Wisdom from Rogers and Livermore

So far the two most insightful quotes about investing and trading I have seen:

"I just wait until there is money lying on the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime." --- Jim Rogers

After I claimed that what Rogers said is the key to the success in the market, I got a lot of doubts: How can you know it is sure money? There is no sure money, everything has a probability. If there are, other people already picked it up long before your do? Market is efficient. Why do you think you have an edge, blah blah. Sounds reasonable, however they only discovered one side of the market, they only see the chaos, the unpredictibility, the change and move on the surface, what they fail to see is the the other side of the market perfectly described in Jesse Livermore's word:

"Wall street never changes, the pockets change, the stocks change, but Wall Street never changes, because human nature never changes" -- Jesse Livermore

Human nature never changes, that is the sure thing, that is the ultimate source of sure money Rogers talked about, and it happens every minute every day in the market. The only difference is someone can see more of them, at the earlier stage than the other market participants. When the majority see it, sure money turns into crap shot, since starting from that moment market debut on the stage to shows its overrated, overclaimed efficiency.

我和疯猫(MCZ)间不得不说的故事

第一次听说MCZ是二月来自法师(zzpt@mitbbs)的站内邮件，他告诉我他读了报表，看了forum,了解到CEO开始谈论profit bonus，那时analyst预计亏损，开始谈profit bonus是个不寻常的现象，当时pps=0.61, 他估计自己0.62还是0.63买的，我等到ER当天，0.64买的，这个是完全基于对法师FA能力的信任，他自己很少喊赌ER,所以他喊你一定要听。

最后结果很好，eps=+0.07,最重要的是margin大涨，这里有关于那次ER和疯猫基本面的简单讨论。

最近学习TA,这个0.62-0.64的买点刚好能用trendline做出来，所以是个旁证,为什么我说FA,TA本是一家，为什么要分彼此.

之后MCZ沉寂了一段，我一直有利润，慢慢捂，最近的突然拉升是Halo3 news driven,这个你如果没跟上，也无所谓，我在MCZ快到1的时候喊了到$1搏傻。

各位TA高手如果熟悉Jesse Livermore,一定知道他的整百追高法，其实这个$1也是一样，是一个非常重要的心理关口.

但是我误算了一步，就是第一下冲过$1后有回来再确认的需求，所以致使一位忠实读者被stop out, my mistake, 今天再上$1，开始奔就是很明显的事情了，这个先回调一下再break out的道理就是TA教科书上说的"cup and handle"一个道理，虽然这个cup,handle形状都不标准，但是这个炒家心理是一样的，触类旁通而已，所以这个$1搏傻基本上是一个心理搏傻。

至于今天的1.12 buy on dip,就是纯TA了， 50% retracement,没什么好说的。MCZ trendline清晰可见，还是很好做的。

一句话，炒股不要钻牛角尖，各种方法都是相互贯通的。正所谓华山气剑二宗都是一个祖师爷传下来的，何苦非要分个彼此喃，充分发挥自己的长处也不要忽视了各种方法背后相通的道理，我写过的君子不器和处长胜人可以给这个疯猫故事做个注脚

谁会是成功者，谁会最成功

这个市场上有两类可能成功player，

一种是做功课的人(FA派)
一种是会看图的人(TA派)

第三类又不看图又不做功课的人还是别来炒股的好，菜板上的肉而已

会做功课的牛人能从其他各种信息渠道了解分析出自己应该干什么获利可能大，他们的行为反应在股市买卖中就是看图派的最初的input.

会看图的牛人能从图上看出市场主流在想干什么（其实想干什么都太复杂，就是二元选择，涨还是跌)，看图派的行动常常是一个自刺激的feedback control system，因为它们本身参与市场博弈的过程也是改变市场态势的核心力量

会看图而不精的弱人，正确率不高，看不清主流，容易迷失在各种指标中，输多赢少

做功课但是听信谣言，抓不住重点的弱人，很容易buy-and-hope,最后死抱垃圾水下争扎

所以真正最赚钱的是在大多数做功课的FA派place了他们的bet, 大多数看图的TA派开始步调一致自刺激的早中期发现这个态势，ride the trend，怎么找到这样的pick和timing就是成功的核心关键，大道理就这点。实际有效的操作方法远远不止一种。我都说到这个地步了，我想你应该能有所悟了。

最后归根到底就是一个sure money in front of you. 你要能看到，怎么捡就是小问题了

Interesting Forbes Article

12-buyout-target

Today I just pumped two names out of 12 in the list above: RAIL and OVTI

The truth is when you see value, other people see it too, when you see value stock getting cheaper, other people see it as well, eventually those value-cheap-losers will be in a lot of ppl's watchlist and become highly controversial losers, our main target in this blog. Once the trend reversed either natually (value driven like PLXS) or suddenly (news driven like MCZ), you have great opportunities to play.

There are many good stocks out there, I am not saying HCL is the only way to go, I am saying it might be the most efficient and systematical way to go to find highly profitable picks for trading and investing.

In a nutshell, it combines the momentum(DTer's favorite), sustainability of trends(Swinger's love) the value (Investor's holy grail).

If you come from value investor side, all you need to do is a little bit more patience (which I assume you already have, since without patience, you are not going to perform as a value investor). What to wait for? wait for bargain deals become sweeter, wait for the sign of end of downtrend and start of uptrend.

If you come from the trader side, first of all please drop your assumption of efficient market theory, it is not true. Keep your eyes and mind open, take advantage of amature "value investors" who think they are following Buffett, but they are really not. Buy-and-hope is primarily what they are doing. However they cannot always be wrong, once their hopes are actually realized (the probability is usually fairly low, especially those Buy-out rumors floating around), join their party. Once their hope turned out to be disappointment, beat the dead horse immediately without hesitation, I don't even care about if it is the very horse in investor me's own barn. I short ASPV after ER, I put OVTI after EK conference call, that's trader's best show time.

The beauty of underknown/undercovered names

Yesterday I discovered this baby WINN

And you are watching what is happening to it.

Even if you don't take the risk and bet the ER, just ride the post-ER momentum on it, you will do better than 99% day traders out there.

Why? removal of uncertainty on those undercovered names can create very strong momentum, that's one of the foundations my methods are built on.

Quiz with Award

What are the reasons behind for me to only play
undercovered, small names (unlike AAPL, ICE, GOOG, everyone is playing)

The best answer will get the next momentum prediction sent exclusively to your email address.

welcome comment. (also just to see how many readers I have)


Update:

best comment: yong, bac
runner-up: Janhaus
honorable mention: theisland@mitbbs

please contact me for award you deserve.

The No.1 rule for Bigger Fool Trading

The No.1 rule for Bigger Fool Trading:

Be a fool before everyone else,
Be nuts before everyone else,
wake up when other people become fools,
and exit when other people become nuts.


搏傻第一原则

傻在人前，疯在人先
人傻我醒，人疯我逃

今天早上开盘前call JRCC
有感而发

The Top Secret Of Highly Controversial Loser(HCL) (1): Value Investing Gurus and Followers

When world-class value investors such as Warren Buffett and Mohnish Pabrai are looking for their next Geico or Frontline(FRO), they screen the whole universe of public traded companies following certain criteria. From those candidates , they pick the businesses they fully understand and whose intrinsic value they have a thorough understanding of. They know they are getting a bargain because of market's irrational valuation on those distressed business, most of which are big losers on one year graph.

But, how come only a small number of people become world-class and make themselves a fortune doing so, while most other people following the same strategy have failed and get trapped in "value lemon"?

Despite the fact that they all claim they are following the same value- investing approach, why are the the results so drastically different ?

The answer to this question can be very complex, to name a few reasons: availability of information, analytical reasoning ability, knowledge of finance, accounting, tax and bankruptcy law and etc.

We have to admit that those gurus are true professionals and they do tremendous amount of research to have an upper hand on their odds. Besides, they are extremely smart and some are born with investing instincts. What can we say, not everyone is born equal.

Does that mean we retails don't stand a chance to do long-term investing following the proven approach?

The answer is "No". Everyone has his/her own edge in particular areas and can discover leads to successful picks. (I am going to discuss this in a future post)

To be continued.

How to play ER on Highly Controversial Loser (2): Example

You have read the first part of the theory, and you may have questions on how it works. I am going to walk you through one of the recent examples in this second post.

PLXS: April 25th

PLXS is one of my value investing picks @17, and it has been a highly distressed stock in earning downtrend, and has been under margin pressure.
I found this pick using my value searching criteria, such as P/S ratio, strong balance sheet and previous strong ROIC. I believed it is an interesting turnaround play. However, if you check the 1 yr graph, it looks like a big loser. When more and more value investors find this, it becomes a highly controversial loser.

To make it even more controversial, fool.com recommended this stock in one of their most expensive newsletter after I found it (I got to know this reading yahoo message board). That makes it even more interesting.

Actually after I found it, it dropped further to 15.xx. But I didn't load then. Instead I loaded at 16.5 when I clearly saw the end of the downtrend.

The Pre-ER run happened as expected from 16.xx-->19.xx. It was nice sure money swing and I sold before ER.

The ER itself is actually good. 23c vs analyst's estimate of 17c.
However if you see title in newswire like this :
"Its fiscal second-quarter profit fell 45 percent"
Under-informed panic sale actually sent its price in after hour further down to 18.3(I had a chance to load there, but I didn't.)

Now think about this: the earning decline is already fully priced-in, it is already in a turnaround mode. How efficient the market is at their first response to the news. This was a great opportunities for prepared mind.

The second day's market turned out as expected, gap up, and strong momentum running up until overshoot. Overshooting is almost always a component in Post-ER momentum on HCL, that's why it is a DT opportunity.

So this is the story of PLXS. Today's JRCC has exactly the same story and Post-ER momentum is strong despite the increased loss compared to a year before (that is also already priced-in). Market is always looking forward, expecting a coal market to come back.

I am going to collect more such ER story on HCL to show you why there are so many opportunities for sure(high winning probability) money play before/after ER on such highly controversial loser picks. Once you see those many opportunities with very little risk, you will have no interest in betting on hope, such as option bet before DNDN's FDA decision. Instead you will do it after the FDA results are released,and you will have plenty of time to play the post momentum.

The next major ER I am watching is OVTI @May 31th. Tomorrow we will also see PRS.(however it is undercovered, not that controversial). We may have a post-ER swing opportunity if the ER is really good.

How to play ER on Highly Controversial Loser (1): Theory

To Sell or not?
To Buy or not?

It is a question every player is going to ask before an earning release.
Especailly on highly controversial losers we are mainly talking about here in this blog, it is a big question.

My answer is, play it before, play it after, just don't bet the ER.

The reason and logic is clear and consistent with all my trading/investing decisions:
Pick Sure Money, Don't Bet on Hope.

Pre-ER run is a typical swing opportunity for HCL, the reason I have explained in DT or Swing
to summarize, you profit on long's hope and short's fear. This is very nice and high probability money, and the more controversial, the bigger loser the better.

Post-ER run is a typical DT opportunity. the reasons I have explained in this post
to summarize, you profit on the removal of uncertainty, the uncertainty removal itself will generate huge inbalance of sentiment, once the balance of sentiment is broken, price movement momentum will follow, either up or down. The degree of momentum is associated with the degree of expectation, which comes back exactly to the same logic: the more controversial the better, the bigger loser(this is for up side momentum, for downside momentum you should check the degree of pre-ER run and expectation build-up) the better.

Update:
Since we are talking about ER play, here I assume that you are a trader. For investor, no such ER play thing at all. After ER/CC, when more information is available to you, you can make futher investing decision.

Expired Bigger Fool Momentum Call Achieve

I will keep updating this archive to track previous day trading and short term swing calls.

5.3 ASPV post-ER momentum, DT short, due to expectation not being met, and hot money getting out.

5.7 TASR post-French election momentum, DT long, due to newly elected president calling for buying TASR laser guns for every police car, and there is hope premium for this news.

5.8 SIGA First ever Conference Call,
things to watch
As an investor I got all I want to hear in the CC, excellent, however since no short term immediate gratification, short term traders are dumping this one creating a huge downside momentum.

5.15 IOC Post-ER momentum, reason for the call
I didn't get that kind of momentum I am expecting due to the CC in the morning gave fake hope to the longs about the going on Elk 2 development. Still for a 2-3% DT with option, not bad.

5.17 MCZ minestone price play 30%+ in one trading session

5.24 PACT call@open Post-ER momentum, 35%+ within one hour

Bigger Fool Theory And Value Investing

According to this wiki

"The opposite of the bigger fool theory is value investing"

Even though I call my blog "bigger fool trading", I almost always take the "value investing fundamental analysis" approach.

Momentum day trading and long term value investing are just two sides of the coin. They don't have any conflicts in my system.

Insight of causality derived from due diligence is the magic glue that sticks both sides together, and makes both methods viable through a unified methodology.

野鸡FA指导博傻trading简易教程(三): 理论到实践

如果你已经读完了该教程系列一，二和这篇长文，那你已经做好了理解我提出的野鸡FA指导博傻trading，做Highly Controversial Loser bottom momentum为什么会work的理论准备。

其实要点就在于，highly controversial的pick基本99.99％是highly uncertain, 背后原因那就很直观了吧，不uncertain都觉得好就不会highly controversial了，正是因为uncertain所以才会on sale。

那么选这个loser，最近半年跌的非常厉害，接近52week low又是为什么？ 其实是因为是个人都有一种捡便宜货的心态，当这种又是loser，又highly controversial的票非常便宜的时候，很多人在等着捡，人气的聚集是momentum trading的第一关键。

注意我可不是说low不会go lower, loser不会broke，大部分52week low的其实会go lower，因为business本身有大问题。 所以Highly Controersial Loser找出来了只是第一步，是必要条件不是充分条件。这些放入你的watchlist就好。 那加上什么才够充分条件？

那就是底部动量，Bottom Momentum，快速放量攀升，这个就是你DT进场要关注的第一要素，这种很猛的攀升和一般的上下波动要区分开来，一个例子April 13早上的MDTL那种图，就是我说的典型Bottom Momentum，最开始从18.xx涨到快20，就被我发现了。这种highly controversial loser一旦开始bottom momentum了，为什么是好的DT机会？

原因就在于这种momentum会非常strong，而一般来说是news driven，对fundermental有大的影响的那种，因为没有这样的news，rumor，也不会有这么strong的bottom momentum, MDTL的例子是说开始first fuel cell powerpack commercial sale to Microsoft "historical event",而以前做的野鸡FA得出的争论焦点就是这家公司一直hyper自己的技术，但是没有revenue，不卖货不赚钱，所以会被非常多人short. 这个就是我定义的焦点事件，是你在把HCL放进watchlist的同时需要记下来的可能事件之一。

因为highly controversial,两方意见都很strong，你觉得你投了钱进去take了side，不管long还是short，你会不会也对另外一方的看法理由有了解有触动？

如果你是short， so far市场说你是对的，但是随着价格的降低你有没有一点担心会有反弹，市场来个大的bottom momentum up的时候会不会质疑自己的看法可能有错，另一方意见可能是对的，尤其是short已经有了profit，你愿意坐过山车从赢变亏？这种情况下short非常有incentive尽早cover。

你是long又会怎么想，会不会觉得every dog has its day，已经suffer这么久了，现在底部已现，消息验证了我原来的看法是对的，巨大机会，一定是hold tight，还很可能加仓

担心套牢盘出逃吗？答案其实是no，这个时候大多数真要跑的weak hand套牢盘,早就跑了，因为他们对这个票没有strong belief，不会hold loser这么久。

场外的观众如何， 前面分析了，想捡便宜货的lurker一直在等着这样的机会。

回到这个uncertainty上，前面那个长文说了市场undervalue有高不确定性的股票，而且常常是非常过分的undervalue,一旦这种焦点事件，核心事件意味着最后能减小甚至去除这种不确定性，市场参与者和旁观者的态度会是什么样的，不用想都知道，这个就是最大可能momentum的来源，典型例子就是DNDN这样的FDA play，你不需要在之前赌，而且我强烈反对这种赌，因为是bet on hope，但是你一定可以在消息出来后大赚其钱，那个时候就是sure money了。

另外因为是highly controversial一般有非常多的option interest，一般有很高的short ratio，所以有squeeze的可能。

你可能又要问这种volatility这么大,风险一定大，loser最后还是非常有可能真是loser，你说的这个MDTL，涨到24.xx，就一直跌下来到15以下了。对，你说的很对，不过，请先看看这个Q＆A Session

所以，提前野鸡FA做好功课，知道焦点事件所在，在HCL底部动量开始的初期，identify这样的焦点事件（一出现底部动量，马上check news wire），如果的确是焦点事件，影响未来盈利能力的，程度越大机会越好，一刻都不要犹豫马上就上去博傻，焦点中的核心事件发生时上call都行，马上就能有赚，赚到一定程度就trailing stop lock profit。

这种方法和看每天涨幅榜前面几名去作momentum的一般方法，和很多TA高手用的Open Range Breakout的巨大区别在，对momentum的持续时间，强度大小你会有把握，更重要的是能在初期先于市场发现。当大多数folllow momentum的DTer看到MDTL这样的机会，你已经赚的差不多，快离场了

还有就是不要太贪，bottom momentum转弱后该获利了结的一定要出手，因为这样的momentum一般都会overshoot，一旦转弱，以前的套牢盘，新的获利盘都会出来，抢在他们之前跑路。


April 13th MDTL Day Graph

提醒一下，野鸡FA的一个可能的陷阱

如果你只做了野鸡FA，那一定注意不要take side，不要固执的认为你一定对，要正反两手准备，两边的momentum都能很大，有的赚，我周四call to DT short ASPV，昨天call to 空OVTI after EK CC就是这个道理。

我非常欢迎其他人bash我选出来的HCL pick，只要能给我新的information, 我都欢迎，没有一个股票长期前景我有100％的信心，我只作我看到的sure money，比如你说HNR 3年后如何，我绝对不敢给你乱说，但是我一定敢给你说这个summer，it要大涨。

就是说我blog里面提到的ticker，各位要buy－hold长期投资的还请慎重，要自己再作研究，因为我大多数也是野鸡FA出来的

野鸡FA指导博傻trading简易教程(二) Swing or DT?

答案很简单，Swing做其他人的hope（一般情况下你可不要跟他们一起去hope，在他们等待的焦点时刻快到的时候离场数钱）这就是为什么说buy on rumor的道理，这也是为什么我关注的HCL的pre-ER run常常是非常sure的money的道理，尤其是有可能来surprise的ER，我正在作的OVTI就是一个典型

DT我一般是作HCL bottom momentum，news driven，post ER momentum，HCL bottom/Post-ER momentum DT卖点要靠TA，我因为不懂TA，所以赚够了就trailing stop.

News-driven比较有趣，怎么作其实只需要区分news是不是焦点性事件，什么是焦点我在这里已经举例说明了，是不是应该sell on news喃，如果是非焦点性事件，如SIGA那个indiana小孩，那就要sell on news，因为这个对fundemental的改变不了什么，如果是焦点性事件，比如Homeland Security开始stockpile SIGA的ST－246，又如PTR找到了大油田，今后的盈利有了保证，那你就不仅不应该sell on news, 反倒应该狠狠的上call博傻

区别就在于： 这个news影不影响今后的盈利能力，如果不是，sell on news，如果是，坚决博傻，焦点事件中如关于business model是否成功的核心事件，一旦验证成功，如HNR，ASPV这样的上call博傻

野鸡FA指导博傻trading简易教程(－): 理论大纲

"Wild Turkey FA" trading guide Part 1.

Different from traditional FA, "Wild Turkey FA" (WTFA) approach

doesn't care a lot about factors such as "asset, liability, cash

flow, growth rate, P/E, P/S, and book value. Of course, they are

important and they are especially essential for traditional FA.

But since I am lazy, the only thing I care about is the "focus

issue" the bearish and bullish fight over. Yes. That's the only

thing I am concerned about for my picks.

We WTFA love the desperate retail longs in those "Highly

Controversial Loser" (HCL) stocks. Why? First of all,the holders

have the strongest incentives to look for reasons to holdHCL,

some of which could be very insightful too. That gives you the

edge to look under the surface.

Does it mean that you are going to purchase the stocks if you

think what they say makes sense? No. You need to find out why the

price keeps dropping despite all the nice things people say. I

want you to get all different opinions, then compare them with

the bearish views of analysts and short bashers.

The easiest shortcut for retail to do WTFA is to look for highly controversial stocks. Why? Because it's only with those picks that you have access to the largest amount of information.

When you have access to the opinions of cruious investors, bullish or bearish investors, MM is not going to have much information edge over you. In most cases, you don't even need insider information. All you need is common sense and be an opinion judge, and watch for new development.

What if you think the investors' opinions are right? does it mean you immediately buy? No. You just need to put this WTFAed stock into your watch list, and just watch.

The first strategy is to avoid catching the falling knife. Play with bottom momentum only. You can make a lot of money with these bottom momentum. It takes a couple of times a year to make you rich.

That's how I built my own watch list. Maybe I don't know the p/E
of every stock, but I surely know what kind of news is going to sink or boost the stock.

野鸡FA关键不是要看这个有多少asset, liability, cash flow, growth rate, P/E, P/S，book value这些当然重要，是学院派FA一定要看得

最最关键要看的是牛熊两派争论的焦点是什么, 因为我还是不够勤奋，所以我对大部分我watch的highly controversial票，只关心这个焦点

野鸡FA的好朋友就是这些desperate Retail Longs in those highly controversial loser(HCL) stocks

他们非常有incentive去找出自己hold这个loser的理由, 很多非常insightful，能挖出非常多你表面上很难看到的蛛丝马迹

那是不是这些人说好，你觉得有道理了，你就要马上买？不是，你还要先搞清楚为什么这个这些人说好的还一直跌. 兼听则明，再对比看看analysts and short bashers的bearish view

散户想做小公司的野鸡FA找Highly Controversial票是非常好的捷径,为什么? 只有这样的票你才能access到更多的information，当非常多好奇的投资者, 投机者看牛看熊的强烈意见和背后原因你都能access到，MM的information edge其实可以被抵消太多。 很多情况下，你并不需要insider的info，你只需要common sense, 当个opinion judge。and watch out for new development 谁说的对，能解释.

那你还是觉得这些investor的意见是对的，是不是说要马上买？也不是，你只需要把做了这个野鸡FA，发现是HCL的票放进你的watchlist，注意观察就好。操作策略的第一关键是不接飞刀，只作bottom momentum，而且这种momentum一定非常可观.够你赚的。

我自己的watchlist全是这样build出来的，我可能不知道每个票的P/E, 但是我一定知道下面可能的有什么样消息能大涨或大跌，和大致程度预期，如果你还记得我april 13早上 call MDTL<20，最后it涨上24才跳水，这个巨大的momentum就是你发财的机会，一年成功的作几次就好了

简单说几个票的焦点：

OVTI， fabless business到底搞不搞的过MU， Samsung这种自己有fab的business model，TrueFocus到底前景如何。所以ER看什么，不是看beat／miss，看的是市场份额的上升和成本的下降，margin回稳反升（进而重获优势），TrueFocus 大的design win就是焦点

ASPV， 这个business model到底行不行，所以焦点是看能不能再找到像Roche／CellCept这样的deal，一旦有了新的Deal，你就抄家伙上吧，即便已经涨了20％

HNR， government approval of new company，一样道理news一宣布，抄家伙上，即便已经涨了20％, 不过我已经fully loaded了，听完CC／ER，这个对我来说是sure money already, matter of time.

Highly Controversial Loser (HCL)

Loser好找吧，跌的利害的，接近52wk low的

highly controversial也好找吧，就是无数人说好，同时无数人说坏的，都振振有词，很有道理的样子

然后等机会做底部动量，一般是news/event/rumor driven，千万不要接飞刀

Q&A session

Q: 欧洲经济史上三大泡沫是什么？
A: 英国南海股票泡沫，荷兰郁金香，法国密西西比泡沫
Q：What does this have anything to do with 搏傻交易
A: 如果把你时空穿梭回去那三个历史阶段，你会怎么盈利？
你一定要在泡沫还在吹的时候果断进入，哪怕你知道可能是骗局，只有有人信，还越来越多。在基本上绝大多数人都进了的时候，你撤

欢迎comment，其实我的方法很简单，就是这个道理

野鸡FA指导下DT搏傻HCL的意义

先于市场发现momentum，
等别人发现了，你都快吃完了

Market is wrong

的可能性多大？

对大股，可能不大，对小股就很难说了，大家看到的都
同样是一个消息最开始的market反应非常有可能wrong,

最后如何只需要一点时间的检验。

今天的HNR， 大前天的ACUS，我相信都是这种情况。

great opporrtunity for ppl did their research