Insider Buy Superstocks by Jesse Stine. Insider buying and technical analysis turned Jesse Stine into a multi Millionaire.
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If you are looking for some financial inspiration look no further than Jesse Stine.
Jesse traded his way to a fortune in the space of only 28 months, turning 46000 dollars into 6.8 million dollars !
This is a multiple of 147 times the initial investment, even $1000 would have turned into $147,000 over this period.
We look at how Jesse Stine managed this astounding return.
In this animated video we present Insider Buy Superstocks by Jesse C. Stine.
Jesse started out just like you and me, an independent stock trader.
In this book he shares his strategy which is a blend of technical analysis and fundamental analysis, a style closely aligned to mine.
In the early years Jesse paper traded popular stocks like Coca Cola, Delta Airlines and Nike. His paper returns were mediocre, and he soon found out that super performance is found in unfamiliar stocks not the familiar stocks he was following.
Let’s take a look at his journey.
Jesse’s first investment came through a recommendation from a friend, a biotech company awaiting FDA approval. It was suggested the price would increase from twenty cents up to fifteen dollars once approval was given, a 7500% return.
Jesse opened his first brokerage account, deposited two thousand dollars, placed the trade and dreamt of riches.
A few months passed by and the stock slowly drifted lower until the news came out that the FDA had rejected the drug.
Jesse’s $2000 went down the drain along with his dream of riches.
Two years later Jesse interned for a small technology company, and shortly after through advice from his colleagues, his boss and a $3000 loan from his father, he again invested.
Again, many months passed and the stock drifted down until it also became worthless.
Another punt, another loss and another lesson.
In 1998 Jesse returned to Atlanta, during this period the stock market was making huge gains and was a talking point in many households. At this point Jesse’s attention turned to day trading.
He put $10,000 into a brokerage account at Ameritrade and proceeded to trade well-known names like AOl, Amazon and Ebay.
Jesse was hooked and started to use leverage to enhance his growing account balance, that was until the financial crisis hit which saw many tech stocks fall in value by 70% in a short space of time.
Once again Jesse lost everything, his savings and his day trading career…
He left the markets for 3 years, vowed never to invest again and continued his education where he studied for a master’s degree in business.
In 2001 Jesse was hit with a setback regarding his health, fortunately his health improved many months later, and he turned this setback into a foundation for future success.
He completed in depth research relating to his initial diagnosis, which led him to a company called Elan Pharmaceuticals. After thorough fundamental analysis he believed the value of the company could reach $500,000,000 which was 160 times more than the current valuation.
He noted that the stock price just a few months earlier was considerably higher and believed it could reach these heights again. To add to his analysis, he seen that the CEO bought several hundred thousand dollars of stock at the current price.
During Jesse’s 4-year absence from the markets he managed to save $22,000, he put it all on the ELAN trade at a price of $1.25 per share in the month of October 2002.
Over the course of the next 10 weeks the stock surged to $9 turning his investment into $165,000!. During this period of increased confidence Jesse added leverage to enhance further growth. Not long after bad news struck the company and in a space of a few days his investment was back down to $36,000.
To compound Jesse’s misery the share price grew to $30 over the following 12 months.
So far, we have seen a high-risk pharmaceutical tip go wrong for a loss of $2000, a tech company recommendation capitulate for a loss of $3000 and with some research, a roller coaster ride trade that eventually ended in a profit of $14,000.
At this point Jesse read every investment book under the sun, studied technical analysis, fundamental analysis and combined them both to develop his own unique strategy. His goal was to be the best investor he could possibly be.
More equipped than ever before Jesse scoured charts with his finely tuned strategy, he came across a company at the time called TRM Corporation, he noticed a specific chart pattern that he called the ‘staircase’, a pattern that would soon change his life.
Jesse noticed a repeating pattern, the price consolidated at 25 cents for a few months forming a base, the price then shot up to 75 cents and stabilised for a few weeks before repeating all the way up to $4. Equally appealing was that almost every company executive was buying stock throughout the pattern regardless of the ever-increasing price.
This time equipped with thorough analysis Jesse bought into the trade, over the coming weeks the price increased to $5 and with it so did his confidence.
Over the next 7 months the price rocketed to $27 and with the help of some leverage his starting account of $46,000 rose to $800,000 !!
It was clear Jesse’s persistence and dedication to education was paying off in a big way.
or……. perhaps not.
During a trip to Las Vegas, the share price endured a huge sell off and within a day (amplified by leverage) his account dropped to $150,000 !
Despite this huge set back Jesse was confident he found the strategy that would change his life.
Two years were spent religiously following this strategy, and Jesse’s account grew to staggering proportions.
In October 2004 his account grew to $267,000.
In December 2004 it grew further to $586,000.
And by May 2005 it had grown to $1.23 Million.
And so on until it reached $6.8 Million by January 2006.
We will look at the detail of these trades shortly but first let’s see what the 2008 market crash had in store…
With 6.8 Million sat in the bank Jesse was justifiably feeling very confident, and when he seen the market decline from late 2007 through to late 2008 unfold, he seen an opportunity to increase his account further, in his mind the market had oversold and was due a rapid rebound.
To fully capitalise on the opportunity Jesse decided to utilise leverage in a big way with a vision that his account would grow to unthinkable proportions.
He proceeded to place a huge trade on the S and P 500 and was convinced the rebound was imminent. The market however had other ideas…
What came next took many experts by surprise, not only did the market not recover but it dropped significantly and rapidly.
Jesse Stine lost a little over 5 million of his 6.8 million account in a matter of days.
His account value dropped to approximately 1.7 million dollars.
In Jesse’s own words he says;
“I committed a series of fatal mistakes: over-leverage, using options, catching falling knives, trading the general market and trading without stop losses”
It was clear that Jesse ignored his original strategy which got him to the 6.8 million dollar mark. It was a recipe for disaster.
In this section of the video we will look at some sample charts and trades that Jesse took using the strategy that got him to 6.8 million dollars in 28 months.
Starting with a company called Dynamic Materials Corp, ironically the ticker symbol is B O O M and the stock did just that.
Let’s look at some of the technical aspects Jesse looked at on the chart prior to making a trade.
You can see here that a long based formed over many weeks, and at the point of breakout there was high volume in comparison to previous weeks.
The price increased above the 30 week moving average and the cost per share was less than $15, a threshold set by Jesse for superstock selections.
In terms of fundamentals, the PE ratio was 10, earnings were increasing, debt was low and insider buying was evident.
Jesse entered the trade at a price of $4.45, he seen this as a low risk entry point because the price started to consolidate whilst volume dried up.
Jesse sold at this point for a near 500% gain in 8 weeks, he saw that the stock price moved way too far away from the 30 week moving average.
This was a classic superstock.
Another company called Forward Industries passed Jesse’s superstock criteria, its cell phone sales were up almost 100% year on year and net income also increased by close to 600% over the same period.
Here we can see that the technical criteria were also met.
There was a long consolidation period over many weeks prior to the breakout.
Volume expanded considerably on the breakout week, price rose above the 30 week moving average and again the price was below the desired $15 threshold.
Insider buying was noted here and there was a low number of shares outstanding.
Jesse entered the trade here at a price of $3.81 which coincided with a drop off in volume.
Assuming a stop was placed here just below the previous weeks closing price, the risk reward would have been excellent.
Jesse eventually sold here at the price of $30 for a 1500% return in 9 months.
This was another classic example of a superstock in action.
There are many more examples of the trades Jesse took in his book, but you should at this point understand the basic concept of his strategy that made him a fortune, if you do I would really appreciate it if you would hit the like button below, it really does help the channel.
Let’s move on to some lessons and words of wisdom from Jesse’s vast experience.
In no particular order;
1) Don’t listen to tips or invest in anything you know nothing about.
2) Stay away from day trading, Jesse makes a great analogy when he says “Day trading is like picking pennies up in front of a steam roller” its not very enjoyable and over 90% of day traders fail.
3) Let your winners run. Many beginners are keen to take their profits early to experience the feeling of being right, but remember the game is not about being right, its about how much you make when you are right and how much you lose when you are wrong.
4) Use only weekly and monthly charts for technical analysis, they are far more reliable than the lower time frames. Huge hedge funds use the longer time frame charts for a reason, don’t get drawn into the excitement of the lower timeframes.
5) Buy individual stocks as opposed to ETF’s or mutual funds. Favourable risk reward is usually only discovered in these individual stocks, aided through research and chart analysis.
6) Don’t over diversify, research a few selective stocks that can give you an edge.
In summary, Jesse Stine has proven through his method that riches can be achieved.
The book covers over 250 pages and details all the trades he took to achieve his super performance.
It is one of the most enjoyable books I have read to date, as such I give it 5 stars.
Thanks for listening. Again, Please hit the like button, subscribe and let me know below if you have any book ideas for review.