E EC Three Things To Avoid As An Amateur Stock Picker

In 2008, I was living in a tiny, dirty efficiency apartment in the worst part of my town. I couldn’t even afford cable. I ate a chicken breast every night for dinner, and most of the time, skipped breakfast and lunch. I was poor.

But six years later, I make more money than any of my friends. I’m the only guy I know under thirty who owns a house a block away from the intracoastal in beautiful South Florida, a boat, and two cars, including a BMW. I bought it all myself.

How did I do it, you might wonder? By picking stocks? Hell no. I did it by finishing a business degree, trying many different things after college until I figured out what I wanted to do, aligning myself with people who could help me and finding a company that could afford to pay a high salary. And then I just worked my ass off.

Sorry to disappoint. Nevertheless, I do enjoy picking stocks. I like scanning the S&P and the Russell for inconspicuous, even obscure companies, looking for issuers that meet some basic criteria. For example, a company that produces a good for which there is a demand, with its financial house in order, and growing revenue and tightly controlled costs.

I’ve picked some winners, and I’ve picked some serious losers. This article is about the losers. Here are my top three things to avoid if you want to have “luck” in picking stocks.

1. Don’t fall for lies.

Early on in my stock-picking foray, I got in with a company called A-Power Energy Generation Systems (APWR). APWR was a Chinese manufacturer of wind turbines, and by the time I came across the issuer in 2009, their Securities and Exchange filings looked unbelievable. They were striking deals all over the world, dozens of them at a time, raking in millions of dollars every quarter. The balance sheet was impeccable. The stock was trading at five times it’s earnings. Between 2009 and 2010, shares jettisoned from $5 a piece to over $30. I rode the lighting. I traded the stock over and over again on the spectacular twelve-month run.