Fire Your Stock Analyst makes our best books on investing list because it shows how to develop a repeatable, measurable process to support investment decisions. It creates a set of stock analysis tools distilled from interviews with investing gurus and shows how to organize them as an investment strategy. Both a value investment strategy and a growth investment strategy are illustrated.
As the subtitle suggests, you can be “analyzing stocks on your own”.
Consistent with our best books on investing philosophy, the book also stresses the importance of understanding when to sell or exit a position.
In preparing the book, Harry Domash interviewed many investment gurus but resisted the temptation to write a chapter about each guru. Instead, he took the information and created a set of analysis tools reflecting the acquired knowledge of many people. A refreshing approach - the acknowledgement section of the book provides a brief synopsis of each guru and his or her general approach.
This section begins with the rationale for having an organized approach to investing. It follows with an overview of the risks inherent in markets, sectors and industries. The point is to apply this type of judgment before the screening process takes place.
For a purely mechanical approach to investing, the initial chapters may have little value. On the other hand, even investors using a mechanical approach would be wise to consider issues like pending litigation prior to entering a position. Many books on investing do not mention these issues.
This section ends with a review of screening and sample screens available on the most popular screeners.
The analysis tools section is derived from guru interviews and reflects Harry’s experience in writing investing tutorials. It consists of eleven distinct tools to help in the process of evaluating candidate stocks. Many, but not all, of the tools are amenable to stock screening.
Each of the tools described is robust.
The book details how to apply the tool to either a value or a growth strategy. For example, the first analysis tool describes techniques to analyze the recommendations of market analysts. Creating a sentiment indicator from analyst recommendations is one of several approaches many investors many not be familiar with.
Another of the eleven analysis tools explains growth at a reasonable price – sometimes referred to as GARP. As with each of the tools, the rationale used to create the tool and the applicability to investing styles is thorough. More so than most books of investing.
The last tool even explains why it makes sense to look at a stock chart.
Whether or not you choose to put these tools in your investment toolbox is a personal decision. But understanding the rationale underlying each tool is worth your time if you are serious about creating and managing your own stock investment strategy.
By the time you get to this section, you will be familiar with an excellent set of tools complemented by lots of investment nuggets in sidebars.
This section puts it all together.
After a general description of why a process makes sense, a chapter is devoted to sample investment strategies: one for value and one for growth. Unlike some books on investing, one investing style is not favored at the expense of the other.
The frosting on the cake is the checklist for each investing style.
While you may choose not to include the analysis tools into your investment strategy, if you plan to improve your investing results, you need to have a measurable, repeatable investment process in place.
And that, in our opinion, is the real value of the book – developing a repeatable, measurable process for each of your strategies. Create a written description of each personal strategy describing the buy criteria and the sell criteria. Make a checklist.
The analytical tools and the description of each provide a lot of great investment information. Implementing some of the tools using stock screening is straightforward but some of the tools will require personal analysis. In either case, you should be able to improve the performance of your stock market investments by considering what the book offers.
This book is worthwhile. If you don’t own it and cannot borrow it, it is available for Kindle or as a paperback at Amazon. The Harry Domash website, www.WiningInvesting.com, is no longer available.
Domash, Harry. Fire Your Stock Analyst! - Analyzing Stocks on Your Own (FT Press, 2010).
Harry Domash is an MSN Money investment columnist and the author of investing tutorials that appear regularly in print. He publishes 2 web sites: DividendDetective.com, a site specializing in high dividend investing and WinningInvesting.com, a free site featuring “how-to” investing tutorials and other resources.