Tuesday, January 28, 2014

A visit with Top Gun Dave Whitmer

Dave Whitmer visited the local CANSLIM group. Here are a few notes. Mr. Whitmer was a Navy fighter pilot, a Top Gun as depicted in the movie. He worked for the discount broker Schwab for several years. In 2000 he started using the CANSLIM method and is mentioned in the new book by Amy Smith.

Whitmer was at the first meeting of this particular Investors Business Daily sponsored group. As was IBD founder William O'Neill. When he worked for Schwab he witnessed the Internet bubble from the broker side. When the stocks were going up, people lined up to get in the office, first thing in the morning. When the bubble popped, their greed turned into fear and many clients experienced huge financial losses.

Whitmer now trades stocks full time, for his own account. He uses the IBD newspaper as well as some of the premium products such as MarketSmith. He brought along several books, How to Trade in Stocks by Jesse Livermore (1940), How I made $2,000,000 in the stock market by Nicholas Darvas (1986). On page 49 of the Livermore book I found this highlighted:
>> If you make your discovery, trade your own way, exercise patience, watch for danger signals, you will develop a proper trend of thinking. <<

Even though Whitmer follows the CANSLIM methodology, he still has to think for himself. I always tell people that there a lot ways to make money in the stock market. It is vital to find a method that works for you. Something that works for me, may not work for you, and vice-versa. Style, personality, risk-tolerance are all big factors.

Whitmer talks about some of his biggest winners from 2013. These include Facebook and LinkedIn, each a 49% winner. QIHU and NETS are two more big winners. In the Amy Smith book, How to Make Money in Stocks Success Stories, Hansen beverage which became Monster is one of the big winners there.

From his days at Schwab, Mr. Whitmer met a lot of clients who were successful in one area and thought they could be successful in the stock market. Many of them turned out to be terrible at the stock market and the bursting of the Internet bubble ruined some of them.

Some things that I took note of, were Mr. Whitmer's daily routine. His military training, likely included many checklists, and the CANSLIM method uses a lot of checklists. He describes himself as a jack rabbit, quick to take profits, quick to take losses. He doesn't like to trade during the open, which he describes as amateur hour. He does check the market through out the day. For those familiar with the CANSLIM method, he prefers first stage bases.

The session closed with a review of stocks from the audience (about 25 people). The list is not that important. I did not see many new people. Some commentators talk about a stock market bubble. If this were a big time stock market bubble, there might have been 100 people in attendance, instead of 25.

A quick comment on the market dip. I took two losses on Monday, closing out short puts on XRT and XOP near the lows of the day. Painful yes, especially gauling to have both stop and reverse higher after I got out. It happens. Either a person takes losses, or doesn't. Other styles may involve doubling down, or going down with the ship. Readers know that at many levels, I prefer low risk, and have a low tolerance for losing. These personality traits are not going to change. I go to the CANSLIM group, because stock market groups are rare, because I can occasionally get a good read on sentiment from the group. I might occasionally find a new stock or industry idea.

It is mostly smart people that do the stock market. Half the population doesn't even save any money so they can't do it. Others are mystified or scared by the stock market. CANSLIM isn't any be all and end all, but especially for novices, it is a very good first system to learn because it looks at fundamentals as well as technicals. CANSLIM is also a system to identify potential home runs and that is one thing I could still use a lot of work on, even after 27 years in the markets.

Okay enough for now. I'll post those losing trades and any others in a weekly recap.

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