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Computerized Investing > Second Quarter 2010

The Stockpiling Approach to Stock Trading

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by Cara Scatizzi

In the September/October 2007 issue of Computerized Investing we highlighted the investing strategy outlined in Phil Town’s book “Rule #1” (Crown Publishers, 2006). Rule #1 investors seek out companies that offer a margin of safety by trading at a discount to calculated “fair value.” Town’s follow-up to “Rule #1,” the just-released book “Payback Time” (Crown Business, 2010), tries to benefit from the lessons learned from the market meltdown of late 2008 and early 2009.

Echoing many of the sentiments outlined with Rule #1, this book encourages investors to treat investments like they would a small business they owned. Town recommends very little diversification and buying more shares as prices fall (stockpiling). He advocates this as a long-term trading strategy based on the theory that if you are buying shares as the price falls, you need to have time to wait for the price to rise.

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Discussion

David from AL posted over 2 years ago:

I have a current version of SIP. The formula for the custom field in not valid when I copied and pasted it:IIF([EPS Cont-Growth 5yr]>=10,1,0)+IIF([Sales-Growth 5yr]>=10,1,0)+IIF([Free Cash Flow-Growth 5yr]>=10,1,0)+
IIF([Equity (common) Growth-5yr]>=10,1,0)+IIF([ROIC - Avg 5yr]>=10,1,0)+IIF([LT debt/free cash flow 12m]<=3,1,0)

Please verify this and post any correction needed. The formulas for the custom fields are greatly appreciated! Thank you.


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