Customer Reviews

Gene Marcial's 7 Commandments of Stock Investing

5 star:		(4)
4 star:		(2)
3 star:		(4)
2 star:		(0)
1 star:		(1)

 

 

The first and most important commandment is to buy
what other investors do not want in the short term.
So, buy low and buy cheap. For instance, Ford Motors
sells for under $5. right now. For consumers who believe
that the company will recover, an investment now could
yield considerable benefits as the hybrid cars roll out
in a few years.

Generally, buy at the bottom while others panic.
You'll have the whole upward part of the curve to make profit.

As a rule, choose standout companies that buck the trend
in downward markets. These stocks are out of phase with
the current market. The investments go up while the rest
of the market is tanking. Examples are Petsmart,
Crowdgather, Carmax and many stocks in the commodity areas.

Some investors like to set a target for a stock and sell
when the target profit has been reached. This is a good
short term strategy. Some stocks continue to go up so that
a short term strategy can fail to exploit long term trends.

Insiders buy to make money so watch what top managers buy.
A review of SEC filings could produce some top performers
over the long term. The book gives a number of stocks
for investors to consider over the long term. i.e.
o Apple Computer
o Boeing
o CVS
o Genentech
o Petrobas

A significant market downturn can provide a much bigger
upside or buying opportunity. Another good strategy is to
buy stocks that consistently pay dividends. Take these
dividends and reinvest to grow the portfolio by multiples
over the long term.

This book would be a good acquisition for new or intermediate
level investors.

Gene has distilled his more than 3 decades of experience in the stock market into this wonderful book "7 commandments of stock investing". The advice he offers is practical and when put to use can get great returns for even an average investor. I have been following Gene Marcial's picks on Inside WallStreet column in Businessweek for almost 2 years now and his picks have consistently beaten the S&P500 and DJIA. Whether you are a novice to the stock market or a seasoned pro, the book has absolutely invaluable advice. Read this book and you won't be disappointed.

Reason to read this book-Gene Marcial's selections of stocks have outperformed both the DJIA and S+P every year for the past 10 years.
GM

The author has been beating the market indexes for a full decade and he shows readers his secret in this book. Most money managers fail to beat the averages, and that's why many financial experts recommend that investors abandon picking individual stocks and just buy index funds instead. But they fail to recognize that one of the reasons why these managers fail to outperform the averages is diversification. You cannot beat the market if you diversify too much. The second commandment states: "Concentrate. Diversity Not" because diversification guarantees mediocre returns.

My other favorite commandment is Number 6: Don't Fear the Unknown. The stock market does not handle uncertainty well. Those who can distinguish between uncertainty and risk can be handsomely rewarded by returns.

After reading this book, investors can think for themselves when confronted with new advice from the experts on TV. I can see why this author has been successful beating the market.

- Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market

If this is the first investment book you read, *some* of the rules/advice might actually be new and insightful. That being said, if this is your first investment book, put it down immediately and find something more useful (Lynch? Graham? Buffett's shareholder letters?).

The rules are so simplistic that they're effectively common sense to all but the most basic investor but then the detailed advice seems to assume you've got the time and ability to spend hours digging deeply into multiple stocks and multiple news sources. Nearly every section instructrs you to read countless business publications and industry publications, go to finance websites, use Google and Yahoo. Seriously?! I paid for a guy to tell me to use a search engine?!.

One favorite:

On investing in foreign countries, Mr. Marcial recommends really understanding the economic system and political climate. Shocking suggestion. And also completely impractical. This book has such a simplistic tone (and very little supporting detail) that it is clearly aimed at casual investors with little time to spend analyzing dozens of companies in detail (as Mr. Marcial repeatedly suggests). And yet its basic advice is do a *lot* of detailed research. If that's your thesis, you could've boiled this book down to a single page (which is true of most business books ... sigh ... scattered anecdotes do not constitute real evidence).

We won't even get into detail about Mr. Marcial's anecdote about a savvy investor who made a killing on AIG stock in 2007 after an investigation into accounting problems (for derivative positions, among other things) blew over. Whoops.

Or the fact that he asserts how actively managed funds often outperform index funds that hold huge chunks of the market (on average, after fees, they don't ... it's a fact ... in fact, it's practically a mathematical certainty).

If you really only have time for very brief reads about investing, try "The Little Book That..." series. A) They're shorter B) they do a better job of substantiating their advice C) they're actually coherent.

If you have a little more time, invest in advice from Lynch/Graham/Buffett.

Whatever you do, do not waste *any* time on this book.

If I could give this book negative stars, I would -- it would be more indicative of the return on investment this book actually provides.

Jane Bryant Quinn aptly referred to a certain kind of financial journalism as soft core pornography (Columbia Journalism Review March/April 1998). In my view, when an investment journalist writes stories and books that defy all the serious research and offer advice that might be good for professional investors but dangerous to the general investor, I think it falls into the pornography category or worse.

Mario Gabelli might well be a millionaire from investing. Maybe these rules have worked for him. Certainly, some small percentage of professional investors beat the market more often that not. But most do not beat the market consistently. While Gabelli points out the truism that market returns equal average returns from the market, that doesn't mean you can do better by stock picking. Most mutual funds do NOT offer returns better than the market return year in and year out.

His seven rules, if you care to risk your hard earned, taxed, and saved money, are:

1) Buy when others are panicking. I instinctively agree with his view of contrarian investing.
2) Concentrate your investments in a few well-chosen great companies rather than diversifying to the entire market. My question is, how do you know that you have chosen well until after the returns are in?
3) Buy the Losers. This is the oddest piece of advice. When he really means is watch for good companies that the market has underpriced for whatever reason and ride the correction back up. Obviously there are losers you should never buy because their stock value is headed to zero.
4) Forget Timing. This is about not using the technical charting methods of investing. I agree.
5) Follow the Insider. Now, this is not about insider trading by watching the public reports that insiders must issue about their purchases and sales of company stock. Obviously, by the time you hear about it the market has already adjusted to include that information in its price, but it does provide you with information on whether you want to stay with, invest in, or get out of a company because the insiders are buying, selling, or standing pat. I think insider behavior is a useful piece of the puzzle, but don't make it dispositive.
6) Don't Fear the Unknown. Here he urges you to invest in good overseas companies. OK, I guess.
7) Always Invest for the Long Term. I agree. He also then provides a list of seven companies you should think about long term. Do you really believe in these? Apple, Boeing, CVS pharmacies, Genentech, JP Morgan Chase, Petróleo Brasileiro S.A., and Pfizer.

I also object to his using Warren Buffett as a model for other investors. Buffett does not really invest as you and I do. He buys control of companies he and his team then manage. He also holds nearly all of his investments forever unless he decides to get out of them altogether.

Anyway, you can decide for yourself if this appeals to you. Personally, I think if you are a regular person with everyday responsibilities, investing as recommended in "A Random Walk Down Wall Street" will be much better for you in the long run.

Reviewed by Craig Matteson, Ann Arbor, MI

Received product as described. Thanks for a fast, easy and smooth transaction. Great experience and A+++ quality product would repeat anytime.

I bought this book last year after I was tired of losing money with a broker. As a lay person now my full time job is managing my own money and it has paid off big time. My portfolio is up over 150%. I can honestly say I love my Job! Thanks Gene Marcial your book changed my life and has given me and my family financial freedom that one could only dream of!

This book is interesting but doesn't offer anything new that I couldn't find for free on the web. A lot of Gene's "commandments" are really just old Wall Street sayings that have floated around for years like "buying when people are fearful" or "invest for the long term."

The problem with this book is that each commandment and examples are isolated from each other. Gene doesn't really explain how to put the seven commandments together to form an investing strategy. While you might feel optimistic reading about how you would have made a 150% return if you had bought company X at a certain time there isn't any real long-term numbers to show that a particular commandment, or all the commandments working together, would yield a positive gain.

Skip this book and visit some free financial websites for some real investment strategies.

For those that read my book reviews, let me simply say that unless I say that I skimmed a book, I read every book that I review, and I don't use the publishers notes to aid me, as many other reviewers do. I just give you my opinion straight, even if I didn't like it, realizing that there will be no commissions at my Amazon Store from that review. And that is fine with me. I review new and old books -- I just want to point my readers to what I think is good, and away from the bad stuff.

I would also add that my Amazon Store is my equivalent of the tip jar. If you value my writing, when you need to buy a book from Amazon, simply start by clicking on a book on my leftbar, and buy the books that you would buy anyway. It doesn't increase your costs at all, and I get a small commission.

Anyway, onto tonight's book review. I am genuinely not sure what to conclude on "7 Commandments of Stock Investing." There was much that I liked, and much I did not. I know that Mr. Marcial wrote a column for Business Week for many years, but that was not something I followed closely. This is my first real introduction to his thought.

Let me take his seven principles, and go in order:

Buy Panic - Hey, I can go for that. The difficulty for average investors, and even many seasoned investors is that they buy too soon in a panic. One also has to focus on companies that are high credit quality in order to avoid big losses. That got some attention in the book, but not enough for me.

Concentrate, Diversify Not -- Ugh, I like having 35 companies in my portfolio, because I concentrate industries. To the extent that you concentrate, you must have superior knowledge of the companies that you own. Without that knowledge, the average investor should diversify more, and investors with no special knowledge should buy index funds.

Buy the Losers - Again, I can go for this, but it takes a special person to separate out the companies that will crater from the companies that have a sustainable business model and will bounce. Buying quality companies is a must here, or else you can lose a lot.

Forget Timing -- I agree. I keep roughly the same equity exposure all the time, and my rebalancing discipline helps protect me as well.

Follow the Insider - That's a good principle, but I'm not sure that it should rank so highly in a set of stock picking rules. Insiders do do better than the market as a whole, but using insider purchase and sale data takes discretion to interpret.

Don't Fear the Unknown - By this he means have some foreign equity exposure and biotechnology investments. One of my rules is, "If you can't understand it, you won't know how to buy and sell it." Getting comfortable with any area of the market that is volatile takes study and effort. This is not trivial. As for biotech in particular, that takes a lot of incremental skill that I don't have. After reading what Mr. Marcial wrote, I would not feel confident investing there.

Always Invest for the Long Term: Seven Stocks for the Next Seven Years -- He employs a multi-year holding period, like I do, and then points out seven stocks that he thinks will do well. I'm not going to spoil that part of the book by mentioning any of the seven, but none of them interest me. (Well, maybe one or two at the right level.) All of them are large caps, and are quality companies.

Quibbles

Under his first principle, he recommends buying the stock of the company that you work for when it gets hammered down (page 8). Unless you are an industry expert here, be careful... you are compounding your risks, because your wage income derives from the health of the firm. Don't put your savings there too, unless you are dead certain. (Full confession: I put one-third of my net worth on the line on my employer, The St. Paul, in March of 2000, selling in August of 2000. Great trade, but no one else knew in the firm did it.)

On page 62, calling Primerica the predecessor firm to Citigroup is a bit of a stretch. Yes, I know how the case could be made, but there were links in the chain where the smaller company was acquired by a larger one, and the smaller company came to dominate the management of the combined firm.

Under his third principle, he favored GM and Ford. I can't support buying such credit quality impaired investments under the rubric of "Buy the Losers." These are two companies that will have a hard time surviving in their present forms. Motorola would be another example... a pity there is such a lag between writing and publication.

Summary

The book is intelligently written, and is short enough for an average person to read in 4 hours (188 pages). He gives plenty of examples to illustrate his points. I wasn't usually enthused by the companies that he chose -- I prefer to go further off the beaten path, and buy them cheaper.

His basic principles are good principals to follow, but they need to be tempered by a focus on risk control. It's one thing to serve up investment ideas as a writer -- you can throw out a lot of promising ideas, and do it well. What is tough is owning the companies, and trading through their troubles. That's a dirtier business; one where average investors will be more prone to fear and greed, and may not do so well, just because they can't stomach the risks.

He also does not make clear how the seven principles work together. Need you follow all seven on every investment? I think that's what he is saying.

Away from that, you can't use his principles on low quality stocks; that would be a recipe for regular large losses. Buying panic, buying weakness, and concentrating requires a high quality approach to investing.

With that, I recommend the book to those that have enough maturity to know that they will have to bring their own risk control models to the game. His methods presuppose a degree of ability in interpreting the fundamentals of companies, so I do not recommend this book to beginners; it would be a dangerous way to start out in investing. Better to start with Ben Graham.