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Use Main Street to Beat Wall Street
10/06/2011 6:30 am EST
Everyone’s reading the financial news and waiting on earnings reports, so one great way to get a jump on most investors is to go to stores near you and see what people are buying, says Victor Schiller in this exclusive interview with MoneyShow.com.
Uncommon information resources are very important to investors. Victor is going to tell us all about that now. Victor, thanks for being here.
You’re welcome. Great to be here.
Well first of all, when you’re doing research on stocks, I mean everybody is looking at The Wall Street Journal or watching the news flow, checking things like S&P reports, watching CNBC. But that’s the problem: everybody is watching that stuff.
The other problem is that the institutions that trade heavily in the most traded stocks, they get that information even before the news folks get it. So if you’re trading on that kind of information, it’s going to be luck that gets you in front of the curve on those stocks.
So for part of your portfolio, you need to dig around and find some uncommon sources. An example would be, in some of the searches I’ve used, is you walk into like a Best Buy (BBY) and you start to talking to—not at a busy time—but you start talking to the sales rep.
If you start talking to him, they will talk, and they will tell you what’s going on. Philips (PHG) has a lot of returns or something on their product, or we’re just not moving these DVD players anymore…things like that.
They’ll give you some insight…oh, it’s been real busy at the Apple (AAPL) section of the Best Buy store. You can use that unique information then to trade on those stocks. So I like to use those as indicators.
The classic one is, count the cars in the Walmart (WMT) on pay day. Actually go in, walk in, and see that people are buying. That’s the thing that I like to do, too. You walk into the store and make sure people just aren’t browsing, that they’re buying and look at what they’re buying. It can be a good indicator.
If all of a sudden there isn’t a line in the Apple store, that may tell you that everybody who has wanted an iPhone maybe has bought an iPhone. If they don’t come out with a new iPhone soon, that Apple stock may start to go down a little bit. So dig around.
You have to be careful if like a friend of yours is a CFO of a publicly traded company and he gives you some inside information, you know if you’re going to break the rules and trade on it, only do a few shares because they’re going to notice if you trade 10,000 shares of that publicly traded stock before they announce earnings.
Primarily, uncommon information is just being observant to your surroundings.
Yes, be observant, look for indicators. There’s a chain of information that sort of indicates what a company is doing.
Another one is to look at the help wanted ads. If you don’t live in the Bay Area, go online and look at the help wanted ads for different companies.
If all of a sudden you see a company like Cisco (CSCO) has lots of help wanted ads out there or on Monster or something, if they’ve got a lot of help wanted ads, then you know they’re expanding. They’re expanding for a reason—boom, time to invest maybe.
Are there any risks that come along with searching out this uncommon information?
Yeah, you know with any investment, you have to make sure that it’s rational. You know, if you hear that so and so is coming out with a new product and you’re very excited about it personally, you have to really take the time to make sure that it’s something that will appeal to other people, too, because it’s going to take more than just one person to move the needle for that stock.
The other risk is you have to be able to differentiate between hot tips. You know, if your brother-in-law mentions to you that so and so stock is going to go up next week because of blah, blah whatever, that’s a hot tip. So you have to be able to differentiate between a hot tip that’s fed to you and the information that you’ve actually gone out and dug around to find.
A good way to start this is just try it and make some notes for yourself before you even invest and see if it works. You’ll notice that over time it might give you that edge you need in the market.
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