For many years, investors have advanced different ideas and methodologies for investing money. Among them are value investors who espouse averaging down, buying low and other assorted (what we believe to be) reckless approaches. There is also growth investing, which pays attention to such things as sales, profits, adoption cycles of society and demographic saturation points.
Trend Following concerns itself with none of these things. Trend Following cares not about the past, has no interest in the future and only values the now. Trend Following’s only interest is price. Price at every moment defines whether or not our investment positions are valid and intact (or invalid and should be disposed). Trend Following bears no affinity for bull or bear markets and embraces both with equal zeal. The goal of Trend Following is to harvest energy from the markets, both up and down.
Some of the most well known names in Trend Following are Richard Donchian, Jesse Livermore, Nicholas Darvis, William O’Neil, Ed Seykota and Richard Dennis. Consider their results with this method:
- During the crash of 1929, it was rumored that one of the biggest winners of the crash was Jesse Livermore, who reportedly made over $200,000,000 in 1929
- Nicholas Darvis, a former Broadway dancer, is reported to have made some $2,000,000 from very meager beginnings, following similar methods. He was featured on the cover of Time Magazine in the 1950’s
- William O’Neil founded Investor’s Business Daily and pays homage to Livermore and Darvis repeatedly in all of his books. A large part of his CANSLIM method is in no small part derived from their work
- Ed Seykota, one of the market wizards, is reported to have run a single account up more than 250,000% using Trend Following
- Richard Dennis started as a teenager in the Chicago trading pits. He would yell orders to his father because he was too young to actually be on the floor. He was called the “Prince of the Pits.” He started with a mere $300 and grew that to a fortune in excess of $300,000,000. He then went on to train roughly a dozen students, who became known as “The Turtles,” as featured in Michael Covel’s book ”The Complete Turtle Trader.” In my mind, that is the definitive book regarding the Dennis/Turtle story
These are the stories of some of the people that have followed the discipline of Trend Following. At Damon Vickers and Company, our goal is to harvest energy from the markets, both bull and bear. We call our approach Adaptive Trend Following. Over the last 10 years, we have called both market tops in 2000 and 2007/2008 and we have positioned assets to benefit from both periods. In addition, in the decade or so leading up to 2000, we owned many of the companies prevalent in society today. Among them are Cisco Systems and Starbucks Coffee. Trend Following is no panacea, but over the long term we believe there is no better investment methodology than one that is fluid enough to adapt to the markets.
*Investing in securities and the financial markets involves risks, such as currency fluctuation, political risk, economic changes and market risks. As with all investments, an investor should carefully consider his or her investment objectives and risk tolerance as well as any fees and/or expenses associated with such an investment before investing. Actively traded accounts will generate high aggregate commissions, which will in turn effect the return in the account. Damon Vickers, Damon Vickers & Co. (DV and Co) is not a registered investment advisor but is a FINRA registered representative and as such is compensated by commissions and not fees. Damon Vickers and DV and Co is not a financial planner and does not provide financial planning advice. Trading in securities and financial markets comes with substantial risk, which can be amplified by active trading of an account. Investing in financial markets and their publicly issued securities may not be suitable for all investors.
