PHIL TOWN

Using Trading Tools

The arrows that Phil Town uses are at Investools and they make for easy analysis, but virtually every research site and online broker now has these key tools.

In Rule #1 I show you how to set them up on MSN Money, and the principle holds for Yahoo, TD Ameritrade, Scottrade etc. You may not have arrows on the chart, but it's not rocket science to read the actual indicator and make a decision.

Read them like this:

Stockpiling: You Better Know Your Business is Wonderful

Here's a letter I recently received from a Rule #1 reader:

Dear Phil Town:

I have done very well with Rule 1 investing, and I am very disciplined about it.

However, one of my wonderful companies, Immucor (BLUD), which meets every criteria and then some, was served a subpoena by the Department of Justice relating to anti-trust and the stock plunged as much as 34% in one day.  For many days before the announcement, the stock had been going down, even after a good earnings report in early April.  I kept asking myself, “Who’s dumping this stock?” and happily buying more.

Is there some way I could have seen this coming?  Am I correct in not panicking and taking the view (as some analysts have) that there is most likely nothing to this investigation?  Have you ever experienced this “disaster” phenomenon?

Regards,

Jan

Jan has given me a wonderful example of the difference between stockpiling (or consuming) a business and trading it.  In both cases, we want the business to be wonderful, but if we are going to stockpile this business as it goes down in price, the bar is raised for knowing that the business is wonderful.  Trading sucks up some of the risk.