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IBD’S 20 RULES FOR INVESTMENT SUCCESS

1. Consider buying stocks with each of the last three years’ earnings up 25%+, return of equity of 17%+ and recent earnings and sales accelerating.

2. Recent quarterly earnings and sales should be up 25% or more.

3. Avoid cheap stocks. Buy stocks selling for $15 to $100 or more.

4. Learn how to use charts to see sound bases and exact buy points. Confine buys to these points as stocks break out on big volume increases.

5. Cut every loss when it’s 8% below your cost.

6. Follow selling rules on when to sell and take profit on the way up.

7. Buy when market indexes are in an uptrend.

8. read IBD’s Investor’s Corner and Big Picture columns.

9. Buy stocks with a Composite Rating of 90 or more and a Relative Price Strength Rating of 85 or higher in the IBED SmartSelect Corporate Ratings.

10. Pick companies with management ownership of stock.

11. Buy mostly in the top broad industry sectors.

12. Select stocks with increasing institutional sponsorship in recent quarters.

13. Current quarterly after-tax profit margins should be improving,near their peak and among the best in the stock’s industry.

14. Don’t buy because of dividends or P-E ratios. Read a story on the company. Buy the No. 1 company in an industry in earnings and sales growth, ROE, profit margins and product quality.

15. Pick companies with a superior new product or service.

16. Invest mainly in entrepreneurial New America companies.

17. Check into companies buying back 5% to 10% of their stock and those with new management.

18. Don’t try to bottom guess or buy on the way down. Never argue with the market. Forget your pride and ego.

19. Find out if the market currently favors big-cap or small-cap stocks.

20. Do a post-analysis of all your buys and sells.

IBD’s 10 Secrets To Success

1. HOW YOU THINK IS EVERYTHING: Always be positive. Think success, not failure. Beware of a negative environment.

2. DECIDE UPON YOUR TRUE DREAMS AND GOALS: Write down your specific goals and develop a plan to reach them.

3. TAKE ACTION: Goals are nothing without action. Don’t be afraid to get started. Just do it.

4. NEVER STOP LEARNING: Go back to school or read books. Get training and acquire.

5. BE PERSISTENT AND WORK HARD: Success is a marathon, not a sprint. Never give up.

6. LEARN TO ANALYZE DETAILS: Get all the facts, all the input. Learn from your mistakes.

7. FOCUS YOUR TIME AND MONEY: Don’t let other people or things distract you.

8. DON’T BE AFRAID TO INNOVATE; BE DIFFERENT: Following the herd is sure way to mediocrity.

9. DEAL AND COMMONICATE WITH PEOPLE EFFECTIVELY: No person is an island. Learn to understand and motivate others

10. BE HONEST AND DEPENDABLE; TAKE RESPONSIBILITY: Otherwise, NOs. 1-9 won’t matter.

The different investing systems — Ben Graham, growth stocks and the others — are fine, as long as you have the discipline to stick to them. Most people don’t, though, so they have the worst of both worlds. Myself, I have no system. I’m a pragmatist, I just wait until the fourth year, when the economic cycle bottoms, and buy whatever seems attractive at the time, whatever I think will have the biggest bounce.

Laurence Tisch, CEO of U.S. conglomerate Loews

If stock market experts were so expert, they would be buying stock, not selling advice.

– NORMAN AUGUSTINE, CEO of U.S. Lockheed Martine

Long-term Success

I don’t think it’s the pathway to long-term success, watching CNBC and checking your account every day. What it leads to is this emotional imbalance that you’ve created for yourself. If you are sage, you can do that. But if you are an immature investor and you look at it every day, you just become hyper about it.

– CHARLES SCHWAB

A Short History of Troubled Investment Bank Sales
Posted by Heidi Moore

Bear Stearns isn’t the first troubled investment bank to seek a buyer, and it likely won’t be the last. Deal Journal took a not-so-random walk with Wall Street’s securities firms and how they fared when trouble hit them.

Drexel Burnham Lambert: Drexel was hit by the unexpected downturn in the junk-bond market in the late 1980s, just as Bear Stearns has been hit by the downturn in the subprime-mortgage markets. Drexel, like Bear, also faced rumors of a liquidity squeeze. In 1989, Drexel’s troubles caused it to post the first operating loss in its 54-year history; in 2007 Bear posted the first loss in its 83-year history.

Then there is the market karma: Drexel racked up many resentful counterparties and such powerful enemies as former Dillon Read banker Nicholas Brady, who later became Treasury Secretary. Similarly, many in the trading community were resentful that Bear didn’t put money into its two collapsed hedge funds last year—and that Bear refused to pitch in on the bailout of Long-Term Capital Management in 1998. Drexel faced a dark future when its civil liabilities and its problems with solvency scared buyers away, and the Fed rejected Drexel’s own restructuring plan for its business. Mr. Brady, who eventually became Treasury Secretary, rejected a government bailout of the firm and advised Drexel to file for bankruptcy protection.

Kidder Peabody: One of the vaunted securities firms of the Northeast, Kidder Peabody was bought by General Electric in 1986. Thereafter, it was plagued by scandals, including insider-trading cases involving Martin Siegel, head of arbitrage Richard Wigton (charges were later dropped), and trader Joseph Jett (who a judge originally found not guilty of securities fraud but, in 2004, the SEC reversed that decision and upheld the charges). Jett wrote a book about his experiences, “Black and White On Wall Street: The Untold Story of the Man Wrongly Accused of Bringing Down Kidder Peabody.” In 1994, General Electric sold Kidder to PaineWebber for $70 million. That was the effective death of the Kidder Peabody legacy; the 129-year-old PaineWebber was sold to UBS.

Salomon Brothers: The firm was forced to pay a huge regulatory fine for allegedly submitting false bids on Treasury bonds. Warren Buffett took over the firm for 10 months and saved Salomon when it was briefly banned from trading Treasurys by intervening with regulators. Mr. Buffett later said he believed Salomon might have gone bankrupt and brought the world’s financial system to a standstill—as many believe might happen were Bear to fall. Buffett sold Salomon to Sanford I. Weill of Travelers Group for $9 billion. Salomon’s name survived for a time as Salomon Smith Barney. Though some veterans still work there, they have been subsumed into Citigroup’s investment bank.