It is interesting that we often use two particular phrases to describe our stock-market investing. “I made a killing in the market” and “my stock portfolio killed me”.
Obviously, it is not a life or death situation even financially. But when we push the “sell” button to close a position, it is final and finished. To the same extent, James Bond carried the 007 designation, a license to be put in situations to both kill and to be killed.
What made Bond a super successful secret agent—other than the busty Bond girls—was “Q”, the weapons expert, and his laboratory. A pen gun was interesting. But the crown jewel was the famous Aston Martin DB5.
You might have noticed if you watch the films, that Bond never had any problem using these devices. Johnny English—starring Rowan Atkinson (Mr. Bean)—had trouble getting out of the laboratory without blowing up things.
We saw Bond easily take out his evil pursuers using all the gadgets that the Aston Martin gave him. What we did not see was Bond learning to drive.
To be a world-class secret agent, you need all the tools of the trade. But first you need to know how to use those tools. That takes hard work and practice. Just like for the stock market.
In spite of all the high-tech weapons, it is the humble pistol—a Walther PPK produced since 1930—that is the foundation of Bond’s arsenal. We never see the hours at the firing range sharpening the skill.
For the stock market, the basic “weapon” every investor has is information. It is not a “stock market” but a “market of stocks.” It is individual companies that we buy and sell for profit. For that we need to know the macroeconomic situation both here and abroad. We need to know trends in industries and what pushes revenues. We need to understand if, how and why companies are making money or not.
Back in the days before the Internet—yes there was a stock market then—every stockbroker and many investors read the Wall Street Journal daily, and Barron’s every Monday morning. Brokers would pay a messenger to have a copy of Barron’s delivered straight from the printer or from the airplane before dawn. Now, investors turn to Facebook, which says much about the way the markets now trade.
We should read every corporate press release not only for what it says but for what it does not tell us. If the company went from loss to profit, was it because of increased revenue or pared expenses? All the listed firms’ official disclosures are found at edge.pse.com.ph and here you often find the bad news that never shows up in the newspapers.
Most investors never look at a company’s Financial Statement. It is too hard and too long. But the FS is the only way for you to know what is going on, and there are only two pages that are important. The Income Statement is simply “money in”, “money out”, and what is left over (profit) or not (loss). Then read the Balance Sheet, which tells you how much the company owns and how much it owes.
In both documents, read the footnotes. This is where the company buries the bodies they really do not want you to know about but that they must reveal.
Make a killing or get killed. Those are the only options. Information is your most basic tool as an investor. If you are not using the available information, then you have only yourself to blame.
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E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.