Book Review > Shares to Buy and When

Jim Berg is a sharemarket investor, educator and author. In his latest book he states that ‘the goal in writing the book was to provide readers with a topical watchlist of companies that could out-perform over the next 12 months.’ All data is as of 31/12/2009 and the 110 companies have been placed in one of eight categories.

He analysis expert research and then carries out his own research to come up with these 110 companies. He uses both fundamental and technical analyses to research companies.

In the Introduction he explains what a watchlist is – and isn’t - and what criteria is necessary to have a ‘rising trend’. He introduces us to weight-of-evidence which he explores further on in the book.

Basically, this book has two sections

1.  The 110 companies making up the watchlists
2.  Chapters 8, 9 and 10 which is the Educational section of the book.

The watchlists

You could spend 10 minutes flipping through the list or you could spend 10 hours digesting each page. Each company has 2 pages allocated to it. Morningstar has provided the fundamental data and the business activities of the company analysed.

There is also a trend analysis and a chart for each company in the book. I personally found it all very repetitive after checking out a half a dozen companies. Usually the Trend Analysis comments were the same or very similar depending on whether the stock was in an uptrend or downtrend. This led me to the question of why a particular company was even in the list if all the comments were negative, the fundamental data was a minus or the chart showed it was in a downtrend. Surely there are enough companies on the ASX in an uptrend to include. I couldn’t see an explanation as to the reason these companies were there. Examples include Nexus, Tabcorp, Qantas, Austar and Boral.

I couldn’t find out which moving average Jim used on his charts. Hopefully, it is somewhere in the book  and despite two readings I have just missed it. A reader who wanted to follow these companies throughout 2010 should be ‘on the same page’ as Jim Berg and a 30 week moving average will tell a completely different story on the chart to a 10 day moving average.

The chapters

Chapter 8 – Timing The Market
Chapter 9 – Combining Fundamental and Technical Analysis
Chapter 10 – Successful trading Strategies

This is where I received the most value for money. Jim has provided an excellent explanation of both fundamental ratios and technical indicators and explains in simple terms how he defines a ‘rising trend’ (and how to recognize stocks in this all-important area) and how ‘weight-of-evidence  is arrived at.

With his example of the short term trading strategy he has kept it logical for an intermediate or experienced investor or trader. But he seems to be aiming at the beginner in the market and I feel he runs the risk of totally confusing a novice by using his Jim Berg ‘volatility entry and trailing stop signals.’ I know this is his ‘trademark’ so to speak and he has a right to ‘push his own barrow’ but I feel that if his aim is to educate (especially a beginner) then this is the wrong place to promote these signals.

I personally do use his entry and exit signals in one of my trading plans and find them great. Berg says he enters on a blue bar (of his own entry signal) but all the charts are grey and thus no blue bar can be seen. I understand that he is only showing and teaching one trading system but I feel the first one should be a simple, easy to use with common garden variety tools available to all.

Chapters 8, 9 and 10 (This is the ‘WHEN’ in the book title) would have been better placed after the Introduction and not at the conclusion of the watchlists. It would be a natural ‘flow-on’ from the explanations of ratios and indicators to an understanding of what the material is showing you in the watchlists.

To prove my point I asked my neighbour who is an intelligent, beginner investor to read the book and give me her comments. She felt very discouraged having to look at 110 companies and not understanding what  a P/E, ROE, ESPG, Pivot Point and MA were. She asked me why all the terminology explanations couldn’t be at the front of the book. She felt that she would have got more out of the book then. As it was, she felt it was a waste of her time as she felt it was aimed at a person with experience in fundamental and technical knowledge.

Conclusion

I feel for $29.95 it is a worthwhile read for intermediate and advanced investors or traders. It is a good reference and refresher book but is certainly not for the beginner in the market. It spurs you on to investigate companies previously not on your radar.

If there was to be a reprint and I was in charge of it (ha!) I would:

1. place chapters 8,9 and 10 after the Introduction
2. state on the first page at what level investor the book is aimed at
3. explain what moving average is used in all the charts
4. have colour charts if the blue bar entry signal was retained
5. include another trading strategy so everyone could use or try it.

Jim Berg is a highly respected member in the investing world and I have always admired and enjoyed the work he has done with seminars, newsletters, books and his trading systems etc. After reading this book with a critical eye for reviewing, I feel there is a lack of thought that has gone into some areas. I get the impression that it has been put to-gether in a hurry to beat a deadline – namely early 2010. Much of this material can be found on his website or in his newsletters.

Jo Martin is a member of the AIA.