To me technical analysis is two things: price action and volume. The rest is too complex or doesn’t add any value.
So based on just this, my favourite book is “the perfect stock". It’s not about price action per se but it explains why it matters, why it works, and why simple is better.
There’s also " how I made 2M on the stock market” which covers the same type of topic.
Price action matters, but what matters more is to understand why it matters, and how to use very simple indicators.
Great article. I like your methods! One error I found in the beginning. Earnings x P/E = stock price, not market cap. Market cap is stock price x # of shares. I'm sure it was just a typo.
The double-lever framework for stock appreciation is razor sharp. Cash generation plus multiple expansion is where the real alpha lives, and the discipline to only buy during confirmed uptrends eliminates alot of headfake traps. I've worked with strategies that tried to time value inflections early and it always felt like betting against price signal. Back when we were experimenting with concentrated portfolios, the hardest lesson was that downtrend bargains statistically underperform patient entries at confirmed support levels. The self-fullfilling prophecy angle around moving averages is understated but acurate.
Earnings × P/E = Market Capitalization
Earnings × ROIC = Intrinsic Value
Weighing Ratio
= Market Capitalization ÷ Intrinsic Value
= P/E ÷ ROIC
.
Benjamin Graham — 'In the short run, the market is a voting machine but in the long run, it is a weighing machine.'
Thanks for the article, incredible work.
Appreciate the comment! More when it comes from, hopefully!
Profit growth most likely to survive longer if the ROIC is strong.
Hey, any recommendations on short technical analysis books?
To me technical analysis is two things: price action and volume. The rest is too complex or doesn’t add any value.
So based on just this, my favourite book is “the perfect stock". It’s not about price action per se but it explains why it matters, why it works, and why simple is better.
There’s also " how I made 2M on the stock market” which covers the same type of topic.
Price action matters, but what matters more is to understand why it matters, and how to use very simple indicators.
Great read. Excited for this years returns!
It’ll be huge 🤝
Great article. I like your methods! One error I found in the beginning. Earnings x P/E = stock price, not market cap. Market cap is stock price x # of shares. I'm sure it was just a typo.
It is! Thanks for pointing that out, I meant net income by "earnings", not EPS. But I'll make that clearer!
The double-lever framework for stock appreciation is razor sharp. Cash generation plus multiple expansion is where the real alpha lives, and the discipline to only buy during confirmed uptrends eliminates alot of headfake traps. I've worked with strategies that tried to time value inflections early and it always felt like betting against price signal. Back when we were experimenting with concentrated portfolios, the hardest lesson was that downtrend bargains statistically underperform patient entries at confirmed support levels. The self-fullfilling prophecy angle around moving averages is understated but acurate.