Seven Timeless Principles BARRY JAMES, PRESIDENT AND CEO JAMES INVESTMENT RESEARCH

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1 Seven Timeless Principles BARRY JAMES, PRESIDENT AND CEO JAMES INVESTMENT RESEARCH

3 Investing Isn t Gambling Don t gamble. Take all your savings and buy some good stock and hold it til it goes up, then sell it. If it don t go up, don t buy it. - Will Rogers

4 The House Wins! Company Revenues/Gross Margin MGM $6.0 Bil (37%) Las Vegas Sands $9.4 Bil (37.1%) Wynn Resorts $5.3 Bil (37.1%) Boyd Gaming $2.1 Bil (44%)

5 Differences Odds favor investors Gambling Immediate loss of 100%, maybe make 100% Large Stocks worst loss since 1926, 43%; 61 of 85 years positive = 72% odds of gain Time favors investors Gambling gets immediate results, investing takes longer Investors have a higher purpose Larger group can benefit rather than a single person

6 Avoid All Scams Common sense is best defense If it sounds too good to be true, it is Confirm claims Get direct access Remember discipline

7 Know Yourself This above all: To thine own self be true. - Shakespeare, Hamlet, Polonius advice to son Leartes, Act 1 Scene 3

8 Stock drops 10%, what would you do? a) Sell b) Sell when back to even c) Buy more

9 What do these answers mean? a) Risk avoider b) Evener not comfortable with risk, no good longterm strategy, needs adviser c) High level of risk tolerance bold, maybe rash, but able to see things differently than crowd Follow guidelines established in advance

10 Avoid Losing Money Rule #1: Rule #2: Never lose money! Never forget rule #1! Warren Buffet Warren Buffet

11 Risk Analysis First Filter every investment through the prism of risk/loss Losses are deadly Loss of 50% takes 100% gain Loss of 25% take 33% gain Volatility kills performance 5,5,5,5,5 vs 5,10,5,10-5 Compounded = 27.6% vs 26.7%

12 What s the most important word in investing? When. Timing isn t everything. It s the only thing.

13 It s not what you own but when you own it 10 best days in Dow of the last 50 years accounted for about half the total return for those 50 years 10 worst days in Dow, if missed, returns would be more than doubled Example Netflix 2010, 2011: Perfect timing isn t required to make a solid profit, just good timing.

14 2010: % 2011: -60.6% Source: Bloomberg

15 When to Buy Start with long-term holding in mind Set a time frame for a solid, strong advance Set an optimal minimum holding period Relative strength and its effectiveness Use techniques to try and buy on a dip if possible

16 How Long to Hold Determine characteristics to hold or sell based on the company and stock, not just market volatility Possible triggers: time, price, performance, valuation or earnings Incorporate the trigger in your discipline Qualcomm,

17 1999: +2,619% Source: Bloomberg

18 2000: -49% Source: Bloomberg

19 When to Sell When you sell is more important than what/when you buy Our test Random buy, steady sell discipline , 4% better than universe Start with the end in mind Use a trigger that works for you

20 Hang onto winners, sell losers If It ain t broke, don t fix it. - Bert Lance

21 Hang onto winners, sell losers a prime example.

22 Why hold winners? Simple math: you can only lose 100%, but you can make 1000%+ They re hard to come by Biogen(BIIB) % S&P +15.1% % vs S&P +2%

23 Avoid Following the Crowd When everyone s discovered a good deal it s long since gone. -Barry James

24 Manias Rapid and extreme run up in prices not justified by fundamental values Becomes common knowledge it s a sure thing Pathway for the average person to invest opens All believe they will be able to sell at a good price if things go south Those giving warning are deemed old-fashioned and irrelevant

25 Is it too popular? Follow the smart money Watch dumb money and do the opposite Follow corporate actions Investor sentiment surveys Check cash levels of mutual funds Prices paid to hedge investments Track financial headlines

26 Diversify, diversify, diversify Don t put all your eggs in one basket

27 Why Diversify? - Disasters Financial Collapse Market Swoons Government Regulations and Incentives

28 Diversification By The Numbers 17 minimum number of stocks a good number 50 maximum > 50 lose the power of your big winners

29 Let Time Work for You Time is money. -Benjamin Franklin

30 Making it Work 1. Self/Client Inventory 2. Outline Objectives Time and Targeted Return 3. Create Guidelines to Rule Your Investments Investing Style 4. Develop Measurement System That Accurately Reflects What You re Trying to Do 5. ID Techniques to Manage Money That Fit Your Investing Style

31 Thank You! Questions?

Tips for potential Capital Market Investors

Tips for potential Capital Market Investors A financial advisor once told It doesn t matter how good of job someone has, if they want to acquire wealth in this life, at some point they are going to have