Has anyone read Phil town's book " Rule # 1 and have you applied any of his principles?

Answer 1

I read it very carefully, and I have used his principles with good success. His formula for determining the fair value price of a stock is very handy. I don't follow his rules rigidly, however. For example, I don't always trade out when the technical indicators say so. I prefer to buy and hold. I also don't require a full 50% discount. As long as a stock is trading at a substantial discount to its fair value, I will buy it. I also look at the 5 year record rather than the 10 year as he recommends. After 10 years of strong growth, most companies will level out. I'm not adverse to commodity stocks either, if I think the time is right. And I buy some small-cap speculative stocks that don't fit his criteria. But his principles are the foundation for my stock investing.

The main problem with his method is that the high growth stocks he prefers tend to be very volatile. If a stock has a lot of upside growth potential, it will also have a lot of downside potential. When earnings come in 1 cent short of estimates, the stock might plunge 10%. If you can stand the volatility, however, it's a good method. But use your common sense in applying the method.

Answer 2

You should visit this discussion forum:

http://www.roicommunity.com

It's devoted to discussing the Rule #1 method and the stocks to apply it to. One topic area is devoted to "calculators" that can help to automate the process of developing the MOS price, both by grabbing the information off the Internet and doing the calculations.