Tuesday, June 3, 2008
Here is the author on Fox News talking about "Full of Bull". It is almost a pun.
Full of Bull Do What Wall Street Does Not What It Says To Make Money In The Market by Stephen T. McClellan is an overview of how wall street misleads the individual investor. McClellan worked as a stock analyst for 32 years, including being a vice president at Salomon Brothers and a first vice president at Merrill Lynch.
While the overall theme of the book, that wall street was misleading you with how analysts portrayed stocks, the interesting part was the small insights into the market which he gave throughout the book. He suggests that if you are looking for a list of stocks to pick from, try to choose from a hedge fund, not a mutual fund, hedge fund managers make their money by taking a percentage of the money they earn from the fund.
A few other insights were that the New York Stock Exchange was an investors market, and the Nasdaq market was primarily a trader and speculators market.
His viewpoint on analysis is that you should use the analysis from the stock market for the information it contains, statistics and financial information mainly. However, you should not necessarily follow the recommendations on which stocks to buy and sell. Analysts are biased towards making recommendations to buy stocks, any indication other than buy is a sell signal for most stocks. McClellan points out that analysts are too close to the companies they cover and often to get coverage, they have to take perks like golf trips, dinners, vacations, and go to conferences. Their job is not to rock the boat, but keep the market steady so people will continue buying stocks.
He further points out that analysts are over focused on large capitalization stocks which mutual funds and banks hold. He claims that it is better to invest in small capital value stocks because they have room to grow over the long term.
He also points out things like it is easier for an analyst to simply stop covering a stock than give a negative rating to stock. When an analyst stops covering a stock it is a bad sign.
There is an interesting section on executive qualities to look for both good and bad. For example he likes confidence, creativity, lack of yes men, and working very long hours. He dislikes bad health, messy relationships, lavish offices and perks, and a fixation on stock price. There is quite a bit on how to spot when an executive or company is misleading the public.
Mr. McClellan's viewpoint from retirement is that his profession is becoming corrupted by historical forces like the 1990's internet bubble and should require greater certification and oversight. He believes every analyst should be a CFA certified financial analyst and have an MBA masters in Business Administration.
I think this book gives quite a bit of insight into how the market really works. It appears to be focused on how to manage your investments in a long term safe manner while avoiding the pitfalls and hype of Wall Street. There is a glossary of financial terms and an index. His writing style often includes anecdotes about the authors experiences covering companies like EDS, Cisco, and other computer companies.