The Perfect Stock by Brad Koteshwar
🧙🏽♂️ What did i learn from this book?
This book is just collection of stories of different type of people who bought taser stock during 2003-2004. Most of story was just from perspective of average traders or broker. I don’t think i learn anything from that stories
Only interesting chapter was about Boyd hunt trading of taser. This chapter explain his detail boyd trading philosophy and how he take his positions in trending stocks. it’s really surreal. I cannot directly use his methods but i really love how he pyramid his position and his 20/4 setups.
Chapter 3 : The Speculator
so i am not taking any notes for first two chapters because book is written like stories and first two chapter about author who got contract/job to do analysis on stock “taser” and he is getting 2,50,000$ for this report, he needs to finish this report within 1 week.
author starts working on this project and find that his older friend boyd is investor in this company. so he decided to visit him to find more about this company.
Now in this chapter author visit his older friend boyd and conversion between them continue
Boyd: “ Why sudden interest in this stock? the market seems to be topping around here at least for the intermediate term. You should be looking to go fishing now. Not to buy stocks. And more importantly your interest in Taser is surprising since I am now looking to get out of Taser shortly.”
Author: “I am doing some research work on taser for my client. it is now headline news. There is talk about stellar earnings report coming out next Tuesday. I thought i could pick your brains about the stock”
Boyd: “You have to be careful when dealing with the markets. I suppose there is no need to tell you that since you are an old trader like myself. I am always wary and respectful of the market. I have been bitten severely many times by the market. And the bite has been deadly every time i had become arrogant. I am now always humble when dealing with the market. so i sound defensive and sceptical of the majority of what goes on in the market, it is due to my plain humility. now that you have my disclaimer where you like to start?”
It is not everybody who gets to listen to one of the true masters of the stock market. Boyd was from an earlier generation and the wisdom was always understated. And he always offered the complete truth. He made it plain that the dangers in the markets far outweighed its ability to be generous. He was unknown to most of the crowd in wall street. as in normally the case, the more well known somebody is on the street more the chances are that such a person’s best days are long gone. It is similar to being in blue ship stock. its best days of great growth and movements are long gone. Having finished its great move up through its great growth years, it reaches a mature phase where the rate of growth is slow and steady. once someone becomes well known in the financial circles, his ego starts to work against him as he becomes, more important that he really is. Ans that is the first step toward mediocrity. Ego and self importance have no place in the markets.
Boyd Hunt was the only one of his kind. He avoided attention, stayed away from the limelight and he went about his operation in complete silence and detachment from the rest of the world. There was no agenda and no self promotion on boyd’s part.
Author: “Boyd, if you could please start with basic’s of stock market speculation tonight. After i’ve done some digging, i’ll have to come back to you for detailed trading lesson and your trade executions on taser. I hope to be back within the next couple of days, if that is acceptable?”
What boyd knows about the market is priceless. If used correctly over time, the knowledge he can impart can make anybody wealthy. I was judicious in my note taking that evening.
Later that night I sat down on my computer at home and began typing all that i had heard from boyd that evening.
Notes
- Nothing in the stock market happens without reason. And the folks with the money make things happen. And there is reason behind every move. The reason may or may not be obvious and in many cases it never become clear. Most of the times it does not become clear to even the most astute of observers. Should the astute observer figure out the reason behind any specific move, it is most times clear only in hindsight.
- All participants in the market are human beings. Theer are no aliens or animal participants. It follows, therefore, everything that happen in market is due to human action. Humans are the only buyers and sellers. The price settles at the end of the day at a level where all the buyers and the sellers for a particular stock come to a balanced agreement for a price for that day. what happens intraday is mainly noise.
- I have learned that to watch the market during the market hours is like slow death. Every price tick up and down just drives me nuts. And i end up making on the spot stupid decisions due to chart or news. the move always occurs well before the news. The smart money usually sells into good news and only to buy it back at a reaction. That is because smart money had discounted the news weeks before it became news. when news are released public gets exited and smart money can sell into the increased volume of buying from the public.
- when i watch the market, it turns out to be nothing more than an online casino where the odds are against me. the only time i have made big money when i only relied on myself and nobody else.
- I find that my interpretation and decisions based on my own interpretations work well for me. And they work best with distance form the noise and news. the distance allows me to see the market from my own eyes instead of relying on someone else’s view.
- If i want to buy a car, i would go to dealership, test drive the car that feels and look right to me. then if the price is right , i make decision to buy. I would never buy a car because some car broker calls me on the phone and describes the car to me. this same thing can be apply to buying house.
- But humans will buy large amounts of stock based on a phone call from broker. Why we do that? because of promise of riches. The buy is made to enrich ourselves rather quickly. It is no different in that respect from a casino. we bet in a casino to enrich ourselves.
- The only consistent winner in the stock market is the one who places his commitments based on probabilities and not on possibilities.
- There’s thin line between gambler and speculator. Speculation is placing commitments only when odds are in one’s favor. The action is not taken by a speculator unless and until the odds favor him. the gambler will make commitments without regards to the odds of wins.
- You know for years i used to write newsletter. I would make comments on market’s general trend. I would try and make the point that the best odds of wins are when one limits one’s trade to only preiods of confirmed trends in market. So it would always payoff to be buying only during market up trends and to be staying in cash during downtrends or uncertain trends.
- Constant bullishness would win more subscribers than the constantly correct market calls. The problem is that most advisors cannot time the market, they assume that it cannot be done. while i cannot catch the bottom and top of move, i can definitely time the periods of increased odds of winning in the market. I would only suggest trading in such time periods of increased odds.
- We live in a society that seeks instant gratification. All of us want immediate action and results. None of us has the old-fashioned patience anymore. None of us wants to wait for anything. It is even more prevalent in the stock market. We want to make triple digit returns in days and weeks when in reality it takes weeks and months. We see that in shot gun weddings and divorces our young people go through nowadays. Nobody wants to work at things anymore. If something does not work on the first or second attempts, most folks will throw in the towel. And folks start looking elsewhere for a faster and quicker satisfaction.
Chapter 11 : The Speculator’s operation
This chapter contain details of boyd buy point , stoploss and sell points of his famos taser trade.
Trading Log
Buy 1 : 3rd October 2003
- buy amount : 49,155, with 10% stoploss
- Reason : new all time high after clearing 17 septermber, new high that was made on huge volume
author comments
- I opened up taser chart and i saw that the stock had made all time high on 17 September, 2003. with five time volume increase then previous day. this is also highest one day volume traded on taser for most recent 52 weeks
- Such move clearly sign big accumulation had started weeks and months ago and there was a shortage of stock that was going to be created by the big money behind the stock
- then for about two weeks the stock just went side ways and without giving back any of gains it had made in recent few weeks and months. thus the first test buy was made by boyd as soon a new higher high had been pegged by taser. and he had placed the order few days in advance having decided that he would test buy into the stock should it make the new high price. and on 3rd October his order was filled
- The Stock started to take off. In just four weeks it doubled in price on October 30. this move from our buy price just came in four weeks and the entire move was without reaction. this had astounded boyd as the move had surpassed his expectation. he was no getting aware that he was perhaps seeing the early stirring of a really classic bull run on a stock. without a reaction to its quick move up, boyd was unable to figure out where and when he could really buy in with a bigger stake
Buy 2 : 20 November, 2003
- His first test buy had proven to him that he was right. He was in the right stock at the right time. Now he had to find a place and time where he could place a larger commitment. he figured that if his stock double in price in four weeks, the it was just beginning a true move. and he knew there would be at least one pure shakeout move on its move up. so he had to start paying attention to its weekly charts rather than daily chart. daily charts would probably show many false short-term violent moves that will help eliminate weaker holder of the stock. so he waited for reaction.
- The reaction began in early november of 2003. the reaction was short lived and by 3rd week of november, 2003 the stock was back near its prior prices. now boyd was ready to place his larger stake.
- buy amout: 194600, with 10% of stoploss
- it’s almost 4 times of previous purchase, now overall position = x + 4x = 5x
- due to previous gain, he will still remain in profit even if stoploss got hit
- TASR continue to run, in matter of 3-4 weeks it went up another 30-35%. Boyd overall gain on 5x position is almost 60%. It would be easy to cash it in. In fact, it would be natural to most to liquidate the holdings and pocket the gains. but boyd was true speculator. Every move was based on what offered the best odds for big wins. The odds in this did not favor selling out. Odds were still tilted to ward much higher prices
- as was his norm, boyd waited for a reaction after last 30% move to see what clues he could get from the stock. and he got his reaction. again only after few weeks of consolidation, the stock started approaching its prior highs again.
Buy 3 : 9 January, 2004
- it was early January 2004, boyd decided to play his hand out fully. He waited and waited for stocks like these. And when they showed up, trading them fully through their moves had always paid dividents to him. So he decided to go out on 50% margin if stock made new high. Going on 50% margin means that hw would borrow up to 50% of his equity form his broker and pyramid the extra borrowd amout to current holdings.
- buy amount 4,00,125, 10% stoploss
- original position =5x after 60% growth =8x
- current position = 8x + 8x (50% margin from broker)= 16x
- so again with 10% stoploss, he would be in profit if things not work out
- Taser continued to sizzle and by early february it went another 40%. Again the temptation was there to sell out. But his system only working after reaction was pegged, still did not offer good odds at selling out. it meant that still higher prices were due. So he waited for the reaction.
- reaction came and this time it was more severe. This did unsettle him but he noted the weekly charts and weekly close, he was confident that this was just classic shakeout probably last big correction before the upside move ended.
- now after this reaction he was bit hesitant and he had placed stoploss below previous low of that week.
- And he waited. that was ll he could do. his sell stop never got triggered. it was the price volume action on weekly charts that never convinced him of the end of the move.
- this stock keep going up till early november and now bowd could feel that the end was coming. he felt it would be within days or weeks so he started watching the stock closeby.
- This last move was unbelievable. boyd had not seen anything like this in a long time. Boyed was just in amazement. All the while moving his stop up to a little below the prior week’s low. and the moves for those last three weeks are listed.