Michael Turner
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Turner (continued from front flap) Michael Turner $24.95 USA/$26.95 CAN market—as well as the various industry sectors Foreword by LOUIS NAVALLIER within it—and interpret what is happening on a broader scale, so you can maximize profi ts on individual positions and boost the overall f someone told you they knew a better way to performance of your portfolio. Imake money in today’s stock market, would you believe them? What if they said their Some of the rules that will improve your stock approach, which only takes a few hours a week investing prowess include: to maintain, could double your net worth every three to four years and keep your downside risk • Know When to Sell extremely low? While this may seem impossible • Never Marry a Stock to most investors, author Michael Turner—a civil • Watch the Institutional Ownership “Mike’s 10 rules are truly a ‘best practices’ how-to book for every investor. The Essential Rules for Beating the MarketThe Essential Rules for (and then software) engineer turned professional • Balance Your Risk through Smart You will not want to put this book down once you start reading it.” portfolio manager—has accomplished this ob- Asset Allocation —From the Foreword by Louis Navallier jective, and with his new book 10: The Essential It is possible to make a signifi cant amount of Rules for Beating the Market, he’ll show you how money in today’s stock market, and with the The key to capturing consistent profi ts in today’s stock market is having a to do the same. proven principles found in 10, you’ll be able well-defi ned set of trading rules and the discipline to follow them—whether After selling his successful software company in to achieve this objective. By following the rules the market is up, down, or fl at. Without this type of plan in place, most inves- 1997, Turner entrusted his nest egg to one of the found in this guide, you’ll have what it takes to tors will eventually fall victim to human emotions and begin to accumulate biggest investment fi rms on Wall Street. And over build a world-class portfolio of stocks that will losses rather than gains. the course of two years, they proceeded to lose excel in practically any market. almost half of it! That’s when Turner decided to You don’t have to be one of those investors, and with 10, author Michael Turner— MICHAEL TURNER is a thirty-year veteran see what he could do on his own, and that’s when founder of TurnerTrends (an online investor tools service) and Sabinal Capital he discovered that the key to capturing consis- of entrepreneurial corporate development. Investments (a Registered Investment Advisory)—shows you what it really takes He is currently the President of TurnerTrends, tent profi ts in the stock market is having a well- to make consistent and signifi cant profi ts in today’s stock market. Inc., and is the Managing General Partner of defi ned set of trading rules and the discipline to Sabinal Capital Investments, LLC. He manages Written in an engaging and accessible style, this book details the straight- follow those rules. With this in mind, he devel- oped a straightforward investment strategy—one several portfolios, including a hedge fund forward investment strategy developed by Turner—one based on ten specifi c where he applies the ten rules in this book based on ten specifi c rules—that allowed him to rules—that has allowed him to build a world-class portfolio of stocks and build a world-class portfolio of stocks and gener- to real-world situations every day. Turner is generate signifi cant returns in any market. Page by page, you’ll become famil- a much sought-after speaker at investor con- ate signifi cant returns in any market. iar with the rules you must rely on to gain an edge in today’s stock market, ferences and financial symposiums. He also Filled with in-depth insights and practical ad- writes an online weekly market commentary and how you can use them to select and trade stocks through a combination vice, 10 takes you step by step through the pro- for his clients and subscribers. of both fundamental and technical analysis. cess of creating and managing a market-beating Whether you’re a seasoned investor with decades of experience or just getting stock portfolio with this proven approach, and ready to make your fi rst trade, 10 outlines a unique approach to investing that shows you how to select and trade stocks using Jacket Design: Loretta Leiva a combination of both fundamental and techni- Jacket Photograph: Randall Fung © Corbis RF/Alamy will help you achieve unparalleled fi nancial success in today’s stock market. cal analysis. Following the rules and method- ologies outlined throughout these pages, you’ll quickly learn how to get into a stock at the right time and, more importantly, when to exit that The Essential Rules for position. You’ll also discover how to view the Beating the Market (continued on back flap) ffirs.indd ii 9/23/08 9:32:48 PM 10 THE ESSENTIAL RULES FOR BEATING THE MARKET ffirs.indd i 9/23/08 9:32:48 PM ffirs.indd ii 9/23/08 9:32:48 PM 10 THE ESSENTIAL RULES FOR BEATING THE MARKET Michael Turner John Wiley & Sons, Inc. ffirs.indd iii 9/23/08 9:32:48 PM Copyright © 2009 by Michael K. Turner. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 750-4470, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at www.wiley.com/go/permissions. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com. Library of Congress Cataloging-in-Publication Data: Turner, Michael K., 1947- 10 : the essential rules for beating the market / Michael K. Turner. p. cm. Includes index. ISBN 978-0-470-29261-7 (cloth) 1. Investments. 2. Speculation. I. Title. II. Title: Ten, the essential rules for beating the market. HG4521.T87 2009 332.6—dc22 2008036132 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 ffirs.indd iv 9/23/08 9:32:49 PM For Sue, Amy, Bryan, Will, Christie, and my grandchildren. I couldn’t have done any of it without you! ffirs.indd v 9/23/08 9:32:49 PM ffirs.indd vi 9/23/08 9:32:49 PM Contents Foreword ix Preface xi Acknowledgments xix Introduction 1 Rule 1 Think like a Fundamentalist 15 Rule 2 Spend Your Money Wisely—The Value Rule 37 Rule 3 Trade like a Technician 53 Rule 4 The Stop Loss Rule 71 Rule 5 Never Marry a Stock (For Adults Only!) 93 Rule 6 Follow Only “Some” Insider Trading 103 Rule 7 Watch the Institutional Ownership 109 Rule 8 Stay Diversified 121 vii ftoc.indd vii 9/23/08 9:33:04 PM viii Contents Rule 9 Balance Your Risk through Smart Asset Allocation 147 Rule 10 Make a Lot More Money by Timing the Market 155 Epilogue Making the Commitment to Being a Rules-Based Investor 173 Appendix A Understanding Stop Loss Orders 175 Appendix B Scoring the Fundamentals 179 About the Author 187 Index 189 ftoc.indd viii 9/23/08 9:33:05 PM Foreword Many of you may know me from your own investing track record. Perhaps we have met at some of the trading show venues. The fi rst time I met Mike Turner I was impressed by his skills to make the market work for him, rather than the other way around. We both enjoy the excitement of investing in the stock market. I was delighted to hear that Mike was writing a book about his 10 essential rules for beating the market.