16 Investing Lessons From Bill Carrigan of Getting Technical

Investing

My full interview with Bill Carrigan of Getting Technical originally appeared in my national bestselling book, Market Masters, which is available at Chapters, Indigo, and Coles as well as Costco and Amazon.ca.

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“I’ll be the old guy with the black jacket on,” said Bill Carrigan the day before we met at the Grimsby food court for our interview. In hindsight, the Grimsby food court was not the ideal location for our interview — it was small, noisy, and busy. So, before the interview got started, I asked Bill to raise his voice and talk as close to the recorder as he could throughout our conversation. He complied, but not until he got a cold-cut sandwich from Mr. Sub, and a double double from Tim Hortons, both of which he ate and drank through the first half of the interview. I didn’t mind the munching or the noisy atmosphere, though. This was pure, unadulterated Bill Carrigan, the “straight shooter.” He was honest, brash, and, above all, chock-full of bang-on observations about the market. I was able to watch some of Bill’s astute predictions from our interview play out in the stock market over the next couple of months. I was awe-struck. Bill is a genius — although, to the people around us in the food court, Bill probably came across as just an old guy with a black jacket on.

Bill is very pessimistic about both the markets and the investment industry, questioning the way in which they operate. To illustrate, his Twitter bio reads, “With 30 years’ experience in the investment industry I have learned to never get sucked into a compelling story — leave it for the Investment Sheep. Baahhh humbug.” During our interview, he expounded upon the compelling story of the month: Patient Home Monitoring (PHM). Sarcastically he said, “We’re all going to be rich, we’re all going to make a fortune. Nobody’s going to lose buying that stock.” I guess that’s the opinion of Bill’s Investment Sheep. Clearly, PHM ranks high on Bill’s shitstorm meter.

If it doesn’t become obvious during the interview, Bill is also a fan of the immensely popular Canadian mockumentary TV show Trailer Park Boys, where the character Jim Lahey often uses “shitstorm” in reference to any dire situation fuelled by Ricky, Julian, or Bubbles, the trailer park’s hellions. Truth be told, I was against any form of technical investing in my early days of investing. Today, while I don’t use technical investing to ultimately inform my final stock selection, it does help me validate my investment decisions. I leverage technical analysis to assess a stock’s relative strength, as well as monitor its moving-day averages, and support or resistance levels. Bill has lots more technical indicators to share, many of which could very well become key inputs into your stock selection process. What’s especially intriguing about his technical investing framework is that he combines technical indicators to uncover future takeover plays.

Bill was a technical sub-advisor to Stonebrooke Asset Management Ltd., which manages the Hybrid Investment Program under the Elite Wealth Strategies for Union Securities Ltd. During his time there, Bill made five astute technical selections that were eventually the subject of takeover bids: Gerdau Ameristeel, El Paso Corp., Biovail Corp., Viterra Inc., and ShawCor Ltd. He has been writing a business column on technical investing in the Toronto Star since 1997, and continues writing the Getting Technical Market Newsletter, which he founded in December 1998.

Bill Carrigan’s 16 Investing Lessons:

1) “Usually when the compelling story gets very compelling, the stock has pretty well peaked. . . . The biggest mistake investors make is getting sucked in by a compelling story.”

2) “If you buy into a long base [i.e., consolidation] and it’s a decent stock, and it’s overlooked, the worst thing that can happen to you is nothing.”

3) “If a stock’s going sideways, but the accumulation distribution lines are still slightly rising, that tells me that there’s smart money buying the stock.”

4) “Never sell a stock just because it’s ‘expensive.’ Because, oftentimes, expensive stocks simply get more expensive.”

5) “The stocks that are cheap, they just keep getting cheaper. ‘Cheap’ means it’s cheap for a reason.”

6) “Basically anything in a bear market should make a new low within a six-month window of twenty-six weeks. To me that’s the definition of a bear. So if you have a market that trades down, makes a correction, and then doesn’t take that low within six months, then it’s not a bear.”

7) “Half of the activity of the stock can often be [the money manager’s] money, so the stock’s rise can be a self-fulfilling prophecy. He’s the one driving the stock higher. But then eventually it comes time to sell. And when everybody wants to sell, who’s left to buy?”

8) “If you think there’s money going into the group [of stocks], you want to be there early. However, if there’s an exchange-traded fund that covers the group, you’d be better off to buy the exchange-traded fund.”

9) “I like to deduce the signals that are not popular. Very corny and old-fashioned signals. The most old-fashioned signal is a trend line. It’s hardly ever used today. . . . Is it going up or going down? All a technician wants to know is, is it going up, is it going down?”

10) “I never use the [death] cross. What I use is the difference — when the 50-day moving average gets too far above or too far below the 200-day moving average, that’s all I care about.”

11) “One of the rules of the dominant theme is that it persists for a generation or more and it also has to be investible. [Also], dominant themes can pop and return in different forms.”

12) “When you buy options, you need to get three things right: which way’s it going to go [direction], when it’s going to do that [time], and to what extent it’s going to do that [magnitude].”

13) “Point-and-figures are . . . very reliable, but hardly anybody uses them. So when you have a tool that works that hardly anybody else uses, then use that tool.”

14) “Usually when a stock is going up, you’ll see one press release a week. And then when things start to go bad, you get almost one press release every day. When the press release machine really starts to crank, you’ve got to be really careful.”

15) “The financial press is looking for headlines or news that people are going to be interested in reading. They really like to focus on a crisis. Usually the crisis occurs at the end of a move, not at the beginning.”

16) “Roll-ups have these tremendous growth acquisition stories. But they’re using their stock prices as currency. Eventually these stories come to an end.”

MarketMasters

Robin Speziale is the national bestselling author of Market Masters, which is available at Chapters, Indigo, and Coles as well as Costco and Amazon.ca. He lives in Toronto, Ontario. Learn more about Market Masters.

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