Many people in the investment arena have probably heard of Jesse Livermore, The Great Legendary Stock Operator. Most stock traders view "Reminiscences of a Stock Operator" as a must read for anyone that wants to learn about trading stocks. However I think anyone interested in the stock market could learn a few things or more from Mr. Livermore. While always considered a stock trader, Mr. Livermore had certain investment techniques that are similar to some well known value investors of today. Which is concentrating ones bet on a few stocks at a time. The well known Warren Buffet operated much like this in his early years of investing. Another well known investment manager by the name of Eddie Lampert limits his bets as well. This shows by his large stakes in Sears Holding $SHLD, AutoNation $AN, and AutoZone $AZO which make up the bulk of ESL Investments, Lampert's investment vehicle.
Below are some quotes from Mr. Livermore:
"Cash was, is, and always will be - king. Always have cash in reserve. Cash is the ammunition in your gun. My biggest mistake was not in following this rule more often. Time is not money because there may be times when your money should be inactive... Often money that is just sitting can be later moved into the right situation and make a fortune. Patience-Patience-Patience. Patience was the key to success - Don't be in a hurry." - Jesse Livermore. How To Trade In Stocks, 1940.
From the words of Mr Livermore you can see, that he shares something with other great investors and that is patience. Warren Buffett has often said that his ideal holding period is forever. This is a bit of an exaggeration, as we know Buffett has been known to cut ties fairly quick if he has miss read the tea leaves.
"I have suggested to people who are interested in the stock market that they carry around a small notebook, keep notes on interesting general market information, and perhaps develop their own stock market trading strategy. I always suggest that the first thing they write down in their little notebooks should be: 'Beware of inside information- all inside information!' "
Livermore along with being patient made sure he did his homework and read the cards right before plunging in, also a trait that some of the other Greats have shared.
Later in his life Livermore was asked an important question. No it was not by any other notable stock traders but by his son's. They wondered why their Dad was so good at this game while others seemed to mostly loose at it. His answer:
"The stock market must be studied, not casually, but deeply, and thoroughly. It's my conclusion that most people pay more attention to the purchase of an appliance for their house, or when buying a car, than they do to the purchase of stocks. The stock market , with its allure of easy money and fast action, induces people into foolishness and the careless handling of their hard earned money, like no other entity."
This is as true today as it ever was. What ever is in vogue today is what the crowd does. However, the investor that really wants to make money in the markets needs to develop his own strategy and adhere to this, the same as the great ones do.