15 Investing Tips From A #1 Wall Street Stock Picker

by Julie Rains on 7 February 2009 11 comments
Photo: Lisa Yarost

I just finished reading “Put Your Money Where Your Heart Is” by Natalie Pace, who has been ranked as a #1 Wall Street Stock Picker by TipsTraders.com. She wants us to love investing not because we love number crunching or looking at what she calls “mind-numbing charts” but because we love shopping for bargains and making the world a better place!    

 

Here are some of her simple, savvy tips.


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  1. Invest in what you love. Buy shares of businesses that you want to succeed so that you can help create a better world by funding companies with worthwhile missions. Not everyone will have the same loves but Natalie uses examples such as investing in a manufacturer of solar energy panels so that you can support efforts to provide clean energy.
  2. Apply your experiences as a consumer. Identify potential investments and continue evaluating the performance of a company by considering the products and services that you buy, the shops you frequent, the restaurants you patronize. You’ll have firsthand knowledge of the company, its product innovations, service levels, and more. Natalie mentions that you’ll see sales trends way before earnings reports show up on a stock analyst’s desk.
  3. Leverage your friends’ knowledge as consumers and experts in their respective fields. If you want to learn more about an industry, company, or product, ask your friends what they know about the growth prospects of an industry, constraints to making money, problems with finding reliable supplies of raw materials, plans for expansion, etc. Natalie recommends that you ask about a company and its products, for example, but not necessarily about the value of a particular stock so that you can get business information and then do your own stock analysis.
  4. Do research because it makes you happy. If you are buying ownership in companies that you admire and make products that you love, you are more likely to keep up with its news, analyze its performance, and understand its value, independent of short-term fluctuations in value.
  5. Notice if companies you invest in have happy employees. Natalie believes that “Happy People Make Better Products Faster, Cheaper.” I had always thought of happy employees as being the result of a well-managed company that knows how to structure its organization, pick the most qualified people, equip them with the resources to do their jobs, and give them good benefits. Now I see that happiness can yield employees who outperform their competition, attract more customers, and reap more sales and profits.    
  6. Embrace companies that have the time, energy, and money to “dream up cool new things to offer their customers”; avoid those that expend too many resources dealing with internal struggles. Natalie particularly dislikes when CEOs are focused on winning lawsuits in the courtroom because then they aren’t figuring out how to outshine the competition in the marketplace. 
  7. Apply common sense to investing decisions. During the dot-com boom, Natalie saw e-businesses burning through cash rather than making money and didn’t think they could last long, similar to the sentiment of many conservative investors at the time who wanted to fund profitable companies rather than just fast-growing dot-coms. But it was her common-sense comment that resonated with me: “I also understood that it was going to be impossible to have the world go shopping online if everyone’s dial-up connection was as crappy as mine was.”  
  8. Judge a company’s leadership by its CEO. Read letters to shareholders in annual reports (find reports at the SEC's website) and speeches to get an understanding of his or her approach and priorities.
  9. Don’t listen to a company’s hype as much as you pay attention to its performance. Public relations and investor relations departments exist to make you feel good about the company, so don’t be too influenced by rah-rah talk.
  10. Love hot industries but invest after the initial boom-and-bust period. “The second surge of innovation tends to be longer, more sustained and yields products at attractive price points that help to attract mass consumers.” The early days for new industries may mean spending lots of money on research and testing, so waiting can be a way of avoiding spending money to fund a company's research rather than its profitable growth.
  11. Pick a growing sector. Figuring out what is poised for growth in the near term is not simple. Talking with people can help to uncover what areas have the financial backing, infrastructure, and innovations to generate stellar profits.  
  12. Do some analysis. Natalie recommends using the information that you have as a consumer, shopper, and friend but at some point, you need to do some analytical work. She has a Stock Report Card (available online) to evaluate key players in chosen sectors. 
  13. Buy low, sell high. This advice isn’t new but Natalie acknowledges that “Buying low and selling high is completely against human nature. Buying low means that when everyone else is crying Apocalypse, you’re seeing opportunity.” 
  14. Lock in gains by selling. Unloading a winner, when you’re enjoying the increase in value, can seem counterintuitive; but to capture gains, you need to sell your investments.  
  15. Never pay retail. Buy good companies that you love but only at a good price. Use the Stock Report Card to figure out whether you are buying shares on sale.

In her book, Natalie offers general advice on money management as well as detailed stock analysis. She provides case studies (evaluating industries and products by Google and GM, for example). She helps investors to develop their own tools for discerning truth rather than being overly influenced by the hype and hysteria of headlines. And, she explores the idea that investing with your heart and socially responsible investing, though worthwhile, is not a sure-fire way to make money but rather an approach for beginning the stock selection process and enjoying your investments. It’s an easy and informative read, especially valuable to beginners and those overwhelmed with negative news reports.  

 

Note: I received Put Your Money Where Your Heart Is: Investment Strategies For Lifetime Wealth in exchange for a book review. 

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Guest's picture

Excellent post I love your way of writing.

Guest's picture
Guest

I really love your blog and all of the new things that have been added.

Guest's picture
Scott

I don't mean to be flippant, but as one who agrees with Bogle, none of this advice is relevant. The vast majority of inventors will be better off simply buying and holding index funds. Why go to all this trouble just to earn inferior returns?

Guest's picture
Guest

Be Flippant, most of this advice is silly. Number 1 on the list could alone ruin a person's retirement horribly. What is you really loved Sirius?

Julie Rains's picture

The advice could be relevant to readers who want to outperform the market, and those who are interested in supporting companies that they believe worthy of their money. The mention that buying what you love is not going to automatically make higher returns is a general statement that there are no guarantees, kind of like "past performance is no guarantee of future performance," which includes index funds.

The 10-year average on Vanguard's 500 Index Fund is -2.73% (higher if you have held since inception in 1976 though); this link will take you to its holdings.

Guest's picture

I love number 1. Buy what you love.

I learned that if you can't draw what they do with a crayon, don't buy it.

-Nate

Guest's picture
finance

good post

Guest's picture

The strategies are a lot like warren buffet, except for the sell part. He pretty much holds on to them forever.

Guest's picture
Guest

Great tips! I particularly like your point about choosing a growing sector. I personally think that Stem Cells is the next hot sector. http://tradingstemcells2009.blogspot.com

Guest's picture

All good advice, just remember investing involves risk of loss-- nothing is surefire . . .

Julie Rains's picture

Hopefully you could have loved Google at some point!  As I mentioned and bolded at the end, the buy what you love idea is the starting point, not the sole factor in making a decision. The points are not to be taken independently but as a group; #10, for example, mentions that you should wait until after the initial boom and bust of new technology; and #4 suggests that you do research on tools for accessing digital content.