Bill Cara: Cracking the Maverick Code
December 2023
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Published by Greenfield / Cara Editor: Bill Cara Etobicoke, Ontario M8X 3A3 Canada 647-868-6013 billcara@billcara.com Copyright @2023, 2024 by Bill Cara First edition December 2023 ISBN: 978-0-9879770-6-9 (eBook) 202310 ISBN: 978-0-9879770-7-6 (Paperback) 202310 All rights are reserved, including the right to reproduce this book or portions in any form.
Bill Cara: Cracking the Maverick Code
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Disclaimer & Disclosures Disclaimer: The information in 'The Maverick Investor's Handbook' is for informational purposes only and is not intended to be professional advice. The author and publisher do not guarantee the content's accuracy, completeness, or suitability and expressly deny all warranties, including fitness for a specific purpose. Any reliance on this information is at your own risk. The author and publisher are not liable for any damages or losses from using this book. Readers should exercise due diligence and consult a qualified professional for personalized financial advice. References to organizations or websites are for informational purposes only and do not imply endorsement. Readers should verify the latest information as financial markets are constantly changing. Disclosures: At the initial publication date of 'Maverick Investor,' Bill Cara was a USregistered investment advisor and a Canadian resident. However, the content of this book does not constitute financial advice and is intended for educational purposes only. The author relies on market data from reputable sources widely used in the financial industry but does not endorse competitive services. The eBook's chapters are bookmarked and hyperlinked for easy navigation, all created by the author for reliability. Some hyperlinks may lead to content behind paywalls, and the author apologizes for any inconvenience. While efforts have been made to ensure link longevity, a few may become inactive. Readers are encouraged to provide feedback for book improvement at billcara@billcara.com.
Bill Cara: Cracking the Maverick Code
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Table of Contents Preface: We all have to start somewhere. 1. Understanding the Maverick Mindset. 2. Mastering the Maverick Mindset. 3. Facing the Investment Adversary. 4. Navigating the Landscape of Risk. 5. What is the Dow 30? 6. Quality Companies and Critical Thinking. 7. Spotting High-Quality Gems. 8. Growth vs. Value Investing. 9. Generating Income through Investments. 10. Investing in Securities vs. Physical Assets. 11. Developing Your Maverick Bias. 12. Harnessing the power of compounding. 13. Fusion Analysis: The Ultimate Approach. 14. Building Your Stock Portfolio. 15. Navigating Market Data with FinViz.com. 16. Deciphering Market Structure. 17. Cracking the Code of Economic Reports. 18. The Art of Fundamental Analysis. 19. Mastering Technical Analysis. 20. Smart Alerts and Buy/Sell Signals. 21. Quantitative Analysis Demystified. Bill Cara: Cracking the Maverick Code
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22. AI and SWOT Analysis Fusion. 23. AI’s Power in Complex Financial Data. 24. Daily Routine of a Maverick Investor. 25. Deep Dive into our Portfolio companies. 26. Insights from TipRanks and MarketBeat. 27. Value Line Reports Unveiled. 28. Analyzing Apple's Maverick Ratings. 29. Analyzing Caterpillar's Maverick Ratings. 30. Analyzing Chevron’s Maverick Ratings. 31. Analyzing JP Morgan Chase’s Maverick Ratings. 32. Analyzing McDonald’s Maverick Ratings. 33. Analyzing Microsoft's Maverick Ratings. 34. Analyzing Nike’s Maverick Ratings. 35. Analyzing UnitedHealth Group’s Maverick Ratings. 36. Analyzing Visa’s Maverick Ratings. 37. Analyzing Walmart's Maverick Ratings. 38. Trading with Maverick Strategies. 39. Optimizing Cash with JPST. 40. Investing Legends: Your Aspiring Path. 41. Portfolio Set-up and Mastery. 42. Maverick Investor in a Nutshell. Glossary of Investing Acronyms.
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Preface: We All Have To Start Somewhere Embarking on the journey of financial exploration can be an intimidating venture, especially for those entering the realm of investments for the first time. If you find yourself in the ranks of Gen Z—born between 1997 and 2005— facing uncertainties and pondering the path to financial independence, you're not alone. At the age of almost 82, I might not share the same birth years, but I've certainly weathered financial storms, just like many of you are doing today. Understanding Your World: We share a disdain for the conventional nine-to-five grind. Instead, we're drawn to unconventional paths, and, for many of you, that includes a keen interest in the FIRE movement—Financial Independence, Retire Early. A recent study by Qualtrics on behalf of Intuit Credit Karma revealed that over half of Gen Z (53%) proudly consider themselves part of this movement. The goal? Maximizing earnings while minimizing the time spent in the workforce. However, despite these ambitious aspirations, a stark reality looms. Nearly a third of Gen Z (32%) openly confess to having no savings earmarked for retirement, exposing a significant gap between the dream of early retirement and the current state of financial preparedness. In the Trenches: Producing this handbook required a deep dive into the profound challenges you face in the financial world, like terminology. I realized that the simplest terms like "stock market" might seem like a cryptic game or an alternative to Bitcoin. So, let's embark on this exploration together. My Personal Journey: Born into a blue-collar family, with a homemaker mom and an electrician dad, I had no silver spoon. Relentless work paid my college bills, leading to an unexpected journey in finance. Despite professional designations, I wasn't ready for Wall Street. It took eight years in management consulting before I seized the opportunity to join the nation’s largest wealth management firm. Bill Cara: Cracking the Maverick Code
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Working 100-hour weeks, I climbed to the penthouse corner office of the Toronto Stock Exchange Tower, building a business from scratch. While my industry experience taught me the ropes, my maverick spirit truly set me apart. Shared Struggles: Our struggles echo each other's. Made unnecessarily complicated by Wall Street intricacies, the financial world is ultra-challenging. With the knowledge I've gained through decades of navigating these complexities, I aim to empower you to do the same. Why This Handbook Matters: Amidst the overwhelming advice on cryptocurrencies and meme stocks, this handbook takes a different route. Focused on blue-chip Dow 30 giants like Nike, McDonald's, Apple, Microsoft, and Visa, it serves as a roadmap for financial independence—a guide not just to make money but to create a lifelong portfolio. Why Now?: Inspired by pioneers like Richard Branson, I wonder if you want to follow in my footsteps. Actively engaged in the stock market in my octogenarian years, I present The Maverick Investor's Handbook to you—a game-changer for young people, and maybe even your parents and grandparents. Let's navigate this journey together. We all have to start somewhere. /Bill
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Chapter 1: Understanding the Maverick Mindset -Initial Thoughts on Your Wealth-Building Journey Before we start this book, I want to share insights from my 43+ years in the financial industry, spanning both the buy and sell sides. Over time, I've had moments of profound realization that have shaped my views on investing and life, which I am happy to pay forward. One key regret is not recognizing early on the distinction between investing and trading. While they once were synonymous, I now understand them as distinct disciplines. Additionally, I've come to see the difference between investing/trading and speculation/gambling. Understanding this earlier in life would have made my journey more rewarding. Another regret is that I initially engaged in securities with a speculative mindset rather than true investing. I started my true investment journey at 39 when I should have begun during my formative years. Starting earlier could have leveraged the power of compounding and allowed more time to learn from financial setbacks. I trusted friendly bankers and associates with my financial interests throughout my career, only to discover not everyone had my best interests at heart. I soon realized that self-reliance and independence are vital in wealthbuilding. Today, I view everyone as a potential adversary, understanding that safeguarding my assets is solely my responsibility. While achieving success in financial services, I admit it took me too long to acquire the knowledge and skills needed for my investment goals or write this book. Hopefully, I've conveyed these insights effectively. The Maverick Investor's Handbook transcends audiences. It's not just for students and novices but also for investors and retirees. Retirees have a unique chance to become financially literate and pass on this life-skill knowledge. You bestow an invaluable gift by teaching the next generations about the stock market and financial independence the Maverick way.
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By following the steps outlined here, I aimed to convince you of the significant benefits of embracing the "boring" Maverick approach – a tailored, patient, and effective strategy. This program emphasizes simplicity, self-confidence, critical thinking, and ongoing education through daily commentary, weekly articles, and a monthly report at billcara.com. Stay informed and confident, for you are not alone on this journey. Bill Cara, the Free Market Patriot, stands by you at every step. Keep your Maverick spirit alive and thrive! If we part ways in the future, let there be no regrets. Memories are precious. Stay disciplined, focused, and curious to learn and adapt, knowing that investing is an endurance challenge requiring patience, perseverance, and continuous growth over many years. Thank you for joining me as a Maverick. May your path to financial success be paved with wisdom, courage, and prosperity. Happy investing!
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Chapter 2: Mastering the Maverick Mindset --Before Skill Set, There's Mindset An insightful article from McKinsey & Co., the world’s premier consulting organization, featured the CEO of Singapore’s largest supermarket chain, prioritizing culture, purpose, and people. Before embarking on your investment journey, adopting a similar mindset is crucial. The culture is capitalism; the purpose is to use the capitalist system to build wealth, and the people are you and your family – your wealth to manage. To learn how to invest, cultivating the right mindset precedes acquiring the skill set. The importance of mindset in both investing and life cannot be overstated. Self-awareness, personal growth, and a healthy emotional state are foundational for success in relationships, careers, personal goals, and financial endeavors. A cheerful outlook, patience, resilience, and effective stress management are essential. With mental clarity, emotional intelligence, and a balanced approach to life's goals, we make better choices, evaluate situations objectively, and find creative solutions to problems. Aligning thoughts and actions with our aspirations fosters confidence and determination, increasing success in personal and professional pursuits. Confidence is a recurring theme in this book, emphasizing its significance in investing. Emotions play a crucial role, and confidence, unlike fear or greed, is about belief. As a Maverick Investor, maintaining unwavering confidence is key to success. Giving up too soon indicates insufficient time invested in the process. To kickstart the Maverick Investor program successfully, consider embracing these essential perspectives: Treasure the Priceless: Your word, health, and time are precious assets not to be squandered.
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Prioritize Time and Words (i) Avoid criticizing others' investments without sound grounds. (ii) Be honest about your priorities; saying "I don't have time" is a choice. Long-Term Commitment: (i) Successful investing, like raising children, requires a long-term commitment. (ii) Both children and investments can have unpredictable futures; commitment is essential. Distinct Concepts: (i) Differentiate between pleasant words and unpleasant truths. (ii) Avoid simultaneous investing and trading; they are distinct concepts with different approaches. Emotional Attachment: (i) Avoid emotional attachment to stocks; treat them as financial assets, not emotional ties. (ii) "Your stocks are not your children" – prioritize rational decisions over emotional connections. Managing Anxiety: (i) Every investor experiences anxiety to some extent. (ii) Overcoming anxiety is crucial for success; reflect and deliberate before making decisions. Simplify Complexity: Cultivate independent thinking, embrace facts, apply common sense, and keep things simple to avoid market manipulation. Beware of Financial Institutions: (i) Be cautious of large banks and brokers with extensive knowledge; they often trade against your interests. (ii) Investing is inherently simple; avoid unnecessary complications financial institutions introduce. Prioritize Your Interests: (i) Do not prioritize others' interests over your own. (ii) Take accountability for your actions. Taking the initiative: Embrace initiative in investing; the journey toward success starts with the first crucial step. Focus on the Future: Focus on the future; the past cannot be changed. Market Downturns: (i) Even well-constructed portfolios decline in bear markets. (ii) A self-assured investor calmly endures market slumps with confidence in their top-notch portfolio. Bill Cara: Cracking the Maverick Code
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Learn from Losses: (i) Losses provide valuable learning opportunities. (ii) Embrace the lessons from losses and avoid staying wrong. Embrace Change: (i) Letting go of who you are allows for personal growth. (ii) Embrace natural changes and avoid resisting them. Stick to Your Plan: (i) Skilled investors adhere to their plans despite market chaos. (ii) Opportunities arise for those who stick to their plans and resist following the crowd. Acknowledge Downsides: Acknowledge the downsides of the market to capitalize on its benefits fully. Market Dynamics: (i) Markets constantly change; embrace the ever-shifting nature of market conditions. (ii) Invest when the market is weak and sell when it's strong. (iii) Avoid overconfidence in trades; those who claim to know everything have yet to encounter all relevant questions. Prudent Behavior: (i) Prudent investors exercise caution in decision-making. (ii) Be cautious of individuals with nothing to lose; they may be unreliable. (iii) Exercise prudence and avoid extreme behaviors or decisions. Mindfulness: Cultivate mindfulness to guide thoughts, words, actions, habits, and character. Lifelong Learning: Continuous learning is essential; knowledge gains true value through practice. Passion and Learning: (i) If investing is a passion, it feels fulfilling rather than laborious. (ii) Embrace the learning process regardless of its pace. Self-Confidence: (i) Believe in yourself and your capabilities. (ii) Building down-to-earth self-confidence in investing takes time. Empower Others: Empower others by teaching the art of investing for longterm benefit. If your expectations exceed your performance, refer to this list for guidance. Over and above experience, revisiting these principles helps realign your path. Bill Cara: Cracking the Maverick Code
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Chapter 3: Facing the Investment Adversary --The Beginning of a Journey Investors aren't born but developed through education and mentorship. While not everyone will become a professional investor, every reader of this book will gain the know-how to invest wisely, steering clear of Wall Street's often misleading consensus. With this book, you’ll learn to be a Maverick. If you've explored my biography,, attended conferences, or followed my website and blog, you're likely aware of my acclaimed financial services career. I've authored this book to champion social equity—a noble pursuit Wall Street seldom supports without exorbitant costs to those in need. Twenty years ago, starting billcara.com, I defined social equity as impartiality, fairness, and justice for all in social policy. It addresses systemic inequalities to ensure equal opportunities for all, including independent investors. Despite Barron’s labeling me 'eccentric' or 'socialist,' I broke away from Wall Street. This chapter summarizes a crucial aspect of our journey: understanding Wall Street dynamics and charting an independent course. Here's a streamlined list of key points: Recognizing the Foe: Wall Street isn't on our side. The promoted investment products and ETFs aren't "opportunities" but hidden risks they want us to take. Besides, building wealth is a serious business, not entertainment. Divergent Interests: While seeking financial freedom, the market is a complex stage with diverse players. The formidable sell-side directly impacts our autonomy and wealth. Understanding different motivations is key. Defining the Sell-Side: Ranging from Wall Street giants to online media, the sell-side exerts substantial influence. To outmaneuver them, understand their strategies and tactics, as they excel at influencing decisions.
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Manufacturing Narratives: The sell-side crafts narratives that deviate from economic reality, misleading investors. Independent, objective analysis becomes your guiding light with help from me. Dismantling Information Imbalance: Wall Street wants you to be a nimble trader, leveraging their powerful systems. Real-time access to marketmoving news and knowledge of your accounts facilitate their trades. Conflicts of interest prioritize their profits over client well-being. Complexity and Confusion: Financially engineered products are marketed as low-risk or high-yield, obscuring risks and interests. This confuses and entraps investors, making informed choices challenging. “Painting lipstick on pigs’” is their expression. Beyond Wall Street's Shortcomings: Studies show most Wall Street pros consistently underperform the market. Focusing on narratives instead of unbiased analysis is Wall Street’s biggest problem. They will not admit it. My decades of Wall Street insider experience underscores my opinion that superior alternatives exist beyond the rhetoric of the sell-side. I look no further than myself in making this statement. I addressed this crucial point in the Bill Cara blog on July 25, 2023, at 9:33 am ET. Why pay exorbitant fees to Wall Street? Over the long term, 98.6% of all actively managed domestic US equity funds in every major category, and 99.8% of all large-cap funds underperformed the S&P 500 Equal Weight Index. Based on 20-year total returns in USD (per S&P Dow Jones Indices LLC, CRSP, data as of Jan. 31, 2023), the performance of the major funds: S&P 500 Equal Weight Index (Annual Return = 11.48%) S&P 500 Growth (Annual Return = 10.88%) S&P MidCap 400 (Annual Return = 10.84%) S&P SmallCap 600 (Annual Return = 10.67%) S&P 500 (Annual Return = 10.29%) S&P 500 Value (Annual Return = 9.33%) Bill Cara: Cracking the Maverick Code
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There is no need to pay management fees to any ETF manager because no actively managed fund has beaten the S&P 500 Equal Weight Index over the past 20 years. This fact is disclosed in this report: Superior performance will be achieved by investing in a select group of 8 to 12 Dow 30 companies based on Value Line financial strength and safety criteria and their stock timeliness, further defined by simple RSI and MACD Technical Indicators. The Route to Success To overcome challenges, follow a two-pronged strategy. First, ground yourself in critical thinking and strategic actions. Invest in well-established blue-chip companies and use free electronic tools from financial data aggregators and discount brokers. Second, broaden your perspective by connecting with likeminded individuals and learning from accomplished investors like 93-yearold Warren Buffett and his partner, the late Charlie Munger, who lived almost a century. By playing the Buffett-Munger game, you’ll grow your wealth over a longer time frame and increase your chances of living a longer life. These insights empower novice investors to separate reality from the market’s deceptive and manipulative practices and help them make well-informed decisions. Understand that Wall Street's main function is to sell risk, and your job is to avoid it. By investing solely in a select group of high-quality companies, you must grasp and monitor their weaknesses and threats for the weeks and months investor sentiment turns share prices negative. With a growing economy led by the performance of these corporate leaders, your success as an investor is assured by your risk management decisions. This simplified approach becomes your most valuable asset on this journey. In the upcoming pages, we'll explore Maverick Investor concepts, giving you the knowledge and perspective to navigate the stock market’s complexities and challenges. The next chapter will focus on the mindset needed for a strong start and how to course-correct when necessary. Bill Cara: Cracking the Maverick Code
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Chapter 4: Navigating the Landscape of Risk --Balancing Personal and Corporate Perspectives Understanding Your Risk Tolerance Risk is an inherent part of investing. How much risk you're willing to take can significantly impact your investment choices and the potential returns you can expect. Before assembling your portfolio, you must understand your capacity for risk. You are different than the ‘crowd’ who watches financial TV. By completing a Risk Tolerance Questionnaire, your responses will clarify your investment objectives and guide you in understanding your risk tolerance, which will help you make informed investment decisions. Personal Investment Risk Tolerance Questionnaire Please complete the following questionnaire using the ranking from 1 (most conservative) to 4 or 5 (least conservative). Add up the numbers of your answers to the following ten questions to get a final score. The reason for knowing your score is explained in chapter 41. A. Investment Objectives Investment Attitude o Very conservative: I prioritize safety over returns and am uncomfortable with any significant risk. (1) o Somewhat conservative. I lean towards safety but am open to some moderate risk for potential gains. (2) o Moderate. I'm balanced in my approach, seeking a mix of safety and growth. (3) o Somewhat aggressive. I'm open to taking on some risk for potentially higher returns. (4) o Very aggressive. I prioritize maximizing returns, even if it means taking on higher risk. (5) Withdrawal Horizon (Years to Start Withdrawals) o 1-2 years. I expect to begin withdrawals in the next 1-2 years. (1) Bill Cara: Cracking the Maverick Code
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o 3-5 years. I plan to start withdrawals within 3-5 years. (2) o 6-9 years. I anticipate withdrawals starting in 6-9 years. (3) o 10-20 years. My withdrawal horizon is 10-20 years from now. (4) o More than 20 years. I don't plan to start withdrawals for at least 20 years. (5) Duration of Withdrawals o Lump-sum. I plan to withdraw my entire investment as a lump sum. (1) o 1-4 years. I will withdraw over 1-4 years. (2) o 5-9 years. I will withdraw over 6-9 years. (3) o 10-20 years. I expect to make withdrawals over 10-20 years. (4) o More than 20 years. I anticipate making withdrawals over 20 years. (5) B. Risk Tolerance Portfolio Protection vs. High Returns o Strongly Agree. Protecting my portfolio is my top priority, even if it means sacrificing potential high returns. (1) o Agree. I prioritize portfolio protection but will take some risk for moderate returns. (2) o Neutral. I'm balanced and consider both protection and returns equally. (3) o Disagree. I am open to taking risks to maximize returns, even if it means some loss. (4) o Strongly Disagree. Maximizing returns is my primary goal, and I'll accept higher risks. (5) Attitude Towards Losses o To completely avoid losses is something I am more interested in (1). o I am concerned about losses along with returns (2). o I am willing to bear the consequences of a loss to maximize returns (3). Investment Philosophy o I feel comfortable only with stable investments (1). Bill Cara: Cracking the Maverick Code
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o I am willing to withstand modest fluctuations in my investment (2). o I am seeking average to moderately above-average investment returns (3). o I am seeking substantial investment returns (4). Next Major Expenditure o Buying a house (1) o Paying college tuition (2) o Investing in a second home or retirement property (3) o Providing for my retirement (4) Expected Annual Income Changes o Stay the same (1) o Decrease moderately (2) o Decrease substantially (3) o Grow moderately (4) o Grow substantially (5) Preference in Individual Stock Investments o Stable "Blue-chip" stocks that pay high dividends (1). o Well-known companies with a potentially high growth rate (2). o Lesser-known companies that have strong finances and good management (3) o Companies with significant technological advancement (4) Current or Preferred Type of Investments o Bonds or exchange-traded bond funds (1) o Mutual Funds (2) o Stocks or exchange-traded stock funds (3) o Put and Call stock options (4) o Commodities and futures (5) Maverick portfolios are tailored to align with the personal risk profile determined by individuals through the questionnaire in this chapter.
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Here are the five Maverick portfolios and their corresponding attributes: 1. CONSERVATIVE (Risk Profile Score=10-15): Prioritizing Capital Preservation •
Minimal risk for capital preservation with low expected returns.
2. CAUTIOUS GROWTH (Risk Profile Score=16-21): Seeking Modest Returns •
Accepting low-to-moderate risk for modest medium-term returns.
3. MODERATE GROWTH (Risk Profile Score=22-29): Aiming for High Potential •
Embracing moderate risk for high long-term potential returns.
4. DYNAMIC GROWTH (Risk Profile Score30-35): Pursuing Substantial Gains •
Willing to take above-average risk for substantial long-term gains.
5. AGGRESSIVE GROWTH (Risk Profile Score=36-45): Chasing Maximum Returns •
High risk for maximum potential returns, accepting sizable drawdowns in volatile markets.
Later in this book, you will discover that a few of the companies in the Dow 30 Index are uninvestable. Walgreen Boots Alliance (WBA) is one example. You’ll find that some like Verizon Communications (VZ) should never be put in an aggressive growth portfolio seeking maximum returns. Each portfolio is designed to provide the maximum comfort for a long-term oriented investor. Risk is always present, so comfort is key to the selfconfidence you will need to overcome the market’s challenges.
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Chapter 5: What is the Dow 30? -- Abundant growth and innovation for investing The Dow Jones Industrial Average (DJIA), or simply the Dow, is a stock market index of 30 prominent companies listed on US stock exchanges . Established in 1885, it’s one of the world’s oldest and most closely followed benchmarks of the US stock market and economy. For our purposes, the DJIA fully captures the potential of the S&P 500 and other broader market indices. Ticker
Company
Sector
Industry
Market Cap
AAPL
Apple
Technology
Consumer Electronics
2954.57B
$189.97
AMGN Amgen
Healthcare
Drug Manufacturers
141.90B
$265.15
AXP
American Express
Financial
Credit Services
119.94B
$164.59
BA
Boeing
Industrials
Aerospace & Defense
133.07B
$219.95
CAT
Caterpillar
Industrials
Farm&Construction Machines
125.92B
$247.35
CRM
Salesforce
Technology
Software - Application
218.05B
$224.10
CSCO
Cisco Systems
Technology
Communication Equipment
196.10B
$48.26
CVX
Chevron
Energy
Oil & Gas Integrated
272.80B
$144.95
DIS
Disney
Communication
Entertainment
175.58B
$95.93
DOW
Dow Inc
Basic Materials
Chemicals
36.23B
$51.65
GS
Goldman Sachs
Financial
Capital Markets
110.43B
$339.15
HD
Home Depot
Consumer Cyclical
Home Improvement Retail
309.28B
$310.75
HON
Honeywell
Industrials
Conglomerates
127.37B
$193.20
IBM
IBM
Technology
Information Technology
141.64B
$155.12
INTC
Intel
Technology
Semiconductors
185.34B
$43.96
JNJ
Johnson&Johnson
Healthcare
Drug Manufacturers
367.06B
$152.48
JPM
JPMorgan Chase
Financial
Banks - Diversified
443.51B
$153.41
KO
Coca-Cola
Consumer Staples
Beverages - Non-Alcoholic
252.57B
$58.42
MCD
McDonald's
Consumer Cyclical
Restaurants
204.63B
$282.11
MMM 3M
Industrials
Conglomerates
52.97B
$95.90
MRK
Merck & Co
Healthcare
Drug Manufacturers
258.17B
$101.88
MSFT
Microsoft
Technology
Software - Infrastructure
2805.16B
$377.43
NKE
Nike
Consumer Cyclical
Footwear & Accessories
163.74B
$107.58
PG
Procter & Gamble
Consumer Staples
Household&Personal Products
357.28B
$151.59
TRV
Travelers
Financial
Insurance - Property&Casualty
40.55B
$177.54
UNH
Unitedhealth
Healthcare
Healthcare Plans
506.02B
$547.10
V
Visa
Financial
Credit Services
517.87B
$254.31
VZ
Verizon
Communication
Telecom Services
157.07B
$37.36
WBA
Walgreens Boots
Healthcare
Pharmaceutical Retailers
18.10B
$20.95
WMT
Walmart
Consumer Staples
Discount Stores
419.45B
$155.84
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The Importance of the Dow 30 Companies For investors in equities, the broad market is defined as the S&P 500. That is too many stocks to monitor. I have invested in the equities market for over 50 years, and I have never heard of many of the company names in the S&P 500, and the names change frequently. I am sure that many are worthy investable companies. Still, I decided to be a minimalist investor, to use my available time to focus on a relatively few blue chip companies and choose the highest quality of those to invest. Choosing from among the 30 companies in the Dow Jones Industrial Index (DJIA) is all I need for my watchlist. The DJIA index managers change the components every few years for various reasons. Since 1991, there have been 15 changes involving 30 new companies replacing 30 others. In the last change, August 31, 2020. Amgen, Honeywell, and Salesforce.com replaced ExxonMobil, Pfizer, and Raytheon Technologies. Why invest exclusively in the Dow 30 companies? Are there other investable companies that are presently excluded from the Dow 30? Alphabet (Google), Amazon, and Nvidia come to mind. These companies might even replace the much smaller and less prominent Walgreens Boots Alliance, Travelers Companies, and Dow Inc. The only companies we select for investment are in the Dow Jones. The companies have varying levels of risk that we analyzed to create a score that puts them in a portfolio category that best aligns with various risk tolerance scores in the Risk Tolerance Questionnaire. We meticulously categorized the Dow 30 companies based on their robust 10year financial and operational performance history, sourcing this data from Value Line's studies and the FinViz screener. This Handbook is focused on the MODERATE GROWTH portfolio from the list above. Its ten Dow 30 stocks include Apple (AAPL), Caterpillar (CAT), Chevron (CVX), JPMorgan Chase (JPM), McDonald's (MCD), Microsoft (MSFT), Nike (NKE), UnitedHealth Group (UNH), Visa (V), and Walmart (WMT).
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Readers must subscribe to the Maverick Program to access all five portfolio selections that align with the five Maverick Risk Profiles. Subscribers will note these changes made to the other Maverick Portfolios, for example: •
Walmart (WMT) is in the CONSERVATIVE Portfolio because the company has a low long-term debt-to-equity ratio, 50 years of dividend increases, and the stock trades with a low beta and the lowest Dow 30 monthly volatility.
•
Coca-Cola (KO), a Warren Buffett favorite with a high return on equity and 61 consecutive years of dividend increases, is part of the CAUTIOUS GROWTH Portfolio.
•
Amgen (AMGN) is included in the DYNAMIC GROWTH Portfolio based on its +12.3% 10-year average annual total return, +10.0% 5-year dividend growth rate, and very high gross margins.
•
Salesforce (CRM) is in the AGGRESSIVE GROWTH Portfolio because of its high gross margins and a 10-year average annual total return of +16.6% despite paying no dividends.
I believe in knowledge based on the immersion of facts. Investing in what you know and trading what you see is a meaningful motto. Summary of my October 21, 2023 article. The Dow 30 is a stock market index representing 30 large, publicly traded companies on the NYSE and Nasdaq. Advantages of investing only in Dow 30 Stocks: •
Blue-Chip Stocks: The Dow 30 comprises large, stable companies with a 10- to 20-year history of strong performance, and most are widely considered relatively safe investments.
•
Diversification: Owning a portfolio of ten diversified Dow 30 stocks provides investment across sectors, reducing risk. Noteworthy is that
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75% of Warren Buffett’s US$350 billion Berkshire portfolio is invested in five stocks. •
Market and Economic Indicator: The Dow reflects the overall health of the US stock market and economy.
•
Liquidity: Dow 30 stocks are highly liquid and allow easy buying and selling.
•
Historical Performance: The Dow has historically delivered solid returns, appealing to long-term investors.
Wall Street Warnings: •
Limited Diversification: The Dow 30 is less diverse than broader indices, causing missed opportunities.
•
Exclusion of Fast-Growing Companies: It includes stable firms, but you miss out on the growth potential of smaller, more innovative companies.
•
Lack of Representation: The Dow 30 represents a small part of the US economy.
•
Changing Composition: The Dow’s composition changes over time as companies are added or removed based on various factors. This affects long-term strategies.
•
Price-Weighted Index Structure: The DJIA is a price-weighted index comprising 30 companies. A special Dow committee adds these constituents. The S&P 500, on the other hand, is weighted by market capitalization. The DJIA structure leads to index performance distortions.
It’s important to note that Wall Street warnings represent sell-side interests and do not hold true for buy-side investors. Here are some reasons why their warnings should be dismissed: • Limited Diversification: Dow 30, with a market cap of US$11.0 trillion, provides sector diversification, minimizing the risk of single-company investments. Bill Cara: Cracking the Maverick Code
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• Changing Composition: Dow 30 changes can disrupt long-term strategies, but investors may not have invested in removed companies, typically financially weak performers. • Index Structure: The Dow 30 Equal-Weighted Index outperforms the major indexes, indicating a sound structure. • Wall Street's Interests: Wall Street focuses on financing and trading shares, not necessarily aligning with individual investors' diversification needs. • Fear of Missing Out (FOMO) Syndrome: Wall Street's FOMO-driven narratives may not align with investors' valuable goals and objectives. • Risk Mitigation: Investors mitigate risks by selecting companies with strong fundamentals and consistent performance. • Investment Focus: Individual investors benefit from a focused investment approach aligned with their circumstances. • In-depth Knowledge: Focused investment in a few companies allows for deeper research, enabling more informed decisions. • Long-Term Focus: Concentrating on specific companies provides a targeted long-term investment strategy tailored to individual preferences and risk tolerance. In conclusion, trading ETFs like the S&P 500 and others means dealing with unknown asset prices and names, competing against sophisticated algorithms on quantum computers managed by major financial firms. Instead, Mavericks consider direct investment in companies they thoroughly understand for financial stability aligned with their objectives and risk tolerance. The Dow 30 blue-chip companies, often deemed "safe" but boring, have a strong historical performance—monotony is best for long-termoriented investors. Many small independent investors, known as Wall Street's retail clients, can easily buy and sell shares in companies like Walmart, McDonald’s, Microsoft, Apple, Visa, and Nike without relying on Wall Street services. They can also rely on these investments to outperform the market. Bill Cara: Cracking the Maverick Code
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When is the Dow 30, i.e., the market, not investable? I joined the securities industry on January 2, 1981. The S&P 500 was in a Bear phase. The index was around 450. It's ten times higher today, close to 4500. In the interim, almost 43 years later, only seven years (1981, 1987, 2000-2002, 2008, and 2022) were mostly uninvestable. That means that almost 85% of the time, the stock market is a good time to invest. Mavericks do not trade the market. We invest in Dow 30 companies that fit our needs. Sometimes, these Good Companies become Bad Stocks, which we determine by technical analysis, particularly by one indicator, the MACD. We use MACD together with RSI alerts and Point & Figure charts (see Chapter 19). Why invest in equities and not bonds? Return Potential: Equities historically offer higher long-term returns but with increased volatility. The main driver for investing in equities is the potential for capital appreciation. Risk and Volatility: Equity prices exhibit short-term volatility but provide greater long-term return potential. Bond prices are also volatile, influenced by rapid changes in interest rates. Income Stream: Income-focused investors may prefer equities with dividends, where total return includes both capital appreciation and dividend income. Investment Horizon: Equities suit long-term investors who are tolerant of market fluctuations. Bonds are preferable for shorter-term goals or those seeking consistent income. Diversification: Mitigate equity risks through diversification across sectors. Various bond types offer diversification but react differently to economic conditions, requiring strategic management. Market Conditions: Equities thrive during economic growth, while bonds become attractive in economic downturns with falling interest rates, although such conditions are less frequent. Bill Cara: Cracking the Maverick Code
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Chapter 6: Quality Companies & Critical Thinking --Unlocking the Key to Investment Strategy In the dynamic world of stock markets, prices continually rise and fall, much of it based on rumor and sentiment, while a company's quality tends to remain steady. Maverick Investors prioritize stable companies, steering clear of frequent trading. We only consider significant changes in our companies, especially for established giants like companies in the Dow 30 (DJIA) index. Maverick Investing may be unsuitable for those seeking to trade disruptive technologies and volatile stocks. We refuse to get caught up in the Fear Of Missing Out (FOMO) and focus solely on high-quality, stable companies that align with our long-term financial goals. The others are too risky. Managing Risk in Your Investment Portfolio As you know, investing entails risks, and strategies are needed to mitigate them. A diversified Dow 30 portfolio helps address various risks: Company-Specific Risk: Diversification minimizes the impact of poor performance in one company, as it represents only a portion of your holdings. Market Risk: Spreading investments across different sectors limits the impact of market volatility, offsetting losses with positive performances. Country risk: Investing in a company that operates in a domestic market bears uncertainty due to political, economic, exchange-rate, or technological influences in that country. Giant US corporations in the Dow 30 index operate globally. Currency Risk: Foreign exchange rate fluctuations impact international investments. For example, suppose you live in Canada and invest in a US stock in US Dollars. In that case, even if the share value appreciates, you may suffer losses if the US dollar depreciates compared to the Canadian dollar. Investing in the global operations of Dow 30 giants reduces currency and country risk. Bill Cara: Cracking the Maverick Code
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Interest Rate Risk: Diversifying across different sectors and industries can help reduce the impact of interest rate fluctuations on your portfolio. Some sectors may benefit from rising interest rates (e.g., financials), while others may be negatively affected (e.g., debt-heavy Industrials). Inflation Risk: A diversified portfolio includes companies that historically performed well during inflation, preserving purchasing power. Liquidity Risk: Investing in Dow 30 companies means investing in mega-cap stocks that are substantially more liquid than smaller stocks. Such liquidity eliminates the risk of being unable to buy or sell shares at desired prices. Many of these risks are mitigated with investments in Dow 30 companies. However, risks cannot always be managed with any stock or fund investment. For this reason, we chose portfolios of 10 financially sound, growing companies that collectively represent the best of American capitalism. Before investing in any stock, however, you must take your time to learn about risk analysis and management and about the metadata and professional opinions you can receive from free resources. Admittedly, investing is complex, but we can make it less so, especially when beginning. Novices who are first-time investors should consider investing a small portion of available funds to start and gradually expand the portfolio size as they gain knowledge and comfort. I strongly urge you to avoid exchange-traded funds, which Wall Street touts as the ultimate risk management solution. ETFs deprive you of any ability to do fundamental research. With an ETF, you are simply trading a price. It’s like saying you are going to buy a car, not that you are buying a Tesla Model X or a BMW X6 – just a car. But investing in individual company securities provides clarity, akin to investing in your house or car, something you know in detail meets your needs. A rather colorful analogy that an associate finds amusing is that buying an ETF is like ordering a hamburger with 10-20% fecal matter. Why subject yourself to something unpalatable? Bill Cara: Cracking the Maverick Code
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As you progress, consider the importance of diversifying your portfolio into different sectors, always keeping these key principles in mind: 1.
Personalization: Tailor your portfolio to match your unique investment
goals, risk tolerance, and time horizon. 2.
Risk vs. Return: Evaluate each company's fundamentals, financials, and
growth prospects to understand its risk profile and potential returns. Mavericks understand their capacity for risk and the degree of risk they take in the companies they invest in. Doing so requires selecting the proper portfolio, staying vigilant, and learning to safeguard one’s investments. 3.
Diversification: Strike a balance in diversification. While it's a risk
mitigation strategy, avoid over-diversification. Instead, focus on understanding each company to manage risk effectively. 4.
Research and Monitoring: Stay updated on news, financial reports, and
market trends for your portfolio companies. Reassess your investments periodically to align with your objectives and market conditions. As novice investors, our strategy involves assessing corporate fundamentals and timing our stock holdings wisely. Critical thinking plays a crucial role.. Here are the key factors for assessing each company in a portfolio of likely successes: Financial Stability •
Examine the key performance indicators of financial statements, earnings history, revenue growth, and debt levels. Companies with consistent earnings growth and robust balance sheets are preferred.
Competitive Advantage •
Seek companies with strong brand recognition, unique products, or valuable intellectual property, as these provide a competitive edge.
Good Management •
Research the leadership teams, considering their history and ability to execute strategic goals. Strong and experienced leadership is a plus.
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Industry Trends •
Assess each company's position concerning industry trends. Companies in growing or innovative sectors may have an advantage.
Valuation •
Compare a company's valuation to its peers and historical levels, focusing on those with attractive valuations relative to earnings growth potential.
Due to time and experience constraints, novice investors should seek to understand professional analysts' insights. Remember that only a few analysts cover most publicly traded companies, while large-cap stocks in the Dow 30 garner extensive attention and consensus opinions. Our approach is minimalist and straightforward. We exclusively invest in Dow 30 companies as the Dow 30 index is a widely recognized stock market index worldwide. These familiar names represent the pinnacle of American capitalist success and align with the robust US economy.
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Chapter 7: Spotting High-Quality Gems --Identifying and Evaluating Top Companies Diversification is a popular strategy touted by Wall Street, but as Mavericks, we thrive with a focused, well-researched approach to a maximum of ten stocks. Warren Buffett's success speaks volumes about concentrated investments and deep company understanding. For Buffett, Apple holds a staggering 43% in his portfolio, followed by Bank of America at 11.2%, Chevron at 9.8%, Coca-Cola at 8.5%, and American Express at 7.5%. These five stocks, primarily Dow 30 components, comprise 80% of his $350 billion portfolio, leaving 44 other holdings with the remaining 20%. If such concentration benefits Warren Buffett and Charlie Munger, ten Dow 30 holdings should work well for us. Let's apply critical thinking principles before selecting ten Dow 30 companies and a few alternatives worthy of our investment. If any Dow 30 stocks don't resonate with you, strike them as candidates regardless of your risk profile and the associated portfolio. 1. American Express (AXP): Strong finance and premium services led by Stephen Squeri prioritize innovation and customer satisfaction. 2. Amgen (AMGN): Top biotech firm with diverse therapies, under Robert Bradway's leadership, emphasizes scientific innovation. High dividends. 3. Apple (AAPL): Iconic brand, innovative products, strong earnings, and cash flow, with Tim Cook's team excelling in tech and AI. 4. Boeing (BA): An aerospace leader with advanced manufacturing and global presence, backed by a hefty order backlog, led by David Calhoun. 5. Caterpillar (CAT): Global leader in heavy machinery, resilient earnings, and a strong balance sheet under Jim Umpleby's industry-experienced team. 6. Salesforce.com (CRM): Pioneering cloud-based CRM solutions, consistent revenue growth, and strong cash flow driven by Marc Benioff's leadership. Bill Cara: Cracking the Maverick Code
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7. Cisco Systems (CSCO): Technology excellence, known for IP and market presence, stable revenue, profitability, and dividends under Chuck Robbins' leadership. 8. Chevron (CVX): Energy leader leveraging reserves and global operations, financial stability in volatile markets, led by Michael Wirth. High dividends. 9. Disney (DIS): Iconic brands, diverse content, and vast media assets ensure a competitive edge, managed by Robert Iger, prioritizing DTC, innovation, and tech-driven growth. 10. Dow (DOW): Thriving in materials science, offering innovative solutions, resilient earnings, and strong cash flow and dividends, led by Jim Fitterling, committed to sustainability and growth. 11. Goldman Sachs (GS): Investment banking and trading excellence with diverse revenues, deep market understanding, and entrepreneurship under David Solomon, ensuring financial stability. 12. Home Depot (HD): Leading in home improvement, supported by stores and customer loyalty, with a strong financial base and consistent earnings under Ted Decker's leadership. 13. Honeywell International (HON): Tech expertise and global reach secure a competitive edge, consistent revenue, and strong cash flow under Vimel Kapur, emphasizing innovation and efficiency. 14. International Business Machines (IBM): Dominating enterprise tech with strong consulting, diverse revenue streams, and dividends, ensuring financial stability under Arvind Krishna. 15. Intel (INTC): Leading semiconductors with a significant market share and steady revenue, driven by Pat Gelsinger's innovation and supply chain solutions. 16. Johnson & Johnson (JNJ): Healthcare excellence with diverse products and research, strong revenue growth, high dividend payout, and a solid balance sheet under Alex Gorsky. 17. JPMorgan Chase (JPM): Finance giant with diversified services, strong client ties, and steady revenue streams under Jamie Dimon's experienced team. Bill Cara: Cracking the Maverick Code
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18. Coca-Cola (KO): Recognized global brand with strong distribution, led by James Quincey for consistent earnings and cash flow. 19. McDonald's (MCD): Iconic fast-food leader with a global presence, led by Chris Kempczinski for steady revenue and strong cash flow. 20. 3M Company (MMM): Diverse industries excellence with innovative tech, led by Michael F. Roman for consistent earnings, strong cash flow, and dividends, prioritizing R&D. 21. Merck (MRK): Pioneering healthcare solutions, led by Robert M. Davis for strong research, treatments, consistent revenue growth, and cash flow. 22. Microsoft (MSFT): Software and cloud services leader, financially stable under Satya Nadella's leadership for steady revenue and profit. 23. Nike (NKE): Athletic wear excellence with a strong brand, led by John Donahoe for steady revenue and profitability, focusing on global expansion and digital innovation. 24. Procter & Gamble (PG): Consumer goods leader with recognized brands, led by Jon Moeller for innovation and stable earnings, cash flow. 25. Travelers (TRV): Insurance dominance with risk expertise, led by Alan Schnitzer for consistent earnings, strong cash flow, and underwriting discipline. 26. UnitedHealth Group (UNH): Healthcare services and insurance leader, led by Andrew Witty for steady earnings and cash flow, focusing on global expansion. 27. Visa Inc. (V): Electronic payment leadership excellence with a global network led by Alfred F. Kelly Jr. and Ryan McInerney. 28. Verizon Communications Inc. (VZ): Telecom excellence driving 5G tech and digital connectivity, led by Hans Vestberg, with high dividends. 29. Walgreen Boots Alliance (WBA): Prominent in pharmacy and retail, led by Stefano Pessina and Rosalind Brewer for trusted healthcare, consistent revenue, high dividends, and a broad customer base. 30. Walmart (WMT): Retail domination with a global reach and diverse
offerings, led by Doug McMillon for consistent revenue, strong cash flow, and focus on innovation, e-commerce, and sustainability.
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SWOT Analysis: Use SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) to understand your investments better. The SWOT information for each Dow 30 company can be found from multiple online sources. It provides a high-level view of the pros and cons of the company finances and operations and for investor considerations of its stock. Strengths & Weaknesses: Internal factors to consider. E.g., strong management, dividends = hold; CEO change, tech competition = consider selling. Opportunities & Threats: External factors. For example, interest rate hikes affect financing-dependent companies. Monitor shifts in rates and industry trends and collaborate for diverse insights. SWOT analysis, discussed in Chapter 22, aids in identifying the most crucial factors that influence Maverick investors' decisions to buy or sell entire positions. For instance, among many, a company's strength might lie in its management's track record, consistent dividend growth, or industry-leading technology, which are reasons to hold its shares. However, if the CEO departs, the dividend is eliminated, or a competitor develops superior technology, these reasons to invest may vanish. When strengths turn into weaknesses, it might be time to consider selling the entire holding. Strengths and weaknesses are internal factors when making investment decisions. On the other hand, external factors encompass opportunities and threats that a company cannot control. For instance, if the Federal Reserve suddenly increases long-term interest rates faster than short-term rates, it could threaten companies reliant on long-term financings, such as real estate developers, insurance firms, and banks. This cost increase could lower profit margins, depress the share prices, and threaten to bankrupt poorly run companies, potentially prompting a decision to sell or reduce your positions. In the dynamic equity market, it's crucial to conduct ongoing analysis. Regularly revisit your SWOT assessments by staying informed about fundamental shifts in interest rates, commodity prices, industry trends, and Bill Cara: Cracking the Maverick Code
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the competitive landscape. Consider forming investment clubs or support groups with like-minded long-term investing individuals to streamline decision-making. Collaborative efforts can harness diverse perspectives and research findings, challenge assumptions, and enhance the breadth of your analysis. Aim to review the analysis for each company every three months for optimal results. Deep and critical big-picture thinking is paramount for Mavericks. It involves asking questions, seeking evidence, and avoiding impulsive decisions. Approach your investments rationally and discerningly, dedicating your available time to thoroughly analyzing your portfolio companies. Embrace curiosity as a means to learn and grow as an investor, recognizing that every decision shapes your strategy and tactics. By applying critical thinking and evaluating factors such as financial stability, competitive advantage, management quality, industry trends, and valuation, novice investors can confidently navigate the stock market without the help of Wall Street. Create a concise watchlist that aligns with your investment goals and risk tolerance. Remember that your portfolio should reflect your unique circumstances, objectives, and input. You can always see the forest (the big picture) without identifying the individual trees. SWOT analysis aids in making decisions at the macro level. In future chapters, we will delve deeper into SWOT analysis for the Dow 30 companies recommended in this book. You will find that it’s not that difficult. Table of current Value Line information and charts from StockCharts.com. For a broad market understanding, study all Value Line company reports in the available time. Note the analyst changes in the data. For StockCharts charts, I use RSI-7 and MACD 12,26,9 for charts with Price Labels, Pivot Points, and SMA 50/200 Overlays. Apple, Inc. AAPL
https://research.valueline.com/research#sym=AAPL&list=dow30&sec=c ompany https://stockcharts.com/h-sc/ui?s=AAPL https://stockcharts.com/freecharts/pnf?c=AAPL,p
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Amgen, Inc. AMGN
https://research.valueline.com/research#sym=AMGN&list=dow30&sec= company https://stockcharts.com/h-sc/ui?s=AMGN https://stockcharts.com/freecharts/pnf?c=AMGN,p
American Express AXP
https://research.valueline.com/research#sym=AXP&list=dow30&sec=co mpany https://stockcharts.com/h-sc/ui?s=AXP https://stockcharts.com/freecharts/pnf?c=AXP,p
Boeing Co. BA
https://research.valueline.com/research#sym=BA&list=dow30&sec=co mpany https://stockcharts.com/h-sc/ui?s=BA https://stockcharts.com/freecharts/pnf?c=BA,p
Caterpillar, Inc. CAT
https://research.valueline.com/research#sym=CAT&list=dow30&sec=co mpany https://stockcharts.com/h-sc/ui?s=CAT https://stockcharts.com/freecharts/pnf?c=CAT,p
Salesforce CRM
https://research.valueline.com/research#sym=CRM&list=dow30&sec=c ompany https://stockcharts.com/h-sc/ui?s=CRM https://stockcharts.com/freecharts/pnf?c=CRM,p
Cisco Systems CSCO
https://research.valueline.com/research#sym=CSCO&list=dow30&sec= company https://stockcharts.com/h-sc/ui?s=CSCO https://stockcharts.com/freecharts/pnf?c=CSCO,p
Chevron Corp. CVX
https://research.valueline.com/research#sym=CVX&list=dow30&sec=co mpany https://stockcharts.com/h-sc/ui?s=CVX https://stockcharts.com/freecharts/pnf?c=CVX,p
Disney DIS
https://research.valueline.com/research#sym=DIS&list=dow30&sec=co mpany https://stockcharts.com/h-sc/ui?s=DIS https://stockcharts.com/freecharts/pnf?c=DIS,p
Dow Holdings DOW
https://research.valueline.com/research#sym=DOW&list=dow30&sec=c ompany https://stockcharts.com/h-sc/ui?s=DOW https://stockcharts.com/freecharts/pnf?c=DOW,p
Goldman Sachs. GS
https://research.valueline.com/research#sym=GS&list=dow30&sec=co mpany https://stockcharts.com/h-sc/ui?s=GS https://stockcharts.com/freecharts/pnf?c=GS,p
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Home Depot, Inc. HD
https://research.valueline.com/research#sym=HD&list=dow30&sec=co mpany https://stockcharts.com/h-sc/ui?s=HD https://stockcharts.com/freecharts/pnf?c=HD,p
Honeywell HON
https://research.valueline.com/research#sym=HON&list=dow30&sec=c ompany https://stockcharts.com/h-sc/ui?s=HON https://stockcharts.com/freecharts/pnf?c=HON,p
IBM IBM
https://research.valueline.com/research#sym=IBM&list=dow30&sec=co mpany https://stockcharts.com/h-sc/ui?s=IBM https://stockcharts.com/freecharts/pnf?c=IBM,p
Intel Corp. INTC
https://research.valueline.com/research#sym=INTC&list=dow30&sec=c ompany https://stockcharts.com/h-sc/ui?s=INTC https://stockcharts.com/freecharts/pnf?c=INTC,p
Johnson&Johns on JNJ
https://research.valueline.com/research#sym=JNJ&list=dow30&sec=co mpany https://stockcharts.com/h-sc/ui?s=JNJ https://stockcharts.com/freecharts/pnf?c=JNJ,p
JP Morgan
https://research.valueline.com/research#sym=JPM&list=dow30&sec=co
Chase JPM
mpany https://stockcharts.com/h-sc/ui?s=JPM https://stockcharts.com/freecharts/pnf?c=JPM,p
Coca-Cola Co. KO
https://research.valueline.com/research#sym=KO&list=dow30&sec=co mpany https://stockcharts.com/h-sc/ui?s=KO https://stockcharts.com/freecharts/pnf?c=KO,p
McDonald's Corp. MCD
https://research.valueline.com/research#sym=MCD&list=dow30&sec=c ompany https://stockcharts.com/h-sc/ui?s=MCD https://stockcharts.com/freecharts/pnf?c=MCD,p
3M Co. MMM
https://research.valueline.com/research#sym=MMM&list=dow30&sec=c ompany https://stockcharts.com/h-sc/ui?s=MMM https://stockcharts.com/freecharts/pnf?c=MMM,p
Merck & Co., Inc. MRK
https://research.valueline.com/research#sym=MRK&list=dow30&sec=co mpany https://stockcharts.com/h-sc/ui?s=MRK
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https://stockcharts.com/freecharts/pnf?c=MRK,p
Microsoft Corp. MSFT
https://research.valueline.com/research#sym=MSFT&list=dow30&sec=c ompany https://stockcharts.com/h-sc/ui?s=MSFT https://stockcharts.com/freecharts/pnf?c=MSFT,p
Nike Inc. NKE
https://research.valueline.com/research#sym=NKE&list=dow30&sec=co mpany https://stockcharts.com/h-sc/ui?s=NKE https://stockcharts.com/freecharts/pnf?c=NKE,p
Procter & Gamble
https://research.valueline.com/research#sym=PG&list=dow30&sec=co
PG
https://stockcharts.com/h-sc/ui?s=PG
mpany https://stockcharts.com/freecharts/pnf?c=PG,p
Travelers Cos. TRV
https://research.valueline.com/research#sym=TRV&list=dow30&sec=co mpany https://stockcharts.com/h-sc/ui?s=TRV https://stockcharts.com/freecharts/pnf?c=TRV,p
UnitedHealth Grp UNH
https://research.valueline.com/research#sym=UNH&list=dow30&sec=co mpany https://stockcharts.com/h-sc/ui?s=UNH https://stockcharts.com/freecharts/pnf?c=UNH,p
Visa Inc. V
https://research.valueline.com/research#sym=V&list=dow30&sec=com pany https://stockcharts.com/h-sc/ui?s=V https://stockcharts.com/freecharts/pnf?c=V,p
Verizon Comm. VZ
https://research.valueline.com/research#sym=VZ&list=dow30&sec=co mpany https://stockcharts.com/h-sc/ui?s=VZ https://stockcharts.com/freecharts/pnf?c=VZ,p
Walgreens Boots
https://research.valueline.com/research#sym=WBA&list=dow30&sec=c
WBA
https://stockcharts.com/h-sc/ui?s=WBA
ompany https://stockcharts.com/freecharts/pnf?c=WBA,p
Walmart Inc. WMT
https://research.valueline.com/research#sym=WMT&list=dow30&sec=c ompany https://stockcharts.com/h-sc/ui?s=WMT https://stockcharts.com/freecharts/pnf?c=WMT,p
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Chapter 8: Growth vs. Value Investing --Choosing your investment path Before diving into this chapter, I want to share advice that my father once imparted to me, a nugget of wisdom that has endured over the years. Dad posed a simple yet profound question: “Why do people ask a salesperson to tell them what they need?” As a youngster at the time, its significance eluded me, but I now realize this is a practice that most people unknowingly adopt in the stock market. Investing is about growing wealth over time through stocks and bonds, different from buying tangible assets for immediate needs. When you embark on your investment journey, you're charting a path toward financial security and realizing your dreams. This journey is all about you and your future, not merely following the suggestions of salespeople, TV pundits, or bloggers. Understanding market dynamics and conducting thorough research is crucial for successful investing. Analyzing a company's financials, industry trends, and economic forces empowers you to make informed decisions aligned with your goals and risk tolerance. Unlike purchasing goods, where personal preferences and affordability dictate choices, investing necessitates continuous consideration and independent decision-making. Another critical distinction lies in the ease of buying and selling investments. Stocks can be swiftly traded, whereas acquiring property, like a house, will involve substantial commissions, fees, and long-term commitments. Selling property may not recoup your initial investment due to depreciation, maintenance costs, taxes, and declining values. However, investing in securities also carries risks, with prices fluctuating more rapidly than property values, economic shifts, and corporate challenges. Diversifying your investments to mitigate these risks is prudent, an unnecessary factor when buying conventional items like property.
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Mastering the art of investing is pivotal to making sound decisions regarding companies and their stock prices, enabling you to navigate market challenges confidently. This takes time. To thrive as an investor, you must grasp market dynamics and conduct thorough research. Unlike tangible items, the value of investments hinges on market sentiment, economic conditions, and the company's growth prospects. It's a reality that stocks and funds are sold, not bought—a revelation that should shock anyone who invests in quality for the long run. When you own stocks, no matter for how short a time, your interests are aligned with the changing financial strength and operations growth of a company. Your primary objective is to grow your wealth over time through rising stock prices, dividends, and interest earnings. In contrast, acquiring homes or cars typically caters to immediate needs or personal preferences, often not geared toward wealth generation. Growth vs. Value: Navigating the Distinction Growth and value stocks represent two distinct investment strategies, each centered on different types of companies and their underlying characteristics. The choice between these strategies depends on an investor's objectives, risk tolerance, and market outlook. About Growth Stocks: Growth stocks are associated with companies expected to achieve higherthan-average revenue and earnings growth compared to their peers and the broader market. These companies reinvest their earnings to expand operations, develop new products, or enter new markets, leading to higher price-to-earnings (P/E) ratios. Investors are willing to pay a premium for their potential future earnings. Key Characteristics of Growth Stocks: • Strong Earnings Growth: Top growth companies consistently outperform industry peers and the market in earnings growth. Bill Cara: Cracking the Maverick Code
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• Higher Valuations: Growth stocks typically have higher valuation metrics, such as P/E ratios, reflecting their potential for future growth. • Lower Dividend Yields: These companies reinvest earnings instead of distributing dividends. • Higher Volatility: The potential for greater returns comes with increased risk and price volatility. Why Invest in Growth Stocks: Growth stocks offer the potential for substantial long-term returns if the company's growth projections materialize. They suit investors with longer time horizons and tolerance for market volatility. About Value Stocks: Value stocks are shares of companies whose assets are deemed undervalued by the market. These companies may temporarily reinvest earnings conservatively or remain overlooked by investors, resulting in lower stock prices relative to their intrinsic value. Value investors believe these stocks will eventually correct to their true worth. Key Characteristics of Value Stocks: • Lower Valuations: Value stocks have lower valuation metrics, like P/E and price-to-book ratios, due to perceived lower risk. • Higher Dividend Yields: Many value stocks pay dividends, offering income even if the stock's price doesn't rise significantly. • Potential Reversal: Value stocks can rebound as market sentiment shifts, potentially leading to capital appreciation. Why Invest in Value Stocks: Value investing appeals to investors seeking opportunities for price appreciation while focusing on relatively lower risk, particularly during market downturns or uncertainty.
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Choosing Between Growth and Value When market prices significantly exceed company fundamentals, distinctions between Growth and Value may blur. Regardless, when stock prices surpass intrinsic values, assessing your portfolio holdings and considering reducing or retaining them is essential. Remember that you invest in companies, not the market. Reducing your holdings or selling several positions may indicate an overvalued market at risk of correction, which is all you need to know. Fearmongers in the investment world lack insight into your portfolio, strategy, or tactics—ignore their influence. Investing in growth or value stocks hinges on your goals, risk tolerance, and market outlook. Maverick Investors Ignore Wall Street. We blend both approaches to balance potential returns and risks. Ultimately, however, the choice aligns with your investment strategy and long-term financial objectives. By grasping these fundamental principles and applying them judiciously, novice investors can confidently navigate the complexities of the stock market. You don't need a salesperson to dictate where and when to invest. Investing is inherently simple, but we insist on making it complicated. As Leonardo Da Vinci reputedly observed, “Simplicity is the ultimate sophistication.” Maverick investing is a journey of continual learning and improvement. Stay committed, curious, and focused on your long-term financial goals and a select portfolio of high-quality companies. By doing so, you'll position yourself for financial success far better than the so-called professionals of Wall Street.
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Chapter 9: Generating Investment Income --Strategies for earning from your portfolio For Maverick Investors focused on income, Total Return is paramount. Even bonds carry capital risk unless held to maturity. In the early '80s, during a 16% interest rate era, bonds were a golden opportunity, but today, interest rate volatility makes long-duration bonds a questionable choice. Many gravitate toward dividend income ETFs, but fees can eat into returns, often matching the total return from selected Dow 30 investments. As of August 11, 2023, 27 Dow 30 firms paid dividends. Boeing (BA), Disney (DIS), and Salesforce (CRM) were exceptions, with Salesforce never having paid dividends in a decade. Verizon (VZ), Walgreens (WBA), 3M (MMM), Dow Holdings (DOW), IBM (IBM), Chevron (CVX), Amgen (AMGN), Goldman Sachs (GS), Coca-Cola (KO), and Cisco Systems (CSCO), among others, merit long-term income investment. These ten boasted a 4.79% Trailing Twelve-Month Dividend Yield on July 27, with the top four yielding 6.30%. Considering capital growth potential, Maverick Investors may find income within the Dow 30. Dividend yield ranks high when selecting investments. A higher yield appears better, but sustainability matters. A stock with an unsustainable payout can swiftly dry up those attractive dividends. Assessing income stability, liquidity, and years of consistent dividend payments is vital. Also, consider how share buybacks affect dividend yield growth. Check Forward Twelve Months (FTM) yields over Trailing Twelve Months (TTM) for a quick, high dividend yield fix. Significant disparities exist. For instance, in mid-August 2023, Goldman Sachs (GS) showed a TTM yield of 3.01% but an FTM yield of 10.00%. UnitedHealth had a TTM yield of 1.35% but an FTM yield of 7.52%, data available on StockCharts.com. Compare actual dividends to a per-share cost basis, not the current share price. Bill Cara: Cracking the Maverick Code
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Reinvesting dividends also impacts investment outcomes, as exemplified below: Example 1: Own 100 shares at $50/share ($5,000 total). Dividend of $2/share yields $200. Reinvested, it buys 4 more shares at $55/share. New basis: $48.077. Dividend yield: 4.16%. Selling 104 shares at $55/share results in a $720 capital gain. Example 2: After 5 years, dividends increase to $3/share. Total shares owned: 127. Cost basis: $5,081. Selling at $70/share yields a $3,809 gain. Accurate tracking is key for investment performance and informed reinvestment decisions. Portfolio Management Considerations: 1. Choose your investment approach (growth, value, income) to align with goals and risk tolerance. 2. Maintain a long-term perspective for steady wealth building. 3. Diversify across industries for reduced risk and stable returns. 4. Stay informed with research and education from Investing.com, Yahoo Finance, FinViz, StockCharts, TipRanks, and MarketBeat. 5. Consider support groups and professional advice for complex portfolios, ensuring they genuinely listen and complement your research. Total Performance Return The impact of dividends is always a consideration. Total Performance Return matters when investing for income. Considering long-term US Treasury yields, high dividends can compensate even in a 4% yield scenario. The following tables were created on August 11, 2023; however, they provide useful information. Bill Cara: Cracking the Maverick Code
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Moreover, the interplay of dividends and capital gains paints a different picture than just looking at dividend yield, as shown in the data. The next table shows that the highest eight dividend payers in the Dow 30 averaged 5.00%. But the Dow 30’s highest ten dividend payers averaged 4.42%. The highest 12 averaged 4.16%, and the highest 14 averaged 4.04%. Because of the long-term capital growth potential, even a 4% dividend yield is a satisfactory return when the 10-year US Treasury yield on August 15 was 4.09%, and the long-term average is 4.25%. A year earlier, the Treasury yield was 2.87%, making dividend yields attractive.
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A 5.0% average dividend yield is considered good compared to the 10-year US Treasury yield, but the Total Performance Return, which combines dividends and capital gains or losses, may provide a different perspective. For instance, Verizon's 10-year data shows an Average Annual Total Return of 0.87%, significantly lower than its current yield of 7.8%. Low-interest rates in the past decade favored growth stocks like Microsoft (MSFT) and Apple (AAPL), with annualized total returns of 28.16% and 27.83%. Salesforce.com (CRM) returned an annualized +16.56% without investors collecting a single dollar in dividends. However, with interest rates now the highest since 2008, value stocks with a consistently high dividend yield are expected to gain favor. Understanding Total Performance Return helps in deciding whether to prioritize growth/value or income in your portfolio, though it doesn't provide immediate dividends.
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Chapter 10: Investing vs. Trading -- Navigating the reality In finance, pursuing wealth revolves around two main approaches: investing and trading. While textbooks outline the differences between investing and trading, it's critical to grasp the reality. Different Perspectives: 1. Time Horizon: •
Textbooks: Investing is patient and long-term; trading is short-term for quick profits.
•
Truth: Traders are not investors, but investors are also traders.
2. Goal and Purpose: •
Textbooks: Investing for long-term wealth; trading for active profit from market movements.
•
Truth: Both involve buying and selling of a price, but investors focus primarily on company fundamentals, while traders use technical analysis.
3. Risk Tolerance: •
Textbooks: Investing is lower risk; trading is riskier due to frequent transactions.
•
Truth: Investing is less risky as understanding corporate fundamentals and applying critical thinking minimizes risks. As traders are blind to essential facts, especially with ETFs, it poses higher risks than investing.
4. Involvement and Activity: •
Textbooks: Investing requires less active involvement; trading demands constant monitoring.
•
Truth: Investors can adopt a laid-back and patient approach, but traders face constant market scrutiny.
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5. Market Analysis: •
Textbooks: Investing uses fundamental analysis; trading relies on technical analysis.
•
Truth: Investors analyze intrinsic company value and compare it to price; traders focus on short-term price movements.
6. Understanding Price Dynamics: •
Whether investing or trading, decisions are based on a combination of technical and fundamental analyses.
•
With a much deeper understanding of corporate fundamentals, investors navigate a less risky path than traders.
7. The Challenge Against Machines: •
Successful wealth accumulation requires a long-term investment approach, making infrequent decisions based on a deep understanding of comprehensive data. Short-term traders face challenges against powerful algorithms, where machine speed often prevails, similar to machine dominance in chess against grandmasters.
Conclusion: •
Market risks are significant, and confidence is elusive for independent market participants due to Wall Street's use of algorithms and lightning-fast machines.
•
The truth lies in the nuanced interplay between investing and trading, emphasizing the importance of critical thinking, understanding price dynamics, and adopting a long-term perspective for successful wealth accumulation.
•
Accumulate wealth by investing in financially and operationally sound company stocks focusing on the long term, i.e., base infrequent trading decisions on daily, weekly, and monthly price series data instead of seconds and minutes.
•
Embrace minimalism in portfolios and adopt simplicity and patience as winning investment strategies.
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Review: Investing in Securities vs. Physical Assets Understanding the Maverick program involves reviewing key points about investing in securities versus physical assets. Securities investments, like stocks, bonds, or mutual funds, differ significantly from buying physical assets. Both involve financial decisions, but the objectives, processes, and dynamics are distinct. To become a maverick securities investor, embrace the personal nature of investing and understand the importance of independent decision-making apart from any advice from Wall Street. Key Differences: •
Purpose and Objectives: Securities investments focus on wealthbuilding and achieving long-term financial goals, emphasizing price appreciation and income. Buying physical assets like houses, cars, or computers fulfills immediate needs or desires, with financial returns not the primary goal.
•
Investment Analysis: Unlike physical assets, securities require meticulous analysis aligned with your objectives. Successful investors delve into financials, industry trends, and market conditions. Conversely, purchasing physical assets emphasizes personal preferences, features, and immediate utility.
•
Market Dynamics: Success in the stock market necessitates extensive financial analysis, critical thinking, and a grasp of liquidity. Securities respond to global economic factors, geopolitics, securities regulations, and investor sentiment, leading to continuous price fluctuations and opportunities. In contrast, local factors such as location, consumer demand, and innovation influence housing, cars, or computers with considerably less volatility.
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•
Asset Allocation: Deciding the percentage of assets in securities versus physical assets is a personal choice reflecting individual risk tolerance, financial goals, and preferences.
•
Liquidity and Marketability: Securities offer liquidity, allowing quick transactions through brokerage accounts. Physical asset purchases like houses involve lengthy negotiations, legal processes, and financing. Cars and computers, while faster to buy, require finding buyers when selling.
•
Professional Advice: While advice from salespersons is common when buying physical assets, securities investing requires independent decision-making based on personal financial goals, risk tolerance, and strategy. Investors can seek insights from financial advisors but must consider potential conflicts of interest.
•
Long-Term Focus: Securities investing prioritizes long-term wealth creation, whereas physical asset buyers primarily consider immediate utility. Market volatility and distractions can challenge securities investors' long-term perspective.
•
Independence: While salespersons play a role in certain purchases, relying solely on their guidance in securities investing will hinder personal growth. Managing investment decisions and staying informed are vital for success in securities.
•
Continuous Learning: Investing is an ongoing learning journey. Maverick investors embrace critical thinking and approach markets with a long-term perspective, positioning themselves for financial success.
•
Safeguarding Wealth: Once financial goals are met, consider safeguarding your securities portfolio with investments in precious metals, securely stored with a premier independent fiduciary outside your country of residence.
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Chapter 11: Developing Your Maverick Bias -- Embracing minimalism for a purposeful future Summarized from my September 2, 2023 article: Introduction: •
In a world teeming with investment options and financial noise, the Maverick Investor Portfolio introduces a refreshing perspective— minimalism in investing, promoting simplicity for a fulfilling life. A favorite saying of mine is “Simplicity and patience will always win in the end.”
Simplify Your Investment Approach: •
The Maverick Investor Portfolio challenges the notion that investing must be intricate.
•
Instead of pursuing complexity, the focus is on well-established giants like Nike, McDonald's, Apple, Microsoft, and Visa, known for their enduring success.
Freedom Through Established Investments: •
Investing in these household names has consistently outperformed major market indexes over the past decade.
•
By aligning investments with familiar and trustworthy companies, individuals can reclaim time and mental space to enjoy life's pleasures without the constant stress of monitoring a complex portfolio.
Investing in What You Understand: •
The Maverick Investor Portfolio emphasizes investing in what you understand, avoiding the allure of industries or investments with little personal knowledge.
•
Unlike Exchange-Traded Funds (ETFs), which lack transparency, investing in known companies empowers individuals to make informed and conscious decisions.
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Minimalism Defines Your Portfolio and You: •
The investment portfolio is portrayed as more than just a collection of assets; it reflects one's values and lifestyle.
•
In this context, minimalism is about decluttering physical space and simplifying financial decisions for a purposeful and fulfilling life.
Championing a Maverick Approach: •
The Maverick Investor Portfolio challenges the status quo by championing a minimalist investment approach, encouraging individuals to invest in what they know, simplify financial decisions, and reclaim time for worthwhile pursuits.
•
As the saying goes, minimalism is the key to unlocking the prison of accumulated stuff, allowing individuals to journey toward a purposedriven and liberated financial future.
Minimalist Covers, Minimalist Approach: The 2023 books on investing, reflecting a philosophy of simplicity and clarity, emphasize actionable advice without flashy graphics or complex charts. Embrace the Maverick Investor's Mindset: To cultivate a Maverick Investor's mindset, heed the wisdom of investment guru Jim O'Shaughnessy, as outlined in his mantra: 1.
Foster a resolute mental attitude.
2.
Disregard external noise and actions.
3.
Don't tether your self-worth to others' aspirations.
4.
Embrace self-reliance and clarity.
5.
Take control of your destiny.
6.
Believe in your capabilities.
7.
Prioritize long-term thinking.
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8.
Don't overemphasize short-term events or succumb to volatility.
9.
Think in decades, especially if you're a Gen Z'er or Millennial.
10.
Understand the Rule of 72 for doubling assets.
11.
Free yourself from the present.
12. Recognize that history informs the future, with cycles repeating in varying forms. 13.
Dive into original sources, literature, and historical records to discern
facts. 14. Study market behavior and what drives human actions, including irrational ones. 15.
Commit to lifelong learning and understanding.
16.
Grasp the strategies of Wall Street, central banks, and mega-banks.
17. Explore value investing and the wisdom of Warren Buffett and Peter Lynch. 18.
Expand your knowledge beyond finance, focusing on factors shaping
our world. 19.
Recognize that interdisciplinary solutions solve significant problems.
20.
Build upon your knowledge, refine your ideas, and seek creativity.
21.
Make an unwavering commitment to continual learning.
Additionally, consider the significance of the Rule of 72, a quick formula to estimate how long it takes for an investment to double based on the expected growth rate. It's a potent tool for assessing potential returns over time. For example, if you expect a 12% annual return, your investment will double in about six years. Over 36 years, with consistent 12% growth, a $5,000 investment could become $320,000, a substantial success even when accounting for a 3% inflation rate.
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Understanding concepts like the Real Rate of Return, adjusted for inflation, and Average Annual Total Return (AATR), which includes both capital appreciation and dividends over five to ten years, is vital to evaluate your investments accurately. Required studies: Total Return. https://www.investopedia.com/terms/t/totalreturn.asp Total Return includes capital appreciation and dividends. Real Rate of Return. https://www.investopedia.com/terms/t/totalreturn.asp Total Return adjusted for Inflation. Lastly, remember that the Maverick Investor separates monthly-weekly data (for assessing quality and intrinsic value) from daily and intra-daily data (for trading). These distinctions reflect two distinct mindsets crucial for success. In closing, I’ll add that an associate says some of the concepts in this chapter take years of trial and error to learn from battle scars, which is the purpose of mentorship.
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Chapter 12: Harnessing the Power of Compounding --Maximize your wealth potential In our journey towards long-term wealth creation, numerous factors play their part – your job, education, savings, resourcefulness, and living within your means, to name a few. Amidst these elements, one force stands out as the most potent driver: the magic of compounding. Understanding and leveraging the power of compounding is crucial for novice investors looking to build substantial wealth over time. In this chapter, we explore the concept of compounding and delve deeper into strategies and concepts that help maximize its potential, paving the way for long-term financial success. "The Silent Hero in Your Investment Portfolio," an article by Justin Carbonneau, refers to an investment's ability to generate reinvested earnings, creating a snowball effect. The longer the compounding period, the more profound its impact on the final investment value. Albert Einstein famously called this phenomenon the "eighth wonder of the world." Let's illustrate the power of compounding with two investors: Case 1: Investor A invests $5,000 annually from age 25 to 35, totaling $50,000, with an Average Annual Total Return of 11.48%. Investor B invests the same amount from age 35 to 65, totaling $150,000. At age = 65, Investor A's portfolio at age 65 ≈ $1,134,930.89 Investor B's portfolio ≈ $1,494,205.53. Despite contributing three times more than Investor A, Investor B's portfolio is approximately $359,274.64 smaller due to the power of compounding and the advantage of starting early. Case 2: Investor A invests $5,000 annually from age 25 to 65, totaling $200,000. Investor A's portfolio at age 65 is $3,898,144.07 Case 3: Investor A starts with an initial investment of $5,000 and adds $50 weekly. Investor A's portfolio at age 65 is $2,124,331.78
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These examples demonstrate the profound impact of compounding over time. Regular contributions and a long-term perspective can lead to substantial wealth accumulation, even with a small account. To harness the potential of compounding: 1. Start Early: Time is the most valuable asset for compounding. Beginning early in life allows investments more time to grow and magnify wealth. 2. Consistency is Key: Regular contributions create a disciplined approach, eliminating the need to time the market and reducing the impact of short-term fluctuations. 3. Reinvest Dividends and Interest: Reinvesting them fuels further compounding, accelerating the growth of investments. 4. Diversify for Stability: Spreading investments across sectors mitigates risk and ensures a stable foundation for compounding. 5. Stay Invested for the Long Haul: Embrace a long-term horizon, resisting reactions to short-term market fluctuations. 6. Avoid High Fees and Expenses: High fees can erode returns. Choose low-cost investment vehicles to maximize compounding. 7. Optimize Tax Strategies: Strategic tax planning can enhance compounding. Use tax-efficient accounts to minimize tax impact. 8. Rebalance Periodically: Realignment ensures your portfolio aligns with long-term goals, optimizing compounding. The power of compounding necessitates a shift from short-term urgencies to long-term goals. Patience and critical thinking are key in a world driven by instant gratification. Embrace this powerful force and let it work for you, transforming your financial future.
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Chapter 13: Fusion Analysis: The Ultimate Study --Fundamental, technical, quantitative, and economic Fusion analysis is like a recipe for making smart investment decisions. It combines different ingredients - fundamental, technical, quantitative, and economic methods - to give you a big picture perspective of the market and individual companies. Broadmindedness helps you spot good investment opportunities and decide when to buy or sell stocks. Think of yourself as a ship in the vast ocean of financial data. Your financial goals are your compass, guiding you on your unique journey. Unlike Wall Street, which has its own agenda, your journey is personal. Your money and life experiences shape your path. Using fusion analysis is like having a reliable map on this journey. It helps you make unbiased and well-informed decisions, protecting you from potential traps set by Wall Street. Fusion Analysis merges four distinct approaches: 1. Fundamental Analysis: Evaluating financial health through metrics like revenue, profitability, debt levels, cash flow, and liquidity. 2. Technical Analysis: Analyzing historical price and volume data to forecast price movements. 3. Quantitative Analysis: Using mathematical models to identify patterns and correlations. 4. Economic Analysis: Assessing macroeconomic factors' impact on the economy and individual companies. Understanding financial market dynamics empowers investors to decide where to invest their money. Doing so will take time, so Mavericks invest only in giant Dow 30 companies and trade the shares with a long-term horizon. In the months and years ahead, Maverick Investors, who are true novices, will appreciate this big-picture approach.
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Fundamental Analysis is the Key to Company Selection. Evaluating a company's financial stability and potential involves analyzing various fundamental factors: •
Revenue growth: An indicator of a growing company.
•
Profitability metrics: Gross, operating, and net profit margins reveal
financial stability. •
Debt levels: Total debt, debt-to-equity ratio, and interest coverage ratio
offer insights into financial health. •
Liquidity ratios: Current and quick ratios measure short-term
obligations. High liquidity ratios signify resilience during economic challenges. •
Cash flow: Positive cash flow indicates the company's ability to fund
growth and pay dividends. Remember, Exchange Traded Funds do not embrace company fundamentals. Buying ETFs classifies you as a trader, not an investor. ETFs are Wall Street's creations designed for trading against their algorithms and huge computers. Here are some commonly used methods for predicting market movements: A. Technical Analysis (TA) Technical Analysis (TA) is like weather forecasting for the stock market. It uses past data, like price and volume, to try and predict future price movements. Just like meteorologists use different tools to predict the weather, traders use various charts and indicators to identify patterns in the stock market. Some of these tools include the Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), moving averages, pivot points, and Point & Figure charts. The idea behind TA is that history tends to repeat itself. So, if a certain pattern has appeared in the past, it might happen again in the future. For example, a pattern called ‘cup and handle’ might indicate a future trend.
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While TA can’t guarantee success or predict unexpected events, it provides insights into potential changes in market trends and cycles. It’s like having a map to navigate the market. Using only the center of this picture, the oscillators represent cycles and the flat dotted line the trend. Here the trend is flat, but it could be rising or falling.
Remember, TA is not a magic wand. It’s just one of the tools you can use to understand the market. It works best when used alongside other methods, like fundamental analysis, to get a complete picture of the market. Even though I recommend a ‘buy and hold’ strategy for Maverick Investors, I understand that market volatility might sometimes require trading. But remember, a stock is just a price that keeps changing, influenced by various factors. Predicting market trends can be complicated, especially with interventions by central banks and governments. So, keep your approach simple and focused on the long term. And avoid getting distracted by flashy ‘black box’ promotions. Bill Cara: Cracking the Maverick Code
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B. Quantitative Analysis (QA) Quantitative Analysis (QA) is a sophisticated method that uses mathematics and algorithms to analyze extensive datasets, aiming to discern patterns and correlations within financial markets. It excels in processing quantitative data swiftly, providing an objective and data-driven perspective beyond human intuition. QA is particularly effective with historical prices, trading volumes, and financial ratios. Its main goal is to enhance investors' ability to accurately identify trends and patterns in numerical data, supporting informed decisionmaking and market awareness. QA is an integral part of financial analysis, complementing other approaches to understand market dynamics comprehensively. C. Economic Analysis (EA) There are several macroeconomic reports that novice investors and traders can consider monitoring for shifts in investor sentiment (insert relevant dates and track weekly/monthly). Economic data can be found at Econoday.com and Investing.com: 1. Inflation Reports: Consumer Price Index (CPI) inflation reports provide government-supplied information on the inflation rate in an economy. High inflation signals potential interest rate hikes by central banks, impacting investor sentiment. Investing.com Econoday 2. Purchasing Managers' Index (PMI): The PMI purchasing managers’ survey reports on the health of the manufacturing and service sectors. Higher PMI scores indicate economic expansion and increasingly positive investor sentiment. Lower PMI scores indicate economic contraction and increasingly negative investor sentiment. Investing.com Econoday 3. Gross Domestic Product (GDP) Reports: GDP measures a country's economic growth. Positive GDP growth can signal a healthy economy and potentially positive investor sentiment, while negative GDP growth
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can indicate a struggling economy and potentially negative investor sentiment. Investing.com 4. Consumer Sentiment: The University of Michigan's Consumer Survey Center questions households each month on their assessment of current conditions and expectations of future conditions. (“US: Consumer Sentiment - CME Group”) Preliminary monthly estimates are released mid-month based on about 420 respondents. "Final estimates are released near the end of the month and are based on about 600 respondents." (“US: Consumer Sentiment - CME Group”). Reports are available from Investing.com and Econoday. 5. Employment Reports: US Job Reports, such as the monthly non-farm payrolls report, provide information on job growth and unemployment rates. Positive employment data can signal a strong economy and potentially positive investor sentiment. In contrast, negative employment data can indicate a weak economy and potentially negative investor sentiment. Investing.com Econoday 6. Consumer Confidence Index (CCI): The CCI is a Conference Board survey measuring consumers' confidence in the economy. (“Consumer Confidence Index (CCI) | Investor's wiki”) Higher CCI scores indicate positive consumer sentiment and potentially positive investor sentiment. In contrast, lower CCI scores can indicate negative and potentially negative investor sentiment. Investing.com Economic reports such as inflation, Purchasing Managers' Index (PMI), GDP, employment data, and consumer sentiment are crucial in informing about market sentiment shifts. However, economic analysis should complement other forms of fusion analysis. I follow these economic data reports from Investing.com as they are called Market Moving Indicators. Readers should maintain a record of the updates to the reported data by Econoday and Investing.com. Bill Cara: Cracking the Maverick Code
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OPEC Meeting
Housing Starts and Permits
4-Month Bill Settlement Consumer Confidence
Industrial Production International Trade in Goods [Advance]
CPI Durable Goods Orders
International Trade in Goods and Services
EIA Petroleum Status Report
ISM Manufacturing Index Jobless Claims
Employment Situation Existing Home Sales
New Home Sales Personal Income and Outlays
Fed Chair Press Conference FOMC Announcement FOMC Minutes GDP
Philadelphia Fed Manufacturing Index PMI Composite Flash PPI-Final Demand Retail Sales Treasury Refunding Announcement
Key Economic Reports to Monitor (if and when you have time) include: FOMC Reports •
Read the FOMC decisions and statements. The FOMC manages Federal Reserve monetary policy through open market operations.
•
Most important is the Fed funds rate, which affects other interest rates like commercial bank loans and mortgage loans.
•
Each FOMC decision contracts or expands the economy.
•
Conducts eight FOMC meetings annually.
Interest rates published by the Fed •
Fed Funds Effective Rate
•
10-Year Real Interest Rate
•
Market Yield on 10-Year US Treasury Securities
•
15-Year Fixed Rate Mortgage Average
•
30-Year Fixed Rate Mortgage Average
•
Bank Prime Loan Rates
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Inflation •
Read the US CPI MoM.
•
Read the US CPI YoY.
•
Read the Econoday Report on US Inflation.
GDP growth •
Understand why investors care about the GDP data.
•
Read the Consumer Metrics Institute reports of US Dept. of Commerce GDP BEA data.
Consumer spending •
Read the Consumer Metrics Institute Leading Indicators.
Econoday reports The most independent and objective economic reporting IMO is from Econoday. To purchase the 2024 Econoday Economic Journal.. For weekly Econoday reports, use this template and adjust the dates: Examples: High Points for Weekly Economic Data: Investing.com, May 8 Econoday May 1 Econoday In summary, Fusion analysis offers a big-picture assessment of how various financial and economic factors influence the economy and company performance.
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Chapter 14: Building Your Maverick Portfolio --Crafting a winning strategy Creating a worthy stock portfolio requires careful consideration of several factors, including your investment goals, risk tolerance, and time horizon. This guidebook aims to assist you in conducting thorough research to make informed investment decisions. Still, remember that the final choice is yours. In Chapter 4, I noted that market risk is an inherent part of investing. How much risk you're willing to take can significantly impact your investment choices and the potential returns you can expect. Before assembling your portfolio, you must understand your capacity for risk. I identified five separate portfolio types based on various risk tolerance scores in that chapter. For the Moderate Growth portfolio, I selected ten stocks most likely to enjoy a high total average annual performance for the next five years between 2023 and 2028 based on historical performance, growth prospects, financial stability, and industry trends, and also fit within the mid-range risk tolerance. Here are the selected companies (charts in Chapters 28-37) with earlier reports:
1.
Apple Inc. (AAPL): Technology ●
Strong earnings growth and cash flow.
●
High return on equity and net profit margin.
●
Relatively low dividend yield.
●
Strong product ecosystem and innovation.
●
Potential for continued growth in technology and services.
●
10-year Performance Study As of November 27, 2023: ●
Start Price: $19.86
●
End Price: $189.79
●
Start Shares Based on $10,000 Investment: 503.52
●
End Shares Based on $10,000 Investment: 574.35
●
Dividends Reinvested per Share: $7.14
●
Aggregate Total Return: 990.07%
●
Average Annual Total Return: 26.98%
●
Starting Investment: $10,000.00
●
Ending Investment: $108,981.61
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Value Line’s September 15, 2023 commentary on Apple's financial results has a mixed outlook with improving trends. While June-quarter sales experienced a 1.4% yearover-year dip, this decline is better than in previous periods. Earnings per share rose by 5%, suggesting a positive outlook for year-end and fiscal 2024. Apple contends with challenges like currency effects, inflation, and higher borrowing costs but benefits from robust services growth. The Services segment achieved record revenues, boasting over one billion paid subscriptions, with over half of recent iPad and Apple Watch buyers being new customers. Though concerns initially arose regarding a potential China ban, recent clarifications affirmed no such ban. Despite a recent technical rank downgrade, Apple's shares have surged over 40% from their 52-week low, signaling strong support from Wall Street. However, caution is advised for potential investors, as upside potential is below average. 2.
Caterpillar Inc. (CAT): Industrial ●
Solid revenue growth and net profit margin.
●
Moderate dividend yield and P/E ratio.
●
Subject to economic cycles due to its focus on industrial equipment.
●
Potential for growth with infrastructure development.
●
10-year Performance Study As of November 27, 2023:: ●
Start Price: $84.60
●
End Price: $247.39
●
Start Shares Based on $10,000 Investment: 118.20
●
End Shares Based on $10,000 Investment: 155.10
●
Dividends Reinvested per Share: $35.69
●
Aggregate Total Return: 283.71%
●
Average Annual Total Return: 14.39%
●
Starting Investment: $10,000.00
●
Ending Investment: $38,360.18
In Value Line’s November 3, 2023 commentary, Caterpillar reported a robust thirdquarter performance with a 12% year-over-year increase in sales to $16.8 billion, attributed to price hikes and higher volume. Strong demand for construction equipment, driven by increased government infrastructure spending, contributed to a 20.8% adjusted operating profit margin. Despite the positive results, Wall Street responded poorly, partially due to signs of demand moderation. Sequential sales slowdowns in the Resource and Energy & Transportation units and a decline in the backlog raised concerns about global economic growth constraints. CEO Jim Bill Cara: Cracking the Maverick Code
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Umpleby explained the backlog moderation as shorter lead times for order fulfillment. Unexpected dealer inventory increases and doubts about sustaining proactive measures in a softening environment may weaken top- and bottom-line comparisons in the upcoming quarters. Caterpillar shares show appreciation potential, but recent quotations may already reflect anticipated operational improvement.
3.
Chevron Corp (CVX): Energy ●
Stable revenues and profitability.
●
Moderate dividend yield and P/E ratio.
●
Exposed to energy price fluctuations and environmental concerns.
●
Potential for growth with energy demand but subject to industry challenges.
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10-year Performance Study As of November 27, 2023: ●
Start Price: $122.44
●
End Price: $144.36
●
Start Shares Based on $10,000 Investment: 81.67
●
End Shares Based on $10,000 Investment: 124.26
●
Dividends Reinvested per Share: $48.53
●
Aggregate Total Return: 79.38%
●
Average Annual Total Return: 6.02%
●
Starting Investment: $10,000.00
●
Ending Investment: $17,942.30
In Value Line’s November 17, 2023 commentary, Chevron announces the acquisition of Hess Corporation for $53 billion, with each Hess shareholder receiving 1.0250 shares of Chevron. The transaction, expected to conclude in 1H 2024 pending shareholder and regulatory approval, enhances Chevron's diversified portfolio with assets like the Stabroek block in Guyana and the Bakken shale. Anticipated to boost cash flow per share from 2025 onward, Chevron plans an 8% quarterly dividend increase to $1.63 per share and additional share repurchases. Despite unfavorable sales and earnings in Q3 due to lower commodity prices, Chevron is positioned for long-term success, ranking to underperform in the short term but showing potential for rising sales and earnings for many years from 2024. Patient investors might find Chevron's financial strength, price stability, and generous dividend yield attractive despite subpar Price Growth Persistence and very low Earnings Predictability. Bill Cara: Cracking the Maverick Code
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4.
JPMorgan Chase (JPM): Financial ●
Strong earnings and return on equity.
●
Attractive dividend yield.
●
The financial services sector may face regulatory and economic challenges.
●
Potential for growth with a strong position in the finance industry.
●
10-year Performance Study As of November 27, 2023: ●
Start Price: $57.22
●
End Price: $153.19
●
Start Shares Based on $10,000 Investment: 174.76
●
End Shares Based on $10,000 Investment: 231.07
●
Dividends Reinvested per Share: $28.25
●
Aggregate Total Return: 253.98%
●
Average Annual Total Return: 13.47%
●
Starting Investment: $10,000.00
●
Ending Investment: $35,384.30
In Value Line’s October 27, 2023 commentary, JPMorgan impresses with a 44% increase in share net to $12.27 in the first nine months, driven by higher net interest income and offset by a rise in the provision for credit losses, including the acquisition of failed First Republic Bank. Full-year profits are expected to reach around $16.50 per share, marking a 35% surge from 2022. While 2024 anticipates a slower 2% increase to $16.75 due to tough comparisons, long-term prospects appear bright, supported by digital technology deployment and partnership agreements. The quarterly dividend is raised to $1.05 per share, with steady hikes expected through 2026-2028. JPMorgan holds a 2 (Above Average) rank for Timeliness, and the dividend yield is appealing, but capital appreciation potential over the 3- to 5-year horizon is unspectacular.
5.
McDonald's Corp (MCD): Consumer Discretionary ●
Stable revenues and consistent profitability.
●
Moderate dividend yield.
●
Well-known brand and global presence.
●
Potential for growth through menu innovation and expansion.
●
10-year Performance Study As of November 27, 2023:
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●
Start Price: $97.37
●
End Price: $281.84
●
Start Shares Based on $10,000 Investment: 102.70
●
End Shares Based on $10,000 Investment: 132.97
●
Dividends Reinvested per Share: $43.59
●
Aggregate Total Return: 274.76%
●
Average Annual Total Return: 14.12%
●
Starting Investment: $10,000.00
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Ending Investment: $37,464.30
In Value Line’s November 10, 2023 commentary, McDonald's impresses with a robust 10.6% year-over-year revenue growth in the first nine months of 2023, outperforming industry peers despite consumer budget constraints. Global comparable store sales rose by 11%, reflecting strategic pricing, attractive value options, bundled offerings, marketing, store expansion, and restaurant reconfigurations. Estimated revenues for 2023 are anticipated to increase by 10%-11% to $25.65 billion, with a more conservative outlook for 2024 at a 5%-6% improvement to $27.0 billion. Despite challenges, profitability remains strong, with share earnings up nearly 20% to $8.99. Company programs to enhance productivity and efficiency offset elevated expenses, supported by expanding digital sales, delivery, and customer loyalty memberships. A generous dividend hike of 10% to $1.67 reflects the 47th consecutiveyear increase. The stock, affected by recent market stress, presents a worthwhile opportunity for conservative investors looking ahead to 2026-2028.
6.
Microsoft Corp
(MSFT): Technology
●
Strong revenue and earnings growth.
●
High return on equity and net profit margin.
●
Moderate dividend yield.
●
Leading position in software and cloud services.
●
Potential for continued growth in technology and services.
●
10-year Performance Study As of November 27, 2023: ●
Start Price: $38.13
●
End Price: $378.61
●
Start Shares Based on $10,000 Investment: 262.26
●
End Shares Based on $10,000 Investment: 311.42
●
Dividends Reinvested per Share: $18.83
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●
Aggregate Total Return: 1079.08%
●
Average Annual Total Return: 27.98%
●
Starting Investment: $10,000.00
●
Ending Investment: $117,874.82
In Value Line’s October 27, 2023 commentary, Microsoft begins fiscal year 2024 impressively, reporting a 13% year-over-year revenue increase to $56.5 billion and a 27% net income increase to $22.3 billion in the September quarter. The Intelligent Cloud segment, driven by Azure and other cloud services, contributes significantly, accounting for 43% of total revenue and growing by 19%. Other segments, Productivity and Business Processes (33% of total revenue) and More Personal Computing (24% of total revenue), also show impressive growth of 13% and 3%, respectively. All 3 segments exhibit growth in both revenue and operating income. Earnings rose to $2.99 per share from $2.35 in the same quarter last year. Microsoft's strategic focus on Artificial Intelligence (AI) is evident through using copilots in all areas of operation, with over one million paid Copilot users and a 40% increase in subscriptions. The acquisition of Activision Blizzard adds depth to Microsoft's gaming content portfolio, contributing to a 9% increase in gaming revenue in the first quarter. The shares receive an upgraded Timeliness TM rank, offering broad appeal with top scores for Safety (1), Price Growth Persistence (100), and Financial Strength (A++).
7.
Nike, Inc. (NKE): Consumer Discretionary ●
Steady revenue growth and net profit margin.
●
Moderate dividend yield.
●
Strong brand in the sportswear industry.
●
Potential for growth through product innovation and global expansion.
●
10-year Performance Study As of November 27, 2023: ●
Start Price: $39.57
●
End Price: $107.96
●
Start Shares Based on $10,000 Investment: 252.72
●
End Shares Based on $10,000 Investment: 281.98
●
Dividends Reinvested per Share: $8.74
●
Aggregate Total Return: 202.42%
●
Average Annual Total Return: 11.78%
●
Starting Investment: $10,000.00
●
Ending Investment: $30,453.77
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In Value Line’s October 13, 2023 commentary, NIKE's shares fell below $100 for the first time this year, influenced by year-over-year figures in North America, despite an improved performance in China. Digital sales pause in growth, raising concerns about reduced spending among younger consumers. The stock has drifted 8% lower since July amid a broader market malaise. Fiscal 2024 earnings per share are expected to climb 16% to $3.75, aiming to reach a record high in fiscal 2022. Despite recent quarters not meeting NIKE's standard, reduced inventory by 10% year over year suggests potential for increased full-price selling. Management believes Chinese operations are back on track, with a 16% sales increase in the August quarter. Despite the lower share price, NIKE rises to the top of the Timeliness Ranking System. Still, long-term appreciation potential is below average, and the dividend yield is 100 basis points less than the Value Line median.
8.
UnitedHealth Group (UNH): Health Care ●
Strong revenue and earnings growth.
●
Attractive dividend yield.
●
Leading position in the healthcare sector.
●
Potential for growth with increasing demand for healthcare services.
●
10-year Performance Study As of November 27, 2023: ●
Start Price: $74.48
●
End Price: $543.59
●
Start Shares Based on $10,000 Investment: 133.26
●
End Shares Based on $10,000 Investment: 156.41
●
Dividends Reinvested per Share: $38.64
●
Aggregate Total Return: 750.21%
●
Average Annual Total Return: 23.87%
●
Starting Investment: $10,000.00
●
Ending Investment: $85,047.47
In Value Line’s November 24, 2023 commentary, UnitedHealth Group is expected to achieve approximately 12% earnings growth this year, consistently surpassing quarterly revenue targets in 2023. The rise in the number of people served and the stable usage rates contribute to positive results. The third-quarter medical care ratio and operating cost ratio increased year over year, reflecting more normalized patient activity in the post-pandemic world. Adjusted share earnings for 2023 are estimated between $24.85 and $25.00. Both sides of the portfolio, UnitedHealthcare Bill Cara: Cracking the Maverick Code
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and Optum, show strength heading into 2024. The acquisition of Change Healthcare enhances Optum Insight, and Optum Health shines with shifts to value-based care. UnitedHealth adjusts its reimbursement list in response to pressure on the insulin front, anticipating minimal impact. The shares now hold a timely designation (2: Above Average), but the long-term potential and yield are rated as average and below the Value Line median, respectively.
9.
Visa Inc. (V): Financial ●
Strong revenue and earnings growth.
●
Relatively low dividend yield.
●
Leading position in the payment processing industry.
●
Potential for growth with increasing digital transactions.
●
10-year Performance Study As of November 27, 2023: ●
Start Price: $50.87
●
End Price: $254.14
●
Start Shares Based on $10,000 Investment: 196.58
●
End Shares Based on $10,000 Investment: 211.18
●
Dividends Reinvested per Share: $10.22
●
Aggregate Total Return: 436.70%
●
Average Annual Total Return: 18.30%
●
Starting Investment: $10,000.00
●
Ending Investment: $53,684.32
In Value Line’s October 27, 2023 commentary, Visa concludes a strong fiscal year with outstanding performance. GAAP net income reaches $4.7 billion or $2.27 per share, increasing by +19% and +22%, respectively, compared to the previous year. NonGAAP net income, excluding special items, is $4.8 billion or $2.33 per share, marking a +18% and +21% increase over the prior year. Net revenues in the quarter rose by +11% to $8.6 billion, driven by growth in payments volume, cross-border volume, and processed transactions. Payments volume increases by +9% on a constant-dollar basis, cross-border volume (excluding European transactions) rises by +18% on a constant-dollar basis, and total processed transactions for the quarter increase by +10% to 56.0 billion. Fiscal Q4 service revenues reached $3.9 billion, up +12% over the previous year. Visa's finances remain robust, with total debt decreasing and ample borrowing capacity. The commentary trims estimates for fiscal 2024, but Visa is anticipated to have a good year, with projected annual growth of 6%-7% in revenue Bill Cara: Cracking the Maverick Code
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and 11%-12% in earnings per share. Visa is positioned as a building block for a welldiversified portfolio, boasting the highest ranks for Financial Strength and Safety and excellent scores for Price Stability, Price Growth Persistence, & Earnings Predictability.
10.
Walmart (WMT): Consumer Staples ●
Consistently high sales and net profit margin.
●
Moderate dividend yield and P/E ratio.
●
Stable and well-established retail business.
●
Growth potential but may face competition from e-commerce.
●
10-year Performance Study As of November 27, 2023: ●
Start Price: $81.01
●
End Price: $156.77
●
Start Shares Based on $10,000 Investment: 123.44
●
End Shares Based on $10,000 Investment: 153.03
●
Dividends Reinvested per Share: $20.90
●
Aggregate Total Return: 139.90%
●
Average Annual Total Return: 9.14%
●
Starting Investment: $10,000.00
●
Ending Investment: $23,979.47
In Value Line’s October 13, 2023 commentary, Walmart thrives as consumers seek its value proposition amid economic challenges. The July-quarter adjusted earnings per share of $1.84 surpassed expectations, driven by strong domestic same-store sales, especially in grocery and health & wellness, with positive traffic and average transaction amounts contributing equally. General merchandise sales improved, and the gross margin grew by 50 basis points due to strategic initiatives. The company benefits from a new hourly starting wage structure and works with suppliers to lower prices as supply-chain costs decrease. Walmart anticipates inflation normalization and may interest momentum investors, particularly its resilience in the grocery category amid economic pressures.
Customizing Your Portfolio to Your Needs and Interests. These stock selections provide diversification across different sectors, spreading risk. Their past decade of performance has been impressive,
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although it may not necessarily predict future results, as investing carries inherent risks with no guaranteed returns. It is essential to monitor and adjust your portfolio according to changing market conditions, economic trends, financial goals, and risk tolerance. As a registered investment advisor, I recommend considering alternatives to my choices based on your specific needs, risk tolerance, and investment objectives, as you know best what matters to you. The beauty of investing lies in its adaptability to your individual preferences and financial aspirations. Whether you seek higher dividend yields, growth opportunities, or value stocks, several Dow 30 companies can align with your criteria. Here are some additional or alternative Dow 30 companies to consider for the Maverick Moderate Growth Portfolio: ● Goldman Sachs Group (GS): An investment bank with a strong global presence, offering exposure to the financial sector. ● Johnson & Johnson (JNJ): A healthcare giant known for its stability and defensive investment potential, with a history of consistent dividend growth. ● Procter & Gamble (PG): Recognized for its consumer goods and household products, providing stability and resilience in your portfolio. However, it's worth noting that not all Dow 30 companies have thrived in the past decade. Three companies have faced distinct hurdles, from retail challenges and market saturation to tech sector competition. While potential paths to recovery exist for each, uncertainties and cautious analyst outlooks advise caution and potential avoidance, particularly for aggressive investors. Walgreens Boots Alliance Inc. (WBA) ● WBA's 10-year decline of -41% contrasts with growth seen in peers like Walmart and Procter & Gamble. ● Despite access to Covid tests and vaccines, it struggles to attract customers to its vast network of over 14,000 stores.
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● Inflation and high-interest rates compel the company to offer discounts, impacting profits. ● An expected EPS decline of 21% this year and an additional 6% in 2024. ● While diversifying into primary care clinics and pharmacy benefit management, it remains heavily reliant on U.S. retail operations. ● Limited analyst optimism with only one bullish rating out of 12. ● A positive is that in October 2023, WBA is the only Dow 30 stock in the 5/10/25 club: (i) 5%+ dividend yield, (ii) Under 10 PE Ratio, and (iii) 25+ years of rising dividends. Verizon Communications Inc. (VZ) ● VZ has lost 35% of its value since August 2013 and struggled to surpass its record high. ● Despite an 8% forward dividend yield, analysts hesitate to recommend it due to a saturated wireless market. ● Economic uncertainty affecting consumer and business spending on wireless purchases. ● Management's soft 2023 guidance and ongoing economic uncertainties. ● There is an expected recovery in 2024, but concerns remain despite the potential for a 34% total return over the next year. International Business Machines Corp. (IBM) ● IBM's cumulative 10-year return is -26%, lagging behind modern tech giants. ● Despite cloud computing and AI efforts, it faces stiff competition from Apple, Microsoft, and Alphabet. ● The WatsonX AI and data analytics platform launch is promising but unproven.
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● IBM aims for long-term, mid-to-single-digit sales growth and improved profit margins. ● Analyst skepticism persists, with no upgrades since January 2023 and a consensus price target pointing to the downside. ● While showing some recovery, sustained success is necessary to regain investor confidence despite a 4.6% dividend. These three companies have faced challenges related to industry shifts, competition, and economic conditions over a decade, making them less favorable investments than their Dow 30 peers. Summary To create the initial Maverick Investor portfolio, we focused on a simple system centered around ten prominent companies in the Dow 30, each operating in different industries to offer diversification benefits. These companies are AAPL (Apple Inc.), CAT (Caterpillar Inc.), CVX (Chevron Corporation), JP Morgan Chase (JPM), McDonald’s (MCD), Microsoft (MSFT), Nike (NKE), UNH (UnitedHealth Group), Visa (V), and Walmart (WMT). As of July 27, 2023, these ten companies had a Trailing Twelve-Month Dividend Yield of over 3.5%, with the first four exceeding 5.2%. Over 10, 20, and 30 years, these investments promise substantial total performance return and capital growth. Note that the companion book, Cracking the Maverick Code, provides a quarterly report and charts for each Dow 30 company. If you prioritize income You may also consider Amgen (AMGN), Chevron (CVX), Dow Holdings (DOW), IBM (IBM), Intel (INTC), Verizon Communications (VZ), Walgreens Boots Alliance (WBA), and 3M (MMM), among others. However, the primary concern in all cases should be total return performance.
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Chapter 15: Navigating Data with FinViz.com --Unlocking market insights The FinViz.com Market Screener is a valuable resource to help you analyze Dow 30 companies in your monitoring and decision-making process. https://finviz.com/screener.ashx?v=111&f=idx_dji Here's how you can use its tabs to support your investment choices: Overview Tab • Gain insights into each company's sector, industry, market cap, and price-earnings ratio for effective comparisons. Valuation Tab • Assess forward P/E, PEG, P/FCF ratios, and projected EPS to evaluate relative value and growth prospects. Financial Tab •
Examine dividend yield, ROIC, liquidity, debt ratios, and operating margin to gauge financial health and performance.
Ownership Tab • Utilize the short ratio to gauge market sentiment and potential shortterm price movements. Performance Tab • Evaluate trading volatility through beta and RSI data to understand historical stock price responses to market fluctuations. The FinViz.com Market Screener offers various criteria for stock screening and analysis, including: ● Exchange: Filter stocks by the listing exchange, such as NASDAQ, NYSE, and NYSE American. ● Index: Focus exclusively on Dow 30 stocks in the DJIA Index. Bill Cara: Cracking the Maverick Code
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● Sector: Sort and export stocks by sectors based on their business activities. ● Industry: Further narrow down stocks within sectors based on their specific products and services. ● Country: Identify stocks based on geographic location, especially those listed on U.S. markets. ● Market Cap: Filter stocks by their market capitalization. ● P/E, Forward P/E, PEG, P/S, P/B, Price/Cash, Price/Free Cash Flow: Use these valuation metrics for assessing stocks. ● EPS and EPS Growth: Evaluate stocks based on earnings per share and EPS growth. ● Dividend Yield: Identify stocks with dividend payments and their yields. ● Return on Assets, Return on Equity, Return on Investment: Assess profitability and efficiency. ● Current Ratio and Quick Ratio: Measure short-term liquidity. ● Debt/Equity and Long-Term Debt/Equity: Analyze financial leverage. ● Gross Margin, Operating Margin, Net Profit Margin: Indicate profitability. ● Payout Ratio: Show the percentage of earnings paid as dividends. ● Insider and Institutional Ownership: Filter stocks by ownership percentages. ● Float Short: Indicate the percentage of shares shorted relative to the total float. ● Analyst Recommendation: Gain insights into analysts' outlook on stocks. ● Option/Short: Identify stocks available for options and short selling. ● Earnings Date: Find the nearest earnings report date. ● Performance and Volatility: Assess recent performance and volatility. ● RSI (14): Measure price strength. As infrequent traders, Maverick Investors use RSI (21). Bill Cara: Cracking the Maverick Code
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● Gap: Indicate price gaps between closing and opening. ● Simple Moving Average: Show moving averages for different periods. ● Change and Change from Open: Display price changes. ● High/Low: Indicate minimum and maximum price levels. ● Pattern and Candlestick: Identify chart and candlestick patterns. ● Beta and ATR: Assess stock volatility. ● Average Volume and Relative Volume: Gain insights into trading volume. ● Current Volume and Price: Show current trading volume and price. ● Signals: Filter stocks based on signals like top gainers, top losers, new highs, new lows, etc. ● Other Data: Access additional stock data such as shares outstanding and float. The free version of FinViz.com offers powerful tools for Maverick Investors, allowing them to screen and analyze stocks based on a wide range of financial and market parameters, facilitating informed investment decisions.
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Chapter 16: Deciphering Market Structure --Peer Groups and Their Importance The Global Industry Classification Standard (GICS), developed by MSCI and S&P, is a key tool for understanding market dynamics and industry structures. It categorizes companies based on their business operations and operates on four hierarchical levels—sectors, industry groups, industries, and subindustries. As of 4Q2023, GICS includes 11 sectors, 24 industry groups, 69 industries, and 158 sub-industries. This structure allows for a nuanced exploration of market dynamics and facilitates the formation of peer groups for meaningful comparisons among companies. Investors use GICS to analyze financial metrics, growth prospects, and efficiency within peer groups, assessing a company’s relative strengths and weaknesses. Factors like interest rates, commodity prices, currencies, employment, and inflation are considered as they affect companies in the same industry. As a Maverick Investor, combining peer group analysis with independent research helps maintain a focused investment strategy. Monitoring peer groups allows benchmarking performance, evaluating relative strengths and weaknesses, and identifying potential investment opportunities. However, each company is unique, and in-depth research into individual fundamentals is essential. Here is the McDonald’s (MCD) peer group: ● Yum! Brands, Inc. (YUM) - KFC, Pizza Hut, and Taco Bell. ● Restaurant Brands International Inc. (QSR) - Burger King, Tim Hortons, and Popeyes. ● Starbucks Corporation (SBUX) - Renowned global coffeehouse chain. ● Domino's Pizza, Inc. (DPZ) - Pizza delivery and carryout restaurant. ● Chipotle Mexican Grill, Inc. (CMG) - Fast-casual Mexican food. ● Wendy's Company (WEN) is Wendy's fast-food chain operator. Bill Cara: Cracking the Maverick Code
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● Darden Restaurants, Inc. (DRI) - Olive Garden, LongHorn Steakhouse. ● Papa John's International, Inc. (PZZA) - Pizza delivery and carryout. ● Jack in the Box Inc. (JACK) - Jack in the Box fast-food restaurants. Utilizing this Peer Group Screener allows investors to assess McDonald's comparative performance swiftly: https://finviz.com/screener.ashx?v=111&t=MCD,YUM,QSR,SBUX,DPZ,CMG,WEN,DRI ,PZZA,JACK Here are peer groups for other companies in the Maverick Investor Moderate Growth portfolio: AAPL – Apple Peer Group: MSFT, SONY, GOOGL, NVDA, META, TSM, DELL CAT – Caterpillar Peer Group: DE, PCAR, OSK, CNH, AGCO, ETN, GWW, ITW, JCI, PH CVX – Chevron Peer Group: COP, XOM, HES, SU, BP, MPC, OXY, PSX JPM – JP Morgan Chase Peer Group: BAC, C, WFC, GS, MS, BLK, COF, AXP, UBS MSFT – Microsoft Peer Group: AAPL, AMZN, GOOGL, INTC, META, NVDA, ADBE NKE – Nike Peer Group: ADDYY, DECK, ONON, SKX, LULU, CROX, UA, VFC, COLM UNH – UnitedHealth Peer Group: ANTM, CI, HUM, CNC, AET, MOH, WCG, HCA, THC, CYH, UHS V – Visa Peer Group: MA, AXP, PYPL, SQ, DFS, WP, FISV, GPN, FDC In summary, GICS structures the market into discernible categories, and the concept of peer groups derived from GICS enhances informed investment decisions by providing a relevant benchmark for performance evaluation.
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Chapter 17: Cracking the Economic Reports --Understanding their impact As a Maverick investor, you understand the influence of macroeconomic data reports on financial markets and the pitfalls of reacting hastily to short-term market turbulence. Despite Wall Street narratives dominating daily headlines, you focus on long-term economic data trends that matter for your holdings. •
Avoiding Short-Term Market Volatility: Novice investors often respond impulsively to fleeting market movements triggered by economic data releases. Financial media can amplify this situation with noise and speculative chatter. Recognize that much of this short-term volatility is driven by algorithms and trading strategies that often hold little relevance to the long-term fundamentals of your investments.
•
Understanding Long-Term Trends: Patience and prudence are key when assessing the impact of economic data on your portfolio. Instead of succumbing to daily fluctuations, examine extended patterns in reported data and their correlation with the asset values of your chosen companies. This approach allows you to sift through the noise and identify meaningful signals, enabling decisions rooted in robust datadriven fundamentals.
•
Identifying Key Macro-Economic Reports: Focus on economic reports that genuinely matter for your investment strategy. Remember, each report is a piece of the puzzle, contributing to your overall understanding of the market dynamics.
Here's how you approach some of the key reports: GDP Reports: These measure a nation’s economic growth, reflecting the economy’s health. But, prioritize broader industry dynamics and companyspecific fundamentals like revenues, margins, cash flow, earnings, dividends. Employment Reports: These offer job growth and unemployment rates statistics. Your focus should be more on how portfolio companies manage their employees over time rather than reacting to monthly national employment fluctuations. Bill Cara: Cracking the Maverick Code
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Consumer Confidence Index (CCI) and Consumer Sentiment: These gauge consumer confidence in the US economy. However, consumer behavior is predominantly influenced by industry trends and company-specific factors. Inflation Reports: Inflation can affect interest rates and monetary policy, but its direct impact on individual company intrinsic values is usually limited. Understanding a portfolio company’s competitive positioning and industry dynamics is prioritized. Purchasing Managers’ Index (PMI): PMI provides insights into the health of the manufacturing and service sectors. Your primary focus, however, remains on comprehending portfolio companies’ management, financials, and growth prospects. In essence, while these reports provide valuable insights, the focus is on understanding the specific dynamics of portfolio companies and their industries. In a landscape inundated with macroeconomic and financial reports, your limited time must be dedicated to studying the macrotrends and linking them to your specific holdings. Maintaining a long-term perspective allows you to stay grounded amid short-term market noise and avoid making decisions solely based on daily economic data releases. Seasoned investors recognize that short-term traders leverage these reports to induce volatility for trading gains, often attempting to trap unsuspecting market participants in unwise trades. They also understand the futility of contending against the algorithm-driven giants of Wall Street's financial services sector, including your "friendly" banker, who profit immensely by trading against independent capital owners. The month-to-month impact is usually minimal, which prompts a wry smile when witnessing the theatrics of personalities like CNBC's Steve Liesman. Remember, successful investing hinges on a profound understanding of the underlying fundamentals of your chosen companies. Acknowledge that the influence of short-term economic reports may be limited.
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Chapter 18: The Art of Fundamental Analysis -- Understanding Company Basics As an independent investor, you need to understand your companies’ financial health and performance. This understanding comes from studying key aspects like revenue growth, profitability, debt levels, cash flow, and liquidity ratios. Note that you cannot do this with an Exchange-Traded Fund. ETF components might number into the hundreds or thousands, making analysis of value impossible. Using Online Tools There are many free online tools that can help you analyze financial data: FinViz.com Tables: FinViz, short for ‘Financial Visualization’, is a stock market platform that provides a comprehensive toolbox for investors and traders, with a focus on US markets. It’s a browser-based platform that does an outstanding job summarizing a massive amounts of information into tables and charts that can be understood by novices. See Chapter 25. TipRanks, MarketBeat, and Finance.Yahoo Snapshots: These data aggregator services provide a wealth of information to investors, especially those who are new to investing. They offer useful summaries of company performance and analyst ratings. See Chapter 26. Quarterly Value Line Reports: Provide detailed analyses, including financial statements and growth forecasts on about 1700 companies. These include mostly US-headquartered companies, but also about 100 others. The service is costly but for the Dow 30 companies, Value Line is free. See Chapter 27. Key Metrics to Monitor There are several key metrics that can help investors determine a company’s profitability and efficient use of capital: Remember, the Price-to-Earnings (PE) ratio isn’t the only measure of a company’s attractiveness. A company with a PE of 25 can be more appealing than one with a PE of 2.5 if it has high profitability. Bill Cara: Cracking the Maverick Code
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Keep an eye on these important indicators: •
Debt Levels: Interest rates are rising, so look at the debt-to-equity ratio to understand a company’s financial stability.
•
Liquidity: Because central banks are tightening the money supply, check current and quick ratios to assess a company’s ability to meet short-term obligations.
•
Return on Invested Capital: (ROIC) [ROI in FinViz] is a key profitability indicator. It tells you how much profit a company can make by reinvesting in its business. A high ROIC suggests efficient use of capital.
•
Return on Assets: ROA measures how efficiently a company uses its assets to generate earnings.
•
Return on Equity: ROE measures the profitability a company generates from the money invested by shareholders and retained from earnings.
•
Cash Flow: Positive cash flow indicates good cash management and potential for company growth and payment of dividends. Free cash flow (FCF) measures the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, FCF is a measure of profitability that excludes the non-cash expenses of the income statement and includes spending on equipment and assets.
Staying True to Your Approach Incorporate these analyses into your daily routine. Remember, understanding a company’s fundamentals is just one part of the investment decision process. You should also consider industry trends and competition. Stay disciplined and patient, and don’t be afraid to go against the crowd. After all, Mavericks invest in the bluest of blue-chip Dow 30 companies, knowing that every moment there are buyers and sellers, all believing in their analysis and decisions. Over the long run, fundamentally strong companies will always prosper and grow, and your portfolio along with them. Your analyses and beliefs are what matter most—it’s your portfolio, and you shape its future. Bill Cara: Cracking the Maverick Code
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Chapter 19: Mastering Technical Analysis --Unlocking stock chart trends and cycles Your Maverick investor toolkit leverages technical analysis alongside fundamental analysis for timely decision-making. This involves studying historical price and volume data to reveal cycles patterns and trends that indicate future price movements. Insights from charts, graphs, and technical indicators show your optimal entry and exit points. This chapter reviews core the technical indicators that will be most useful for effective trading. Relative Strength Index (RSI):
A momentum oscillator and cycles indicator, RSI, identifies overbought or oversold market conditions. An RSI above 70 signals potential overbuying and a likely trend reversal or corrective pullback. pullback. Conversely, an RSI below 30 indicates potential overselling, signaling a trend reversal or corrective bounce. Bill Cara: Cracking the Maverick Code
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Moving Average Convergence Divergence (MACD):
Mavericks only invest in Good Companies. Our primary job is to keep our invested positions on the right side of the trend, i.e., a Good Stock. The MACD, a trend indicator, illustrates how two moving averages of a price series differ, calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA. A nine-day EMA of this gap triggers a buy signal when crossing above and a sell signal when crossing below, helping to keep positions aligned with the trend. Support and Resistance: Support and resistance levels are barriers to stock price movements. The Pivot Point sets the general tone for price action. This is the middle line of the group that is marked (P). A move above the Pivot Point is positive and shows strength. Support (S1 and S2) is where stock typically halts its decline, while Resistance (R1 and R2) is where it tends to halt its ascent. Of various Pivot Point methodologies, keep it simple with the Standard one. Bill Cara: Cracking the Maverick Code
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During range-bound trading, long-term-oriented investors ignore Pivot Point analysis. However, whenever a price series approaches the 50 and 200-day Moving average, the public will become overwhelmed with Wall Street and newsletter narratives about that security flying too close to the sun or about to crash. IMO, these are the only times that Pivot Point analysis is useful for Maverick investors. Other Types of Charts: Point & Figure (P&F) charts distill price movements without considering the passage of time. Using Xs and Os to signify shifts in price direction, P&F charts simplify trend identification, best combined with MACD studies. CandleGlance charts offer a swift way to survey multiple ticker symbols within a peer group. By default, each chart incorporates 20- and 50-day simple moving averages and can be viewed across various timeframes alongside a Point & Figure perspective. CandleGlance for the Maverick Investor Portfolio: ● Here are the CandleGlance charts for one of the Maverick portfolios using the RSI indicator ● This CandleGlance chart for the same portfolio shows the MACD indicator. Bill Cara: Cracking the Maverick Code
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Navigating Sectors with ETFs and Technical Analysis: As a Maverick investor, you monitor macro trends by monitoring sectors and cycles. Employ ETFs in tandem with technical analysis to track weekly sector trends. Assign sector codes (e.g., Sector 10 - Energy) and analyze the primary ETFs to draw comparisons with your portfolio companies. ● XLE for Sector 10 - Energy ● XLB for Sector 15 - Basic Materials ● XLI for Sector 20 - Industrial ● XLY for Sector 25 - Consumer Discretionary Spending ● XLP for Sector 30 - Consumer Staples Spending ● XLV for Sector 35 - Healthcare ● XLF for Sector 40 - Financial ● XLK for Sector 45 - Technology ● IYZ for Sector 50 - Telecom and Media ● XLU for Sector 55 - Utilities ● VNQ for Sector 60 - Real Estate Here is the CandleGlance chart for Sector ETFs using the RSI indicator: ● Employ CandleGlance charts to assess the RSI and MACD for sector ETFs. Ascending order for RSI. Weekly Technical Analysis for Maverick Investor Portfolio Companies: Each portfolio company's weekly technical analysis routine involves multiple steps. Utilize the Investing.com Technical Analysis link and StockCharts.com's CandleGlance and Point & Figure charts for a comprehensive analysis. ● Study Monthly, Weekly, and Daily charts for each portfolio stock to monitor price trends across different timeframes. ● For subscribers to StockCharts.com's premium service, minute and hourly bar charts are available for more intricate analysis, although this is optional. Maverick investors, oriented toward patient, long-term decisions, are advised to avoid attempting to time the market, especially when influenced by Wall Street's marketing forces. Bill Cara: Cracking the Maverick Code
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Analyzing Technical Analysis Pivot Points for Support (S) & Resistance (R): ● Use Pivot Points to pinpoint significant price levels that may indicate potential reversals. Here's an example: https://www.investing.com/equities/chevron-technical. Evaluating Technical Analysis RSI, Stochastics, and Moving Averages for Crossovers and Trends: ● Scrutinize RSI, Stochastics, and Moving Averages for insights into potential crossovers or emerging trends. Example: https://stockcharts.com/h-sc/ui?s=CVX Reviewing CandleGlance for Sector ETFs and the Maverick Investor Portfolio: ● Employ CandleGlance charts to assess the RSI and MACD for sector ETFs. Ascending order for RSI: https://stockcharts.com/freecharts/candleglance.html?XLE,XLB,XLI,XLY,X LP,XLV,XLF,XLK,IYZ,XLU,VNQ|B|B14|-1 ● Ascending order for MACD: https://stockcharts.com/freecharts/candleglance.html?XLE,XLB,XLI,XLY,X LP,XLV,XLF,XLK,IYZ,XLU,VNQ|B|A12,26,9|-1 Reviewing Point & Figure Charts for Changes in Maverick Investor Portfolio Stocks: ● Examine Point & Figure Charts to detect shifts in chart patterns for your portfolio stocks. Example: https://stockcharts.com/freecharts/pnf.php?c=cvx,P ● Utilize the D-W-M-Summary to gain a swift overview of each company's trend. By seamlessly integrating technical analysis into your investment approach, you distinguish yourself as a Maverick investor who harnesses both technical and fundamental analyses, crafting well-informed decisions.
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Chapter 20: Smart Alerts and Buy/Sell Signals --Timing with accumulation/distribution alerts As a Maverick investor, understanding the Accumulation Zone (AZ) and Distribution Zone (DZ) is crucial. These zones, where institutional investors actively trade a stock, can significantly influence your investment strategy and provide valuable insights for your investment decisions. Identifying the Accumulation Zone (AZ): The Accumulation Zone marks a price range where institutional investors diligently accumulate stock shares, hinting at potential upward price movements. To pinpoint the AZ for each company in your Maverick Investor Portfolio, scrutinize price action and volume patterns. Keep an eye out for sustained buying activity, increased trading volume, and gradual price upticks—these are signs that institutional investors are accumulating shares, signaling a potential buying opportunity. Recognizing the Distribution Zone (DZ): Conversely, the Distribution Zone signifies a price range where institutional investors are actively offloading shares of a stock, suggesting the likelihood of downward price movements. To identify the DZ for each portfolio company, assess price action and volume patterns. Look for sustained selling activity, higher trading volume, and gradual price declines. These indicators point to institutional investors distributing shares, potentially signaling a time to consider selling or pausing further investment. Incorporating AZ and DZ Observations: In your weekly technical analysis routine, closely monitor price action and volume patterns for each Maverick Investor Portfolio company. Leverage technical indicators such as candlestick patterns, volume bars, and moving averages to help identify potential AZ and DZ regions. Additionally, consider incorporating trend lines or support and resistance levels on your charts to accentuate these zones. Weekly Summary with AZ and DZ Insights: Integrate your observations regarding each portfolio company's identified AZ and DZ into your weekly summary. Pay attention to any shifts in institutional investor activity, whether Bill Cara: Cracking the Maverick Code
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in terms of price action, volume, or patterns. These insights can provide valuable context for your buy or sell decisions and help you avoid potentially adverse price movements. Risk Management with AZ and DZ: Integrate the AZ and DZ insights into your risk management strategy. When a stock in your portfolio enters the DZ and exhibits signs of distribution, evaluate whether it aligns with your investment objectives and risk tolerance. Be prepared to take appropriate actions, such as implementing stop-loss orders or adjusting your position size, to safeguard your capital. Trading Decision-Making Process: Remember that making trading decisions is a meticulous process. You'll make more informed buy and sell decisions as a Maverick investor by weaving AZ and DZ insights into your weekly technical analysis and overall investment strategy. To recap: AZ represents a range where institutional investors buy, signaling potential upward price movement, while DZ represents a range where they sell, suggesting potential downward price movement. Identifying these zones can be your compass. Weekly Summary and Buy/Sell Signals: After thoroughly analyzing the technical indicators of each company, craft a weekly summary to help understand the overall trend. Monitor buy or sell signals based on support and resistance levels, RSI, Stochastics, and Point & Figure patterns. Weekly Technical Analysis - Merging Buy/Sell System and Core Technical Indicators: As a Maverick investor, you can spot potential buy and sell signals by tracking the RSI-7 indicator for each stock in your portfolio. Adjust your investment strategy accordingly. Downtrend Buy Alert: In a downtrend, the RSI will transition from the 70-100 range on the daily chart, forming lower highs until it enters oversold territory within the 0-30 range. Once the RSI touches the sub-30 level, create a trend line connecting the highs of the RSI. A Buy Alert triggers when the RSI moves from sub-30 and breaks the downtrend line. Remember that the RSI may Bill Cara: Cracking the Maverick Code
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sometimes reverse just below 70 or above 30 before making a substantial reversal, which may result in missed trades, but it's an acceptable aspect of the system. Daily and 2-Hour Chart Alignment: After a Buy Alert on the daily chart, shift to the 2-hour chart and repeat the process to establish a trend line. A Buy Signal emerges when the RSI on the 2-hour chart crosses above the trend line. To preempt potential delays, consider incorporating a one or two-point buffer zone on the daily Alert to account for clear signals on the 2-hour chart. Single Higher Low Confirmation: After selling, wait for a single higher low to materialize on the RSI on both the daily and 2-hour charts or observe a higher low on the stock price. The ultimate buy signal occurs when the RSI forms a higher low and surpasses the previous high after the trend line crossover. This rule can be applied to validate potential entry points within the system. Monitoring the 50-Line: In a fresh uptrend, be vigilant for a potential reversal at the 50-line on the daily chart. This could be a concern in a bear market as it might signal the start of a new downtrend, or in a bull market, it could offer an opportunity to add to your position. Rapid RSI Movement: When the RSI swiftly moves between 30 and 70 and reverses above 70 or below 30, view it as a trade indication, possibly a short one. You can incorporate this into your system by setting alerts for RSI crosses at the 70 or 30 thresholds. Observation On Buy Rule #1: When drawing trend lines, consider the impact of subsequent cycles on RSI peak patterns. If trend lines start above 70 but are shaped by lower peaks, it’s acceptable to start the downward trend line at a lower RSI level. A relatively flat trend line with a buy signal at a high RSI level may be acceptable during an extended downtrend, depending on the broader market context. Conclusion: Technical analysis enhances your fusion analysis research. Using these Buy/Sell rules and observations improves your decision-making and proficiency as an investor.. Bill Cara: Cracking the Maverick Code
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Chevron (CVX) Illustration for using TA to Buy/Sell Mavericks are long-term-oriented investors who Buy and Sell positions infrequently based on TA-based Alerts and Signals. Over ten years for Chevron, there were only two Buy (up black arrows) Signals and two Sell Signals (down red arrows). The chart below is not rocket science. Trust me! Alerts come from AZ-DZ zones in the RSI-7 Monthly data. A Buy Alert is when the RSI-7 ( cycles analysis) drops below the 30-line. The Buy Signal is when the next MACD (trend analysis) turns positive. A Sell Alert is when the RSI-7 moves over the 70-line. The Sell Signal is when the next MACD turns negative.
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Chapter 21: Quantitative Analysis Made Simple -- Using Data to Make Investment Decisions Quantitative analysis uses math and statistics to analyze large amounts of data, finding patterns and relationships. This data-driven method can give you valuable insights for managing your stock portfolio. QA is like using a super calculator to make better money decisions. It uses data, math, and software to help make these decisions, automate tasks, and ultimately make more money with less risk. It’s used a lot in trading. Statistical analysis: This is like looking at past data to predict the future. There are many forms of statistical analysis that helps Maverick investors. In the previous two chapters (19 and 20) on Technical Analysis we described time series analysis (looking at data collected over time) such as our use of the RSI cycles indicator and MACD trend indicator together to make timely Buy/Sell decisions. •
RSI is a cycles-based momentum indicator that measures the speed and change of price movements. It compares the magnitude of recent gains and losses over a specified time period to measure the speed and change of price movements. It is used to identify overbought or oversold conditions, which we use as Alerts.
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MACD is a trend-following indicator that shows the relationship between two moving averages of a security’s price. It is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA. The result of that calculation is the MACD line. A nine-day EMA of the MACD called the “signal line” is then plotted on top of the MACD line, which can trigger Buy and Sell Signals.
Chapter 18 on Fundamental Analysis covered other statistical analysis types: •
Ratio Analysis: Think of this as a financial health check. It involves calculating ratios like Price-to-Earnings (P/E), Price-to-Sales (P/S), and Price-to-Book (P/B) value to see how a company’s stock price aligns
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with its earnings, sales, and book value. This analysis helps us find the fundamentally strongest companies within a group. •
Discounted Cash Flow (DCF) Analysis: DCF analysis estimates a company’s value by forecasting future cash flows and discounting them to their present value using a discount rate. It helps us find tomorrow’s most valuable companies today.
Sophisticated traders use other statistical analysis techniques like regression analysis (understanding relationships between things), and Monte Carlo simulations (a way to account for uncertainty in predictions). Algorithmic trading: This is like using a robot to do trading. The machine can be programmed to make trades based on things like timing, price changes, and other market signals. High-frequency trading (HFT) is a type of algorithmic trading where many trades are made very quickly to take advantage of small price changes. Risk Modeling: This is like trying to predict what could go wrong. It uses mathematical models to measure and understand the risks in a portfolio. Tools like Value-at-Risk (VaR) models, scenario analysis, and stress testing are used to understand different investment scenarios' potential downsides and uncertainties. Derivatives Pricing: Derivatives are like bets on the future value of something, like a stock or bond. Derivative pricing is about figuring out how much these bets should cost and their risks. The Black-Scholes model is a famous model used to price options (a type of derivative). Portfolio Optimization: Techniques like Modern Portfolio Theory are used to find the optimal allocation of assets within a portfolio. This is like trying to build the perfect team of investments. It’s about finding the best mix of investments to achieve specific financial goals while minimizing risk. Optimized Portfolio: Our 10-stock Maverick portfolios are expected to outperform the Dow 30 DJIA index by containing fewer holdings; in other words, by being optimized. Bill Cara: Cracking the Maverick Code
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Combining Quantitative Analysis with Other Approaches to Trading Think of quantitative analysis techniques as tools in your investment toolbox. QA is a complex subject so keep it simple. Use the Maverick tools one at a time or mix them together, depending on your investing style. But they’re most effective when used with other methods like fundamental, technical, and macroeconomic analysis. By blending these techniques in what I call a ‘fusion analysis’, you can build a well-rounded, big-picture investment strategy that fits your long-term goals and risk tolerance as a Maverick investor. In my experience as a wealth manager, I worked alongside several individuals and teams who specialized in one favorite mathematical technique. CANSLIM high-growth stock break-outs and Elliott Wave numbered impulse waves and corrective patterns are a couple that come to mind. But I found that these specialists almost always ended up losing money because there’s no surefire way to predict future prices - only probabilities that can be highly subjective. That’s why mathematical techniques are called ‘indicators’. As Mavericks, we take a different approach. We choose only blue-chip companies, research their fundamentals and strategic developments, and do an overview SWOT analysis for long-term holds with minimal trades. We do things the Maverick way. In other words, we steer clear of Wall Street. The fact is, it’s your portfolio, and your decisions shape its destiny. Non-financial applications of Quantitative Analysis: QA has a wide range of applications beyond finance. Here are some of them, listed from various information sources: Business Sector: Quantitative analysis helps business owners make decisions under uncertain conditions. It’s used in project management to plan and control resources and deadlines1. It also aids in production planning, helping businesses make informed decisions about product development. Economics: Economists use quantitative methods to understand and predict economic behavior. For instance, they might use regression analysis to understand how interest rates affect consumer behavior. Bill Cara: Cracking the Maverick Code
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Marketing: In marketing, quantitative analysis can help understand consumer behavior, measure the effectiveness of marketing campaigns, and predict sales trends1. Psychology: Psychologists use quantitative methods to measure and analyze behavioral data. The data can then be used to understand patterns, make predictions, and test hypotheses. Demography: Demographers use quantitative analysis to study population size, composition, and distribution changes. Sociology: Sociologists use quantitative methods to collect and analyze social behavior and society data. Community Health: In community health, quantitative analysis can help track the spread of diseases, understand health behaviors, and evaluate the effectiveness of health interventions. Political Science: Political scientists use quantitative analysis to study political phenomena, understand voter behavior, and predict election outcomes. In summary, the subject of Quantitative Analysis is as broad as it is long. The minimalist tools I advocate in the Handbook are sufficient to outperform the market and thereby meet your goals and objectives as a Maverick investor.
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Chapter 22: AI and SWOT Analysis Fusion --The Future of investment analysis In the dynamic world of modern investing, cutting-edge tools enable investors to navigate the complex stock market landscape with finesse. Artificial Intelligence (AI) and SWOT analysis are two such potent tools. The amalgamation of AI's formidable data processing prowess and SWOT analysis's methodical evaluation empowers even novice investors to cultivate a robust strategy for wealth accumulation. AI algorithms have orchestrated a paradigm shift in investment research and decision-making, rapidly assimilating financial data, market trends, historical price trajectories, and news articles. While initially harnessed by industry giants like Humongous Bank & Broker, the horizon holds vast potential for AI to empower independent investors. The avenues it opens are multifaceted: ● AI simplifies access to comprehensive and up-to-date market data, ending the need for convoluted searches. ● AI's astute analysis unmasks obscure market patterns and trends. ● From continuous monitoring, AI optimizes portfolios by indicating realtime adjustments to bolster performance. ● AI's predictive capabilities foresee future market trends with remarkable accuracy. SWOT analysis provides a structured scaffold for assessing a company's potential. Investors obtain profound insights by meticulously scrutinizing strengths, weaknesses, opportunities, and threats: ● Methodical Appraisal: SWOT analysis systematically examines internal and external factors. ● While AI excels in data-driven domains, SWOT analysis addresses qualitative dimensions such as management and brand.
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● While AI proficiently handles real-time data, a SWOT analysis fosters continuous market vigilance. A balanced approach: Considering that each tool has strengths and constraints, achieving a harmonious blend of AI and SWOT analysis is imperative. ● Synergistic Fusion: Merging AI's analytical prowess with SWOT's qualitative insights augments the breadth of investment understanding. ● Market Volatility: While AI predictions hold value, prudent caution is essential amid market unpredictability, warranting a holistic approach. Later (in Chapters 28 to 37), we investigate Maverick portfolio companies using AI-based SWOT analyses. By harnessing AI's data-driven insights alongside SWOT analysis's structured methodology, novice investors can confidently navigate financial markets if they never forget the importance of human judgment.
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Chapter 23: AI's Power in Complex Financial Data --A case study By now, we’ve all heard of Artificial Intelligence, so I asked ChatGPT this simple question: What are the key differences in these two Value Line reports on Chevron (CVX)? Michael Napoli, CFA May 26, 2023: Shares of Chevron Corporation have resumed their downward trend. We anticipate unfavorable comparisons for the second and third quarters and that the company will report lower sales and earnings per share for the current year. A more challenging pricing environment and a modest decline in production should further impact operating results in the near term. However, greater margins on refined product sales may continue to provide support. The company is looking to expand its lower-emission businesses. Chevron has announced a commercial collaboration with Bunge and Corteva to introduce proprietary winter canola hybrids that produce plant-based oil with a lower carbon profile. The aim here is to increase the availability of vegetable oil feedstocks primarily for the growing domestic renewable fuels market. Meanwhile, the Chevron New Energies division has signed a Memorandum of Understanding with Japanese electric power joint venture JERA that provides a framework for collaborating on carbon capture and storage projects in the United States and Australia. This agreement could expand the significant liquid natural gas relationship the two companies already have. This stock is ranked to track the broader market averages for six to 12 months. Looking further out, we anticipate rising sales and considerable improvement in earnings per share for the company from 2024 until 2026- 2028. As one of the largest oil companies in the world, Chevron remains well-positioned in the energy sector. Investment in operations should allow the company to capitalize on increasing demand from global markets. From the recent quotation, this issue offers attractive long-term total return potential. A fairly competitive dividend yield supports this. Leverage is quite low, and the cash balance is ample. As a result, Chevron earns a good mark for Financial Strength. However, Price Growth Persistence and Earnings Predictability scores are fairly low. However, patient, risk-tolerant accounts seeking exposure to the energy sector may take a closer look. Michael Napoli, CFA February 24, 2023: Chevron Corporation's shares have moved slightly lower in price following a strong rally in the fourth quarter of last year. The company finished 2022 on a fairly good note. Sales and share earnings increased 17% and 27% for the December quarter. It benefited from healthy production levels, a favorable pricing environment, and greater margins on refined products. However, we anticipate less favorable results in the coming quarters, and sales and earnings will likely decline in the current year. Measures by the company to enhance shareholder value are encouraging. The board of directors has recently increased Bill Cara: Cracking the Maverick Code
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the dividend by roughly 6%. Beginning with the March payout, the quarterly dividend is now $1.51 a share. Moreover, the board has authorized the repurchase of $75 billion of common shares, effective April 1st. Buybacks should continue to support earnings per share in the future. Operating prospects are relatively favorable for the long haul. As one of the largest oil companies in the world, Chevron looks to be well-positioned in the energy sector. Investment in operations should support growth in both the traditional and new energy arenas in the coming years. The company is looking to grow energy production in response to increasing demand from global markets. Rising production, a favorable pricing environment, and healthy margins on refined products should all benefit performance. These shares are ranked to track the broader market averages for six to 12 months. Appreciation potential for the 18 months is above the Value Line median. Looking further out, we anticipate rising sales and earnings for the company from 2024 onward. From the recent quotation, this equity offers attractive long-term total return potential. A healthy dividend yield supports this. Moreover, total debt is quite low, and the company has ample cash balance. As a result, Chevron earns a favorable mark for Financial Strength. That said, its Price Growth Persistence and Earnings Predictability scores are low.
The Result: ChatGPT responded in a manner that a novice investor can understand: The key differences in the latest two Value Line Reports for Chevron (CVX) are as follows: 1. Sales and Earnings Outlook: ●
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May 26, 2023: The report anticipates unfavorable comparisons for the 2nd and 3rd quarters of the current year, with lower sales and earnings per share expected. The challenging pricing environment and a modest decline in production will impact operating results soon. February 24, 2023: The report notes that Chevron finished 2022 fairly well, with sales and share earnings increasing in the December quarter. However, it anticipates less favorable results in the coming quarters, with sales and earnings likely to decline in the current year.
2. Dividend and Share Repurchase: ●
May 26, 2023: The report mentions that Chevron recently increased its dividend by 6% and authorized the repurchase of $75 billion of common shares, effective April 1st. Buybacks are expected to support earnings per share in the future.
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February 24, 2023: The report does not mention specific recent dividend increases or share repurchase authorizations.
3. Long-Term Outlook: ●
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May 26, 2023: The report anticipates rising sales and considerable improvement in earnings per share for the company from 2024 until 2026-2028. It also highlights the company's efforts to expand its lower-emission businesses, such as collaborations for carbon capture and storage projects and introducing proprietary winter canola hybrids. February 24, 2023: The report anticipates rising sales and earnings from 2024 onward and emphasizes Chevron's equity's favorable long-term total return potential.
4. Financial Strength Assessment: ●
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May 26, 2023: Chevron earns a good mark for Financial Strength, with low leverage and ample cash balance. February 24, 2023: Chevron also earned a favorable mark for financial strength, with a low total debt and a healthy cash balance.
5. Price Growth Persistence and Earnings Predictability: ●
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May 26, 2023: The report mentions that Price Growth Persistence and Earnings Predictability scores are fairly low. February 24, 2023: The report notes low Price Growth Persistence and Earnings Predictability scores.
Both reports agree that Chevron is well-positioned in the energy sector and has favorable long-term prospects. Still, the May 26, 2023, report emphasizes near-term challenges and expansion into lower-emission businesses, while the February 24, 2023, report focuses on recent dividend increases, share repurchases, and positive long-term prospects. I then inputted the Value Line summaries of the key Chevron Financial Data from these two reports. The answer I received from ChatGPT: To compare the latest two financial reports from Chevron, let us analyze the key financial metrics for the years 2022 and 2023: Bill Cara: Cracking the Maverick Code
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1. Sales per Share: ● 2022: $128.58 ● 2023: $114.60 Sales per share decreased from $128.58 in 2022 to $114.60 in 2023. 2. Cash Flow per Share: ● 2022: $27.04 ● 2023: $26.70 Cash flow per share slightly decreased from $27.04 in 2022 to $26.70 in 2023. 3. Earnings per Share (EPS): 2022: $18.28 ● 2023: $17.25 Earnings per share decreased from $18.28 in 2022 to $17.25 in 2023. 4. Dividends Declared per Share: ● 2022: $6.25 ● 2023: $6.75 Dividends declared per share increased from $6.25 in 2022 to $6.75 in 2023. 5. Capital Spending per Share: ●
2022: $6.25 ● 2023: $6.75 Capital spending per share increased from $6.25 in 2022 to $6.75 in 2023. 6. Book Value per Share: ● 2022: $83.17 ● 2023: $91.90 Book value per share increased from $83.17 in 2022 to $91.90 in 2023. 7. Common Shares Outstanding: ●
2022: 1915.2 million shares ● 2023: 1850.0 million shares Outstanding common shares decreased from 1915.2 million in 2022 to 1850.0 million in 2023. 8. Operating Margin: ● 2022: 28.8% ● 2023: 32.0% The operating margin increased from 28.8% in 2022 to 32.0% in 2023. ●
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9. Net Profit Margin: ● 2022: 14.4% ● 2023: 15.3% The net profit margin increased from 14.4% in 2022 to 15.3% in 2023. 10. Return on Total Capital: ● 2022: 19.8% ● 2023: 17.0% The return on total capital decreased from 19.8% in 2022 to 17.0% in 2023. 11. Return on Shareholder's Equity: ● 2022: 22.3% 2023: 19.0% The return on shareholder's equity decreased from 22.3% in 2022 to 19.0% in 2023. 12. Retained to Common Equity: ● 2022: 14.0% ● 2023: 12.5% The proportion of earnings retained to common equity decreased from 14.0% in 2022 to 12.5% in 2023. 13. All Dividends to Net Profit: ●
2022: 34% ● 2023: 34% The percentage of all dividends to net profit remained constant at 34% in both 2022 and 2023. ●
Conclusion: This Chevron case study illustrates how AI swiftly simplifies intricate financial data and analysis for novice investors. With AI, you sidestep Wall Street's agenda-driven computations and narratives while prioritizing your objectives. AI empowers independent DIY investors, but remember, it's just one element of fusion analysis; there are other essential tools to utilize. Also, I asked ChatGPT if it uses copyrighted content. The answer I received was, “No, I don’t take from copyrighted content. I generate responses based on a mixture of licensed data, data created by human trainers, and publicly available data. I have not been directly trained on specific documents or books.”
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I believe that when dealing in non-fiction, AI is a productivity tool. When I asked Microsoft Copilot to expand on my belief, this is the answer I received: Artificial Intelligence (AI) has emerged as a powerful tool in the realm of nonfiction, enhancing productivity in numerous ways. Non-fiction encompasses a broad range of content, including academic research, news articles, biographies, and more. In these areas, AI can assist in tasks such as data analysis, fact-checking, content generation, and summarization. For instance, AI can analyze vast amounts of data quickly and accurately, providing insights that would take humans significantly longer to discern. This capability is particularly useful in fields where large data sets are common, such as scientific research or market analysis. In terms of fact-checking, AI can cross-reference information from multiple sources to verify its accuracy. This is crucial in non-fiction writing, where factual accuracy is paramount. AI can also assist in content generation and summarization. For example, AI can generate drafts or summaries of articles, saving writers considerable time and effort. These drafts can then be refined by human writers, combining the strengths of AI and human creativity. Moreover, AI can help organize and manage information, making it easier for writers and researchers to find relevant sources and references. This can significantly speed up the writing process and improve the quality of the final output. In conclusion, AI serves as a valuable productivity tool in non-fiction, enhancing efficiency, accuracy, and the overall quality of work. However, it’s important to remember that AI is a tool to aid human effort, not replace it. The human touch is still essential, especially in areas requiring creativity, critical thinking, and nuanced understanding. AI and humans, working together, can achieve the best results.
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Chapter 24: Daily Routine of a Maverick Investor --Taking control of your financial journey As a Maverick investor, establishing a disciplined daily routine is required for successful investing. Here's a practical roadmap to serve as your daily compass: 1.
Our Guiding Mantra: Start your day by reaffirming the fundamental
principles that steer your approach. Tune out self-serving Wall Street narratives and channel your focus on strategy, market structure, and the art of connecting information to form a comprehensive perspective. 2.
Navigate Bias with Clarity: Stay vigilant against biases clouding your
judgment. Foster an independent mindset that thrives on critical thinking. 3.
Daily Portfolio Review: Keep yourself updated on the status of your
portfolio every day. Seek factual information from reliable sources to gain pertinent insights. Upcoming chapters will guide you through the comprehensive steps of this crucial process. 4.
Sentiment Observation: Embrace the role of an emotion observer and
sentiment detective. Regularly monitor investor emotions and trends. A daily check on CNN’s market fear and greed index will offer a window into how extremes influence the performance of your portfolio stocks.
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5.
Grasp the Big Picture: Stay attuned to the US 10-year Treasury Yield and
the US Dollar Index, as they provide essential context for your investment analysis and decision-making process. 6.
Engage the Cara Community: Take advantage of opportunities to
participate in investment discussions to enrich your knowledge and fine-tune your strategies. Register at BillCara.com. One of the most potent challenges we face is mastering our emotions. Amidst the noise of Wall Street's sales pitches and opinions, many of us grapple with the push and pull of fear and greed. By embracing discipline, staying informed, and nurturing an unbreakable connection with your portfolio, you empower yourself as a Maverick investor.
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Chapter 25: Deep Dive into Portfolio Companies --FinViz.com studies This chapter delves into the FinViz.com studies for the Maverick Investor Portfolio companies, providing insights into growth, value, and income portfolio assessments. Here's a streamlined overview of these criteria: •
Portfolio Selection: We've chosen the tickers AAPL, AXP, CAT, CSCO, CVX, KO, NKE, and UNH in the FinViz.com screener for companies in the Maverick Investor portfolio. Maintaining a compact portfolio is vital, allowing you to focus on substantial price variations and dynamics.
•
Performance Assessment: This filter evaluates historical stock performance, including price trends, total returns, and performance against benchmark indices like DJIA and S&P 500.
•
Valuation Metrics: Evaluate various valuation metrics like Price/Earnings (P/E), Price/Book (P/B), Price/Sales (P/S), and Price/Cash Flow (P/CF). Comparing these with industry peers or historical averages helps identify undervalued or overvalued stocks.
•
Financial Health: Analyze financial indicators like revenue growth, earnings per share (EPS), profit margins, debt levels, and other ratios to gauge the financial strength and health of the portfolio companies.
•
Ownership Structure: Assess the ownership structure, including insider and institutional ownership and recent ownership changes.
•
Technical Analysis: Focus on technical indicators, such as moving averages, RSI, MACD, and chart patterns, to identify historical price and volume patterns and trends.
•
Snapshot Summaries: Regularly review key financial metrics, news updates, analyst recommendations, and technical indicators for each portfolio stock.
•
Analyst Ratings: Mavericks prioritize quality in the Dow 30-based portfolio, relying on information from reports and analyst recommendations on platforms like TipRanks.com and MarketBeat.com. We favor stocks rated "Buy" or better by analysts but approach "Sell" recommendations
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cautiously. Understand that "Sell" ratings are rare due to industry dynamics. Exercise caution and investigate when encountering "Sell" recommendations. o It's worth noting that Analyst Ratings can lag behind price trends, often spiking during market crashes in a Bull market. o On November 28, 2023, out of 1206 buy-hold-sell ratings on Dow 30 stocks, 62.3% were "Buy," 34.4% were "Hold," and 3.1% were "Sell," aligning closely with S&P 500 stock ratings. Notably, the ten stocks within the Maverick Moderate Growth Investor recommended portfolio received higher ratings: 77.3% "Buy," 21.2% "Hold," and 1.4% "Sell," over 490 ratings. In contrast, the remaining twenty Dow 30 stocks had 716 ratings of 52.0% "Buy," 43.4% "Hold," and 4.6% "Sell." o Analyst ratings also change over time based on factors like changing corporate earnings, guidance, and market conditions. On August 16, 2023, out of 1156 buy-hold-sell ratings on Dow 30 stocks, 59.9% were "Buy," 34.5% were "Hold," and 5.5% were "Sell." As always, the ten stocks within the Maverick Moderate Growth Investor recommended portfolio received higher ratings: 76.9% "Buy," 20.2% "Hold," and 2.9% "Sell," over 481 ratings. In contrast, the other twenty Dow 30 stocks had 675 ratings of 47.9% "Buy," 44.7% "Hold," and 7.4% "Sell." o While analyst ratings don't always correlate with stock quality, all our Maverick Investor portfolios consistently maintain superior ratings to the average of the Dow 30 stocks. •
Financial Strength: For quality in the Dow 30-based portfolio, prioritize Value Line Financial Strength ratings, aiming for no less than a B++ rating for strong financial health. These ratings can be found at: https://research.valueline.com/research?=#list=dow30&sec=list
•
Growth and Value Criteria: Depending on your stock type, consider statistical data, technical patterns like float short >5%, relative volume, RSI14, and 20-day high/low. Different criteria apply to evaluating growth and value stocks.
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•
Income Portfolios: Focus on stocks with a Forward 12-month Dividend Yield matching or exceeding the interest rate of the US 7-year Treasury Note. As of July 2023, the 7-year Note yielded 4.087%, the highest in 15 years. Check the latest data here: https://www.investing.com/economic-calendar/7year-note-auction-682.
•
High-Yield Stocks: On July 27, 2023, ten companies had a Trailing TwelveMonth Dividend Yield of over 3.5%, with Verizon Communications (VZ), Walgreens Boots Alliance (WBA), 3M (MMM), and Dow Holdings (DOW) exceeding 5.2%. An equally weighted portfolio of these stocks initiated on that date outperformed the recent 7-year Treasury Note yield.
The investment data as presented by FinViz.com for the recommended Moderate Growth-value portfolio: ● Portfolio review ● Valuation ● Financial ● Ownership ● Performance ● Technical ● Snapshots By regularly assessing these criteria through FinViz.com, TipRanks.com, and MarketBeat.com, Mavericks can fine-tune portfolio strategy and ensure it aligns with personal risk management and investment goals.
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Chapter 26: Insights from the Data Aggregators --Reports for select portfolio companies As Maverick investors, we prioritize informed decisions rooted in data-driven insights, ignoring Wall Street narratives. TipRanks.com, MarketBeat.com, Yahoo Finance, Value Line, FinViz.com, and Koyfin are key sources providing critical information to deepen our understanding and contribute to our full portfolio management. Logging weekly data informs us about analyst opinions, price targets, and competitor analysis. Maverick investors focus on valuable data, thereby overcoming Wall Street's information overload,. This list helps monitor 10 MODERATE GROWTH portfolio companies (Chapter 4): Apple Inc. (AAPL) •
TipRanks Page: AAPL
•
Analyst Consensus: AAPL Forecast
•
Technical Analysis: AAPL Technical Analysis
•
MarketBeat Page: AAPL
•
Price Target: AAPL Price Target
•
Competitors and Alternatives: AAPL Competitors and Alternatives
Caterpillar Inc. (CAT) •
TipRanks Page: CAT
•
Analyst Consensus: CAT Forecast
•
Technical Analysis: CAT Technical Analysis
•
MarketBeat Page: CAT
•
Price Target: CAT Price Target
•
Competitors and Alternatives: CAT Competitors and Alternatives
Chevron Corporation (CVX) •
TipRanks Page: CVX
•
Analyst Consensus: CVX Forecast
•
Technical Analysis: CVX Technical Analysis
•
MarketBeat Page: CVX
•
Price Target: CVX Price Target
•
Competitors and Alternatives: CVX Competitors and Alternatives
JP Morgan Chase (JPM) •
TipRanks Page: JPM
•
Analyst Consensus: JPM Forecast
•
Technical Analysis: JPM Technical Analysis
•
MarketBeat Page: JPM
•
Price Target: JPM Price Target
•
Competitors and Alternatives: JPM Competitors and Alternatives
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McDonald’s (MCD) •
TipRanks Page: MCD
•
Analyst Consensus: MCD Forecast
•
Technical Analysis: MCD Technical Analysis
•
MarketBeat Page: MCD
•
Price Target: MCD Price Target
•
Competitors and Alternatives: MCD Competitors and Alternatives
Microsoft (MSFT) •
TipRanks Page: MSFT
•
Analyst Consensus: MSFT Forecast
•
Technical Analysis: MSFT Technical Analysis
•
MarketBeat Page: MSFT
•
Price Target: MSFT Price Target
•
Competitors and Alternatives: MSFT Competitors and Alternatives
Nike, Inc. (NKE) •
TipRanks Page: NKE
•
Analyst Consensus: NKE Forecast
•
Technical Analysis: NKE Technical Analysis
•
MarketBeat Page: NKE
•
Price Target: NKE Price Target
•
Competitors and Alternatives: NKE Competitors and Alternatives
UnitedHealth Group Incorporated (UNH) •
TipRanks Page: UNH
•
Analyst Consensus: UNH Forecast
•
Technical Analysis: UNH Technical Analysis
•
MarketBeat Page: UNH
•
Price Target: UNH Price Target
•
Competitors and Alternatives: UNH Competitors and Alternatives
Visa (V) •
TipRanks Page: V
•
Analyst Consensus: V Forecast
•
Technical Analysis: V Technical Analysis
•
MarketBeat Page: V
•
Price Target: V Price Target
•
Competitors and Alternatives: V Competitors and Alternatives
Walmart (WMT) •
TipRanks Page: WMT
•
Analyst Consensus: WMT Forecast
•
Technical Analysis: WMT Technical Analysis
•
MarketBeat Page: WMT
•
Price Target: WMT Price Target
•
Competitors and Alternatives: WMT Competitors and Alternatives
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For the entire Dow 30 stocks, here is a list of Wall Street analyst recommendations: Hol
Sel
d
l
26
9
0
TR
22
8
0
3
MB
8
6
3
3
1
TR
8
4
2
14
3
0
MB
12
6
0
11
6
0
TR
12
5
0
MarketBeat
10
8
0
MB
12
6
0
TipRanks
12
6
0
TR
16
6
0
MarketBeat TipRanks
23
4
0
MB
22
7
0
22
5
0
TR
20
6
0
MarketBeat TipRanks
34
4
0
MB
32
3
1
32
1
0
TR
32
2
1
MarketBeat TipRanks
22
10
2
MB
22
9
3
18
11
0
TR
20
5
3
MarketBeat TipRanks
14
2
0
MB
14
1
0
13
2
0
TR
17
2
0
MarketBeat TipRanks
14
3
1
MB
14
2
1
20
3
0
TR
10
2
0
27
4
0
MB
27
4
0
25
5
0
TR
24
4
0
MarketBeat TipRanks
10
8
2
MB
7
4
3
12
8
2
TR
6
5
2
MarketBeat TipRanks
8
7
3
MB
5
7
5
9
7
0
TR
5
4
4
MarketBeat TipRanks
13
2
0
MB
10
5
0
15
3
0
TR
11
4
0
MarketBeat TipRanks
26
13
1
MB
23
14
1
26
12
1
TR
22
10
1
MarketBeat
8
12
2
MB
12
10
1
TipRanks
5
16
0
TR
6
11
1
MarketBeat TipRanks
19
4
1
MB
17
3
1
18
6
1
TR
12
5
2
28-Nov AAPL - Apple CAT - Caterpillar CVX - Chevron Corp. JPM - J.P. Morgan Chase MCD - McDonald's MSFT - Microsoft NKE - Nike UNH - UnitedHealth V - Visa WMT - Walmart AMGN - Amgen AXP - American Express BA - Boeing CRM Salesforce.com CSCO - Cisco Systems DIS - Walt Disney
16-
Buy
Hold
26
9
0
MB
25
8
0
MarketBeat TipRanks
8
7
9
MarketBeat TipRanks
MarketBeat TipRanks
MarketBeat TipRanks
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Aug
December 2023
Buy
112
DOW - Dow Holdings GS - Goldman Sachs HD - Home Depot HON - Honeywell IBM - IBM INTC - Intel JNJ Johnson&Johnson KO - Coca-Cola MMM - 3M. MRK - Merck PG - Procter & Gamble TRV - Travelers VZ - Verizon WBA - Walgreens Boots Dow 30 Totals Percent of total
MarketBeat TipRanks
5
10
2
MB
5
9
2
4
9
0
TR
1
9
1
MarketBeat TipRanks
12
6
0
MB
11
7
0
12
4
0
TR
12
6
0
MarketBeat TipRanks
15
11
0
MB
15
12
0
16
9
1
TR
17
10
0
MarketBeat TipRanks
3
5
1
MB
5
6
1
8
3
1
TR
7
2
1
MarketBeat TipRanks
4
7
0
MB
3
7
1
3
6
0
TR
3
6
1
MarketBeat TipRanks
6
19
4
MB
6
21
6
5
18
4
TR
5
19
6
MarketBeat TipRanks
6
8
0
MB
4
8
0
7
9
0
TR
4
8
0
MarketBeat TipRanks
8
3
0
MB
10
3
0
12
6
0
TR
10
1
0
MarketBeat TipRanks
0
8
2
MB
0
9
2
0
11
2
TR
1
8
4
MarketBeat TipRanks
16
5
0
MB
15
5
0
14
2
0
TR
12
3
0
MarketBeat TipRanks
12
6
0
MB
12
5
0
12
7
0
TR
10
6
0
MarketBeat TipRanks
5
8
0
MB
6
7
0
2
9
0
TR
1
7
1
MarketBeat TipRanks
7
5
0
MB
5
9
0
5
6
1
TR
3
10
0
MarketBeat TipRanks
2
7
1
MB
3
8
1
2
6
1
TR
1
9
2
1206
751 62.3%
415 34.4%
40 3.3%
1156
693 59.9%
399 34.5%
64 5.5%
490
379 77.3%
104 21.2%
7 1.4%
481
370 76.9%
97 20.2%
14 2.9%
675
Maverick Mod. Growth Percent of total Dow 30 ex-Mod. Growth Percent of total
716
372
311
33
52.0%
43.4%
4.6%
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302
50
47.9%
44.7%
7.4%
113
The Maverick Moderate Growth Portfolio has superior buy/sell ratings from Wall Street analysts. The essence of any of the five Maverick portfolios (see Chapter 4) is quality. There are Good and Bad companies in any index or ETF. The Dow 30 is no different. We do not invest in Bad companies. Over time, some Good companies become Bad, as reflected in the corporate data and the analyst ratings. Similarly, some Bad companies become Good companies. Despite the narratives from Wall Street, this does not happen often. But when these circumstances arise, which we determine from constant monitoring, Mavericks will modify their portfolios. Note the difference in ratings between August 16 and November 28, 2023. There are various reasons why more or fewer analysts are reporting to these data aggregator companies. The data does give a sense of whether the analysts have become more or less favorable to each company. The ratings are subjective based on differing data assessments, personal opinions, and political pressures within each firm to support investment banking and sales interests.
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Chapter 27: Value Line Reports Unveiled --A vital resource for the Maverick Investor The Value Line (VL) ranking system, a widely embraced investment research tool, meticulously assesses, and ranks stocks based on their future performance potential. Amidst a sea of systems that promise similar results, it's crucial to exercise caution. Beware of the 'black box' syndrome; comprehensively understand any system you follow. This chapter delves into the rationale behind our reliance on the Value Line system and its associated strengths and weaknesses. In the following chapters, we study the Value Line Reports. Features: ● Broad Coverage: Value Line scrutinizes 1700 stocks, spanning diverse sectors and company sizes. However, our exclusive focus remains on the Dow 30. ● Accessibility: With a user-friendly rating scale of 1 to 5, Value Line simplifies complex financial assessments, particularly beneficial for novice investors. ● Long-Term Focus: Prioritizing long-term potential aligns with the Maverick investor's strategic approach, emphasizing stability over short-term fluctuations. ● Comprehensive Insights: Value Line's reports offer extensive company data, including financials and projections, enriching our decisionmaking process. Deficiencies: ● Update Lag: Quarterly reports and summarized weekly updates lag behind rapidly evolving market dynamics, necessitating supplementary sources like TipRanks.com and MarketBeat.com. ● Limited Scope: While pivotal metrics like revenue, cash flow, and earnings growth are evaluated, the system may overlook other critical factors such as industry trends and economic data. Bill Cara: Cracking the Maverick Code
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● Minimal Technical Analysis: Value Line's lack of in-depth technical analysis may limit its utility, prompting us to turn to StockCharts.com. ● Subjectivity: Analyst judgment plays a role in rankings, introducing a subjective element. These pros and cons must be considered within the larger context of an investor's research and decision-making process. The Value Line ranking system is an enormously valuable part of our comprehensive investment analysis toolkit. Value Line offers the data free for the Dow 30 companies as an educationbased incentive for users to subscribe for their full 1700 company research service. Perhaps when Mavericks graduate to alternate investment tasks, the understanding of this service will be a factor in their premium subscription. Leveraging Value Line Reports: I cannot over-emphasize the significance of this invaluable resource. Value Line's reports offer profound insights into a company's financials, performance, and growth prospects, substantially aiding investment decisions. I have used it for decades. Notably, Warren Buffett subscribes to this research service, underscoring its worth. Please consult this Value Line link for an in-depth two-page understanding of Value Line’s presentation of each Dow 30 company's fundamentals and prospects and their description of building an investment portfolio. Understanding the Value Line Ranking System is important. Notes from the Value Line website. http://www3.valueline.com/pdf/The_Value_Line_Ranking_System.pdf The Value Line Investment Survey® is probably most famous for its timehonored Ranking System for Timeliness, Safety, and Financial Strength. Any Value Line stock rank is always relative to all other stocks in the Value Line universe of about 1,700 stocks.
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Financi al
20230813 20230813
Timeline ss
Safet y
Strengt h
TTM Yield Yield
FTM
Sector Apple
AAPL
Technology
3
1
A++
0.53%
0.96%
Caterpillar
CAT
Industrial
1
2
A+
1.83%
5.20%
Chevron JP Morgan
CVX
Energy
3
3
A
3.68%
6.04%
Chase
JPM
Financial Staples
1
2
A+
2.58%
2.58%
McDonald’s
MCD
Spending
3
1
A++
2.11%
6.08%
Microsoft
MSFT
Technology Discretionary
2
1
A++
0.84%
2.72%
Nike
NKE
Spend
3
1
A++
1.17%
1.36%
UnitedHealth
UNH
Healthcare
2
1
A++
1.50%
7.52%
Visa
V
Financial Staples
3
1
A++
0.74%
1.80%
Walmart
WMT
Spending
2
1
A++
1.42%
2.28%
Value Line provides three key ranks to help investors assess stocks: Safety Rank, Timeliness Rank, and Technical Rank. Safety Rank: Value Line's Safety Rank is crucial for assessing risk within its universe of 1,700 stocks. It combines a stock's Price Stability and Financial Strength, graded on a scale of 1 (Safest) to 5 (Riskiest). Rank 1 (Highest): Safest, stable investments. Rank 2 (Above Average): Safer and less risky. Rank 3 (Average): Medium risk and safety. Rank 4 (Below Average): Riskier and less safe. Rank 5 (Lowest): Riskiest and least safe. High Safety ranks often indicate large, financially strong companies. Safety's track record shows that high-ranking stocks perform well during market downturns. The recommended Maverick Investor Portfolio, as of August 13, 2023, consists of seven stocks with Safety rank #1, two with #2, and one with #3 (Chevron), which is considered fundamentally sound. Bill Cara: Cracking the Maverick Code
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Timeliness Rank: Value Line's Timeliness Rank assesses stocks' anticipated price performance over the next 6 to 12 months, rated on a scale of 1 (Highest) to 5 (Lowest). It considers factors like earnings and price trends. Rank 1 (Highest): Top performers compared to Value Line's universe. Rank 2 (Above Average): Better-than-average prospects. Rank 3 (Average): In line with Value Line's universe. Rank 4 (Below Average): Below-average prospects. Rank 5 (Lowest): Poorest prospects. As of August 1, 2023, the Maverick Investor Portfolio includes one stock with Timeliness rank #1, one with #2, and six with #3. Changes in Timeliness ranks can result from earnings reports, price movements, and shifts in relative positions. Value Line Track Record: Annual investing based on Timeliness Ranks consistently outperforms. High Timeliness ranks provide protection against market declines for 6 to 12 months. Technical Rank: Predicting short-term price movements (1 to 5) over three to six months, the Technical Rank complements but doesn't replace Timeliness. Trading Strategy: Maverick Investors exit stocks losing the top three ranks in Safety or Timeliness. Avoid stocks with Financial Strength lower than B+. Keep a weekly Value Line summary for each portfolio company, identifying changes due to new earnings and revenue guidance from Wall Street analysts. Value Line Subscriptions: While Mavericks are able to use the service free for the Dow 30 companies, Value Line covers about 1700 companies, offering six levels of service. The Basic Subscription package provides access to the full online platform, including the Value Line Investment Survey, the Small and Mid-Cap Survey, and the Options Survey. The subscription cost for the Basic package is US$598 per year or $498 per year for renewing subscribers. Bill Cara: Cracking the Maverick Code
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Chapter 28: Analyzing Apple (AAPL) --Value Line Ratings and SWOT Analysis Quarterly Value Line Reports: https://tinyurl.com/VL-AAPL-20230324 https://tinyurl.com/VL-AAPL-20230617 https://tinyurl.com/VL-AAPL-20230917 https://tinyurl.com/VL-AAPL-20231216
Maverick investors, staying informed about your portfolio companies is vital. Major SWOT or Value Line rating changes deserve attention. Reserve deeper investigations for Sell ratings from Wall Street analysts. Here's a streamlined version: Value Line Ratings for AAPL (November 20, 2023): ● Timeliness (3): AAPL's expected price performance in the next 6-12 months suggests average relative performance. ● Safety (1): The stock carries minimal risk according to Value Line. ● Financial Strength (A++): Apple boasts a robust financial position. Changes in Value Line Ratings: Analysts may adjust these ratings based on financial performance, industry trends, and market conditions. Be vigilant for changes to grasp evolving perceptions. Wall Street Analysts' Ratings: Alongside Value Line, Wall Street analysts offer insights into AAPL. Monitor their reports for market sentiment and price movement clues. SWOT Analysis of Apple (AAPL) Stock: ● Strengths: Strong brand, product diversity, ecosystem, and financial health. ● Weaknesses: iPhone dependence, high pricing, supplier reliance, regional manufacturing concentration. ● Opportunities: Services growth, emerging markets, wearables, and services diversification. Bill Cara: Cracking the Maverick Code
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● Threats: Intense competition, global economy, regulatory issues, rapid tech changes. Chart: https://stockcharts.com/h-sc/ui?s=AAPL
P&F Chart: https://stockcharts.com/freecharts/pnf.php?c=AAPL,P
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Chapter 29: Analyzing Caterpillar (CAT) --Value Line ratings and SWOT analysis Quarterly Value Line Reports: https://tinyurl.com/VL-CAT-20230210 https://tinyurl.com/VL-CAT-20230512 https://tinyurl.com/VL-CAT-20230805 https://tinyurl.com/VL-CAT-20231104
Maverick investors, staying informed about your portfolio companies is vital. Major SWOT or Value Line rating changes deserve attention. Reserve deeper investigations for Sell ratings from Wall Street analysts. Here's a streamlined version: Value Line Ratings for CAT (November 20, 2023): ● Timeliness (3): CAT is expected price performance in the next 6-12 months suggests average relative performance. ● Safety (2): According to Value Line, minimal risk is associated with CAT. ● Financial Strength (A+): CAT possesses robust financial health. Changes in Value Line Ratings: Analysts may adjust these ratings based on financial performance, industry trends, and market conditions. Stay vigilant for changes to gauge evolving perceptions. Wall Street Analysts' Ratings: Alongside Value Line, Wall Street analysts offer insights into CAT. Monitor their reports for market sentiment and potential price movement cues. SWOT Analysis of Caterpillar (CAT) Stock: ● Strengths: Global construction and mining equipment leader, diverse product portfolio, extensive distribution network, strong aftermarket business. ● Weaknesses: Cyclical farming and mining industries, capital expenditure dependence, vulnerability to commodity price fluctuations, environmental concerns. Bill Cara: Cracking the Maverick Code
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● Opportunities: Infrastructure development, emerging markets growth, digitalization, energy transition. ● Threats: Competition, trade uncertainties, regulatory challenges, economic and political uncertainties. Chart: https://stockcharts.com/h-sc/ui?s=CAT
P&F Chart: https://stockcharts.com/freecharts/pnf.php?c=CAT,P
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Chapter 30: Analyzing Chevron (CVX) --Value Line ratings and SWOT analysis Quarterly Value Line Reports: https://tinyurl.com/VL-CVX-20230224 https://tinyurl.com/VL-CVX-20230526 https://tinyurl.com/VL-CVX-20230825 https://tinyurl.com/VL-CVX-20231118
Maverick investors, staying informed about your portfolio companies is vital. Major SWOT or Value Line rating changes deserve attention. Reserve deeper investigations for Sell ratings from Wall Street analysts. Here's a streamlined version: Value Line Ratings for CVX (November 20, 2023): ● Timeliness (4): CVX's potential for below-average relative price performance compared to the market. ● Safety (3): CVX carries average risk and safety according to Value Line. ● Financial Strength (A): CVX boasts a strong financial position and resilience. Changes in Value Line Ratings: Analysts may adjust these ratings based on financial performance, industry trends, and market conditions. Stay vigilant for changes to gauge evolving perceptions. Wall Street Analysts' Ratings: Alongside Value Line, Wall Street analysts offer insights into CVX. Monitor their reports for market sentiment and potential price movement cues. SWOT Analysis of Chevron (CVX) Stock: ● Strengths: Strong global presence, integrated business model, diverse asset portfolio, financial strength. ● Weaknesses: Vulnerability to oil price fluctuations, environmental concerns, geopolitical risks, and high capital expenditure requirements.
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● Opportunities: Renewable energy transition, technological advancements, emerging markets expansion, energy efficiency initiatives. ● Threats: Intense competition, energy market volatility, climate change regulations, and rising renewable energy. Chart: https://stockcharts.com/h-sc/ui?s=CVX
P&F Chart: https://stockcharts.com/freecharts/pnf.php?c=CVX,P
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Chapter 31: Analyzing JPMorgan (JPM) --Value Line ratings and SWOT analysis Quarterly Value Line Reports: https://tinyurl.com/VL-JPM-20230128 https://tinyurl.com/VL-JPM-20230429 https://tinyurl.com/VL-JPM-20230729 https://tinyurl.com/VL-JPM-20231028
Maverick investors, staying informed about your portfolio companies is vital. Major SWOT or Value Line rating changes deserve attention. Reserve deeper investigations for Sell ratings from Wall Street analysts. Here's a streamlined version: Value Line Ratings for JPM (November 20, 2023): ● Timeliness (2): JPM's expected price performance is favorable compared to the broader market over the next 6-12 months. ● Safety (2): According to Value Line, minimal risk is associated with JPM. ● Financial Strength (A+): JPM boasts a robust financial position. Changes in Value Line Ratings: Analysts may adjust these ratings based on financial performance, industry trends, and market conditions. Stay vigilant for changes to gauge evolving perceptions. Wall Street Analysts' Ratings: Alongside Value Line, Wall Street analysts offer insights into JPM. Monitor their reports for market sentiment and potential price movement cues. SWOT Analysis of JP Morgan Chase (JPM) Stock: ● Strengths: It is one of the largest and most profitable global financial institutions, has a diversified portfolio, an international presence, technology investments, and is a trusted brand. ● Weaknesses: Regulatory challenges, market volatility sensitivity, operational risks, reputation risks.
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● Opportunities: Fintech integration, emerging market expansion, postpandemic economic recovery, sustainable finance. ● Threats: Competition from traditional and fintech rivals, regulatory changes, economic downturns, and cybersecurity threats. Chart: https://stockcharts.com/h-sc/ui?s=JPM
P&F Chart: https://stockcharts.com/freecharts/pnf.php?c=JPM,P
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Chapter 32: Analyzing McDonald (MCD) --Value Line ratings and SWOT analysis Quarterly Value Line Reports: https://tinyurl.com/VL-MCD-20230211 https://tinyurl.com/VL-MCD-20230513 https://tinyurl.com/VL-MCD-20230812 https://tinyurl.com/VL-MCD-20231118
Maverick investors, staying informed about your portfolio companies is vital. Major SWOT or Value Line rating changes deserve attention. Reserve deeper investigations for Sell ratings from Wall Street analysts. Here's a streamlined version: Value Line Ratings for MCD (November 20, 2023): ● Timeliness (3): MCD's potential for average relative price performance in the next 6-12 months. ● Safety (1): Minimal risk is associated with MCD, per Value Line. ● Financial Strength (A++): MCD's robust financial position ensures resilience. Changes in Value Line Ratings: Analysts may adjust these ratings based on financial performance, industry trends, and market conditions. Stay alert for changes to grasp evolving perceptions. Wall Street Analysts' Ratings: Alongside Value Line, Wall Street analysts provide insights into MCD. Monitor their reports for market sentiment and potential price movement cues. SWOT Analysis of McDonald's (MCD) Stock: ● Strengths: Global brand recognition, diverse markets, fintech integration, cost-effective processes. ● Weaknesses: Health-conscious trends impact choices, franchisee reliance, and intense industry competition.
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● Opportunities: Healthier menu expansion, technology adoption, emerging market growth, sustainability practices. ● Threats: Health-conscious eating, economic downturns, regulatory impacts, fast-food competition. ●
Chart: https://stockcharts.com/h-sc/ui?s=MSFT
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P&F Chart: https://stockcharts.com/freecharts/pnf.php?c=MCD,P
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Chapter 33: Analyzing Microsoft (MSFT) --Value Line ratings and SWOT analysis Quarterly Value Line Reports: https://tinyurl.com/VL-MSFT-20230128 https://tinyurl.com/VL-MSFT-20230429 https://tinyurl.com/VL-MSFT-20230729 https://tinyurl.com/VL-MSFT-20231028
Maverick investors, staying informed about your portfolio companies is vital. Major SWOT or Value Line rating changes deserve attention. Reserve deeper investigations for Sell ratings from Wall Street analysts. Here's a streamlined version: Value Line Ratings for MSFT (November 20, 2023): ● Timeliness (2): MSFT's expected price performance is favorable compared to the broader market over the next 6-12 months. ● Safety (1): Minimal risk is associated with MSFT, per Value Line. ● Financial Strength (A++): MSFT's robust financial position ensures stability. Changes in Value Line Ratings: Analysts may adjust these ratings based on financial performance, industry trends, and market conditions. Stay vigilant for changes to gauge evolving perceptions. Wall Street Analysts' Ratings: Alongside Value Line, Wall Street analysts provide insights into MSFT. Monitor their reports for market sentiment and potential price movement cues. SWOT Analysis of Microsoft (MSFT) Stock: ● Strengths: Globally recognized brand, diverse technology portfolio, cloud computing leadership, strong financials. ● Weaknesses: Legacy dependencies, security concerns, limited hardware market share.
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● Opportunities: Cloud expansion, AI integration, gaming market growth, subscription-based revenue. ● Threats: Tech competition, data privacy regulations, rapid tech changes, economic downturns. Chart: https://stockcharts.com/h-sc/ui?s=MSFT
P&F Chart: https://stockcharts.com/freecharts/pnf.php?c=MSFT,P
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Chapter 34: Analyzing Nike (NKE) --Value Line ratings and SWOT analysis Quarterly Value Line Reports: https://tinyurl.com/VL-NKE-20230421 https://tinyurl.com/VL-NKE-20230715 https://tinyurl.com/VL-NKE-20231014 Maverick investors, staying informed about your portfolio companies is vital. Major SWOT or Value Line rating changes deserve attention. Reserve deeper investigations for Sell ratings from Wall Street analysts. Here's a streamlined version: Value Line Ratings for NKE (November 20, 2023): ●
Timeliness (2): NKE's expected price performance is favorable compared to the broader market in the next 6-12 months.
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Safety (1): NKE carries minimal risk, according to Value Line.
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Financial Strength (A++): NKE maintains a strong financial position and stability.
Changes in Value Line Ratings: Analysts may adjust these ratings based on financial performance, industry trends, and market conditions. Stay alert for changes to grasp evolving perceptions. Wall Street Analysts' Ratings: Alongside Value Line, Wall Street analysts provide insights into NKE. Monitor their reports for market sentiment and potential price movement cues. SWOT Analysis of Nike (NKE) Stock: ●
Strengths: Strong brand recognition, global presence, diverse products, effective marketing.
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Weaknesses: Sourcing dependence, fashion trend vulnerability, counterfeit risks, and pricing pressures.
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Opportunities: E-commerce growth, innovation, emerging market expansion, sustainability focus.
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Threats: Intense competition, economic factors, changing consumer preferences, geopolitical tensions.
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Chart: https://stockcharts.com/h-sc/ui?s=NKE
P&F Chart: https://stockcharts.com/freecharts/pnf.php?c=NKE,P
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Chapter 35: Analyzing UnitedHealth (UNH) --Value Line ratings and SWOT analysis Quarterly Value Line Reports: https://tinyurl.com/VL-UNH-20230225 https://tinyurl.com/VL-UNH-20230528 https://tinyurl.com/VL-UNH-20230826 https://tinyurl.com/VL-UNH-20231125
Maverick investors, staying informed about your portfolio companies is vital. Major SWOT or Value Line rating changes deserve attention. Reserve deeper investigations for Sell ratings from Wall Street analysts. Here's a streamlined version: Value Line Ratings for UNH (November 20, 2023): ● Timeliness (2): UNH's expected price performance is favorable compared to the broader market in the next 6-12 months. (Upgraded Oct. 20.) ● Safety (1): UNH carries minimal risk, per Value Line. ● Financial Strength (A++): UNH maintains strong financial stability. Changes in Value Line Ratings: Analysts may adjust these ratings based on financial performance, industry trends, and market conditions. Keep an eye on changes to understand evolving perceptions. Wall Street Analysts' Ratings: Alongside Value Line, Wall Street analysts provide insights into UNH. Monitor their reports for market sentiment and potential price movement cues. SWOT Analysis of UnitedHealth Group (UNH) Stock: ● Strengths: Strong market position, diversified segments, Optum platform, extensive provider network, robust financial performance. ● Weaknesses: Regulatory challenges, customer complaints, litigation risks.
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● Opportunities: Growing healthcare demand, tech advancements, international expansion. ● Threats: Competitive landscape, political/regulatory uncertainty, rising healthcare costs. Chart: https://stockcharts.com/h-sc/ui?s=UNH
P&F chart: https://stockcharts.com/freecharts/pnf.php?c=UNH,P
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Chapter 36: Analyzing Visa (V) --Value Line ratings and SWOT analysis Quarterly Value Line Reports: https://tinyurl.com/VL-V-20230128 https://tinyurl.com/VL-V-20230429 https://tinyurl.com/VL-V-20230729 https://tinyurl.com/VL-V-20231028
Maverick investors, staying informed about your portfolio companies is vital. Major SWOT or Value Line rating changes deserve attention. Reserve deeper investigations for Sell ratings from Wall Street analysts. Here's a streamlined version: Value Line Ratings for V (November 20, 2023): ● Timeliness (3): V is expected to perform at an average level compared to the broader market in the next 6-12 months. ● Safety (1): V carries minimal risk, according to Value Line. ● Financial Strength (A++): Visa maintains a robust financial position. Changes in Value Line Ratings: Analysts may adjust these ratings based on financial performance, industry trends, and market conditions. Monitor changes closely for evolving perceptions. Wall Street Analysts' Ratings: Besides Value Line, Wall Street analysts provide insights into V. Stay updated on their reports for market sentiment and potential price movement indicators. SWOT Analysis of Visa (V) Stock: ● Strengths: Global brand recognition, extensive payment network, diverse solutions portfolio, secure processing. ● Weaknesses: Dependence on the electronic payments sector. ● Opportunities: Growth in cashless payments, expansion into emerging markets, fintech collaboration, and value-added services. Bill Cara: Cracking the Maverick Code
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●
Threats: Fierce competition, regulatory changes, economic downturns, technology disruptions.
Chart: https://stockcharts.com/h-sc/ui?s=V
P&F Chart: https://stockcharts.com/freecharts/pnf.php?c=V,P
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Chapter 37: Analyzing Walmart (WMT) --Value Line ratings and SWOT analysis Quarterly Value Line Reports: https://tinyurl.com/VL-WMT-20230415 https://tinyurl.com/VL-WMT-20230715 https://tinyurl.com/VL-WMT-20231014
Maverick investors, staying informed about your portfolio companies is vital. Major SWOT or Value Line rating changes deserve attention. Reserve deeper investigations for Sell ratings from Wall Street analysts. Here's a streamlined version: Value Line Ratings for WMT (November 20, 2023): ● Timeliness (2): WMT’s expected price performance is favorable compared to the broader market over the next 6-12 months. ● Safety (1): WMT carries minimal risk, according to Value Line. ● Financial Strength (A++): Walmart maintains a robust financial position. Changes in Value Line Ratings: Analysts may adjust these ratings based on financial performance, industry trends, and market conditions. Monitor changes for evolving perceptions. Wall Street Analysts' Ratings: Besides Value Line, Wall Street analysts provide insights into WMT. Stay updated on their reports for market sentiment and potential price movement indicators. SWOT Analysis of Walmart (WMT) Stock: ● Strengths: Global store network, buying power, diverse product range, e-commerce investment. ● Weaknesses: Labor practice criticisms, reliance on physical stores, fierce competition. ● Opportunities: E-commerce expansion, private label growth, sustainability focus. Bill Cara: Cracking the Maverick Code
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● Threats: Competition from online giants, economic downturns, regulatory challenges. Chart: https://stockcharts.com/h-sc/ui?s=WMT
P&F chart: https://stockcharts.com/freecharts/pnf.php?c=WMT,P
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Chapter 38: Trading with Maverick Strategies --A Final Review We now delve into the essential principles of technical analysis and how Maverick investors employ it to achieve long-term success in the stock market. StockCharts.com is my Go-To source of technical analysis charts, concepts, strategies, and terminology. For this chapter, my notes are the critical information taken from the massive database of information contained in the following StockCharts Educational Resources: •
Overview A diverse collection of educational investing articles
•
Market Indicators Descriptions and formulas for our broad market indicators
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Market Analysis Articles about the many different types of market analysis
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Glossary Helpful definitions for common financial terminology
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Trading Strategies & Models Info about technical trading strategies and systems
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Index & Market Indicator Catalog Documentation for the index symbols we provide
As novices would be overwhelmed with endless technical analysis techniques, the Maverick program keeps it as simple as possible, but still requiring a serious study commitment. To become a Maverick takes time, but all the tools have been included in this handbook. Bill Cara: Cracking the Maverick Code
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By focusing on key technical indicators like RSI (Relative Strength Index) and MACD (Moving Average Convergence Divergence), we create a roadmap for well-timed trades, aligning our positions with market trends and maximizing the potential for profitable investments. Key Technical Indicators: •
RSI (Relative Strength Index): RSI serves as our first line of defense in identifying overbought or oversold conditions in the market. It's a crucial tool for determining when to consider making a move. These are Alerts.
•
MACD (Moving Average Convergence Divergence): MACD aids us in spotting trend reversals, providing valuable insights for making informed investment decisions. Trend reversals are Buy/Sell signals.
Using Monthly and Weekly Data with RSI and MACD: •
To keep our positions well-aligned with market trends and avoid significant market declines, we incorporate monthly and weekly data alongside RSI and MACD.
Understanding Price Motion: •
We study price patterns over time to identify optimal moments for investment. This deep analysis helps us make well-informed decisions about when to enter and exit the market.
Navigating Trends and Cycles: •
We use oscillators as our guiding compass in this journey.
•
The MACD Trend Indicator assists us in recognizing prevailing market trends. We Buy, Hold, Sell or Avoid based on MACD.
•
The RSI Cycles Indicator helps us identify overbought and oversold conditions. RSI alerts us to a potential Buy or Sell depending on trend.
The Maverick Investor Mindset: •
"Buy Weakness. Sell Strength." This motto guides our approach, emphasizing the importance of investing in high-quality companies at a discount.
•
This mindset is crucial for successful trading in the Maverick program.
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Technical Analysis vs. Wall Street: •
It's worth noting that many Wall Street experts often underperform the S&P 500, highlighting the need for a different approach.
•
Results back the Maverick strategy and offer a fresh perspective on financial success.
Understanding Accumulation and Distribution Zones in Trading In the trading world, the market often resembles a tug-of-war, with traders evenly matched. When a stock's price drops to a low level, particularly with weak trading volume, a shift occurs where buyers' actions align with those of dominant sellers, marking the start of Accumulation. During this phase, buyers gain influence, perhaps from the support of other buyers, including purchases to close short positions, driving the price up. On the other hand, when the market price surpasses the asset's intrinsic value, or external challenges outweigh opportunities, Distribution takes place. Here, sellers and short-sellers dominate, causing the price to decline. When buying and selling, traders commonly adjust their positions over multiple transactions, 'accumulating' when increasing their stake and 'distributing' when reducing it. However, as investor profiles vary in risk tolerance, time horizons, and interest levels, there's no single point where all sellers or buyers make decisions. These transitional periods, known as 'Zones,' signify the gradual shifts in investment sentiment from bullish to bearish. In summary, Accumulation and Distribution Zones are pivotal in trading, representing the transitional phases of making the most important decisions. Key Facts: •
Emotions run high during these AZ and DZ phases as computer algorithms increasingly influence traders. These times also witness the proliferation of contrived narratives.
•
At the peaks of market cycles, when the prevailing narratives are undeniably positive, the underlying reality is often less rosy. Conversely, when negative narratives abound during market bottoms, the reality is not as dire as it may seem.
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•
Contrarian investment strategies are most effective during these market phases. In most cases, however, investors should base their decisions on conventional analysis.
Guidance: •
Before deciding to sell an entire position, investors must conduct a SWOT analysis to identify any significant changes in their reasons for investing in a company.
•
Accumulation and Distribution Zones often precede or coincide with price trend reversals in technical analysis. This phenomenon can be best identified using a cycles-based technical indicator like RSI.
•
Investors with a long-term perspective use these zones to adjust their positions in a stock. During Accumulation Zones, the strategy is to buy when the stock is weakening, whereas in Distribution Zones, the goal is to sell when the stock is strengthening.
RSI as a Decision-Support Tool: •
RSI is instrumental in identifying Accumulation and Distribution Zones. The RSI extremes on Daily, Weekly, and Monthly data are the only times when Mavericks must bear down.
Understanding RSI with Schematic Mavericks ensure a robust decision-making process by comprehensively understanding RSI levels and their correlation with market phases. The consistent cycle of RSI aids in making informed and strategic investment decisions. RSI values above 70 suggest Distribution (a signal to consider selling), while values below 30 indicate Accumulation (a signal to consider buying).
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Trending Markets and RSI Levels Making decisions at the 70 and 30 levels requires judgment. In rapidly evolving markets, RSI levels may vary significantly, with levels above 80 indicating a Distribution Zone and below 20 signifying an Accumulation Zone. Integrating RSI with additional analytical tools such as MACD, fundamental analysis, quantitative analysis, and macroeconomic analysis is crucial for effective risk management and maximizing potential returns. Point 1: RSI falls to 30-line (Accumulation Zone - Oversold Phase): This marks the start of an oversold phase, suggesting potential buying opportunities as the market is oversold. This initiates the Accumulation Zone. Point 2: RSI falls to 10-line (Extreme Oversold Conditions): Further decline to the 10-line indicates extreme oversold conditions, viewed as an excellent buying opportunity. Point 3: RSI rises to 30-line (Early Recovery): The RSI starts moving towards the 30-line, signaling an early recovery and a BUY/ADD Signal. Point 4: RSI rises to 50-line (Market Stabilization): The market stabilizes as the RSI reaches the 50-line, resulting in price consolidation or sideways trading.
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Point 5: RSI rises to 70-line (Distribution Zone - Overbought Territory): This indicates overbought conditions and signals to start booking profits. Point 6: RSI peaks at 90-line (Extreme Overbought Conditions): Extreme overbought conditions signal a prime moment for selling or taking profits. Point 7: RSI falls to 70-line (Market Correction): A decline from extremely overbought conditions to the 70-line signifies a market correction. Dropping below 70 signifies SELL. Point 8: RSI falls to 50-line (Continued Correction): The market's correction endures, with bearish sentiment prevailing. The cycle concludes with RSI returning to point 1 at the 30-line, potentially initiating another oversold phase and commencing a new round of market phases. Important note: RSI levels might vary in trending markets, with values above 80 indicating a Distribution Zone during swift markets and values below 20 signifying an Accumulation Zone. Summary •
As you chart stocks, maintain a disciplined use of the RSI protocol as a decision-support tool without adjusting levels. Combine this protocol with the MACD trend indicator, fundamental analysis, quantitative analysis, macroeconomic analysis, and robust risk management strategies.
•
This fusion approach helps you avoid succumbing to the Fear Of Missing Out (FOMO) fueled by sell-side and media influence, ultimately empowering you to make informed and successful investment decisions.
•
In summary, technical analysis, especially RSI and MACD, empowers market awareness, skillful application enhances investment decisions, and consistency is the key to success. If all this appears to be rocket science, you are overthinking it.
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•
Remember that Mavericks are matched with five portfolios that align with their self-determined risk tolerance. 0. Currently not appropriate for Mavericks=4 Dow stocks 1. CONSERVATIVE portfolio=11 Dow stock candidates 2. CAUTIOUS GROWTH portfolio=19 Dow stock candidates 3. MODERATE GROWTH Portfolio=20 Dow stock candidates 4. DYNAMIC GROWTH portfolio=19 Dow stock candidates 5. AGGRESSIVE GROWTH portfolio=13 Dow stock candidates
Mentorship is available I encourage student Mavericks to participate on the billcara.com/community website.
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Chapter 39: Optimizing Cash with JPST --JPMorgan Ultra-Short Income ETF for Mavericks Market declines can affect any portfolio, even those of experts like Warren Buffett and Peter Lynch. As a Maverick investor, it's essential to handle such situations wisely by diversifying beyond stocks. Whether you have sold your entire position in a stock or reduced it, here's how, in many bond market conditions, you can manage your cash effectively: JP Morgan's Ultra-Short Income ETF (JPST): ● JPST is a fund managed by JP Morgan Chase, known for its cash management expertise. ● When interest rates fall, JPST offers a chance for short-term income with risk management. Falling rates historically led to rising bond prices. Conversely, like most bonds, JPST prices decline in rising rate scenarios. Opt for cash or one/two-month Treasury Bills during rate hikes. Why Choose JPST: ● In challenging markets, JPST offers prudent, low-risk earnings from secure investments. ● Backed by JP Morgan, it combines safety with competitive returns, outperforming cash, and many other investments. Experienced Management: ● JPST benefits from JP Morgan's seasoned team of 130+ short-term fixedincome professionals worldwide, averaging 22 years of industry experience. How JPST Operates: ● With an average duration of around 4 months, JPST keeps its investments short-term. ● About 80% of its portfolio is in safe, short-term US dollar investments, ensuring diversification. Bill Cara: Cracking the Maverick Code
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Strong Performance: ● Consistently delivering solid, low-risk returns since inception. ● At a reasonable 0.18% expense ratio, it stands out among similar funds. ● JPST has a dividend yield of 4.61% and paid $2.32 per share in the past year. The dividend is paid monthly; the last ex-dividend date was Nov 1, 2023. ● For Maverick investors, JPST is crucial in adjusting to market conditions, providing Total Return Performance and portfolio protection. A Reliable Alternative: ● JPST outperforms typical money market funds, making it a compelling option for cash holdings, especially in flat or falling interest rate conditions. ● JPST delivers 96% of the returns of the US Aggregate Bond Index with lower risk.
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Chapter 40: Learning from the Legends --Your path of inspiration While it's tempting to compare your investment performance to legends like Warren Buffett, Peter Lynch, and perhaps Cathie Wood, it's crucial to approach this journey with a realistic perspective. But you can always find inspiration from these performance leaders. Warren Buffett, the Oracle of Omaha: ● Over decades, Buffett has achieved a remarkable 19.8% annual return, doubling the S&P 500's performance. ● Consistently surpassing Buffett's long-term performance is an enormous challenge due to his careful portfolio construction, extensive research, and unique opportunities. Peter Lynch, the Magellan Fund Maestro: ● Lynch achieved an astounding 29.2% annual return during his tenure at Fidelity, nearly tripling the S&P 500. ● Matching Lynch's performance is highly challenging due to his expertise, research capabilities, and disciplined risk management. Novice investors must set realistic expectations. Trying to match these seasoned professionals without similar resources and insights is challenging. Instead, focus on gradual skill development and patience: ● Invest in well-known, widely-held stocks with exhaustive analyst coverage. ● Concentrate on high-quality Dow 30 companies while tactically timing your holdings. ● Learn from investing legends' strategies and deep-dive studies of corporate fundamentals. ● Diversify your portfolio in individual stocks across sectors and asset classes. ● Embrace a patient, long-term mindset. Bill Cara: Cracking the Maverick Code
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● Enhance your research skills for informed decisions. ● Stay informed and adaptable as market conditions change. Taking Advice from Market Specialists and Innovation Visionaries: ● There are many online services that for a substantial subscription cost delve into story stocks, technical systems, and the like. ● Mavericks are not ready to be taking guidance from specialist investors no matter how much publicity they receive. ● An example of a recent high profile so-called visionary is Cathie Wood. Her success relies on in-depth knowledge of high-risk disruptive technologies, concentrated sector holdings, and a long-term perspective. Replicating her performance requires expertise in thematic investing and extensive research, plus highly efficient trading skills. In conclusion, building a solid investment strategy takes time and dedication. While emulating legends may be challenging, focus on personal growth as an investor, aligning your strategy with your goals and risk tolerance. Investing is a lifelong journey, not a race, and with the right approach, you should always work toward meaningful goals and objectives.
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Chapter 41: Building Your Maverick Portfolio --You are the captain of your financial ship In the preceding chapters of The Maverick Investor's Handbook, we've taken an in-depth journey into investing. From understanding your mindset to identifying high-quality companies and mastering various investment strategies, we've covered much ground. However, the truth is that many individuals lack the knowledge and confidence to navigate this complex landscape on their own. As I was organizing the content for this handbook, I received a message from a member of the Cara Community that struck a chord. The message highlighted the need to bridge the gap between recognizing a financial problem (i.e., a lack of control over one's financial future) and finding practical, cost-effective solutions. This chapter delves into the essential steps of setting up your investment portfolio, understanding and applying your risk tolerance, and, ultimately, taking control of your financial future. But before diving into the specifics, remember that being a Maverick means taking full responsibility for your investment decisions. You are the captain of your financial ship, and your success rests firmly in your hands. Determining Your Risk Tolerance Profile: Utilize the 10-question Maverick Personal Investment Risk Tolerance Questionnaire from Chapter 4, calculate your score (between 10 and 45), and discover your risk tolerance profile. Each category aligns with a specific Maverick Portfolio. ● Conservative Investor (Risk Profile Score=10-15): You prioritize protecting your investments and are more risk-averse than the average investor. Your Maverick CONSERVATIVE portfolio is designed to minimize potential losses, partly by stock selection and market timing (i.e., greater use of cash at times of enhanced market volatility). Bill Cara: Cracking the Maverick Code
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● Moderately Conservative Investor (Risk Profile Score=16-21): You have a balanced approach, seeking both growth and stability. Your Maverick CAUTIOUS GROWTH portfolio will aim for a mix of conservative and growth-oriented Dow 30 stocks for modest medium-term total returns. ● Moderate Investor (Risk Profile Score=22-29): You balance caution and ambition as a moderate investor. You aim to achieve reasonable growth while managing risk. Your Maverick MODERATE GROWTH portfolio will typically include a mix of conservative and moderately aggressive Dow 30 stocks to maintain a stable yet potentially rewarding financial strategy. ● Moderately Aggressive Investor (Risk Profile Score=30-35): You are comfortable taking on a higher risk to potentially achieve higher returns. Your Maverick DYNAMIC GROWTH portfolio will include a higher allocation to high-growth-oriented Dow 30 stocks. ● Aggressive Investor (Risk Profile Score=36-45): You are willing to accept significant risk for maximum potential returns in your Maverick AGGRESSIVE GROWTH portfolio. You are prepared to accept large drawdowns of your investment capital in volatile markets. Model Dow 30 Portfolios: We've designed five model portfolios featuring Dow 30 companies tailored to match your risk tolerance. Timing the market is crucial for capital protection. Our Maverick MODERATE GROWTH Portfolio, ideal for those with a risk profile score of 22-29, comprises Apple (AAPL), Caterpillar (CAT), Chevron (CVX), JP Morgan Chase (JPM), McDonald’s (MCD), Microsoft (MSFT), Nike (NKE), UnitedHealth Group (UNH), Visa (V), and Walmart (WMT). This selection aligns with a moderate risk profile, scored between 22-29 out of a maximum of 45. There are four other portfolios we recommend based on different risk profiles. Also, at December 3, there are four Dow 30 companies that fail the suitability test for any Maverick Investor portfolio based on weaknesses in finances or operations. Bill Cara: Cracking the Maverick Code
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Number of Dow 30 stocks that are candidates for each Maverick portfolio: •
Suitable for risk profile score of 10-15: CONSERVATIVE portfolio=11 Dow stocks
•
Suitable for risk profile score of 16-21: CAUTIOUS GROWTH portfolio=19 Dow stocks
•
Suitable for risk profile score of 22-29: MODERATE GROWTH Portfolio=20 Dow stocks
•
Suitable for risk profile score of 30-35: DYNAMIC GROWTH portfolio=19 Dow stocks
•
Suitable for risk profile score of 36-45: AGGRESSIVE GROWTH portfolio=13 Dow stocks
Creating Your Portfolio at Your Broker: Building an investment portfolio might seem daunting, particularly when dealing with high-priced stocks like Microsoft, especially if starting with a small account. However, constructing a diversified portfolio with fractional shares has never been easier, thanks to brokers like Interactive Brokers. Apple Caterpillar Chevron JP Morgan Chase McDonald's Microsoft Nike
AAPL CAT CVX
$500.00 $500.00 $500.00
$174.79 2.8606 shares $273.06 1.8311 shares $166.28 3.0070 shares
JPM MCD MSFT NKE
$500.00 $500.00 $500.00 $500.00
$145.73 3.4310 $272.22 1.8367 $317.01 1.5772 $90.85 5.5036
UnitedHealth Visa
UNH V
$500.00 $506.10 $500.00 $235.08
Walmart
WMT
$500.00 $5,000.00
$162.35
shares shares shares shares
0.9879 shares 2.1269 shares 3.0798 shares
Fractional shares enable you to invest any amount you want, no matter the stock's price. For example, you can evenly distribute $5,000, $100,000, or any amount you wish across ten stocks in your Maverick portfolio, creating a simple, efficient, balanced investing approach. Bill Cara: Cracking the Maverick Code
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Accessing Maverick Investor Portfolios: To explore Maverick Portfolios and the Maverick Index, register on BillCara.com/Maverick. In addition, our website, BillCara.com, offers Mavericks a week-by-week performance analysis and transparent insights into the blue-chip Dow 30 companies for a comprehensive understanding of the financial world. You might wish to trade them as I do via Interactive Broker's award-winning platforms like Trader Workstation (TWS) or IBKR Mobile App. These platforms provide the functionality to manage your portfolio, for real or paper trading. Choosing the Right Portfolio Management Platform: Koyfin: For effective market research, Koyfin is a standout choice. With trend analysis, financial tools, customizable dashboards, and watchlists, it caters to Maverick investors' needs. While advanced features have a cost, the basic free package suffices for Dow 30-only portfolios. Trusts and Fiduciaries: Considering potential conflicts of interest, we recommend setting up a Living Trust for client protection. A Living Trust, effective during your lifetime, aligns with your investment goals. Although we can't provide direct guidance, we may be open to collaborating with your lawyer/accountant to create a trust. Subscription Service: Opt for our low-cost subscription service for a hands-off approach. Subscribers to the Maverick Program can upload portfolios and receive periodic reports, alerts, signals, and more based on their participation level. You can order the Maverick books only via billcara.com, and beyond that there is no cost to participate in Maverick discussions on the website. During 2024, I anticipate there will be a subscription service for Alerts and Buy/Sell Signals that I will send by text messaging that will cover all Dow 30 stocks.. In summary, this chapter offers a clear path from recognizing financial challenges to effective investment portfolio management. Bill Cara: Cracking the Maverick Code
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Chapter 42: The Maverick’s Handbook Summarized --A Guide for Novices This handbook aims to be your reliable guide in creating a stable, long-term stock portfolio tailored to your financial goals. It empowers novices, students, and retirees to enter the stock market strategically. Ten Crucial Points Recap: 1. Building Trust: We initiated our journey by establishing trust and understanding your financial goals, risk tolerance, and time horizon as a novice investor. 2. Equity Outperformance: We explored historical data showcasing equities' impressive long-term outperformance, emphasizing their wealth accumulation potential. 3. Market Volatility: Emphasized the normalcy of short-term market volatility, urging focus on a long-term investment strategy. 4. Discouraging Short-term Trading: Discussed the risks of timing the market briefly, highlighting the advantages of a long-term approach. 5. Portfolio Rebalancing: Emphasized the importance of periodic portfolio rebalancing to align with risk tolerance and achieve long-term goals. 6. Power of Compounding Returns: Delved into the incredible power of compounding returns, illustrating how quality equity investments can lead to substantial wealth over time. 7. Risks of Market Beating: Examined the challenges of consistently outperforming the market, underscoring the value of discipline. 8. Short-term Underperformance: Reminded that even well-diversified portfolios experience short-term underperformance during market downturns, emphasizing long-term commitment. 9. Diversification Benefits: Argued the benefits of a diversified portfolio, inspired by legendary investors like Warren Buffett and Peter Lynch. 10. Staying Engaged: Committed to providing regular updates and open communication, encouraging you to stay engaged and confident on this rewarding journey. Bill Cara: Cracking the Maverick Code
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Maverick Strategies Review: ● Value Investing: Identifying undervalued assets based on fundamental analysis, seeking out strong financials and low valuations. ● Contrarian Investing: Going against the crowd, investing in out-offavor undervalued stocks, capitalizing on market overreactions. ● Trend and Cycle Investing: Profiting from market trends and cycles by buying low and selling high while staying invested during positive trends. ● Cost Basis Investing: Reducing the cost basis of dividend-paying investments to exceed the quoted annual dividend yield. The Maverick strategy is unconventional, ignoring Wall Street narratives, avoiding distractions, utilizing free internet resources for research, and aligning with your unique financial goals and risk tolerance. Commitment and adherence to principles can lead to outperformance of the S&P 500, a feat achieved by very few professional investors. Beating the Dow means beating the market. In conclusion, a long-term perspective, due diligence, and patience enable confident investing, while trading against powerful organizations leads to perpetual uncertainty and low self-confidence. Most people turn to Wall Street for help, which is a mistake. Choosing ten of the best Dow 30 companies that meet your needs and trading only at extreme trend reversals offers a path to confident investment supported by facts. Remember: "Wall Street needs you. You don't need Wall Street." I rest my case. /Bill
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Glossary of Investing Acronyms 1.
AI - Artificial Intelligence
2. AZ and DZ - Accumulation and Distribution Zones (used in technical analysis) 3. BEA - Bureau of Economic Analysis 4. CCI - Commodity Channel Index (used in technical analysis) 5. CEO - Chief Executive Officer 6. CME - Chicago Mercantile Exchange 7. DCF - Discounted Cash Flow 8. DJIA and Dow 30- Dow Jones Industrial Average 9. D-W-M - Daily, Weekly, Monthly (used in chart analysis) 10. EPS - Earnings Per Share 11. ETF - Exchange-Traded Fund 12. FCF or CF - Free Cash Flow or Cash Flow 13. FOMC - Federal Open Market Committee 14. FOMO - Fear of Missing Out 15. FTM or NTM– Forward (or Next) Twelve Months (used in financial data) 16. GDP - Gross Domestic Product 17. GICS - Global Industry Classification Standard (sector-group-industry codes) 18. MACD - Moving Average Convergence Divergence (used in technical analysis) 19. MoM and YoY - Month-over-Month and Year-over-Year 20. NYSE and NASDAQ - New York Stock Exchange and National Association of Securities Dealers Automated Quotations 21. P&F - Point and Figure (used in technical analysis) 22. P/B - Price-to-Book Ratio 23. P/E or PE - Price-to-Earnings Ratio 24. P/S - Price-to-Sales Ratio 25. PEG - Price/Earnings to Growth Ratio 26. PMI - Purchasing Managers' Index 27. Q1 or 1Q2023 - First Quarter of 2023 28. RSI - Relative Strength Index (used in technical analysis) 29. S&P and S&P 500- Standard & Poor's 30. SWOT - Strengths, Weaknesses, Opportunities, Threats analysis 31. TTM - Trailing Twelve Months (used in financial data) 32. VGI – Value-Growth-Income stock designations Bill Cara: Cracking the Maverick Code
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Acknowledgments I want to acknowledge the extraordinary debt I owe to members of the Cara Community, without whom I could not have published this book. The biggest contributors of ideas for content were Dan DeNeve (somewhere near Savannah, Georgia) and my brother in Thunder Bay, Ontario, Terry Ciccarelli (yes, I changed my name to Cara simply because it is easier to say but still Italian). Terry is a retired certified financial planner and entrepreneur. He sold me the importance of readers’ understanding of Risk Tolerance and linking it to five portfolios instead of the one I had intended. DeNeve (deneve83 at the Cara Community) is Major Dan DeNeve, who has been tasked with establishing his US Army division “with good automation and systems and processes.” I am proud to have their support. The book's scope came to me from a comment about my earlier books by Dan DeNeve’s wife, Shannon. She wanted to learn how to invest and to be able to share her knowledge with their children. My earlier books were over the heads of novices, she said. Her husband added that those books would be mostly read by people with a fair bit of experience in financial markets and were looking to improve. I agreed that I needed to speak to novices, students, retirees, and others with almost no investment and trading knowledge. After edit reviews from the Cara Community, including thankfully many from Joseph A, thetindalls6, and NYUGrad, this book hits the mark. Still, we all agree that it’s a two-way street. Readers will have to put in the work I did so many years ago. Learning a life skill takes time. At least I know there are millions of you that I can help. For this book, the name Maverick came to me from a neighbor whose name I don’t even know. I had been invited to tell my life’s story to a men’s club, at the end of which a retired senior banker said, “Well, you are quite the Sh*t Disturber.” I thought “Maverick” was more appropriate, and that’s when the light went on. I wanted to tell people who lacked experience in the financial markets how best to survive against the nonsense we independent investors put up with daily from bankers who, first and foremost, promote their self-interests. If I do a good job of it, these bankers can call me whatever they want, but I truly am a maverick. Pat Cara, who has known me as a maverick for 54 years of marriage, edited the title, telling me this was more than a book; it was a comprehensive Handbook or guide. She also edited or suggested changes in many of the chapter titles. Bill Cara: Cracking the Maverick Code
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Andy Magee of Oxfordshire, UK, designs my printed books' typesetting and covers. Andy works closely with Dan DeNeve and Glendys Lopez, who were assigned to upload correctly formatted books to BillCara.com (published and sold by Issuu), Amazon Kindle, Kobo, and Draft2Digital. I learned to write but admit not being good at self-publishing. The credit for my writing competence started with the late Frank Kaplan, the editor of Canadian Doctor, a magazine that solicited the article that launched my writing career in 1976. Frank taught me the importance of readability and structure. I’ll never forget his advice that “Every piece of writing needs book ends,” which means the start and the ending must be linked to the point of it. Finally, a round of applause goes to the companies that provide various free electronic tools and aggregated data: Value Line, Investing.com, TipRanks, MarketBeat, Yahoo Finance, FinViz, KoyFin, and IBKR. I use them all daily.
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Do you feel Wall Street has an unfair advantage? Meet Bill Cara, an acclaimed investment pro who speaks out on market risks, opportunities, and inequities. With multiple professional designations and advanced degrees, followed by decades of industry leadership and 20 years of daily market commentary,
Bill
intelligently
built
an
online
community and readership ranked among the most elite. In his latest books, Trader Wizard 2023, Stock Market
Literacy,
and
The
Maverick
Investor’s
Handbook, he shares a perspective that can't be found in the classroom. In his quarterly Cracking the Maverick Code books, he does a deep dive into the corporate fundamentals and stock prices of all of the Dow 30. Whether you're a novice or veteran, investor or trader, advisor, lawyer, or accountant, join the Cara Community of individuals who have already been transformed by Bill's mentorship at BillCara.com and become a Free Markets Patriot(sm) and a Maverick.
Why choose “The Maverick Investor’s Handbook”? Bill Cara crafted this book series with novices, students, career-changers, and retirees in mind – individuals eager to construct a lasting securities portfolio. Liberating you from the noise of ubiquitous Wall Street advice, Bill champions a simple yet powerful long-term investment strategy, emphasizing, "Simplicity and patience will always win." You can achieve remarkable results by adopting a minimalist approach tailored to your needs and concentrating on a carefully curated portfolio of just ten globally renowned companies. This book guides you through mindset development, empowering you to comprehend your investments' risks and rewards fully. Secure your investments today with "The Maverick Investor’s Handbook" and the quarterly supplement, "Cracking the Maverick Code." Join a lifelong journey toward financial empowerment and growth with the guidance of an industry expert recognized by Forbes as "Best of the Web" and “Favorite."
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