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Harriman House Book of Investing Rules hh_rules_full_cover_HB:rules_full_cover_pb_sent 21/12/06 10:07 Page 1 T T h h e Praise for the Book of The Harriman Book Of e Rules from top H Investing Rules: H investors including a Investing Rules a r r r “The Book of Investing Rules will For the first time, the tactics, strategies and insights used by r i almost certainly prove to be the most 150 of the world's most respected financial experts are i • J oh n C B og l e m m useful financial book published all revealed in a concise, digestible form. • Ti m Con g don a year.” a • Th omas DeMar k n Luke Johnson Learn how you really make money in the markets from the n • J oe Di Napol i The Sunday Telegraph B The Harriman • Mar c Faber world’s top rated: B • Fr an k J Fabozzi o o Book Of • fund managers • Ni al l Fer g uson o o “There is actually so much in The • K en n eth L . Fi sh er k • traders k Book of Investing Rules that it is like • J er emy Gr an th am • analysts O a condensed library of the best O • economists • B i l l Gr oss financial publications.” f • financial journalists. f • Y al e Hi r sc h • J oh n C. Hul l I James Glassman I n Techinvest Each provides focused and practical rules on how to succeed n Investing • R og er I bbotson v in the market. Often counter-intuitive, their rules tell you v • P h i l i ppe J or i on e exactly what to do and what not to do. No padding; just a e • B ur ton Mal k i el s concise list of do's and don'ts. s • L aw r en c e Mc Mi l l an t t i i • J oh n Mur ph y n n Rules Harriman House The contributors to this book are the elite of the investing • V i c tor Ni eder h of f er g world. They consistently beat the market because they have g Collected wisdom from the • R ober t P r ec h ter Harriman House is one of the UK’s R • Ch ar l es Sc h w ab the experience and analytical skills to beat the crowd. R world's top 150 investors leading independent publishers of • J er emy Si eg el u finance, business, economic and u Never before has so much superior financial advice been • J i m Sl ater l political books. Our catalogue covers l e packed into a single book. I f you want to increase your wealth e • A n dr ew Smi th er s a wide range of subjects from Edited by Philip Jenks & Stephen Eckett s s personal finance, small business and through investing, this is an unmissable opportunity to • L ar r y Wi l l i ams lifestyle, through to stock market acquire knowledge and skills from the best in the world. • P aul Wi l mott investing, trading, and professional • an d man y mor e... guides. For details of all of our titles Hh ISBN 1905641222 go to: www.harriman-house.com. w w w .h ar r i man - h ouse.c om/r ul es Hh Harriman House Publishing Hh £19.99 The Harriman House Book of Investing Rules edited by Philip Jenks and Stephen Eckett HARRIMAN HOUSE LTD 43 Chapel Street Petersfield Hampshire GU32 3DY GREAT BRITAIN Tel: +44 (0)1730 233870 Fax: +44 (0)1730 233880 email: [email protected] web site: www.harriman-house.com First published in Great Britain in 2001 Reprinted 2006 Copyright Harriman House Ltd The right of the contributors to be identified as authors has been asserted by them in accordance with the Copyright, Design and Patents Act 1988. ISBN 1-905641-22-2 978-1-905641-22-2 British Library Cataloguing in Publication Data A CIP catalogue record for this book can be obtained from the British Library. All rights reserved; 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, or otherwise without the prior written permission of the Publisher. This book may not be lent, resold, hired out or otherwise disposed of by way of trade in any form of binding or cover other than that in which it is published without the prior written consent of the Publisher. Printed and bound in Great Britain by Biddles Ltd, Kings Lynn, Norfolk No responsibility for loss occasioned to any person or corporate body acting or refraining to act as a result of reading material in this book can be accepted by the Publisher, by the Authors, or by the employers of the Authors. The ‘rules’ provided by the Authors are not offered as, nor should they be inferred to be, advice or recommendation to readers, since the financial circumstances of readers will vary greatly and investment behaviour which may be appropriate for one reader is unlikely to be appropriate for others. Authors have contribued their ‘rules’ in an individual capacity and, even where the name of their employer is referred to in the text, the ‘rules’ should not be attributed to the employer or any other named body, nor to the author as an employee or representative of that employer or other body. s Introduction and Acknowledgements viii-x Robert Z. Aliber International markets and capital flows 1 David Andrea The auto sector 5 Nick Antill Company valuation 9 Martin Barnes General principles and the role of liquidity 13 Richard Bauer Jr. Building trading systems 17 Gary Belsky Behavioral finance 21 Bruce Berman Understanding the value of patents 25 William Bernstein Intelligent asset allocation 29 James B. Bittman Trading options 33 John C. Bogle Common sense investing 35 Lewis J. Borsellino The ‘ten commandments’ of trading 41 David Braun How to make gains from M&A activity 45 Ian Burns The chemicals sector 49 John P. Calamos Convertible bonds 53 Thom Calandra General principles 57 Donald Cassidy Which stocks to sell, and when 59 Simon Cawkwell Advice from a short seller 63 Edward Chancellor Lessons from history 65 Moorad Choudhry Investing in bonds 69 Robert Cole The Tempus ten golden rules 73 Antoine Colonna The luxury goods sector 77 Tim Congdon Economic drivers of asset prices 81 Laurence Copeland Currencies 85 Richard Cragg Demographic investment 87 Anthony Crescenzi The bond market’s crystal ball 89 Anthony Cross Investing in intellectual capital 93 Lawrence Cunningham The investing methods of Warren Buffett 95 Frank Curzio Safeguards and buying opportunities 97 Ray Dalio Systemizing fundamentals 99 iii Alexander Davidson How to avoid being a victim of stock manipulation 103 Nigel Davies The transport sector 105 Steven Davis The banking sector 109 Philippe Delhaise Valuation of Asian bank shares 111 Thomas DeMark Trading with technical analysis 113 David DeRosa General principles and financial engineering 115 Joe DiNapoli Trading and the importance of a plan 117 Bob Dischel The weather risk market 119 Richard H. Driehaus Investment paradigms worth avoiding 123 Dru Edmonstone Investing in AIM companies 127 Marc Faber Contrarian advice from Dr Doom 131 Frank J. Fabozzi Bond investing 133 Alan Farley Swing trading 137 Niall Ferguson Lessons from the Rothschilds 139 Kenneth L. Fisher Engaging The Great Humiliator 143 George Fontanills Attaining a winning trader’s edge 149 Martin Fridson A streetwise approach to stock selection 151 David R. Fried Profiting from buybacks 153 Foster Friess Investing in growth companies 157 Tony Golding Interpreting broker research and recommendations 161 Julio Gomez Selecting an online broker 163 Philip Gotthelf Precious metals trading 167 Jeremy Grantham Investment management 171 Robert V. Green Handling the emotional side of investing 175 Herb Greenberg How to avoid problem stocks: Lernout & Hauspie 179 Bill Gross Cost reduction and other essential lessons 181 Steve Harmon Commonsense lessons on technology stocks 185 John Hathaway Investing in gold 189 Alan Hicks Financial spread betting 193 Yale Hirsch A stock trader’s almanac 197 John C. Hull Option valuation and trading 201 John Husselbee Selecting a mutual fund manager 205 Roger Ibbotson How to manage your asset allocation 209 Mark Ingebretsen Using the web to perform due diligence on a stock 213 Edmond Jackson General principles and intrinsic value of companies 215 Simon M. Johnson The leisure sector 217 iv Philippe Jorion Value at Risk 219 Ajay Kapur Asian equities 221 John Kay Business economics 225 Karl Keegan The biotechnology sector 227 Brian Kettell Fed watching 231 Max King General principles and politicians’ promises 235 George Kleinman Commodities 237 Richard Koch Finding your own approach to stockpicking 241 Joe Krutsinger Trading systems 243 Mike Kwatinetz Investing in technology companies 247 Dean LeBaron Habits 251 Steve Leuthold Managing your mother lode... 253 David Linton Trading and the importance of stop losses 255 Burton Malkiel Essential truths of risk and reward 257 Joe Mansueto Value investing and funds 261 Conor McCarthy Technology stocks - attractions and dangers 265 Duff McDonald Business technology 269 Colin McLean Value investing and the unreliability of share prices 273 Lawrence McMillan Axioms for option traders and short-term traders 275 Rajnish Mehra The equity premium 279 Viren Mehta The innovative therapeutics sector 283 Paul Melton Navigating the world’s markets 287 Michael Molinski Global investing and the small investor advantage 293 Robert A.G. Monks General principles and Senators from Tennessee 297 David M. Morgan Investing in silver 301 John M.
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