to make money. Another opportunity to bargain-hunt came up onNovember 12, 2007, when the Dow slipped below 13,000, to12,987.55, as investor confidence was rattled by the continued falloutfrom the credit-market crisis sparked by the mortgage maelstrom. Itwas the first time the Dow had closed below 13,000 since August 16,2007. By November 16, 2007, the Dow had rebounded to 13,178. Forsure, it is likely to bounce around some more but I would be very sur-prised if it doesn’t jump back to an upward trend.These crashes paled in comparison to how scared investors wereduring the horrible 9/11 terrorist attacks in 2001. Justifiably, panicgripped the nation. The New York Stock Exchange shut down opera-tions to prevent panic trading from overwhelming the market. Whenthe Big Board reopened a week later, droves of investors rushed to sell.2GENE MARCIAL’S 7 COMMANDMENTS OF STOCK INVESTINGFrom the Library of Melissa Wong Uncontrolled FearIndeed, the 9/11 attacks were one of the darkest moments in U.S.history. The market world looked like it was headed for total chaos.The entire nation, along with the rest of the world, convulsed andpanicked. And, not surprisingly, many of the institutional investorsrushed to protect their investments and issued sell orders—indis-criminately, in most cases. Such dire situations almost always provide opportunity forsteeled and pragmatic investors to make handsome profits. Investorswith the wherewithal to snap up stocks when nobody wants themwind up counting rich rewards. Investors had ample opportunities topick up real bargains. Let me recount how the market crashed in theaftermath of 9/11 and then picked up to climb to record highs threeyears later. The market was already teetering before that tragic September11, 2001. The Dow stood at 9,162.23, down from 11,337 on May 21,2001 in the aftermath of the bursting of the tech bubble and an eco-nomic slowdown. On September 11, the stock market operationsbecame disrupted by the terrorist attacks, and the markets shut downfor a week. Pandemonium reigned when the market reopened, andby September 21, the Dow had tumbled by about a thousand points,to 8,235. Practically all stocks were for sale and, despite the bargainsto be had, few people had the spirit to go bargain hunting. The mar-ket remained a barren source of good news, with small rallies failingto find legs to stand on. The rest of 2001 was a lost cause as the mar-ket continued to inch lower, but again that period represented a “BuyPanic” opportunity to some steel-hearted investors. Indeed, by early2002, the market was showing some signs of life, and on March 19,2002, the Dow had cranked up to 10,635.25. That period from mid-September of 2001 to March opened a window of opportunity forthose who had hunted for bargains. COMMANDMENT 1 • BUY PANIC3From the Library of Melissa Wong By March 11, 2003, equities again tumbled in a big way: TheDow plunged to 7,524.06. Was it another buying opportunity for thepanic buyers? Indeed, it was, for right after the market’s dive inMarch, the Dow started to race up again, hitting 10,453.92 onDecember 13, 2003. By that time, the air seemed to have lifted, withthe market once again feeling unbounded. After climbing from late December of 2003 through March of2005, the Dow didn’t do much the rest of the year. 2006 was a turningpoint for the market. It was the year when the Dow started to hit newrecord highs. On December 27, 2006, the blue-chip barometerjumped to 12,510.57, marking the beginning of a robust rally, despitethe more than 400-point decline in February 2007. It started packinghigher, striking new record highs almost every week. On July 19,2007, the Dow soared to a heady, all-time record high of 14,000.41. Two kinds of panic spook investors. One is panic that affects theentire market, created by national or global events. Inflation, reces-sion, massive earnings declines, or national calamities are forces thatproduce total market chaos. The second type is panic associated withspecific events that impact a particular stock or group of stocks orindustries. In such cases, the crash is stock specific or industry specific.I discuss examples of these kinds of breakdowns, such as the onesinstigated by government probes into the use of accounting fraud insome of the major corporations, resulting in the ouster of top execu-tives. In the process, the shares of those companies were severelybeaten down. To take advantage of the awesome declines, investors must plot aclear strategy to seize opportunities during a market panic, whichusually comes out of the blue. 4GENE MARCIAL’S 7 COMMANDMENTS OF STOCK INVESTINGFrom the Library of Melissa Wong Expect the UnexpectedThe first principle that investors have to adhere to is quite simple: Be prepared. Investors must be psychologically prepared forany surprise the market can deliver. Part of preparedness is assumingthe market can tumble sharply at any time. Corollary to that: Alwaysassume the market can mount a sudden big rally. After you drill that into your head, that these surprises canbesiege the market without warning, you are ready to take on panic. First of all, assuming that you are already invested in the stockmarket and you want to take advantage of the bursts of market activ-ity, you need to have a cash reserve. Cash reserves should be from 10to 20 percent of your portfolio.That brings us to the next step: Prepare two lists of stocks. Thefirst list to keep handy is of stocks you want to own for the long haul.If you already have them in your portfolio, mark them as the stocksyou should buy more of. These are the stocks that, when they tumblein price, you would want to snap up to add to your holdings. The sec-ond list should consist of stocks you own but that have already pro-duced handsome gains, and that you would be willing to sell when themarket goes on a buying rampage. The reason to sell them is so youcan augment your cash fund. Armed with these two lists of stocks, an investor will have a clearmind as to what to do when a panic situation hits the market. He orshe will be free of fear about any trouble in the marketplace. The BuyPanic commandment will, in truth, free you of the jitters that nor-mally afflict investors in times of market volatility. This is not to suggest that you will engage in short-term trading.On the contrary, this maxim encourages building a long-term port-folio and, with an ample cash reserve, fortifying it whenever panicCOMMANDMENT 1 • BUY PANIC5From the Library of Mel...

关注我们

关注微信公众号