Jack's Investment Philosophy & Methodology
The widely expounded "Efficient Market Hypothesis" states that you can't outperform the market because everyone gets the same information at the same time. Jack has always known this theory is deeply flawed. (Indeed, the original proponent of it has repudiated it, but it is still taught in colleges across the country.)
It is not the availability of information that determines investment success, but the correct analysis and judgment of it. Information without sound analysis and good judgment is just noise.
It is also Jack’s deeply held belief that most financial analysts are woefully inept at analysis of financial statements. Too much attention is paid to earnings estimates of company executives, and almost no attention is paid to uncovering the truthfulness of reported earnings through analysis of company cash flows. Balance sheet analysis, except for superficial examination of debt-to-equity ratios, is greatly under-appreciated as well.
When recommending covered calls to sell to market speculators, Jack has but one goal: to make a healthy profit in a relatively short period of time that allows for risk re-balancing according to the current market trend. Jack recommends stocks in fundamentally sound companies, but he buys them with the expressed intent of having those stocks called away by option buyers.
In Jack’s process, the aim is to average a 12% to 18% return per year, or more, depending on market conditions. Last year, 2003, the average annualized return for the portfolio of covered calls was 26%.
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