How To Beat Buffett, Icahn, Soros At Their Own Game
Cast your net where the big fish swim. -- Anonymous
Who hasn't dreamed of buying and sellingalongside the most successful investors of all time?
I'm talking about big fish like, George Soros and Carl Icahn.
(Let the record show that the per-share factor of 78.9 times. As for Soros, Forbes this month estimated his at $20 billion. That him in the same neighborhood as Icahn, whose latest has delivered an average annual return of 41.3% since 2004, trouncing the broader by a factor of seven.)
Thanks to a new advisory from a StreetAuthority sister company, Profitable Trading, it's now not only possible to ride the coattails of these Wall Street icons, there's a good chance you can beat them at their own game in the process.
You see, Michael J. Carr -- the Chief Trading Strategist for Guru-- casts his net where the big fish swim.
Let me explain...
Each quarter, Michael scours the files at the Securities and Exchange stocks are being favored by the top investors in the country -- those who've proven they can deliver market-beating returns under any market conditions. Investors like Buffett, Soros, Icahn, Simons and Cohen.to determine which
At the moment Michael is tracking 400 stocks that 20 of these investing gurus expect be big winners. In other words, Michael utilizes the research from the best investment minds on the planet to create his watch list.
But that's just the beginning.
Michael himself is a Chartered Market Technician, of which there are only about 1,400 in the world. And he's got 26 years of trading experience under his belt, during which time he's written two books on the subject.
Among the hundreds of "guru" stocks he identifies, Michael will consider only those that are rising faster than 70% of the market during the prior six months.
From the stocks that pass this part of the test, Michael looks at the strength of the companies' cash flow per share is rising faster than 70% of all available stocks.-- the amount of coming into the business, a barometer he regards as the very lifeblood of a company. Here, again, Michael considers only those holdings whose
What's left is the best of the best -- the stocks that have the most potential for capital appreciation in the current climate, not to mention the implicit endorsement of the world's top investors.
The best way to get to know Michael and learn more about his system is to watch an online presentation I hosted with him last week. You can get a taste of the webinar -- including the name of one of his top-rated guru picks -- from the excerpts that follow. In the following remarks from last week's webinar, Michael talks about some of the tools he uses to zero in on those guru stocks with the greatest potential. Here's a sample of what you'll hear.
On using relative strength to pick winning stocks...
To my knowledge, relative strength is the only investment strategy that's been proven to work by academic research, by analytical back-testing, and through real-world trading experience.
Here's a sports analogy to illustrate why relative strength is a reliable indicator of success. In any game, the winner plays in a way that is relatively stronger than the loser. If you were trying to select the winner before the game started, you would probably pick the team you thought was the stronger of the two. That might be the team with more wins or the one that has an edge in some way for the upcoming games.
Researchers have found that the team that is ahead after three innings in a baseball game wins about 80% of the time. In hockey, the team ahead after the first period wins nearly 70% of the time. Teams up by 8 points or more at halftime in college basketball win about 80% of the time. In each case, the team that has the stronger start is likely to win in the end.
Just like in sports, I want to pick the stock that is leading at halftime because it has a better chance of winning. Relative strength lets us quantify who the leaders are right now, and studies confirm that those stocks tend to outperform the average stock in the future.
Cash flow analysis: the ultimate value-add...
Risk is lowered when a company has strong and reliable cash flow. The improvement I made to cash flow analysis is to apply the idea of relative strength to it. Specifically, I home in on the companies with the strongest improvement in cash flow over the past 12 months. These are the companies that have the resources to increase their dividends or earnings now.
Combining the relative strength of cash flow with traditional relative strength, we own the companies that are doing well fundamentally -- but only when their stock is beating the market. This simple strategy, which I call my Guru Investing system, combines the best technical and fundamental indicators I know of into a single system.
A guru stock that's flashing 'buy'...
U.S. Bancorp is the sixth-largest bank in the nation ranked by assets, fifth when ranked by total efficiency ratio, a measure of a bank's management effectiveness, in the second quarter of 2013 and for the full 2012 year.and fifth when ranked by . Among large banks, the company was number one when ranked by return on common and
USB's relative strength (RS) rating of 83 means it has outperformed 83% of the market the past six months.
Like other large banks, USB cut its dividend after the crisis had passed. The current annual dividend payment is $0.92, a 2.5% yield at recent prices. That might not sound like much right now, but I expect USB to grow its dividend over time.during the financial crisis. But the company was among the first to obtain government approval to begin raising its
The stock has been a market leader throughout the summer, even as the broader stock market struggled in the wake of the Federal Reserve's public debate about tapering its bond buying program.
USB has a relative strength rank of 83, meaning it has outperformed 83% of the market in the past six months. In addition, USB has grown cash flow faster than 94% of companies in the past 12 months. In other words, USB is a 'buy' right now according to my Guru Investing system.