This is a book which I read on a recommendation of a friend and was a lovely read given that am also a practitioner of buying 52 week highs and All Time Highs.
The book has only examples of US markets but the construct will be helpful to find similar trends in Indian Markets. Would recommend reading this book to all investors and traders even if you do not have any interest in Technical Analysis. ( It is not a very long book but the only issue is its only available on kindle )
Book Review of - The Next Apple: How To Own The Best Performing Stocks In Any Given Year Authors - Ivaylo Ivanov (Author), Howard Lindzon
This book written by Ivaylo Ivanov and Howard Lindzon is about understanding a different method to find the next outperformer in the financial market.
Ivaylo Ivanov is a seasoned trader who runs his own newsletter and is a partner in a hedge fund. Ivanov has written two trading books, The StockTwits Edge and 5 Secrets to Highly Profitable Swing Trading. but his new book The Next Apple: How To Own The Best Performing Stocks in Any Given Year is even better that his first two.
Howard Lindzon is a Canadian author, financial analyst, technical analyst and super angel investor. Lindzon manages a hedge fund, serves as managing partner of the holding company Social Leverage, limited partner at Knight's Bridge Capital Partners, and is the co-founder of StockTwits.
The best traders and investors have a trading or investing method that works for them and they religiously stick to it. This is a great way to approach the markets with a plan and the methods told by Ivanov and Lindzon in this book help you to understand the process behind finding the next company that has the potential to be The Next Apple.
Some of the most common things that we see in world markets and things that are repeated throughout every market cycle are explained to us in this book -
The more the world changes ,the more things stay the same. Patterns repeat in the financial markets. Only the names of the winning stocks change.
The market is an opportunity machine. Some trends last only several quarters before they fade, while others continue for years and deliver fantastic returns. Sooner or later, though , every trend ends. This is not just an opinion. It is a fact.
Since Ivanov and Lindzon invest primarily in the US markets all the examples and illustrations are of American companies.
This book aims at helping you finding the next Apple, Google or Tesla. It explains a very important concept about timing in the market and how it is the most important part about investing and at what time in a market cycle one should look to buy particular stocks.
The biggest stock market winners of each decade are very different because of 3 main factors –
1. The law of big numbers.
2. The law of high expectations
3. The law of innovation
It is theories like this and the reasoning and understanding provided by the authors that makes the book a breeze to read. All of these theories are backed by examples of companies and their evolution through various market cycles.
The most important concept taught by this book and an underlying theme throughout all the chapters is -
The vast majority of big long term trends start with a breakout to new 52 week highs from a proper base. The underlying reasons behind this breakout could be very different.
The authors have adopted a simple process to see the future and catch trends. They look at the 52 week high list as it is a shortcut into the minds of smart investors. The author advises that one should not blindly buy any stock that hits a 52 week high. One needs to consider the technical characteristics of the stock as well as the catalyst behind the breakout and the growth prospects of the company.
They also follow the thoughts of people with particular domain experience and expertise. With the advent of social media and the internet one has access to this experience and expertise for a nominal cost.
They go onto stress that knowing the reason for your investment and the rationale behind it is the most important part about the investment as this will dictate the exit of the investment. If one does not know this then one will exit at a random point which does not maximize the potential of the investment.
The authors state that past performance is a powerful stock selection tool. Past performance is not a guarantee for future returns but the same patterns repeat year after year. Past performance can be a great source for new ideas. This refers to momentum as stocks that tend to outperform in the past year also tend to continue outperforming in the next one year.
A lot of the examples in this book have given about companies and how short term price moves have been on sentiment but the longer term trend is always a reflection of the earning power of the company. If earnings do not catch up eventually the market loses patience with the company and there is a trend reversal.
One of the most powerful combinations to make big money in the market is being right about something that the majority of the market is wrong about. Hence, one of the most powerful catalysts is a new 52 week high + high short open interest + negative sentiment.
One of the patterns that is followed by the authors is that during major market pullbacks the stocks that show relative strength become the leaders of the nest bull market.
The three pillars of risk management advocated by the authors are proper equity selection should include timing your investment, having an exit strategy and position sizing.
This book is a well written, step-by-step guide on how to use well-known methods of analysis to discover those stocks that have the potential to move the way Apple has over the last decade. There is no fluff in this book, only a method needed to be implemented and a process to be followed to find the next Apple. When you are done with this book, you will know everything you need to know in order to find and profit from the next Apple, Starbucks and Tesla of the world.
( Disclosure - This is not a paid post. I am an amazon affiliate and may get some pennies if you buy from above link. Will buy more books.)