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4 of 5 people found the following review helpful
5.0 out of 5 stars The Best of the Gardners' Thinking on Stock Picking, February 17, 2001
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This review is from: The MOTLEY FOOL'S RULE BREAKERS, RULE MAKERS: THE FOOLISH GUIDE TO PICKING STOCKS (Hardcover)
Having been disappointed in the earlier investing books by the Gardners (You Have More Than You Think and The Motley Fool Investment Guide), I found Rule Breakers, Rule Makers to be a solid and satisfying investment book. That was a pleasant surprise. If you decide to read any of the books by the Gardners, I suggest this one.
The book is a combination of a conceptual search for outstanding growth companies to buy stock in, along with a quantitative discipline to test your thinking. This is also unusual in investment books, 99 percent of which are qualitative only.
The first half of the book focuses on Rule Breakers, newer companies that have successfully established a new business model that will emerge as the new standard in their space. The examples are pertinent and interesting to consider. The cases are turned into specific guidelines for you to consider in selecting stocks.
In a time when new business models are created much more frequently than ever before, this is a superb focus for an investment book. I strongly suggest you read and focus on what is said here to select the companies.
Generally, you will not be able to pick stocks that will outperform the market. See John Bogle's excellent book, Common Sense About Mutual Funds, to learn more about why. The only approach that I think has a chance is to locate business model innovators. My research into top performing stocks has shown this factor to be determinative for many of the best companies.
The Rule Maker section looks at more mature companies that have such market power that they can create a successful future for themselves. The main benefit is that it may be easier to sleep with a portfolio full of these stocks because they are typically not as volatile and as high priced as Rule Breakers.
I particularly liked the appendix where 12 companies (AOL, Cisco, Coca-Cola, Dell, Disney, Gap, Intel, Kmart, Microsoft, Nike, Pfizer, and Schering-Plough) are evaluated using the Gardners' methods. This makes it much easier to understand their concepts.
People who love the usually flippant style of the Gardners may not love this book as much as I did. The book is more conservatively written and framed than the usual Motley Fool style.
But where money is concerned, clarity should be selected over humor. I think the Gardners made the right decision.
If you are interested in stocks that may well grow faster than the market, I suggest this book as a solid way to evaluate the potential candidates. The book compares well to other books that look at this same question, being more specific and helpful. I also suggest that you consider the thinking in ChangeWave Investing as a test on your ideas drawn from this book.
Well done! Good luck in applying these concepts to an appropriately-sized part of your portfolio when you can buy outstanding companies cheaply!! We may be nearing such a moment later in 2001.
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Donald Mitchell
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