I keep running an old saying through my mind when looking at markets these days: “Keep it simple, stupid.”
Overthinking is a killer, especially when it comes to investing.
You really like an idea you have, so you start digging … and digging … and digging.
You build an airtight case to back up your idea,
but by that time, the optimal window to invest has passed you by.
Instead, you should have just kept it simple.
There’s a reason why I bring this up today, but first, an origin story of sorts.
Kelly and the K.I.S.S. Method
You probably haven’t heard of Clarence L. Johnson.
But, Kelly — as he was known by most — was one of the greatest aeronautical innovators of the 20th century.
He founded Lockheed Martin’s famous aircraft prototyping division, Skunk Works®.
In the midst of World War II, the U.S. Army’s Tactical Service Command met with Lockheed Martin officials to develop a jet fighter that could counter Germany’s growing aerial threat.
A month later, Kelly’s hand-picked group of engineers developed the XP-80 Shooting Star jet fighter. When the Army gave the green light to the project, Skunk Works® was born.
Kelly and his team built the revolutionary XP-80 in 143 days — seven days ahead of schedule.
In its 80+ year history, Skunk Works® produced the SR-71 Blackbird — the fastest manned aircraft in the world — the F-117 Nighthawk — the first steel aircraft in history — and the F-22 fighter — the first 5th generation aircraft.
Skunk Works® has continued to push the boundaries in aeronautics because Kelly devised 14 rules for the team’s operation.
And it’s where I was reminded of that slogan… “keep it simple, stupid (K.I.S.S.).”
Kelly knew that his team could use common sense to solve tough problems. And it led to better products that were cheaper and faster to produce.
This idea is often forgotten in the world of investing.
That’s because we, as traders, can get bogged down with complexity in search of profits.
Find a simple set of rules of which to trade … and stick with it.
Take out the headlines, the emotions … the noise around trading, and keep it simple.
How We “Keep It Simple”
There are thousands of technical and fundamental indicators you can apply to a stock chart.
But we specifically target six main factors when contemplating an investment:
- Momentum — How is the stock moving?
- Size — How big is the company?
- Volatility — Is the stock subject to big price swings?
- Value — How is the stock’s price relative to its earnings, book value and sales?
- Quality — How efficient is the company’s management at generating profits?
- Growth — Has the company grown its earnings and revenue?
These six factors can tell you most of what you need to know about a company before you invest in it.
It’s why these are the six main factors that comprise Adam’s proprietary Green Zone Power Ratings system.
The system is a one-stop shop that combines all of these factors into one easy-to-use rating that shows whether you are on the right track to profits or should look elsewhere.
Adam’s system takes out the emotions and the noise around the market and makes trading simple.
As Kelly would say … keep it simple, stupid.
That’s all from me today. I hope you all have a great weekend.
Until next time…
Safe trading,
Matt Clark, CMSA®
Chief Research Analyst, Money & Markets
