Spoonfuls of Investment Knowledge

April 11, 2011 at 10:52 pm Leave a comment

When it comes to investment advice, I’m a sucker for good quotes, so it should come as no surprise that I am highlighting some rousing material I stumbled upon from a 1978 Financial Analyst Journal article written by Gary Helms (Toward Bridging the Gap). Helms is a Wall Street veteran who managed major mutual funds in the 1970s, the research department for Loeb Rhoades & Co. in the 1980s, and the University of Chicago’s endowment in the 1990s. In an attempt to codify conventional investment wisdom he learned in his career, he established the Helms Ultimate Truths (HUT) system, which cataloged the tenets of real world investment wisdom consistent with practical experience. In order to satisfy the numerical needs of quant-jocks programming for an investment Holy Grail, Helms spoon-feeds readers  with a list of tenets – each truth has a nine-digit HUT code attached (with tongue firmly in Helms’s cheek). Here is a partial list of my conventional wisdom favorites bundled into categories that I organized:

Hodgepodge Truisms

“Never confuse brilliance with a bull market.”

“You can’t spend relative performance.”

“If anybody really knew, they wouldn’t tell you.”

“None of the old rules work anymore, but then they never did.”

“When everybody likes a stock, it must go down; when nobody likes a stock, it may go up.”

“You never understand a stock until you’re long (or short).

“A penny saved will depreciate rapidly.”

“Chart breakouts don’t count if your own buying does it.”

“The new high list will do better in the subsequent six months than the new low list will.”

Common Sense Commandments 

“In a bull market, be bullish.”

“Two things cause a stock to move – the expected and the unexpected.”

“The stock doesn’t know you own it.”

“The market will fluctuate.”

“A portfolio that goes down 50 per cent and comes back 50 percent is still down 25 per cent.”

“An outstanding portfolio always contains an outstanding stock.”

Numerical Rules of Thumb

“You can be 200 per cent wrong when you switch.”

“Money management is 10 per cent inspiration and 90 per cent perspiration.”

“More stocks double than go to zero.”

“The market is a random walk up a 9.3 per cent grade.”

“Nobody has been right three times.”

“Turnarounds take seven years.”

“The bottom is always 10 per cent below your worst case expectation.”

“If you have a great thought and write it down, it will look stupid 10 hours later.”

“If the idea is right, eighths and quarters won’t matter.”

Principles of Selling

“Sell the stock when it runs off the top (or bottom) of the chart.”

“Sell down to your sleep point.”

“Sell the stock when the company announces a new corporate headquarters.”

“Sell when the research file gets full.”

“Sell your losers and let your runners run.”

Investment Management Realities

“The best thing about money management is that it’s indoor work with no heavy lifting.”

“A good portfolio manager never asks a question unless he knows the answer.”

“The first word in analyst is anal.”

 “A bright and energetic guy can make all the mistakes in this business in five years, but fools and sluggards can take a lifetime.”

 “Analysts write long research reports when they don’t have time to write short ones.”

“Someone will always have a better record.”

“The trouble with managing money is that everybody once made a successful investment.”

“Every time a trade is made, somebody was wrong.”

“Don’t apologize for acting on your instincts if you’ve spent years developing them.”

“Be long term but watch the ticks.”

“You’ll never know who your friends are until you’ve had two bad years in a row.”

“A guy who likes a stock but doesn’t own it has no right to an opinion.”

Ha-Ha Truths

“Bulls make money and bears make money, but pigs get swine flu.”

“The truth will set you free, but Scotch isn’t bad either.”

“Babe Ruth once led the league in strikeouts.”

“Trust everybody but cut the cards.”

“You can’t kiss all the girls.”

“Get caught bluffing once a night.”

“There is more than one way to skin a cat, and six ways to roll a seven.”

Economic Truths 

“Cyclic stocks should be bought when their multiples are high and sold when their multiples are low.”

“Growth will bail you out – if you live long enough.”

“All growth is temporary.”

“Half of your portfolio is cyclic, but you don’t know which half.”

“Own West Coast companies in bull markets, Boston companies in bear.”

Helms’s rules can be very helpful, but I think heeding his advice provided in HUT #: 272451-79-9, “All generalizations are false, including this one,” is an important truth. As you can tell from the abbreviated but extensive list, these spoonfuls of investment gems can be both playfully messy and informatively tasty.

Wade W. Slome, CFA, CFP® 

Plan. Invest. Prosper. 

www.Sidoxia.com

DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own certain exchange traded funds, but at the time of publishing SCM had no direct position in any security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

Entry filed under: Education, Profiles. Tags: , , , , .

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