Customer Reviews

Invest Like The Best, Book with Diskette

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Using your computer, O'Shaughnessy shows you how to find out the leading factors that mutal funds use to pick stocks. He provides insite and information on both value and growth investing. It is geared toward the long term investor. The book shows how using your computer you can enter in these factors and screen 1,600 stocks. The ones that match your screen will show up on the screen. This beats sifting through stock tables.

His theory is that by analyzing the holdings of top mutual funds, and then determining how they differ most from the index, you can then emulate the mutual fund's performance.

You can even improve on the performance of mutual funds because you can follow their strategy in a more consistent fashion and because you can reduce their strategy to its essential elements. Often even good fund managers are not entirely consistent.

An example of a strategy is: from the stocks with

12 month EPS gain >20% and
26 week % price change>20% and
Last Qtr EPS % chg > 20% and
Valueline Timeliness Rank <=5

Pick the ten stocks with highest estimated EPS growth for next year .

He explains how to do all this in detail and derives some good looking strategies. Risk is taken into account and proves to be a very useful measure of the reliability of a strategy.

You can use the same techniques to evaluate your broker's recommendations, and the advice from books and newletters. Do they follow a strategy or is it just random tips and hunches?

He also showed how various fund managers changed strategy quite radically without announcing it eg Magellan in the early 1990s.

There are some good tips on how to avoid common traps when using quantitive strategies eg using single variable strategies.

He also explores combining various strategies and shows how to build your own.

He did not really prove his theory which is that noone really makes money by individual stock picks, it is all strategy.

As a final caveat, if you don't like numbers you will not like this book. But it seems you cannot succeed in investment without being very friendly with numbers.

I'm missing something here: the apparent feasibility of the author's stock-picking techniques with my little PC?

I found the floppy disk accompanying the book unreadable. My local computor builder/dealer/consultant couldn't read it either. My computer kept calling for another disk, which did not come with the book I ordered or with its replacement. The disk seems to herald back to the days of DOS; whatever, I'm lost.

More on the downside, the valueline online survey is unmanageable for me (I got a masters in English and I've been studying and investing stocks for 25 plus years). Determining the average for numerous search fields (market cap., P/E ratio, Price/Book ratio, etc.) that O'Shaughnessy calls for cannot be done with the basic online service. A simple piece of data such as "dividend" or "yield" can be tough to pin down with 7-8 different kinds listed (estimated, quarterly, current, etc.).

The book, in spite of my moronic protests, is praiseworthy. The methods make sense. There is something beautiful about their simplicity - the step by step processes of narrowing down fields in order to determine the best bargains (value) or the best upside potential (growth).

A guiding principle of O'Shaughnessy's argument - the answer to the nagging question of why so many portfolio managers fail - is very simple: they either have no useable plan or they do, but they don't stick to it.

I'm convinced this book has the answer. It's just so damn grueling to apply the principles; a dozen calls and emails to valueline still leave me clueless.

It's been 6 years since this book was published, and I believe that many of the fundamental items identified by the author still apply. Most investors are looking for rules for identifying good stocks, and using these techniques offers someone a way to actually test the results they could expect - at least if you're willing to use a service like ValueLine. The only downside of the book was in the lack of exploring additional ideas - things like shorter holding periods, stop-loss strategies, diversification across industries, etc. For the price, buy it!

It is hard to get a computer with diskette slots. Wish there was a CD instead of the diskette.

I read this book many years ago. O'Shaughnessy's other books are much better when it comes to making money in the stock market. I doubt that 1% of the readers of this book ever analized a fund portfolio as prescribed by the author. If you want to make money, read "What Works On Wall Street", also by O'Shaughnessy. But you'll need to be VERY math oriented and you'll need to read the book two or three times; but it's worth your time.