Welcome, like-minded long-term investors, to this discussion, exploration and tribute to some  time-honored principles that can be part of a successful lifetime of strategic fundamental investing.

It seems fitting that we launch this series on the heels of  Memorial Day – because it is important and appropriate that we remember the contributions made by the late George Nicholson, Jr. CFA to his “Grand Experiment” known as the National Association of Investors Corp (NAIC), our Better Investing (BI) methodology and the modern investment club movement.

The introduction to the text shown here reads, “[this learn-by-doing manual] is unlike any stock study book you have ever seen. It shows you how you can take the vast amount of information that comes to the attention of investors and put it into a simple picture that tells you a great deal about the investment potential of a particular company.”

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Strarting tomorrow, our guest guru, Mark Robertson will present a series in which he tells you, with his unique eloquence, how he applies the work of George Nicholson, Jr., which we both seek to emulate and build upon. His agenda will be as follows:

Ellis Fundamental Investment Views, Investment Concepts, NAIC Veterans' Lounge

As I said in my last post, each quarter you should analyze growth from last year to the current year and do it in the same order the items appear on the income statement. I submit that the best bet is to compare the sum of the data for the last four quarters with the similar period the year before. That way, it will take a down trend or a significant decline—more than just a single quarter—to get your attention. Read more…

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While we advocate expending the least amount of effort necessary for investment success, one urgent requirement is monitoring your portfolio to catch the poor performers before they do too much damage.

Our “rule of five,”—a convenient, statistical pigeonhole into which we can cram every failure—suggests that fully four out of five companies we select will do just fine, one even doing better than we had expected. The nice thing about that is, if we’ve selected carefully, the eighty percent of those we’ve selected will perform well enough to keep our portfolio’s performance from being too badly damaged. Read more…

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I’m delighted to announce that, next week, Mark Robertson, founder of Manifest Investing, former Associate Editor of Better Investing Magazine, and a gifted guru in our brand of fundamental investing, has agreed to join us to contribute a timely and interesting short series for our readers.

Ellis Investment Concepts Guest, Manifest Investing, Mark Robertson

Yesterday (May 19th), the Dow Jones Index (the sum of the market prices of one share of 30 mostly venerable blue-chip companies, adjusted daily for splits and stock dividends) spurted more than $235. Our local newspaper, beneath the header, “India’s Market Soars,” spent its allocated two-paragraphs discussing the unprecedented surge in India’s stock market the day before. However, the banner headline on the front page of the financial section screamed “Stocks Jump on renewed optimism for housing, banks.” And the lead reported, “Reassuring news about housing and banking on Monday convinced investors to return to the stock market.”

Hello! This morning, reporting a $29.35 decline in the Dow, the header over the explanatory two paragraphs read, “Housing fall drags stocks.” And, the leading explanation was “…the surprise drop in construction and a cautious outlook from retailer Home Depot pared gains in energy and utility stocks.”

A typical chronicle of two exciting days of the herd’s decision-making!

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I’m really enjoying sharing with you the things I’ve learned about investing over the past couple of decades. It’s great to know I’m not only reaching those who have traveled this road with me, but also people who are just now considering investment in common stocks for the first time.

One of my goals is to help new people who may have been frightened by the “game” discover that there’s nothing particularly difficult or risky about investing when it’s done properly. To accomplish this, it would be helpful to me to know a little more about the kind of subscribers who have been attracted to Take Stock with Ellis Traub.

Please provide me some direction by answering the following three questions. I’ll give you the responses in an upcoming post. (For those of you receiving posts by email or RSS subscription, click on Help me understand who you are to take you directly to the post where you will be able to make your entries.)

s Investment Concepts

Investing is an activity in which, more than most, Keep It Simple…Students, applies.

There’s a critical distinction between what an investor needs to know and what a company’s management must know. The investor, much like a company’s CEO, needs only to see the results his management produces. There is no need to bother with the details of how his management produced them. It’s that distinction that makes it possible for us amateurs to be successful investors, no matter how much the financial professionals would like us to believe we can’t get along without them. Read more…

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There are three—and only three—situations when you, a long-term investor and company part-owner, might want to sell stock you own:

1. When you want or need the money – After all, that’s what you’re doing this for, isn’t it!
2. When revenue or earnings growth declines – the company can no longer maintain the fundamentals that induced you to buy the shares in the first place. (Defensive Strategy) Or,
3. When expected total return declines – an excessively high market price puts your five-year plan way ahead of schedule. (Offensive Strategy)

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Since the first half of last century, many who were new to fundamental investing but who wanted to explore its benefits found it helpful to form an investment club. While it would seem a good idea to consider joining an existing club so that you might have someone with more experience available to learn from, I would suggest that it will work even better to form one of your own and start with everyone having the same experience level. That way, you can learn together and no one will feel left out or, worse yet, impatient with you while you’re learning. Some of the benefits of an investment club include: Read more…

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