The book recommend buying stock following the “CAN SLIM” methodology. CAN SLIM is a formula Mr. O’Neil found after many years studying the markets and which he credits with his success in trading. What I liked about it is the hands-on of / no BS of his formula. Here are are my notes.

C- Current Quarterly Earnings per Share

• Only buy stocks which QEPS  have risen by a minimum of 20% year on year
• Make sure the last two quarters are positive
• If two successive quarters are in the red, the stock may be trouble

A – Annual Earning Increase

• Only buy stocks that have a compounded growth rate of earning superior by at least 25% year on year
• It is imperative that this is coupled with the +20% QEPS
• P/E ratios should be ignored

N- New Management, Products, Highs

• 95% of stunning successes have a new product or management
• Look for companies emerging from price consolidation patterns
• Forget cheap stocks, they are usually cheap for a reason

S – Supply and Demand

• Small supply = better performance
• Stocks with a large percentage of ownership from Management are good bet
• Regular share buy-back may lead to higher earning per shares
• Lower debt ratios are better
• Look for volume increase when stocks are going up

L – Leader or Laggard

• Buy the best two or three stocks in a group
• Stocks’ relative price strength need to be superior to 80
• Overall strength line should not be going down (ex. 85, then 80, then 78)
• Sell the worst performing stocks first

I – Institutional Sponsorship

• Winning stocks need 3 to 10 institutional owners (funds, pensions, insurances etc.)
• Shy away from over owned stocks by institutional
• Try to find the intelligent, highly informed institutional to follow their actions

M – Market Directions

• Track and interpret the daily price & volume chart of the general market
• Follow the leading stocks evolutions
• The big money is in the first two years of a Bull Market

I found the rest of the book to be less interesting. Still a few gems to extract, but otherwise, the author was mainly sharing his experience and going into more details about his past 35 years as an investor. Here are the few gems I extracted

• Sell if your stock take a dive.
• Ask yourself regularly “Do I want to buy this stock now ?”
• Limit your lossed to 7% or 8% for each stock
• Get out while the stock is up and has a chance to break
• Only buy 6 to 7 stocks at one
• No well run portfolio should have losses carried over 6 months
• Never short sell in a bull market
• Never short sell thinly capitalized stocks
• If you like mutual funds, big money is made long term – i.e. 10 to 15 years or more, and increase your investment when in a bear market as a fund always recover
• Keep things simple !!

Here it is folks !
All in all, a highly recommended read.

How To Make Money In Stocks: A Winning System in Good Times or Bad

For those who don’t know LM, they are a privately owned, specialist Australian income funds manager who provide established income funds with a range of flexible investment options: cash, conservative income and enhanced income. Their funds are on the rise, and their interest rates are quite attractive.

Personally, I am still lukewarm on their funds, but they do seem serious, and certainly do provide good industry reviews for the Australian property market. Here it is:

Whilst Australia is not immune from the global recession, its strong macro-economic framework continues to provide resilience within its general economy and property market, to ensure any recession is short term in nature.

Australia’s population continues to grow, supported by a fairly aggressive migration program which welcomes approximately 160,000 new Australians each year, who immediately contribute to the economy.

Fiscal policy and interest rates

• Since September 2008, Australia has seen a sharp reduction of 4.25% in interest rates, from 7.25% to 3.00%. Loan rates are now the lowest they have been in some 50 years.
• In addition, the Australian Government has implemented expansive and conservative fiscal policy of approximately AUD$60 billion, the equivalent of around 6.00% of GDP. According to the International Monetary Fund (IMF), this gives Australia’s government “scope to counteract the downturn”.
• The resultant Australian Government debt created by these expansionary policies will be subsequently less than experienced by other economies. Australian Government debt as a percentage of GDP is forecasted to be below 20.00% in 2014, compared to close to 80.00% for the UK, US and Euroland, and Japan at 140.00%.
• There have been NO government bailouts required, unlike the UK and Europe where massive bailouts have been required within the banking and corporate sectors.
• Australia’s banking sector is strong, with its four major banks each holding one of only 12 worldwide Standard and Poor’s AA+ ratings.

Funds management industry and financial services sector

• Australia has one of the largest and most tightly regulated funds management industries in the world.
• As part of the managed funds industry, the financial services sector is the fourth largest sector in Australia.
• Australia’s non-bank sector is well established and recognised. It constitutes approximately 35.00% of the financial services sector.

Property

• Australia’s property market is diverse and ranks in the top 10 globally.
• Australia has the second largest REIT (Real Estate Investment Trust) market in the world, after the US.
• The continuing housing shortage faced by Australia is being addressed at both Federal and State Government levels. Both are currently spending AUD$ billions on infrastructure to combat unemployment, and to provide the necessary framework for continued growth. The Federal Government currently provides a grant of between AUD$7,000 to AUD$21,000 to first home owners.
• During 2008, Australian property prices softened around 2.00% to 3.00%, with further marginal softening occurring in the first quarter of 2009.
• Sales activity is slow and there has been no volume of discounted sales, a result of the current environment of record low interest rates.

The Credit Suisse has an interesting take on where we start this new year and the how 2009 may be pivotal for many reasons. Developed Economies Enter 2009 in Recession touches many different topics, keeping it simple and interesting. A good read.

The Bag Lady Paper shares the story of Alexandra Penney who lost her life saving in the Madoff debacle. So as to better protect the likes of Ms. Penney, Morninstar calls for more transparency and investor protection following the Madoff affair. Quite expected if you ask me. Too many people just got lazy and stopped asking questions when time were good. Yet, it may not go down well with some fund managers like Kenneth C. Griffin, who made his fortune on the back of the hedge fund ride and who is featured in an interesting piece about Hedge Funds in the NY Times.

Farish A. Noor is one of my favourite Malaysian thinker. He writes very provoking pieces and loves nothing more than challenging the status quo. His piece 5 part piece on Gaza and the Liberal Conscience really got me thinking. It raises a lot of question, many objections, and I really am glad I read it.

I could not end up not having a couple of articles from The Economist. The first is discussing Risk aversion and how our financial decisions are influenced by our past experiences. As we tend to reflect on our past perception of a situation to define our financial choices, it got me thinking on how to best exchange and discuss about it with my wife and future kids; so as they can make informed decisions. The second one is about Barack Obama – getting back on track. I particularly liked the very useful little flash application at the end of the article summarizing the top issues Mr. Obama will face, his cabinet and white house staff – I tried to embedd it here for a good 30 minutes; alas, I did not manage…

The 5 mirror funds are as follows:

DWS Invest Africa this is FPI’s first venture on to this continent where markets are being driven by strong macro factors, which are likely to persist. The trend to political and economic stability, improved business confidence and a willingness to invest makes this an exciting investment proposition for those who want to buy into the nascent pan-African development cycle.

Sarasin EmergingSar – New Frontiers, FPI has bolstered its emerging market offering with the addition of this fund, which invests predominantly in countries that are at an early stage of development even by the standards of emerging markets.

DWS Invest Global Infrastructure concentrates on companies that stand to benefit from infrastructure spending, the fund invests in 4 key themes: Transport: including roads, airports, seaports, rail; energy: particularly through companies which specialise in gas and electricity transmission, distribution and generation; water: irrigation, portable water, waste treatment; and communications.

Castlestone Aliquot Agriculture offers investors an actively managed and diversified exposure to agriculture, water, alternative energy and livestock futures contracts and is a theme that is set to demonstrate continued interest given global demographic trends.

Castlestone Aliquot Commodity offers a diversified exposure to commodities futures contracts including energy, precious metals, livestock, industrial metals, alternative energy, water and agriculture. This fund can act as a hedge in a multi-asset portfolio as well as providing defence against a wide range of economic and political uncertainties.

Commenting on the launch, Jim Henning, funds marketing and research manager at Friends Provident International said:

These new fund additions offer relatively low correlation to conventional equity investment whilst offering attractive long term potential for the future. Combined with the recent launch of our on-line portfolio planning tool, Dynamic Portfolio Planner International, we remain committed to offering advisers sufficient fund choices and support to weather the unprecedented market turbulence.

• JF ASEAN
• JF Australia
• JF Korea
• JF Taiwan
• Franklin MENA
• HSBC Climate Change
• HSBC Brazil Equity
• HSBC Korean Equity
• HSBC Russia Equity
• GAM Star Continental European Equity
• GAM Star US All Cap Equity

A pretty good seletion. I particularly like the ASEAN, Climate change and Brazil Equity ones. They offer good upside and may not suffer too much from the current credit crunch. But they are for pretty agressive investors…