Bill Ackman initiated two new (undisclosed) positions in his Pershing Square Hedge Fund, representing 13% of committed capital. New Position 1: 4% weight. New Position 2: 9% weight. Bill’s in recovery mode, as his fund was down -20.5% in 2015 and -13.5% in 2016 (net returns). Based on my interview with Bill in my book, Market Masters, he’s likely to have invested in North American Companies, with market caps > $15 billion. I predict that Pershing Square will post a positive net return this year. Read more about Bill Ackman’s new positions here.

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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I interviewed top investors in my book, Market Masters. Some invested primarily in strong capital compounder companies. However, there’s a gentleman named François Rochon of Giverny Capital, located in Quebec, who doesn’t appear in my book (maybe the sequel…) but has been very successful investing in these types of companies through many business cycles. I want to bring him to your attention now. Since inception, Mr. Rochon’s “Rochon Global Portfolio” has delivered a 16.3% compound annual return. You can dig into his returns here and learn more about his investment strategy here.

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.

C stands for Current earnings. Per share, current earnings should be up to 25%. Additionally, if earnings are accelerating in recent quarters, this is a positive prognostic sign.

A stands for Annual earnings, which should be up 25% or more in each of the last three years. Annual returns on equity should be 17% or more.

N stands for New product or service, which refers to the idea that a company should have a new basic idea that fuels the earnings growth seen in the first two parts of the mnemonic. This product is what allows the stock to emerge from a proper chart pattern of its past earnings to allow it to continue to grow and achieve a new high for pricing. A notable example of this is Apple Computer’s iPod.

S stands for Supply and demand. An index of a stock’s demand can be seen by the trading volume of the stock, particularly during price increases.

L stands for Leader. O’Neil suggests buying “the leading stock in a leading industry”. This somewhat qualitative measurement can be more objectively measured by the Relative Price Strength Rating (RPSR) of the stock, an index designed to measure the price of stock over the past 12 months in comparison to the rest of the market based on the S&P 500 or the TSX 300 over a set period of time.

I stands for Institutional sponsorship, which refers to the ownership of the stock by mutual funds, particularly in recent quarters. A quantitative measure here is the Accumulation/Distribution Rating, which is a gauge of mutual fund activity in a particular stock.

M stands for Market Direction, which is categorized into three – Market in Confirmed Uptrend, Market Uptrend Under Pressure, and Market in Correction. The S&P 500 and NASDAQ are studied to determine the market direction. During the time of investment, O’Neil prefers investing during times of definite uptrends of these indexes, as three out of four stocks tend to follow the general market pattern.”

Source: https://en.wikipedia.org/wiki/CAN_SLIM#cite_note-IBD-1

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.

1) Does the company have products or services with sufficient market potential to make possible a sizeable increase in sales for at least several years?

2) Does the management have a determination to continue to develop products or processes that will still further increase total sales potential when the growth potential of currently attractive product lines have largely been exploited?

3) How effective are the company’s research and development efforts in relation to its size?

4) Does the company have an above-average sales organization?

5) Does the company have a worthwhile profit margin?

6) What is the company doing to maintain or improve profit margins?

7) Does the company have outstanding labor and personnel relations?

8) Does the company have outstanding executive relations?

9) Does the company have depth to its management?

10) How good are the company’s cost analysis and accounting controls?

11) Are there other aspects of the business somewhat peculiar to the industry involved that will give the investor important clues as to how the company will be in relation to its competition?

12) Does the company have a short-range or long-range outlook in regard to profits?

13) In the foreseeable future, will the growth of the company require sufficient financing so that the large number of shares then outstanding will largely cancel existing shareholders’ benefit from this anticipated growth?

14) Does the management talk freely to investors about its affairs when things are going well and “clam up” when troubles or disappointments occur?

15) Does the company have a management of unquestioned integrity?

Source: Common Stocks and Uncommon Profits. Philip Fisher.

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.

[This article was originally printed in the Financial Post]

I was reading a new investment book this week, Market Masters, by Robin Speziale. (Well, I sort of had to read it, since there was a chapter on me in it!) The book is a collection of interviews with successful investors, and makes for a very good read. At the end, Speziale speculates on what actually makes a good investor.

One of his conclusions: good investors simply love the investment game. If you think about it, most successful investors are very, very rich, yet most keep plugging away, trying to find good stocks and get great performance, year after year. They are not doing it for the money. The love of the process, and the passion for investments, means that these portfolio managers are never really ‘working,’ but just doing what they love. And why not? There are many things to love about the investment world, whether you are a professional or not. Here are five of them:

Lazy people can make money, and get annual raises too!

When speaking about investments to young people, I always highlight how investments are one of the only ways a lazy person can make money. Invest in dividend paying companies, and every three months, or every month, another deposit lands in your account. What did you have to do for this free money? Absolutely nothing. What’s more, if you buy the right company, you might get annual raises — dividend increases — as well, all for, again, doing nothing. Lazy long-term investors, in fact, can do very well indeed.

It is always interesting

Even though I have been in the business, like, forever, every day is entertaining. Companies get taken over, have problems, discover oil, make acquisitions, grow earnings, win some contracts and so on. You almost never know what might happen with a company or with the market. As I write this, one of the stocks we follow is halted. News could be good, or could be bad, but either way something is going to happen. It is hard to get that variety in other businesses.

There are tax advantages

Capital gains taxes have the lowest tax rate in Canada, so when you make a good investment and take a profit, you get to keep a lot of it. Dividends in Canada come with the dividend tax credit, making dividends a preferred form of income over salary for most Canadians. So, while others slave away at a salaried job and pay the highest marginal tax rates, many investors are sitting back, earnings gains or dividends and still paying lower tax rates.

Math works in your favour

When you pick a bad stock, you can have a 100 per cent loss, when that stock goes to $0. However, when you pick a great stock, you can have a 1,000 per cent or more gain. You can only lose all of your capital on the bad investment, but can make 10-times or more of your capital when things go well. Thus, one good winner makes up for a few big losers. You really only need one amazing stock pick in your life. Don’t believe me? Take a look at Intuitive Surgical, a $6 stock in 2001, trading at $620 per share today. Or, how about Monster Beverage, trading at 18 cents, split-adjusted, in 2001, and now at $130 per share. That is a 72,122 per cent return in 15 years.

Business can be bad and you can still make lots of money

When you are employed, and your company has a tough year, you might not get a raise, nor a year-end bonus. In the market, though, you can still make money when things are bad. Either through selective stock purchases — not all stocks go down, even in a bad market — or, for those more aggressive, through short selling. You can still profit, even when times are horrible. What other business can say this?

Now, since I have been in the industry so long, I clearly might be biased here. But you have to admit, compared to many industries, investments do have a lot of good qualities.

Peter Hodson, CFA, is CEO of 5i Research Inc., an independent research network providing conflict-free advice to individual investors (www.5iresearch.ca).

[This article was originally printed in the Financial Post]

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.

If you have some free time to yourself this long weekend, I would recommend watching some great movies on the financial world / the stock market.

These are my top 6 stock market movies (some are on Netflix):

1. Wall Street
2. The Wolf of Wall Street
3. Inside Job
4. The Big Short
5. Margin Call
6. Boiler Room
7. (Am I missing any?)

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.