Since February life has changed for everyone. I back in sunny England, some days being warmer than the South of France! I have also been thrown into the world of shares and trading.
by Kay Hare
Where to start? The first advice I was given was to listen to a podcast by journalist and ex-City broker, Zak Mir. With hesitation, I began to listen and quickly became interested in the clear advice and daily charts Mir explores free of charge on a website called Share Talk.
I met Mir in London at the Connaught Hotel in the heart of Mayfair for an interview. Mir described himself as a blogger and philanthropist – but strictly in inverted commas. A blogger – even though he is a member of the NUJ because journalism in the mainstream media is still something he regards as a closed shop – dependent on your background, politics, and ability to step over others. As far as being a philanthropist is concerned Mir is perhaps more a benefactor providing the fishing rod to investors rather than just spoon-feeding fish.
His service helps people like me and experienced investors navigate their way through the turbulent world of small-cap stocks and shares. Part of the motive is to show that charting stocks can work, and a part that it need not be complicated, but perhaps most of all, to provide a helping hand in volatile markets.
Zak provides a 6 min daily chart pinpointing the values of new and developing companies and more established companies both on the London stock exchange and the USA penny stocks.
1. How did you get into trading? Did journalism come first or trading?
I like people, and I enjoy helping people, although socially, I have always found it very difficult to communicate. The internet and social media have given me a voice. Although the stock market is a relatively small parish, at least with Twitter, I know that followers want to listen and hopefully learn. I may have been influenced by my parents, who were both doctors, they felt intensely loyal to their practice, even if this was not always reciprocated. However, I never found any interest in the medical profession. I thought about cricket and had a passion for music, but I was too shy for the rock star lifestyle or being in the public eye. In this way, the internet, some 20 years ago, “saved” me.
I was offered a place at Eton, which I think may have pushed me into politics, but my parents turned it down (it was a couple of miles further to get to from where we lived!), so I went to Harrow instead. I was academic, but sporty Harrow was not. I retook my A levels and managed to turn down a place at Oxford as well, as it was “only” Theology. I doubt many people have managed to turn down places at both Eton and Oxford…
I always had both an interest in politics and the stock market and wanted to make money, so I sort of fell into broking, as stockbrokers to my mind at that time were somewhat glamourous. Most of us do not know poor stockbrokers. Unfortunately, I was not too good at this either. I was the ultimate ‘honest broker’ as if I thought a client would lose money on a trade, I would tell them not to: hence not make any commission. They generally did well, though!
The arrival of the internet at the end of the 1990s saved me from the 9 -5 doctrine of being a futures broker. I realised that there was very little financial journalism and very little advice for people from people who knew and liked the markets – most journalists do not like capitalism or anyone who makes more money than they do.
In 1999 I had a lucky break to get a job at Shares Magazine and started writing about small caps and interviewing companies. Since then, I have written for Spectator Money, the Investors Chronicle, and Yahoo! Finance, but only as a freelance.
Now each day for the past 3 years I have been writing about the markets and charting with www.Share-Talk.com, an online platform for traders and investors. I like their no-nonsense approach and genuine enthusiasm for the stock market, which I share. They only produce the content people want to read and do not pander to advertisers or sponsors.
2. How do you read the graphs? Does it take training, or is it more intuition and a sixth sense?
I think if you are sticking your neck out, highlighting companies on the stock market, there has to be an element of training and experience. My training has come from 10 years working in the industry as a broker and clocking over 10,000 hours – maybe 100,000 hours, as a chartist. According to Malcolm Gladwell’s book Outliers, 10,000 hours is the magic number to become an expert in a field. Doing it via social media, on Twitter, where you can be trolled viciously when you get it wrong, is the ultimate stress testing of a strategy. I have nearly 15,000 followers on Twitter (@Zakstraderscafe), and Share-Talk (@Share_Talk), another 11,000. Together we are approaching half the national number – so we must be doing something right. So the market has effectively given the approach the thumbs up.
As for the sixth sense, I think once you have the fundamentals and knowledge of a business or if you are a competitive person, you then start to use your initiative and can foresee the ups and downs. In charting, this means where to draw the trendline to give the entry and exit points and the stop loss level, which cancels the setup. It is, in part, practice makes perfect, but I do think there is an element of talent involved. Roger Federer knows how hard to hit a ball to touch the line, a Picasso the right brushstroke. If you do not have their talent, you just have to graft, and it has taken years to know what angle to draw the trend line and work out what will generally be the best profit and loss taking levels. Do I necessarily know how I get it right when I do? Not always, no. Am I amazed when a difficult charting call in unloved stock doubles or triples? Yes, one is using historical price action to predict future movements. There is nothing more difficult in the world. But the idea that patterns can predict numbers has always been quite magical, and I think this will always be the case.
3. How do you find new growth companies?
Simultaneously this is hand in hand with the researching of companies and watching the rising stocks day in day out. Over time one learns to filter out the best-rising stocks – that are consistent with those that investors have the best sentiment towards and those backed by either solid or recovering fundamentals. These days the filtering process after focusing on the best-rising stocks with the most reliable looking chart setups is to see then whether the Twitter traders, a.ka. Fintwit, are also backing them. However, this is not just a finger in the air investigation of who is shouting loudest on social media. Instead, one is looking for the people on Twitter who have proved to be the most reliable in calling stocks higher to do it again. Above all, finding new growth companies is about having a hook to buy: be it the chart, the management, influencers, or of course, the business model. That said, in my experience, the chart is the most honest guide, especially in either the most unloved of situations or when a stock just keeps going up. In the former, you can have a technical trigger point, such as a trendline break of an extended bear market. In the latter, it can be that a support line or trailing moving average can provide a run for a profit for longer than you would merely be judging on valuation metrics such as the price-earnings ratio or net asset value.
4. Is it worth reading the books of the giants like Warren Buffet for tips?
Researching and reading is a wise idea on any subject, and I have written a book, ‘101 charts for trading success’. However, I would be wary of relying on this. I think it is essential to develop your own talent. If books could teach us everything, we would all be Einstein, Shakespeare, or even Winston Churchill. Going back to the Roger Federer comment: you could spend 100 years training on a tennis court and never get up to his level. Everything, including investing is a mix of talent and hours put in. It is disingenuous to pretend that it is either just luck or hard work. The safest advice is to say you should follow what works for you, knowing that for some people nothing will work, and for others, things will work with no effort at all, as they have pure talent. Investing is a talent like almost everything else we aspire to. I have used technical analysis to try and give me set rules of investing, which I feel fundamental research sometimes misses out on.
If there is a golden rule, though, I would say it is “scale in and scale-out.” Meaning entering part of your eventual position size in stages and getting out in stages. On the entry side, only add to winning positions, and on the exit, gradually as the share price falls. This way, the stocks you hold should only be those which had positive momentum and were not the result of averaging down – adding to losing situations. This way, your portfolio is obeying the “survival of the fittest” maxim, not “a long term trade being a short term one that has gone wrong.”
5. Is it wise to look at a company’s assets, the buyers, and sellers and take your time?
Given that it is short term losing traders who finance long term holders – the shorter the timeframe, the less time you have to get it right, taking your time like the legendary Warren Buffet has to be, by definition, the way forward. But I would suspect his edge is not just his extended timeframe. It is his talent for picking winning companies. He is an expert at assessing companies’ assets and their balance sheets. He is looking at large corporations most of the time, those who are cash-rich. His strategy is essentially to follow the money and try and buy $1 for 50c. Very often meaning investing in “boring” or unloved companies where revenues are consistent. I would maintain that this is not as easy as it sounds, especially the case for most hot-blooded males. I think it is a shame that more women are not investors like the ones I have seen. They are far more cool-headed and sensible than men. They tend to be more logical and play safe, not to go for the “get rich quick” approach. There is always the emotional factor with male traders, far more than for females.
6. Do you get outside help? For example, do you have to talk to other traders, or is it more your research?
I am beyond help, given that I am someone who likes to do things their own way! I research everything myself. If there is an edge I have that most do not, or cannot, it is that I am interviewing many companies and so in contact with them regularly. For example, today, I am speaking with Zoetic International, a company in the CBD space. This is still relatively below the radar. It is quite a gift to meet the people involved in a newly fashionable company and is a similar edge to that which fund managers and stockbrokers in the City have.
I am currently interested in companies with the environmental focus, for example, as I think the few transformational ones out there could not only improve our quality of life but be massive investment opportunities too. Waste plastic to hydrogen and electricity group Powerhouse Energy (PHE), could improve our quality of life in the war against plastic. Verditek’s (VDTK) ultra-thin solar panels could reduce Carbon emissions.
But in many, ways as far as research is concerned, and new ideas, I am a plagiarist. If you are going to copy, copy the best. After 10 years on Twitter, I have filtered down those who are genuine investors, post genuine results and are consistently ahead of the market in their analysis. There are no more than a dozen names I could mention. In real life, you might be fortunate to meet even one or two of them. With Twitter, you can follow them every day, and learn.
7. Do you think you can make a living from trading? Do you have to do it full time? How much would you need to start with?
You can get lucky. But to be consistent I would suggest you have to do this full time to make a living. It is a Catch-22 in the sense that I think only by being totally dedicated can you be sure that your portfolio is not just one for the next 1 or 2 years but in the next 20 or 30 years. Most of us combine the day job with investing, and it is very difficult and dangerous to do otherwise. The markets are now too fast and too changeable to have a portfolio in the background. The alternative is to use investment trusts or tracker funds and leave the responsibility to someone else. Nevertheless, the crash of 2008 and COVID have shown us that the only certainty we have is uncertainty. The markets are turbulent for example; Tizana Life Sciences (TILS) rallied from under 100p at the start of July to near 300p a few weeks later. It is now back near 120p with arguably better fundamentals than before the rally. The market has to be monitored, and there are a few easy rides.
That said, with the influx of liquidity since COVID into the growth companies space, I think if you do your homework and are staring at the screen all the time, you can double/triple your money quite quickly. Many companies this summer have shown this, for example, (UFO) Alien Metals has risen in two months from 0.12p in July to 0.9p on the 31st August. Again, you would have to be watching this daily to reap the rewards.
8. Is there any business that is completely safe these days? For example oil, do you think this sector will pick up again?
Currently, and counterintuitively, the market is buoyant due to the after-effects of the COVID lockdown. Many larger international companies have been affected by the pandemic with their stocks and shares falling considerably leaving them vulnerable. It is now difficult to gauge what the future holds. However, many new smaller companies, not affected by the general economy and with their own niche, have flourished. Of course, the pharmaceutical industry is particularly favored, backed by the search for a COVID vaccine.
4d Pharma (DDDD), which focuses on biotherapeutics, has surprised many with their value increasing from below 50p to 136.5p in a matter of weeks. Valirx (VAL) that looks at cancer treatments, reached 26.5p from 8.25p within August. These were well known as “punters’ favorites even before they rose. It is of course wise to invest in pharma companies that are diversified, and not just concentrating on the COVID vaccine. I think as soon as we find a cure for COVID, sadly, we will have other viruses following. We have to accept we are living in an age where viruses are part of everyday life. So, pharma stocks appear well-favored for a while to come.
As far as oil consumption and production are concerned, we all travel and continue to do so, albeit on a lesser scale. The point to remember is that betting on the demise of oil is not a good idea given the way that the cheaper it gets, the less cost the oil industry tends to charge for production. Also, expensive wells go out of business, so there is an adjustment to suit the conditions in terms of what is coming out of the ground.
101 Charts For Trading Success is available on Amazon.
by Kay Hare
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