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Tobin Smith – ChangeWave Investing 2.0 Picking the Next Monster Stocks While Protecting Your Gains in a Volatile Market

Tobin Smith – ChangeWave Investing 2.0 Picking the Next Monster Stocks While Protecting Your Gains in a Volatile Market

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Don’t you think it would be great if we could all predict the next big breakthrough stock and buy it before everyone else? Tobin Smith, a financial expert, presents his method for achieving this goal in ChangeWave Investing with infectious confidence. His unique strategy starts with a thorough process for selecting the most likely high flyers of the future, applying criteria that, according to Smith, “produced more than 150 percent annualized profits since 1995 and more than 430 percent gain per stock choice in 1999 alone.” Then Smith accelerates this strategy with what he terms “open-source investment,” utilizing the same open-flowing information-exchange model that has been so effective in the Linux software community. Smith claims that investors can improve his own aggressive growth-stock strategy much as how constantly tinkering programmers have improved Linux.

Will it function? Investors who agree with Smith’s argument and cooperate with him should be able to improve the financial “source code” of the New Economy and make it accessible to all participants by fusing his suggestions with their combined experience.

Serious stock watchers looking for an ambitious and creative approach with significant potential (and proportional risk, to be sure) may just want to buckle on a virtual seat belt and see for themselves. Casual investors may find some of the jargon-filled procedure confusing. — Howard Rothman

CREATED BY PUBLISHERS WEEKLY

This stock selection strategy may not be all that glitters. Smith claims to be the “vice president for Phillips International, one of the largest financial advising organizations in the world,” but in reality, Phillips International mostly distributes vitamins and nutritional supplements and produces a number of newsletters. Even if Phillips’ entire income came from providing financial advice, the company would not rank among the 500 largest such businesses in the world. However, a number of the newsletters do deal with investing. The “ChangeWave” system of Smith is based on systemic trends that, in his view, point to 10 “Supersectors” (groups of industries with explosive growth potential), 5 “emerging Supersectors,” 9 “Superspaces” (thinly populated areas of economic opportunity), and 7 categories of profitable companies across industries. These markets together provide the costly, rapidly-rising equities that momentum investors like (and value investors hate). Smith identifies “Gods” (Game Over Dominator Stocks) or “eGods” (Emerging Game Over Dominator Stocks), which, in his opinion, should be purchased and sold in accordance with moving average circumstances, using 33 distinct point-based scales. The fact that 41 of Smith’s 56 featured stock recommendations were among the top 56 performers up until February 2000, when Smith quit writing, and all but four of the remaining picks were among the top 100 performers, would raise some warning flags for some readers (out of more than 10,500 stocks). Currently, most of his choices have losses of at least 50%, and sometimes significantly higher losses. Perhaps this should not deter ChangeWave supporters, though, as the author claims that permanent market aberrations are defeated by underlying technology and human realities (waves) (storms). Investors beware: the book just provides the author’s personal theories about the economy and financial markets as evidence that the system actually operates. (June)
Reed Business Information, Inc., 2000.

REVIEW

Very impressive—a significant book! Never invest in tech stocks again without first reading ChangeWave Investing. — The San Francisco Chronicle Online investing columnist Harry Domash

DESPITE THE PUBLISHER

[From the Preface by the Author]

Your success in the New Economy and two key concepts are the focus of ChangeWave Investing. First, learn how to make money using a stock-picking strategy for the New Economy that has produced yearly growth rates of 150 percent since 1996. This concept has made it possible for investors to quickly transform tens of thousands of dollars in investments into hundreds of thousands (12-18 months). Second, a ground-breaking method by which you may profit from the New Economy’s best growth stock prospects before the majority of the investing public. “Open source investment” is the term for it.

Together, these two concepts have given ChangeWave investors the opportunity to seize many of the New Economy’s monster stocks and ride them to incredible new wealth. We think that this will go on, and we hope that after reading this book, you’ll want to take part!

I’ve always struggled to balance my two cerebral passions, the search for emergent growth stocks and the pursuit of new clients, or marketing. About 10 years ago, I questioned myself, “Isn’t the secret to a company’s success the analysis and creation of marketing strategies—figuring out how to dominate/sell more than one’s competitors? A major aspect in a company’s stock appreciation wouldn’t be identifying whether publicly listed firms have strategies that are likely to outperform or dominate their rivals. My response? Making sense

I became convinced right then and there that choosing winning stocks had more to do with examining marketing and company plans than balance sheets. My lack of training as a securities analyst really worked to my benefit since I was able to create my own rules without any preconceived notions.

After studying investment managers and investment techniques for many years, I came to the conclusion that their knowledge of the markets in which their firms competed was the weakest aspect of their stock-picking research. (However, it makes sense; it reflects the distinction between a financial and a marketing standpoint.) My new marketing-focused strategy, which evaluates businesses based on their ability to outperform competitors rather than how they seem on a spreadsheet, appeared like a potentially profitable investing edge. I had no idea how useful the strategy would be after the Internet was invented.

I also heard something else that wasn’t nearly as extreme. I started looking for businesses that were utilizing dramatic shifts in both marketing strategies and strategic business design. In the course of my investigation, a clear pattern became apparent: the more quickly and significantly a sector is changing fundamentally, the more valuable the firms that are driving that transformation have become. I was unaware of it at the time, but this marked the start of the strategic analytical ideas that you are going to study in the ChangeWave Investing program.

Based on the trend I had noticed, I began distributing my “ChangeWave Portfolio” of stock recommendations for friends and coworkers in 1995. The first five businesses I suggested in the original ChangeWave Investing e-letter on December 31, 1994, were

– Chantal – QUALCOMM – Medicine Shoppe International – Orthodontic Centers of America – AOL

Chantal lost her money. Orthodontic Centers of America saw an approximate 600% increase before losing around half of that growth, where it is now. For a 150 percent profit, a pharmaceuticals distributor ate up Medicine Shoppe International. You are also aware of the other two’s achievements. However, my early success was only a glimpse of what ChangeWave Investing would become in the future.

I observed the stocks of the businesses I was doing business with skyrocket in value as I immersed myself more and more in the developing New Economy. What would dramatic changes WITHIN THE WHOLE ECONOMY CAUSE, in light of the hypothesis that suggests that drastic changes in the stock values of industry leaders are the result of radical changes in an industry? Would the same trend continue? I honestly never imagined that the response would be a resounding yes.

ChangeWave Investing had developed into a collaborative e-letter to thousands of friends, family members, and New Economy workers by the start of 1999. We quickly discovered that the more WaveWatchers (as I termed active ChangeWave investors) who engaged in the research and analysis, the more accurate the findings were. By the middle of the year, our tenacious band was raking in more cash than we had ever imagined. With astounding success, our approach was driving us to invest only in New Economy businesses and marketplaces. In less than 18 months, several WaveWatchers had raised their portfolios by six figures. There were some millionaires. I proceeded to test and refine the method, and each time it did so with flying colors.

Around that time, I discovered “The Cathedral and the Bazaar,” a fantastic book by Eric Raymond thanks to my study. The “open source” software movement, as exemplified by Linus Torvalds and his Linux operating system, was persuasively argued for by Eric. When I saw “open source investment research,” I felt I had glimpsed the future. My own experience with our group of WaveWatchers has persuaded me that almost all of the open source software development ideas are transferable to the field of investment research.

Phillips International decided to join me in creating ChangeWave.com with me in the summer of 1999. This website currently provides a variety of research decision assistance tools to all investors without charge and regularly updates the “core investment analysis logic” at the heart of our investment models. Additionally, the website manages and sponsors the ChangeWave Alliance, a sizable network of certified, profiled New Economy specialists, which compiles the findings of our financial intelligence collecting and peer-review research into a “buy/sell/hold” advising service.

Open source investing, you object, isn’t it simply like a stock message board? No. These come-one-come-all “stock-picking as fun” websites and chat boards have certain drawbacks, such as the dubious foundations or credentials of their “posting.”

Our track record shows that funds invested via the ChangeWave Investing technique have increased by more than 2,500% over the past 48 months. On a compounded basis, its growth rate reaches 150 percent yearly. Our ambitious expansion capital really increased by more than 511 percent in 1999 alone. Importantly, our stock-screening and investing reasoning have been becoming BETTER every year because to the strength of our open source strategy.

We’ll provide you a fast overview of the New Economy at the beginning of this book to assist you grasp the potential of ChangeWave Investing and determine what it implies for your monster stock selection. After that, we’ll make sure you understand the fundamentals of aggressive growth investment. The fundamental philosophical and economic presumptions and guidelines incorporated into the ChangeWave Investing application will then be covered. Finally, we’ll discuss the fundamental behavioral presumptions and guidelines we’ve incorporated into ChangeWave Investing to closely resemble the behavior pattern of institutional investors. When you’re ready, you can start using the ChangeWave strategy to selecting and purchasing aggressive growth stocks. You’ll soon realize that it’s simpler to purchase these highly volatile stocks than to maintain them. I can also assist with it.

For ChangeWave Investing, our goal is to

– Leverage the “power of many-focus of one” feature of open source investing to make high-performance, low-cost investment research accessible to the general public. – Use our collective intelligence to identify the top growth investments for the first decade of the twenty-first century in order to assist ourselves and our colleagues attain financial stability. – have a fantastic time and make new friends along the way.

Here at ChangeWave Investing, welcome!

WHO THE AUTHOR IS

The CEO and founder of ChangeWave.com, TOBIN SMITH is also a vice president at Phillips International. In addition, he serves as managing partner and chief investment officer of the private hedge fund ChangeWave Capital, L.P., as well as editor of the New Economy Investing newsletter. He spent more than 15 years as a marketing executive in the financial services and investment banking sectors prior to joining Phillips in 1995. Marjorie and Toby live in North Bethesda, Maryland.

Bond -Stock Trading course: Learn about Bond -Stock Trading

Bond trading definition
Bond trading is one way of making profit from fluctuations in the value of corporate or government bonds.
Many view it as an essential part of a diversified trading portfolio, alongside stocks and cash.

A bond is a financial instrument that works by allowing individuals to loan cash to institutions such as governments or companies.
The institution will pay a defined interest rate on the investment for the duration of the bond, and then give the original sum back at the end of the loan’s term.

A stock trader or equity trader or share trader is a person or company involved in trading equity securities.
Stock traders may be an agent, hedger, arbitrageur, speculator, stockbroker.
Such equity trading in large publicly traded companies may be through a stock exchange.
Stock shares in smaller public companies may be bought and sold in over-the-counter (OTC) markets.

Stock traders can trade on their own account, called proprietary trading, or through an agent authorized to buy and sell on the owner’s behalf.
Trading through an agent is usually through a stockbroker. Agents are paid a commission for performing the trade.

Major stock exchanges have market makers who help limit price variation (volatility) by buying and selling a particular company’s shares on their own behalf and also on behalf of other clients.

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