How to Trade in Stock Market like Warren Buffet’s Teacher

The greatest influence on the investment style of Warren Buffett was Benjamin Graham, widely considered to be the originator of value investing. In 1934, Graham even wrote the book on value investing when he published “Security Analysis” with David Dodd. This was the first book to provide a detailed explanation of how to value a stock. This article will provide information with how to trade in stock market like warren buffet. This book was one of the most important books ever written about finance and remains on the book shelves of many investment managers more than 80 years after it was publi...
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Reading the Charts Right Now: Bullish Until This Happens

Many articles on chart patterns are theoretical. Instead of telling us about the market, the writer provides an abstract explanation of a pattern. There is a very good reason for this. Many of those articles are written for educational purposes. The author starts with the pattern and provides the reader with a roadmap of what to look for. In this article, we are going to turn the process upside down. We will start with the chart and explain what we see. Our goal is to explain how a chart can be read, moving from theory to practice. We are looking at the broad stock market so will start our ...
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The Best Trades for April, Following A Strategy That Is up 12% This Year

This month, we are continuing to apply our seasonal strategy. The strategy is among the simplest seasonal trades possible. We are running a scan to find the stocks with the best historical performance in the month. To find trades for April, we started by looking at how stocks have performed, on average, during the month. We assumed the stock was bought at the beginning of the month and sold at the end of the month every year. We then calculated how well that strategy would have done for every stock in the S&P 500 index. We limited our test to stocks in the S&P 500 because those are ...
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How to Prepare for the Next Bear Market

Let’s face it, there will be another bear market. It might start tomorrow or it might not start for several years but over time, bear markets inevitably follow bull markets. The inevitability of a bear market can, and often does, influence an investor’s outlook on the market. This impact ranges from a tendency to ignore the risks to a tendency to be paralyzed by the risks. Ignoring the risks allow investors to invest aggressively. If we think back to the Internet bubble, we have a perfect example of this behavior. The table below shows the return of the S&P 500 for a few years in the...
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Four Warren Buffett Stocks Trading Under $5

In a recent blog post, we described how to create a screen to spot stocks using indicators that appear to be important to Warren Buffett. Our screen focused on a few fundamental indicators and targeted companies with high return on equity, strong cash flow and management teams that maximize the return on assets investors have entrusted to them. We used the free screening tool at the FinViz web site and applied the setting shown below. As we noted, our screen serves as a reasonable starting point for additional research. One avenue for research is in stocks Buffett cannot buy. He r...
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Using Sentiment As a Market Timing Tool

In the never ending search for a potential market top, some analysts use sentiment analysis. This type of analysis relies on sentiment indicators which are tools that are designed to identify how investors feel about a market. Sentiment is independent of fundamental information and price data and is based solely on feelings, which can provide significant information not factored into the fundamental or technical picture. Sentiment analysis is based on logic. The general idea is that when everyone is bullish, everyone is fully invested in the stock market and the market is unlikely to go muc...
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Five Biotech Stocks Under $5

Over the long run, the biotechnology sector has been a consistent winner in the stock market. The chart below shows the biggest winners among sectors over the past five years and biotech is near the top of the list. This has often been the case for most of the past twenty years or so. As a group, biotechs have done well. There are always winners and losers within the group but the winners have usually done so well that the sector is consistently on the list of best performing sectors over the long run. Recently, that has not been the case. The next chart shows the worst performing se...
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Finding Stocks the Warren Buffett Way

Last week we reviewed the failed bid for Unilever that had Warren Buffett’s backing. As the world’s greatest investor, we find it useful to study not just what Buffett says but also what he does. His actions are, of course, more important than his words. Buffett’s actions are usually only known when a deal is announced. With Unilever, we had an opportunity to study a failed deal. The deal failed because Buffett was true to his word. In interviews, he has explained that combining the consumer brands of Unilever with those of Kraft Heinz looked like a good deal. A representative of Kraft Hein...
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Low Priced Energy Stocks Analysts Believe Are Undervalued

Even though we are in a bull market, not all sectors participate in the major trend at the same time. While financial stocks have been doing well lately, energy stocks have been underperforming the broad market. This pattern is almost always seen in the stock market and is the basis of a trading strategy known as sector rotation. To benefit from sector rotation, traders can look at stocks in sectors that are lagging the broad market, buying them when they are bargains expecting their sector to recover in time. Energy stocks have been beaten down for some time but there are some promising bu...
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A Look Over Warren Buffett’s Shoulder

Warren Buffett can be thought of the way Winston Churchill once described the Soviet Union, In 1939, Churchill said, “I cannot forecast to you the action of Russia. It is a riddle, wrapped in a mystery, inside an enigma; but perhaps there is a key. That key is Russian national interest." This sums up Buffett. No one can forecast what the great investor will do but there is value in trying to understand his actions. Buffett has attained a remarkable record of success with returns averaging more than 20% a year over a 50 year career. If we could understand his decision making process, we migh...
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