Don't Lose Money

In the early part of 2008, I began reading a book called, "Rule #1" by Phil Town (see below).

THIS TURNED OUT TO BE A GREAT BOOK!  In his book, Town lays out a simple strategy for investing.  Well, as I was reading, I decided to create an Excel spreadsheet and try to apply the formulas that he teaches for evaluating, buying, and selling, stocks.  This spreadsheet was really just to test out the book - to see if it really worked.  Since I wasn't sure yet, I DID NOT INVEST MONEY IN THE STOCKS THAT I EVALUATED USING THESE FORMULAS.  Mistake?  Read on.

I evaluated several stocks, but eventually narrowed my list down to 10 finalists.  They are listed below along with their stock price as of March 13, 2008.

Apple - AAPL                             $122.25
Amazon.com - AMZN                 $68.32
Dell Inc - DELL                           $19.85
Microsoft - MSFT                       $28.62
Wal-Mart - WMT                        $50.60
China Mobile LTD - CHL            $70.72
Qualcom - QCOM                       $40.25
Best But - BBY                            $40.61
Tradestation Group, Inc - TRAD  $10.04
Cisco Systems - CSCO                $24.95

Since March 2008, I think most people understand that markets around the world went into the tank.  With that said, if I had purchased those stocks and then sold them at their high point in the last 52 weeks, 7 out of the 10 stocks above would have made money.  Apple and Amazon could have made me rich.  The 52-week highs for those stocks were:

Apple - AAPL                                      $279.01

Amazon.com - AMZN                          $151.09
Dell Inc - DELL                                    $17.52
Microsoft - MSFT                                $31.58
Wal-Mart - WMT                                $56.27
China Mobile LTD - CHL                     $59.22
Qualcom - QCOM                               $49.80
Best But - BBY                                     $48.83
Tradestation Group, Inc - TRAD           $8.89
Cisco Systems - CSCO                        $27.24

So, for every dollar I would have invested in these stocks (including the losers), I would have made .51 cents profit.  That's a 51% return on investment (ROI) or put another way, a 25.5% ROI annually.  Where else can you get that kind of return?  Some might argue that the answer to that question is Gold, but that's another story all together.

This process doesn't happen without some work, but I'm eventually going to take the steps to evaluate more stocks based on today's financial situation.  I wouldn't do it without this book though.

By the way:  Rule #1 is "Don't Lose Money".