Changewave Investing 2.0: Picking the Next Monster Stocks While Protecting Your Gains in a Volatile Market

by Tobin Smith

Book Overview

Investment guru Tobin Smith reveals his secrets for scoring monster returns in today's volatile stock market by focusing on the emerging sectors that have the best potential for explosive growth -... This description may be from another edition of this product.

• Format: Hardcover
• Language: English
• ISBN: 0385502443
• ISBN13: 9780385502443
• Release Date: October 2001
• Publisher: Broadway Business
• Length: 231 Pages
• Weight: 1.10 lbs.
• Dimensions: 1.1" x 6.5" x 9.5"

Customer Reviews

The right stock in the best space at the right time wins

To qualify for a changewave company, the company must be $1 billion in size. Changewave 1st Screen : They must have a growth rate in the top 10 percent companies in the new economy. Changewave 2nd Screen (Top 10 sectors) : five times S & P 500 growthChangewave 3rd Screen (Supersectors): Top 10% growth rate in each new economy industrial category. Changewave 4th Screen (Market): Top 1%Predicability is essential in changewave. The most predictable winner in a top secular growth space goes to the highest valuation - everytime.All things being equal, the simplest to understand secular growth and competitive advantage logics wins the growth stock debate.People buy stocks the same way they buy other products. People buy products they are comfortable with; the product is simple too understand and its indispesible to the consume.Fundamentalist figure out stock value based on fundamental research and analysis. They predict the stock price will go up. P/E = Price of Share/Retain Earnings. This tells you if the investors are being unrealistic about the price in relationship to earnings growth. However, price is a function of present value and future earnings, It does not consider capital generators, such as, copy rights, intellectual property, and patents. Capital growth companies accounted for 50 percent of all the corporate profits.When the dust settles in any information technology-based industry, there will be one company with 60 to 70 percent of the market share and the bulk of profits and valuation in the segment. The number two guy will have a 20 percent share.Technical analysis is employed to decide buy and sell patterns. Technical analysis uses bar charts and indicators to buy and sell.The momentum investor waits to see what everyone else is doing. If there's momentum behind a stock, he assumes that the momentum will continue and bets on that fact.The innovators: Because only 3 to 5 percent of the world are innovators. The early adopters: 10 to 15 percent are early adopters. The early majority: "I need more evidence"Change wave looks at marketing, first, and considers how marketing will use product superiority as a compeling motivator to buy. Product superiority does not guarantee a consumer buy trend. (Beta verse VHS, DVD verse CD,CD verse memory stick). Customer acceptance is more important than product superiority. The winning product will have the best marketing.Suppose a company builds a car that rides on air and suppose it comes with special safety features than are 80 percent more effective at saving lives. Does everyone go out and buy the new car? Probably not because safety does sell just increases cost. Now suppose other companies are starting to build a similar vehicle. Its radical departure from terrestial ground transportation creates a changequake. It looks like the old transportation technology is being abandoned. Suppose, the technology is the hydrogen cell transportation; the changequake may not be felt, if it is felt than it qua

Practical Strategies for riding out the Downturn

Times are tough out there and we could all use some sage wisdom. In Changewave 2.0, Tobin Smith offered the same (but more in-depth) great advice and strategies that he shares on his appearances on FOX BULLS AND BEARS, where I've caught him on occasion and agreed heartily with his advice.Tobin, tells it like it is, he is not some Wall Street Analyst hawking the latest fad to his own (veiled) advantage. His basic principles and strategies for forecasting, screening, and using stop orders to your advantage are sound. His chapter on what he calls ChangeQuakes, while not wholly new, is a valuable lesson to be learned and reviewed. This is an author who has done his homework!

This program really works

Over the past year, with technology stocks in the toilet and most stocks significantly down, it was hard to believe in any investment program. But this fall, just as the Tobin Smith predicted, the stocks aligned with transformation change-- particularly cutting edge growth and technology companies-- have come roaring back. What makes ChangeWave Investing 2.0 so compelling, though, is the theory behind why these kinds of stocks enjoy monster returns, allowing readers to indentify emerging growth stocks before Wall Street -- and before they begin to take off. And by balancing your portfolio between less volatile "ballast" stocks, and stocks of companies connected to transformational change (what Smith calls a "change wave"), you can attain stellar growth with far less downside. My own portfolio is up 85% this year, and I feel like I'm extraordinarily well positioned for the rebound in the economy next year.

A Growth Investment Discipline with a Fine Track Record!

If you have read ChangeWave Investing, this book is not required reading. If you have not read ChangeWave Investing, I strongly urge you to read this book instead!The model portfolio that Mr. Smith operates has enjoyed "an average of 75%-a-year growth . . . since 1995. Including the Nasdaq crack of 2000-2001." I assume this is through the date the book was written. Naturally, the portfolio has taken losses recently (the return is from 150 percent a year that was reported in ChangeWave Investing), but the overall result is certainly enviable. How will it do in the future? I don't know, but Mr. Smith is very optimistic. "Building a million-dollar investment portfolio is a simple game." Well, I think most people would agree that it's not so simple, even if you have 50 years to accomplish it, unless you start with two million dollars. ChangeWave Investing is "a philosophy, a growth-stock-picking strategy, and portfolio management system all rolled into one."Mr. Smith argues that technology will be over half of the U.S. economy by 2008, and the potential for sharp shifts in trends will be accelerated by dominance. The thought process is basically as follows. Find the biggest shifts going on in society (ChangeQuakes) which may come from economic (the light bulb extending night-time activities), technological (DSL), regulatory (end of fixed commissions on Wall Street), strategic (better business models like Dell's direct selling of PCs), or fad (Furby interactive toys) sources. There will also be second generation aftershocks, like HTML shifting into XML to provide more richness on the Internet. Then find the few companies with the Killer Value Propositions for these shifts that will "relieve pain/anxiety/stress (emotional or physical)," "deliver pleasure or hope (direct or indirect)," "satiate greed/build self-esteem/create wealth, status, or power," or "reduce/eliminate fear/regret (provide safety, predictability)." Invest in the best two or three that have fine profit growth prospects. Use technical analysis to pick when to buy (typically when the 50 day moving average surpasses the 200 day moving average). If a stock tanks by 8-10% soon after you buy it, sell. If it goes up rapidly, buy more. Winnow down to own the ultimate market leader as soon as you can. Separately, you should have set a portfolio allocation for what percentage of your holdings will be in these rapidly growing stocks. You are encouraged to have a fair amount of your holdings in less rapidly growing stocks that will be more stable, but will be helped by large trends. You should also hold some cash. When I reviewed ChangeWave Investing, I predicted that there would be a 2.0 version. Having read the 2.0 version, I predict there will be a 3.0 version. There are still some important problems with this approach. One of them is valuation. As long as the trends and the technical indicators are positive, you are supposed to buy . . . no matter how high the price

Who dares wins (but not always)

I read Tobin Smiths first book "ChangeWave Investing" which was good but this one is better. In 2.0 we get much more on risk and also the importance of selling stocks, as well as a recognition thats stocks have Price to earnings ratios, and that these mean something in terms of value, this is a welcome addition to the new book. I receive Tobin Smiths newsletter via e-mail each week and have bought some of the stocks he has recommended. The results overall have been good, but with some stocks I have lost quite a lot of money. To prevent this Tobin recommends holding some less risky but slower growing stocks like Texas Instruments too. The more risky stocks like Ballard Power Systems have greater potential reward for the investor but much greater risk. The fact that Tobin Smith has employed the services of experts in many different fields of expertise, to give him suggestions on potential changewaves, adds credibility to his recommendations. I think this guy is on to something and I like the way he is prepared to think independently of analysts on Wall Street. In time this book just might become a classic.