For our penultimate season one episode of Fill the Gap, we are very fortunate to feature an in-depth conversation with Irusha Peiris, CMT.
Not only has Irusha been practicing the CAN SLIM methodology made famous by William J. O'Neil in his bestselling book, How to Make Money in Stocks, for over two decades; he has also been working within the O'Neil companies since 2009. As a CMT charterholder, portfolio manager at O'Neil Global Advisors, weekly contributor on IBD's must-listen weekly podcast Investing with IBD, and former Director for O'Neil's excellent Market Smith web-based equity research product, Irusha brings a wealth of experience and perspective to this highly informative discussion.
Our conversation spans topics that range from staying focused on picking "game-changing stocks" to the importance of patience and discipline; from always staying humble, to how to manage the pesky mental challenge of constant portfolio drawdowns, and so much more.
As a life sciences student in Boston, Irusha was given the fateful advice to only get into medicine if he was 100% sure it was what he wanted. Certain that he wasn't that certain, he decided to shift his focus to the stock market, where he truly found his passion - and we are grateful that he did.
To better understand the concepts covered and market commentary included in this episode, we recommend reviewing the supplemental resources available on the CMT Association website using this link: go.cmtassociation.org/ftge11.
Fill the Gap, hosted by David Lundgren, CMT, CFA and Tyler Wood, CMT brings veteran market analysts and money managers onto a monthly podcast.
For complete show notes of every episode, visit: https://cmtassociation.org/development/podcasts/
Give us a shout:
CMT Association is the global credentialing authority committed to advancing the discipline of technical analysis in the financial services industry. We serve members in over 137 countries. Our mission is to elevate investors mastery and skill in mitigating market risk and maximizing return in capital markets through a rigorous credentialing process, professional ethics, and continuous education. CMT Association formed in the late 1960s with headquarters in lower Manhattan, NY and Mumbai, India.
Learn more at: www.cmtassociation.org
2019 recorded interactive session at the CMT Annual Symposium
How to Make Money in Stocks book by William J. O’Neil
24 Essential Lessons for Investment Success book by William J. O’Neil
Tyler Wood 00:13
Welcome to Fill the Gap, the official podcast series of the CMT Association hosted by David Lundgren and Tyler wood. This monthly podcast will bring veteran market analysts and money managers into conversations that will explore the interviewees’ investment philosophy, their process and decision making tools. By learning more about their key mentors, early influences, and their long careers in financial services, Fill the Gap will highlight lessons our guests have learned over many decades and multiple market cycles. Join us in conversation with the men and women of Wall Street, who discovered, engineered and refined the design of Technical Market Analysis.
Fill the Gap is brought to you with support from Optuma, a professional charting and data analytics platform. Whether you are a professional analyst, portfolio manager or trader, Optuma provides advanced technical and quantitative software to help you discover financial opportunities. Candidates in the CMT program gain free access to these powerful tools during the course of their study. Learn more at Optuma.com. Hello, good morning, Dave Lundgren, welcome to Episode 11 of Fill the Gap. How are you today?
Dave Lundgren 01:58
I’m doing great Tyler. You know, I’m just kind of sitting here waiting for the bull market to resume trying to be patient in the meantime.
Tyler Wood 02:05
You and many other investors who’ve been waiting all summer long, all summer long. Yeah. Cold weather Santa Claus Rally. Let’s go. Let’s heat this thing up.
Dave Lundgren 02:13
Yeah, let’s do it.
Tyler Wood 02:14
I was so impressed by our conversation with Irusha Peiris, CMT. This episode has got so many great takeaways from a person who’s really made William O’Neil’s process their own, but has lived through the experience of of trading. And, Dave, for you what was -what was really the highlight that you took away from this episode?
Dave Lundgren 02:33
The idea of patience and recognizing when your style is in – in sync with the market and recognizing importantly, when it’s not. And knowing what to do in both cases. And so you know, all summer long as we’ve just been talking about the trend-following momentum type investing style hasn’t – hasn’t been really engaged with the market. It’s been very rotational, many things we can point to in evidence of that, but Irusha’s response to that has instead of continually pressing his bets and trying to force the process, he’s being more flexible about it and allowing cash to accumulate and not feel like he needs to be fully engaged in the market at all times. And then the idea that he’s just going to continue to do that until his portfolio starts to work. And he’ll signal off the portfolio’s performance, which presumably will kick in when his process kicks in. And when he starts to see that evidence, then he’ll start to press bets and be more aggressive. But until then, it’s more about playing small ball and, and not – not trying to force the process. And I think at the end of the day, though, the key word is patience. And I think that’s probably the thing that through the course of one investor’s career, I mean, that’s that’s something that, you know, we can all probably use a lot more of his patience.
Tyler Wood 03:42
Absolutely. Hearing Irusha, you know, be able to outline exactly what he’s looking for in terms of a growth equity story that makes sense. He sees the fundamental factors that are, you know, a deep part of the CAN SLIM process and things that he has learned within the William O’Neil companies, but then to have the humility to know when, you know, environment is not favorable and to simply continue to test with small position size to see you know, as the market is changing, but that adaptation, I thought was an incredibly difficult and disciplined thing to execute. Way to go to Irusha Peiris for being able to not only execute that, but also to share that with the audience and the humility that comes from talking about riding stocks 80% down and the tough way that he’s learned a lot of lessons and hopefully to not repeat those same mistakes. For the CMT Association community. You know, there’s so much to learn from William J. O’Neil. It was such an honor to bring him the whole team his son Scott out to the CMT symposium in New York in 2018. William J. O’Neil became our annual award winner based on the recommendation of a Fill the Gap podcast guest, Robert J. Farrell. And then Irusha of course joined us in 2019 and shared some more about the process and tools that they use. both within MarketSmith and throughout the William O’Neil companies. So, Dave, I can’t wait to get into this interview. Thank you so much for inviting me to be a part of this. Let’s talk with Irusha Peiris, CMT.
Dave Lundgren 05:16
Welcome to fill the gap, the official podcast of the CMT Association in Episode 11. We are excited to have as our guest CMT charterholder Arusha Paris from the legendary William O’Neal company, Arusha. His role has changed there recently. So we’ll let him give us all the details there. But let’s just say that Arusha has been an active practitioner of the O’Neal investing methodology for upwards of 20 years, maybe longer. And for that reason, alone, Arusha we are super thrilled to have you on as a guest with us today. So welcome to fill the gap.
Irusha Peiris 05:46
David, thanks so much. Tyler. Great to see you again, too. It’s always an honor to do something with the CMT.
Dave Lundgren 05:52
Yeah, we will talk about your presentation I think he gave in 2019, which was excellent as well and gave some great pointers there. I know, Tyler, maybe we can make that available to our listeners, but it was fantastic. You know, for me,
Tyler Wood 06:05
he would be the last live presenter at a conference pre COVID. Right?
Irusha Peiris 06:10
Probably 12 years ago. And with your best
Dave Lundgren 06:15
ad, you know, and he would have doubled his fee from zero to exactly nine times. So for me, you know, I’ve I’ve been a follower of the O’Neill methodology for as long as I can remember when I first started out investing, I mean, I used to get the books delivered at home and you know, do the weekend chart review and everything else. So I’m, I’m up to my eyeballs all in on the O’Neal methodology. But I can’t certainly can’t call myself a lifelong practitioner of that methodology as you can. So this, I’m really looking forward to having this discussion with you. Before we dive into cancelin, the methodology what it was like to work with William O’Neal. And in particular, we should I really want to get, you know, your personal take on this process. As much as I want to talk about William O’Neal and the cancelin process. I also want to hear and I want our listeners to hear from you in terms of how you’ve made it your own and what your experience has been as you execute this methodology because you know, you’ve done it, right. So to get somebody who’s been in the weeds for that long, what are your takeaways? So we want to cover all of that. But before we do that, why don’t you tell us a little bit about how you got into the business? And what path got you to the way Moneo methodology?
Irusha Peiris 07:27
Yeah, so I was probably the last person ever to get into stocks. I was a bio major at Tufts University. I was in medical research at Newell Medical Center. And so I was planning to go to medical school. And around that time, I was working with a lot of residents and a lot of patients. And the one thing that this resident told me, she told me that, you know, only go to medical school, if you’re 100%. Sure. And that was the one thing that I knew I was like, I’m like, probably 90% Sure, but not 100%. It wasn’t like I really had to be a doctor. So I started exploring things. And this is during the.com era. And I ended up getting a job at Fidelity when they were really revamping fidelity comm and I just happened to be right in the middle of all that. And it was around that time where I started to think that yeah, maybe I should do this stock thing too. And so I took a free trial just to Investor’s Business Daily. And this is probably 9899. And like I said, I didn’t know anything about stocks, but they would send the paper. And it was essentially a computer readout of just stock tables. And so I didn’t know anything about it. So I didn’t read it, you know, so I just stack them up on my table. And it was really around 2001 to 2000 market crash hit. And that’s where it started to wake me up and say maybe I should try to learn a little bit more about these stocks. Because before that, I was just doing like what most people did, getting advice from friends getting tips from the water cooler, and I in so 99 I thought I was a genius, right? I just wrote these stocks up. But 2000 I just wrote in right back down. And so that’s when the light bulb went off with a cleaner minute, you know, this bind hold might not necessarily be for me, right? It’s not necessarily a bad strategy. Obviously it isn’t, but it just didn’t resonate with me. So I remembered one thing that IBD did, and I threw those papers away at that point, but they sent a book and it was called 24 essential lessons for investment success was a really, really small book. And so I think I have this book on stocks. And so I went through my closet, and I found it it was still actually in the mailer because I didn’t read it at that point. But once I once I took it out, I was like okay, let me just read a little bit of this. And it was essentially a q&a with Bill O’Neil, William J. O’Neal, and I read the whole book right there. I mean, it’s a really small book, but I I cannot put it down because it was the first time. It was the first time I heard anyone talk about the stock market. The way he talked about it, he was talking about look for the next great companies that have these monster earnings and sales. But what really resonated with me was the risk management. Like he was talking about, like cutting losses. I was like, I’ve never heard about that, you know, usually what you hear about is when stocks go down by more, right, and so I really liked that I was like, oh, there is actually an exit strategy to the downside where you know, you’re wrong. And so that’s what really kind of made me interested in especially I just have more of a interest in technology and newer things. This kind of resonated with me, too, instead of just buying GE because it’s, you know, great value or whatever. So that’s how the whole kind of journey started. I subscribe. I started getting the paper. And I was in Boston with you, David, that dynamic? We weren’t we were in different time. Yeah. But I was writing the green line, reading the paper, and trying to just slowly absorb this stuff. And I think where it really where I really started getting an understanding is when I went to one of the seminars, and Bill Himself taught it, and it was in New York. And finally, it got some kind of references of here’s AOL building a couple of handle. And here’s the breakout, here’s Cisco coming out of a double bottom early on. And so I finally had some reference points. But it was it was actually pretty hard back then, because there weren’t a lot of examples of great successful stocks. So there was actually I think it was on State Street in Boston, David, there was like a Business Library there. And the library actually had the daily graphs, chart books, they got the blue green books every week. And so every week, I would go to that library. And on the the each of those books, I think they had two examples of great stocks breaking out. So I would go and photocopy those stocks, and like gather analysis and all that stuff. So I built myself like my own little model book there just to kind of train my eyes for so that’s really kind of how it started. And then I eventually realized that, you know, I’m kind of learning about the stock market, and my free time, you know, and it’s like, it’d be always really cool to try to make it more of a career and stuff like that. And so I ended up going to be you and doing a master’s in investment management there. And that was really cool. But I also learned eventually that, you know, I don’t necessarily want to be kind of the traditional equity analyst. So I kept I kept narrowing it down was like, Really, the only thing I really liked is O’Neal, right? Because it combined the fundamentals and companies essentially combining the best of both worlds, the fundamentals, looking for great companies, game changing companies, but then using charts to help manage that risk. And so I kind of like you’re trying to improve your odds in both directions. And especially then, of course, the market to trying to be there when the markets ready to turn around to so that that’s how the whole thing really started for me.
Dave Lundgren 13:04
Interesting. So you made your way over to O’Neill just sent your resume or did you do Chase like like frame text, or chase down the legends and said, I want to work for you. Did you do that? Or did you just send in your resume?
Irusha Peiris 13:14
Well, you mentioned tic tac sherif. I was actually asking him questions at one point because when I started doing the CMT levels in the early 2000s, I passed the first one. And I was doing the second one, this was at BU, and he was teaching a course for the level two. So I took a I took that class, I ended up not even taking it, because I was just so busy with the classes at that time, but he was so nice. And he was always willing to answer questions and things like that. And he told me one thing, don’t be a diamond doesn’t, you know, it’s like, do find something unique. And really do it don’t just, you know, go and get these exit designations and just get any job you want to really kind of Friday, find a way to stick out. And so I knew the only way that I was going to be able to stick out was really continue to focus on Neil. So for probably the first five, six years, I was just trading my own money, though. I was trying to get in on Neil. So in 2005 2004, I was sending resumes, but from Boston, and I actually was interviewing and stuff like that. And I nearly joined them probably like in 2005. But I decided to stay in Boston at that time. It was 2009 I ended up coming to do my MBA at USC. And so I was in LA I knew O’Neill was in LA, right. And the crazy thing, the whole reason why I probably ended up working on Neil was the 2008 market crash because I was a student at USC at that point. And usually right out of UC, you go immediately to one of the the big companies around LA or Silicon Valley, but the market crash happened and I I was probably the only one who realized in 2008 when the market crash happened. We’re not going to have a lot of jobs in 2009 Yeah, so I I made the decision to stay in LA there were opportunities and Silicon Valley, but I didn’t you guys know this in Boston, New York, it gets really gray up there. And one of the reasons why I needed sun for first time my wife, I needed sons, I didn’t want to go back up to Silicon Valley, it was, it was pretty great up there too. So I just kept an eye out for Neil, I saw a job at daily grass, just answering phones and being a coach there. So I figured, you know, let me take advantage of this, and try to follow my passion, tried to just get in at the bottom level, and at least like get my foot in the door, and then figure out what while I go, because I know I at least have the passion just work towards learning this methodology.
Dave Lundgren 15:38
Yeah, good for you. That’s an important message for those young, aspiring corporate welders that are out there today that get their MBA and they want to join a company and be vice president or president on within the first week, it takes more than that, right? You got to actually, you know, knuckle down and take those jobs that get you in the door, especially if it’s a place you want to be at doing what you want to do, you got to do what it takes. And so kudos to you for doing that. You know, Tyler, just listening to, to I wish his introduction, it’s interesting to me, because we now have a number of folks who have touched on two themes that Arusha just touched on again, and one is to follow your passion and in investing, you have to do what makes sense for you, because you won’t be able to do it otherwise. So that’s, you know, managing to bear markets as a buying holder, or as somebody who’s actually more respectful of risks, and then also sort of follow on to that. I think that’s every guest so far, has talked about how they came to technical analysis, because they became aware that you need to understand rest, and no one trend changes and respect the market and things like that. So here we go. Again, another very successful investor, basically powering these these two themes once again,
Tyler Wood 16:44
and the mentorship component, right? You talk about chasing Frank out the door, when he was teaching a CMT prep class, he talks about chasing Ralph out the door, as Ralph was teaching technical analysis. I mean, I think this discipline lends itself to a lot of practicum learning. It’s it’s not all theory that you could just absorb from a book, but you got to roll up your sleeves and have your hands on the charts. And doing that with with somebody who will mentor you, I think seems like a pretty common thread through all of our interviews as
Dave Lundgren 17:14
well. Right? Right. You had the opportunity to work directly with Bill O’Neil. What was that like?
Irusha Peiris 17:20
Well, I didn’t work directly with Bill O’Neil, I worked more with his son, Scott O’Neill. And I work very closely with Scott O’Neill. So one of the big things that with when I started with daily graphs, I, once I heard that Scott O’Neill was the president of daily graphs, and it was soon to be market Smith, he and he was setting with the group. And and I was like, and I enjoy my interviews, like and you can is it possible to talk to him sometimes he’s like, the door’s always open, you know, and he always loves talking about stocks. And I was like, Sign me up. Like, that’s what I want. And what was actually kind of interesting, too. So 2008. So 2000 was kind of once I just complete the role the markets down. That’s what really kind of got me into this whole thing. 2008 I’ll just find the rules. I was in business school at that time, but I was just following the rules. And once I started seeing the markets get worse, I went to cash. And I hardly was in 2008, because there weren’t that many things to buy. So I completely avoided 2008. And so that was kind of like the, you know, realization that at all those four or five years of working, understanding, the methodology really saved me in 2008. And so I took some of that money and went to IBDs, like advanced courses at that time, which were a lot of money, but I said, you know, I’m gonna take the money I saved in the markets, and I’m gonna use it to invest. And that’s what I heard, like, obviously, Bill O’Neil talk, Scott O’Neill. And so that was the first time I really learned about Scott O’Neill. And his presentation was probably my favorite, because he talks about pulse analysis, he talked about, like, I got to see him and realize that, hey, he’s not perfect. None of these guys are perfect. When you read the books and stuff like that. It’s like you buy here, you sell here, you buy here, and here, I am messing up everything. And then I go, and I see them talk about it. And they’re showing, like they showed some of his trades. And it was it was the same kind of thing. And, you know, he was, you know, up there, and it was hard for him to talk about, like, what he was thinking at that time. So it made him human, it made the whole system, human. And really, that’s what I was saying. It’s like, you know, trading is, you know, to be human, if you’re going to have those emotions, you’re gonna have to manage those emotions. And that’s really, it’s 90% Psychology, it doesn’t really matter about those strategies, and psychology and, of course, the risk management.
Dave Lundgren 19:40
Yeah. Can you give us some I wanted to flesh that out a little bit more because I, I think, you know, I’ve mentioned this many times with other guests that that’s to me, it’s it’s the area where we, we struggle the most as investors, and I do think it has a lot to do with not really just fully understanding what exactly it is that you’re doing and what your expectations should be in that gap between those two things can cause you know, mental games in your head and especially in you know, an environment where or in a pursuit where, you know, you’re gonna draw down probably what 85% of the time. Like you’re, you’re you, you’re basically below your high watermark almost all the time. And when we think about trading and investing in is particularly when we’re getting started, we don’t think about it like that. All we know is we hear a William O’Neal killed it. Yeah, right. We hear that Frank Tisch era killed it. And all these Jesse Livermore killed it. But what we forget about is that while they were killing it, you just alluded to a really, that the reason they were able to kill it is because during those periods of drawdown ahead of us they had a certain mental capacity and sort of mental strategies to help them navigate it. So can you can you talk about that a little bit, and maybe some of the ways that you navigate those vast majority of times when you’re actually in a drawdown?
Irusha Peiris 20:51
It’s not easy. And and a lot of a lot of the times, I think it’s the realization that your strategy is not going to work well in every single market, right. And like, so last year, I’m more I’m looking more for technology, related stocks, more game changing stocks, and I try to hold them longer. So more more of a trend follower, but intermediate trend followers. So last year was the perfect environment. For me, it was the greatest environment for me. And it seemed like those the greatest environment since 99, then this year, it’s been just rotation, rotation, rotation. So for me, but especially a buying strength I’ve been struggling on this year where I’m just getting whipped around with their own. And so it’s now it’s just more kind of leaning back on the experience. I still go through those emotions and the questioning and the the psychology where you lose the confidence. But it’s the right now I’m at a point where I dug myself out of that, where you have the drawdowns, and you’re not, you’re not like 50% draw downs, right? I’m hopefully piling on knock on wood, I don’t want to I catch myself quicker these days, that once I know I’m not out, when I’m out of sync with the market, to reduce my positions to not trade as much and try to just slowly prove to myself that I’m getting back in sync with the market. So that comes to towards the results. And can you put a few trades together? Can you get a few singles, right? It’s not always about hitting the homeruns. And Bill O’Neill is, you know, the legendary home run hitter. One, he was taking us to still taking plenty of singles, and also still cutting his losses tons of times too. Right. So even in his career, gosh, like the mega mega kind of homeruns that he had maybe 1015 I don’t know, maybe I might even be that legend. There. I’m in the legend. Everyone’s like syntex, Amgen Apple, those ones were where he had huge concentrations. And he knew that that was the mega market winner, or Levitz furniture was one Yeah, so but when you think about his trading over 50 years, and still maybe 1015 monster winners, he really capitalized on a lot of plenty of others like 20% winners and all that kind of stuff. But you have to kind of still be there when you know you’re not when the markets not right. When you’re out of sync. You don’t have to have a lot of exposure in the market. But you want to be trying you want to test and you have to kind of set yourself up to get frustrated really so so that I think that’s that’s part of it until you let the numbers until you let your your trades start telling you you’re getting back more in sync with the market so that that’s where you just kind of out there just and trade smaller.
Dave Lundgren 23:45
Right? So it’s you know, you don’t change your process. Like you you have to always take the signal because you don’t know when the next when the markets going to be ready to go again. But the way that you you also can’t just do it blindly knowing that that every breakout that you’ve purchased for the last six months has you know, the vast majority of them have failed. So you have to recognize that so you continue to execute your strategy ie buy the breakouts, but you do so with what a smaller position size tighter stops, how do you actually how do you actually navigate well, how have you been navigating?
Irusha Peiris 24:15
I’ll say that it’s definitely not always taking the signals because the emotions get to you and you know you’re out of sync and so I’ll try to back back away. I’m mainly a breakout trader but over the years I have tried to add more entries into my process. So there’s and CAN SLIM the O’Neal methodology isn’t it’s mainly breakouts, but there’s plenty of places for pullbacks where you can buy on pullbacks, a lot of times when a stock is building the right hand side of the bases. I’ve been working on that for a number of years. And so that becomes a little bit more comfortable. So there are a few kind of different things I’ll try and then obviously the strong kind of earning scalps which I can talk about, later about how I’ve kind of adapted it to my my own personality, but so I do have a few other things in my toolbox to try where I’ve kind of adjusted is to try to get them a little bit earlier and not always try to break it by the breakouts like halfway during the year, because it was clear that they weren’t working, you know. So I’m not going to always take every signal, if it isn’t working, especially the breakouts I require are monster type of breakouts where it’s breakout on a huge volume. It’s not just I’m not just looking at the price, when is crossing a pivot, it has to be like almost a no doubt, or it is just rocketing through their institutions, these large players are falling over themselves to buy shares of that stock. And so you’re seeing this huge volume. And these days, a lot of times that happens on an earnings reaction. So you see just a Monster Monster move on earnings reaction where they blown up the numbers, they’re raising guidance, and you know that every firm now has to adjust their models and the target prices are going to go up. And all of a sudden, more and more firms are going to realize that they don’t have enough shares. So they have to start getting as many shares as they can while they still can before the stock runs away at that point.
Tyler Wood 26:20
Right. Right. So Mark Minervini has this quote, to win in an environment where everybody has the same objective, you must do the things that most investors are consciously unwilling or subconsciously unable to do. So as a breakout trader or trend following investor? How do you differentiate from the pack or maybe speed your entry when you’re buying a monster breakout like that, and you know, the institutions are piling in, how is your process differentiated from, you know, the massive buying that’s happening all over the street,
Irusha Peiris 26:53
I’m not always buying, like my whole position on that, on that initial breakout, especially when the gap up kind of like one of those really monsters, it’s just gotten too extended. And so my goal is, and it might be like a lot of other funds too, but I’m going to try to space it out. And or try to accumulate that position over a few weeks, how you differentiate Now, one thing, so these kind of monster breakouts or these kind of monster, then sometimes they’re just huge earnings gaps. The reality is a lot of people aren’t going to want to buy those. Right. So I think you’re ready differentiating yourself, because a lot of people think that’s too high to a, it’s too late. Exactly. It’s scary. It really is scary. And so I think you’ve already eliminated a lot of them like, like the I mean, I think one for the listeners to look back at. And it’s a classic example is the Facebook breakout. Yeah, 2013 in July, right, it’s this Facebook was kind of down and out for a year. And then all sudden, they report earnings and show prove to Wall Street that they’ve monetized the mobile device, and they can make money on their mobile app. And that stock I think gaps up like 27% That day, 700% volume above average, it’s you know, it’s up at $31 $32. Like way above it, it’s ever traded, who’s crazy enough to buy that the only ones are gonna buy it are gonna be like the institutions, right. And that was the place where I was buying it. And I know a number of other O’Neill, people were buying it. And you know, knew that that was going to start I mean, Tesla started really got going with the earnings gap back in 2013. And that actually wasn’t even an earnings gap. It was there was a sales announcement, we’re also on Wall Street realized that they were selling out of an electric car that was $90,000. Like normal, but that when I remember seeing those, like who would be crazy, not you know, they are actually selling out this, this is a game changing type of thing. That’s when Wall Street was starting to realize it. So kind of set, I think that you figured out a few entry points. And you mentioned Mark Minervini Mark Minervini is a good friend of mine. He is a mentor of mine too. I’ve learned a lot from him also. And he learned a lot from below nil, you know, so yeah, in the end, it comes down to math, it comes down to your success on different entries. And if that’s really working for you or not, right, and the kind of those monster breakouts they work for me because it makes it obvious that this could be the next institutionally owned stock right or in demand type of stock right there. And so maybe it settles wait for it to settle down a little bit. And then you know, try to ride that wave. And it doesn’t always work though to their, their their seasons where you’ll have a number of earnings gaps, and you try them and they reverse immediately and you’re stopped out so all of this stuff is it’s a numbers game and you find an age it’s and then you tried to take enough of shots there to to make that egg, you know, be profitable at that point,
Dave Lundgren 30:05
we had bought Facebook on that breakout as well. And aside from the obvious technical reasons for doing it, if you remember when the stock came public, it basically opened and just traded, traded straight down. And eventually the site became known as faceplant instead of Facebook, and so you knew that that was sort of the the behavioral bias against the stock. And so that’s the gap up told you that people need we’re changing their minds rapidly because it was so explosive. And so that’s that to me, I mean, you don’t you don’t get those as you as you mentioned, Russia, you don’t get those opportunities often. But when they do come around, that’s that can be a real, as you said, game changer and something that can be a real portfolio changer along the way, as well. So as we wait for these things to happen, right, so this is the this is sort of the question, because we’re dealing with this now, can you speak to the importance of patience and not pushing in rushing things and just, you know, living in the moment and dealing with the data as it is and not feeling compelled to do something that you you don’t you don’t have to do you can just be patient? Can you talk to the power of patients,
Irusha Peiris 31:05
patients that discipline, that’s, you know, that’s where it comes down to picking your spots, right, because the reality is, is that with the markets now, and we’re in kind of unusual times, we’ve been in unusual times, probably really, for the last 10 years or so. But with the with the markets, when you’re kind of in normal markets 1/3 of the year, the windows open up for our methodology for trend traders forum for for breakout type of buyers, 1/3 of the year where the markets, everything lines up and a trend up and growth, stocks just can go through the roof at that point, the other two thirds of the time, the markets are going down, which is pretty easy to avoid that or the most dangerous market, they’re going they’re chopping around, right. So that’s where you get the false signals, that’s where you can get whipped around a little bit, waiting for those times where everything lines up. And this is why I love charts is why I love technicals. Because you can see that in the price action A lot of times you know, it’s the stocks are well in downtrend, or they’re way extended, you don’t buy them at that point, really, I mean, you shouldn’t buy them. I mean, I learned the hard way for all those things, you know, I would buy extended, I’d get in there, they completely pull back and I’d get thrown out of them. I bought and downtrend they just kept going down, right, so you learn those things. So I’ve learned the hard way just to wait for kind of the setups to appear for them to get above their moving averages for the relative strength line to start showing an upward trajectory. And so that in itself, that behavior forces me to be patient, especially when you’re in a bad market. When you’re in kind of a rotating market, like you’re right now you’re going to constantly see things and you’ll have opportunities to get into the charts might not help you to be patient at that point. Because there’s going to, there are going to be things to buy, I think part of it is figuring out what works for you figuring out the best type of strategies and also really the best type of stocks. And that comes with experience. But if you’ve a lot of times, for me, they’re larger cap tech related stocks, like if I see like a Facebook breaking out of a monster base or something like that on huge earnings, I already I usually just automatically go for those, because I know just from history that I do better on those, I understand those stories, the larger cap stocks are a little bit less volatile, so I can ride them better, I’m not gonna get shaken out of them. And so I just have that history of I’ve done you know, Google’s and the by do’s and apples and all the all these stock all these large kind of tech stocks Tesla’s those are the ones that have done the best in the past versus like small caps or IPOs. Also try them, you know, because I’m trying to learn those. But I don’t have nearly as much success because there’s so volatile, I don’t understand the companies as well. So I don’t have the conviction to hold when they’re pulling back. And and so that in itself can also help with the patients too, because these markets are not always going to be rewarding the large cap tech stocks, you know, the the IWF and the MD wire on verges are breaking out May might make turn into a small cap, mid cap type of market, so I might have to adjust. But a lot of times, that all kind of helps with the patients. But I think in the quick answers, I’ve learned the hard way to be patient, because the windows are not always open to make money. You know, the markets aren’t always gonna give you money, right? Most of the time, they’re gonna take your money, more often
Dave Lundgren 34:31
than not, they’re not being receptive to your ideas. And so we need to accept that in the idea that that patients will be rewarded as almost should be obvious, but it’s difficult to do in practice. The other the other strength that you mentioned was discipline. And I wonder when you do your fundamental work, I think I think in the in the presentation that you did for the CMT Association in 2019, you mentioned that your strategy is 70% fundamentals, which makes sense if folks that are interested in learning more about it It’s the cancelin process, which is the acronyms for the things that Bill O’Neil outlined in his book, How to make money in stocks, which is a fantastic book, we can we’ll link it in the show notes, show notes. But you know, if you if you spend 70% of your time on the fundamentals, and you’ve identified a great company with explosive growth, it’s a game changer as you would define it. But it breaks down technically, how do you muster the discipline to sell something that you’ve done all this work on? And you’ve kind of like behaviorally attached yourself to it? Because it’s going to literally change the world? How do you sell the stock just because of broken uptrend line or board? relative performance deteriorated or something?
Irusha Peiris 35:34
That is a great question. I think that’s one reason why I love not just being a pure fundamental person, the one kind of blessing for me in 2000, once I was learning this system, and that’s where I really started learning. The system was that keeping your losses small, was I learned to cut losses very quickly, I had a lot of practice, like cutting losses very quickly. In a bear market. I remember the first few stocks where I cut my losses, I think student loan was one sketch or not spectralis sketches. I actually rode, like down 80%. So I that’s how I learned why you cut your losses. So Skechers Yes, exactly. Yes. So once you get past that kind of initial wave of cutting your losses, because the first few that I cut my losses on, I would dwell on it, right? It’s like, How can I lose like, 8%? You know, and then of course, you know, the stocks probably go, they went up without me too. But I would just dwell on it, you know, because it’s, it’s bruising your ego, right? You’re, you’re you have to admit you’re wrong. But after a while, that is probably the one thing I’m really good at is just cutting my losses. So even if I’ve done all this work, and I’ve done tons of work on tons of companies, and I think there’s so many companies that are game changing, if the chart are my entry point is telling me that I’m wrong, because I’m losing money on it. I’m out and it’s just kind of out of mind. If it sets up again, I’ll get back in into it again, I definitely don’t have the problem of that. I think I’m smarter than the market. The market is always right, though the market is beating the crap out of me enough that I’m like, okay, okay, you are right, and I’m going to try to go with you. Right, it’s the I’m the you’re the elephant, I’m the little fly, I’m just going to try to stay on the elephant. When the elephants moving in one direction, it doesn’t matter how much the reaction is, you just might be early on some of these like Tesla 2013, I thought Tesla had that potential to become what it is actually, maybe not this big. But I knew that I had that game changing O’Neill type of stock potential. I was I was early on it a little bit. Not that much. I was I was getting beaming earlier. But when I’m wrong, I’m wrong. I keep those losses small. But because I think just the experience itself, especially writing some of these stocks down 70 80%, I’ve just learned how hard it is to recover from those losses.
Dave Lundgren 37:53
You know, it’s interesting I do, the thing that I always remember is Amazon, which truly was a game changer, not not in not only in many ways, but in many ways that we never even were perceptive enough to understand in the moment that they came public, despite all that future that lies ahead of it in 2000, the stock went down 90%. And in that same year, earnings went up 90%. So, you know, so that’s just a, it’s just a subtle reminder that, you know, markets are not always, you know, the stock is not always the same as the company. And oftentimes they disconnect and yeah, yeah, yeah, they can definitely be that can, you know, represent opportunity and valuation and opportunities and all that, but, but I think it’s good enough to know when to get out. And keep those good game changing stocks on your radar screen, like Facebook, we talked about earlier. I mean, the thing came up public, it was down, I forget, like 80%, it’s still want to change the world. And if you’re just patient enough to wait for the chart to change away you went in my career, I’ve had the incredible fortune to be able to work with some of the best fundamental investors in the business. And so I’ve seen the level of fundamental work that they do, and it’s really like they’re in they’re trying to create an edge against the rest of the market in their fundamental analysis. And so when I think about the William O’Neal process, I don’t think it’s like that I don’t think it’s as in the weeds fundamentally. So can you talk about how you develop an edge with your fundamental analysis without really going into the weeds? The way a typical institutional investor might?
Irusha Peiris 39:17
There are a couple things one thing I will say is that what people don’t realize with Bill O’Neil is that he you know, he was operating the markets before cancelled was there he’s the one who created it. Right? Right. So when you see someone like kind of his older notes and things like that, he had a real fundamental view, what I think was the it was Price Club, which eventually turned the Costco where he had some notes. There’s only a two stores at that point. But he said, Hey, you know, if they project out to like 1000 stores around the nation, this is what the earnings are going to be like. So he was doing that kind of work. Doesn’t always talk about it because but he actually I think had that fundamental bent probably that was probably more towards, like you were exposed to David with some of these fund managers, right now, the reason why we can get away with not having to do that? Well, first I definitely can get away with because I’m definitely not nearly as smart as them. So I’ve learned that a long time ago too. But you don’t have to be right on these things. You don’t have to outsmart you just have to figure out at least get enough information, enough facts down to figure out where the smart money is going. Right. And so the way we get away with it, is we’re looking we keep it very, very basic. We’re just looking for a huge earnings, huge sales, hey, is there a new product as a new service? It’s game changing potential to it? Are their margins? Are they expanding? You know, are they is it in a growing market? Is it or is it a shrinking market? Right? It just kind of basic stuff, but it’s deep down deep enough. And especially once you start using the products, and you start realizing that they might have something that everyone’s gonna want. I remember apple in 2004, when they came out the iPod was like, Who would be dumb enough to buy a $400 music player when I got my Archos jukebox for 100 bucks, like the songs on it. Sure, it’s really hard to you know, find those songs on it. But, but yeah, I couldn’t believe people are buying that iPod. But then, you know, once I started seeing how much easier it was, and then you start seeing a couple of hands on the powerful breakout thing, and then you start seeing huge earnings and sales, you you start, you put enough together to realize that they might be on to something so the very best companies. And I think one advantage we have is we can look at the whole market too, right? When when these really smart fund managers or analysts, they might only be looking at a specific sector or even a few stocks within their, their, their sector. For us we get a look at okay, what it’s a game changing kind of events, companies out there, let’s use their products, is it really a better kind of mousetrap. And then you start putting those all together. And we have enough models and you have enough experience to know that once you see some of these kind of services or products come out, and they’re just doing something different. And you see a line out the door, you start seeing people talking about and think well, this is really amazing, or like that when I saw that Tesla Model last for the first time in 2013. In their showroom, I was like this is the most beautiful car I’ve ever seen in my life. And it’s electric. And they don’t even have a engine in the front, you know, and it’s like, and they were selling out it was $90,000 card. So immediately I knew that that had the potential now whether they put the earnings and sales and do they have the technicals we’ll we will have to wait and see on that. But once you see enough of these game changing companies, you’re going to start picking up on others that have that potential. I think great companies behave a certain way great companies look a certain way and start to attract those customers. And that that buzz like Netflix 1015 years ago, we knew they were doing something different first of the DVD, but it was really that streaming thing where it’s like, well, we don’t even go to the mailbox and get the DVDs, right? You start
Tyler Wood 43:19
for you Russa does it start with the industry that’s ripe for disruption or the company that is creating the disruption. Right? So like Airbnb, largest hotel chain on the planet, Uber Lyft, you know, replacing all taxi cab service. Is it the industry? Or is it the company that you start with
Irusha Peiris 43:37
a lot of times with the company a lot of times you may stumble on it using it. So I remember Uber when I tried that, like six, seven years ago, I just couldn’t believe that there’s some random car is gonna come pick me up where I was standing. I was like freaked out by it. But once I did it a couple times I was like, oh my god, this is gonna change everything right now it things are a little different. Now if that was a public company, at that point, I would immediately bought it, you know if the chart was there, and all that stuff, but a lot of times you just stumble on it. Like, I’m gonna have it where when I’m out and about, and I see a store and I see some really interesting products or there’s a line out the door or a new restaurant like a Chipotle. I was going to Chipotle every day in 2010. Right now, I knew that that company had something because you know, I was there every day. And I was getting there trying to get earlier because the line was getting so long, right? A lot of times it’s just kind of see the same thing over and over again, like oh, a Roku first. I was like, you have this little device. Like I don’t know if that’s really better than Apple TV. But then once you start seeing all these other TVs advertising that they have Roku ins their operating system, that’s when it’s like okay, this could be kind of like a Microsoft, right where it’s like not as big as Microsoft but you know, they’re using the software to kind of get through so it is always kind of I’m not necessarily looking at the industry ripe for disruption. I stumbled on a company either using their services or to start reading some stories about it. But I I’ll tell you the probably the earliest place I’ll find him is through the Charts, where all sudden you see some explain, you see some move strong move in the charts. And you’re like, why is that moving? Like even when Bill when he did really well on Amgen, he didn’t catch the first run, he got the second run right where he missed the first stage base, we call them were that’s kind of the initial one that comes out, it was the strong breakout of that and ran up like 50 60%. And then when it built the next base, that’s where he was all over it. Because you start seeing the relative strength, you start seeing that explosion, you start seeing these the the first institutions and pick up on it, they’re not going to tell anybody, they’re buying it left and right. And so you see, they’re like, why is this moving really fast? Now you start doing that research, and you’re starting to read about it, and maybe you’re going to try it out or, you know, look at the numbers are whatever, and you’re trying to wrap your head around it. And now once the next correction or the pullback and starts forming a new base. That’s the chance that at least for our methodology, a lot of times, that’s where we’re going to first get into it. We’re not going to get out of the initial thing, because we’re not doing like the a lot of the fundamental guys that David was working with. We’re not doing that initial kind of work there. It’s so we want to see what if they’re buying it and others are buying it. They’re like, Okay, we probably should learn about this because that seems interesting.
Dave Lundgren 46:25
Yeah, that’s kind of cooperates. One of the things that I always talked about in its in its I taught this this notion at Brandeis, it’s not that we don’t do fundamental analysis, or even worse, that we don’t believe in it, we let the market do the fundamental analysis for us. And so when the Wellington’s infidelities are in, they’re doing their their deep dive fundamental work that has an edge, eventually they’ll make a decision and you know, their footprints will show up in the snow, and we’ll know where to go. So this has been a fantastic conversation. It’s just been really, really a treat for us to get your perspective on all this. I have a couple more questions. And then and then maybe we can turn it over to Tyler to maybe get to get to the markets and maybe some current some current ideas that you might have. So two questions. First, valuation I know in a O’Neal process and in my process as well, I don’t I don’t look at valuation. It’s not even something that it’s certainly not that I’m aware of it. But it’s not it’s never a decision for me it’s a cheap stock numbers, a decision reason to buy it in an expensive stock is never a reason to sell it. But at certain times in history, when we today may be one of them. And we have companies that are trading at you know, 50 times revenues, 60 times revenues, and yes, they’re going fast and everything else. But I guess it’s sort of like a double edged sword type of question. So one is, as a P E ratio ever just too much too high is 50 or 60 times revenues just too high for you to do on the one hand. And then the other hand, on the other hand, is something like Amazon, which is growing, you probably meet many of the cancelin target criteria, but it’s now one of the largest companies on the planet. Is it? Is that too late to own it? Would you rather own something smaller? So on the smaller companies is valuation ever a consideration when you get to the point where it’s so extreme as we have it today? And then are some of these large growth companies just too big to die?
Irusha Peiris 48:09
Yeah. So what’s the valuation? I’ll say? Really, before this year, I never really considered it that much. I’ve considered it more recently, just simply because I’m working more with the analyst team at William O’Neal. And we have a lot of institutional clients and obviously they’re more interested in evaluation. So So I’ve just started be a little bit more conscious. But I think the biggest reason why I’m just a little bit more conscious of it now is because I recently just got crushed because uh, not once interest rates started going up a little bit of my highly valances my stocks had astronomical valuations got crushed at that point, right. And that’s part of the thing has it been in the past has an ever really prevented me? No, it hasn’t will in the future? I don’t think so. I’m just becoming a little bit more conscious of it. Maybe it’s just because of the market has gone so much. So high. And like you said everything just so like just crazy valuations right now. But I don’t think it’s ever going to be a huge, huge part of the game, like even a wall in 99. I think their P E ratio was 500 bn doubt before it went on. It’s a monster.
Dave Lundgren 49:22
Yeah. So okay, that’s that’s kind of the point is it’s something perhaps to consider, but at the end of the day, supply and demand drives price fundamentals drive price as well. And so, oftentimes, valuation is you get what you pay for. And there’s a reason why these companies are trading at 50 times revenues. And the risk is of course, is that when the fundamental stumble there’s an awful lot, there’s an awful lot more air in that balloon to be taken out. But that’s what stops for right that’s what technical analysis risk management is for.
Irusha Peiris 49:51
Yeah, I mean, like even like zoom I’m sure last year got into astronomical valuations and still went up higher. Right. I was in zoom Last year, but once it started breaking and really I think what I finally got out of zoom close a position was when they announced the vaccine in November, I think I was probably one of the only people who was upset that the vaccine came out. So yeah, the charts and then tell me when they get in when to get out. The valuation is definitely not a showstopper. Yeah, I love it.
Dave Lundgren 50:22
Perfect. And then last question for me. And then we can turn it over to Tyler. Thank you, Tyler, for your patience as always, for all the questions I used to ask, so here we go. Amazon question, did Amazon is Amazon ever too big or company’s ever too big, even though they meet all the criteria at the end of the day? Is it going to double from here?
Irusha Peiris 50:40
It’s funny, let me let me let me pull up an Amazon chart Amazon has in the past, like when it was trading at 1000. I was buying it when it broke out of it reported earnings. And I had a strong breakout of that. And I was all over it at that point. So generally, I never really, I haven’t been concerned or even when when it broke out at 2300. Like last year, it’s like it close that that week at 2375. That was another really powerful breakout for me. And so I was all over that one to eat started to get really high here. So maybe I’m having a little bit more down on it. But if you know honestly, if it were to break out again, and if it looks like it has that action of strong accumulation, I’d probably get some of it still and see what happens. But yeah, I think we’re you know, I mean, people are asking that question 10 years ago about Apple, I’ll big can Apple good. Yeah, no, one’s good own apple. I think Apple at that time had like, 4000 funds. And and and it’s like when is over own? You know, when is it over on? It’s like, we don’t know, now it’s at 6000 funds. These markets are crazy. They go much further stocks go much further. And I think I mean, that’s what why it works. Because even the smartest people in the room, trying to break down these companies on a fundamental basis and try to project it. It’s hard. Like you said David before with Amazon, they were an online bookstore, it was hard to imagine that they were going to do all this stuff, and especially Amazon Web Services, that was the game changer for them. Right? No one thought that. But once once people started seeing that, that’s when the stock really took off. I’m like 302 words now.
Tyler Wood 52:16
So we’re on Amazon right now hasn’t gone anywhere since September 2020. How did you handle the breakout in July this year? Were you a participant when it got above that trend channel just before rolling over back into it?
Irusha Peiris 52:31
I don’t think I was actually and the reason why was the relative strength was really poor on the stock. So if you I’m looking at these are the marks with charts here. But when the stock was breaking up, the relative strength line was in a downtrend, and it wasn’t hitting new, new highs. Even though we talked a lot about price and volume, what the one thing that really learned in house was relative strength and how important it was and that relative strength line. So when I see a stock that I’m considering, and it’s breaking out, I want that relative strength line, ideally going into new highs at that point, or really should go be right near new highs and ready to go into new highs in the next couple of weeks. The Amazon in this case? No, I don’t think I bought it this time around. Because there was a divergence price was going into new highs, relative strength was not confirming so it was saying that okay, this is a lagging stock that’s going to new highs and we don’t buy that many stocks, you know, we don’t have like, we’re not buying 50 stocks, we’re buying five to 10 stocks in our portfolios. And so there are plenty of other stocks that were moving and outperforming much more than Amazon at that point.
Tyler Wood 53:39
Yeah, if you want to beat the benchmark, you got to own the things that are beating the benchmark. I think, well, relative strength is probably the biggest secret weapon of mass destruction that technical analysts have the real game changer over over the others.
Irusha Peiris 53:52
Yeah, one thing about the relative strength taller just very quickly is that when people ask, you know, what’s the most important thing these days, I’d say relative strength. It really is the most important thing. And then I’ll completely changed in that I’ve just learned over the years, that it’s that relative strength being the top performers. And you know, Michael Jordan just kept outperforming you know, I’m a Knicks fan. And I had to see, I know, I know, I had to suffer many, many years and Michael Jordan beating us in the playoffs over and over again. We never done it. You know, he just kept getting better and better. So that’s the thing. It’s like the outperformance the relative strength. The market is always telling you where where the money’s going.
Tyler Wood 54:35
I had a fascinating conversation with a PhD quant from MIT who had just finished the CMT program. And I had to call him up I need to know what a PhD quad from MIT was doing, you know, studying technical analysis like where did he find so much value and he said, that really the core concepts of relative strength of inner market analysis of understanding what what else the market is? Telling you beyond just price and volume was such an eye opener because most of the folks who are, you know, heavily into systematic and quantitative finance, they’re not starting from a place where they know where to go, Look, they’re not fishing where the fish are. And he said he just couldn’t believe that in his whole program that never came up. So excellent, excellent point well taken, let’s shift the conversation. Talk a little bit about current markets, we’ve already discussed that. You are a growth equity biased investor, you look specifically for tech names. So I think the first question our listeners want to know here at the end of October is, you know, railroad companies oil exploration, are you buying, you know, building materials as copper breaks out to new Have you had to totally change what your preferred venue investing is? Just to find those momentum ideas? Or are you looking still within technology and disruptive new companies for the style of company that you want to be investing in,
Irusha Peiris 55:55
I have tried to change, but habits are, you know, a really tough thing to break. And just what I gravitate towards are more just growth related technology type of stock. So that and that’s one reason why I am getting missing out on some of these opportunities, like the energy once again, I did not capitalize on it there, there, there are a number of them, they’re perfectly set up there on my watch list. Once they got going, I just had, you know, I let that doubt kind of creep in and I hesitated and then they just took off. And then I was like, Oh, wait for the pullback. And of course, the pullback then come in those things. Right. So, so the energy just because of the the lack of conviction, and I just don’t trade those, and that not really doesn’t really go into with our methodology that much. I just haven’t capitalized on those. So so those are big missed opportunities this year.
Dave Lundgren 56:48
This is another example of combination of patience and discipline. Right? It is
Irusha Peiris 56:51
it but it’s also Tyler, you mentioned the bias part. Right. And, you know, and David, this, this is one thing. You know, like, I think you mentioned earlier about, you know, the patient Yeah, the patient’s discipline all this up. Look, I’m so far ahead, having expertise in any of that stuff. It’s comical. It this is a never ending process. And I feel like I’m just getting started a lot of times, because I still make so many mistakes. The only difference is, I guess, don’t make the big portfolio destroying mistakes. But I’m always still trying to do that self analysis. And trust me, I am dreading doing a pulse analysis this year, because it has been a very frustrating year for me and I missed so many opportunities. Because of my bias towards technology itself. I wasn’t pure and listening to the what the market was saying, right? I just refuse to really listen to the market during plenty of times when that rotation was going back into energy, and stuff like that now like building related stuff, and and some of the other materials or housing those a little bit easier for me to get into because I understand them a little bit better. Yeah, so your biases, or at least my biases can sabotage me plenty of times when when my stocks aren’t in favor.
Tyler Wood 58:04
So my follow on question is having a background in biology and the advancements in medical technology in particular, that that are coming out in the healthcare sector and new developments in gene therapy and protein regulation, all of the rest of that, does that fit your style of looking for disruptive technology? I mean, are you looking for ideas and biomedical or in healthcare names?
Irusha Peiris 58:30
Absolutely. Yeah, I’m always looking for now. Now, I don’t always do as well in the medical ones, because they really can get volatile. But I remember being so excited about like garden health. It’s terrible right now, and I haven’t tried it in a while. But I remember just when I read about it years ago, and I’ve tried it a few times in the past. So the ticker symbols GH on that one, but just the idea that you can take take a blood sample and and from that, you might be able to diagnose that you have a certain type of cancer. Right? So yeah, I mean, the what’s happening with just medicine and biotech is you’re just having this dramatic convergence of all these other technologies coming in into that field, right. So machine learning, and then all these innovations going on with that field and Kashim just like the simple thing like the Apple Watch, which isn’t simple, but how’s that gonna change and all these kind of wearables? So yeah, I mean, they’re gonna be monster opportunities there. So if you’re interested in growth and innovation and disruption, that that’s definitely a field you want to always be focusing on for the next 1020 years. You know, the
Dave Lundgren 59:36
cancelin acronym CIA’s current earnings and annual earnings as part of William O’Neal’s process. In healthcare. There are lots of companies with massive growth prospects down the road there are even some companies with current massive top line growth but no earnings. How important is it for you to buy something that actually has earnings today? It’s usually important
Irusha Peiris 59:57
now I would say 90% of times I’m gonna buy stocks with earnings. Now I will say that I have another bias of mine is for a lot of these like biotech companies that have like they’re working on some drug, and everything’s based off of this one drug and they’re an FDA approval, I generally avoid those, I have never done one of those. And I’m terrified of the big gap up and GAP downs on based on an FDA approval. So I don’t consider those a lot of times the biotechs I will consider do have pretty big earnings and sales. So that that is ironically, that’s one of the fields where I really do want to see some earnings and sales, because I know there’s so many pitfalls, but a lot of like kind of the medical products. I’m going into the surgery surgicals just like classic O’Neill’s stock, you know, over the years, I mean, that’s not really a drug drug thing. But there’s a massive innovation with their robotic system. And with the surge and all that for years and years that has always come up on screens, and they’re making a killing. And so they have huge sales. So a lot of times those are the ones I’ll gravitate towards now, just very quickly, it’s for me, I need two or three either earnings sales, or it has a massive story, right? So they don’t have the earnings, but they have the sales in the story. I’ll consider it like a lot of those cloud companies over the last few years. And the reason why I think I can get away with it. I don’t always get away with the thing. I get away with it because I can use the charts to help manage the risk on that. So I’m very quick to get out. Let’s talk right now
Tyler Wood 1:01:22
about your current market outlook. We’re recording this here, the October 21. We work just went public today. Are you getting involved in what went from $47 billion valuation to just north of zero?
Irusha Peiris 1:01:38
I’ve even know how that came up public. I was I thought it’s like Joe. Yeah, so that’s on my radar.
Tyler Wood 1:01:43
Where are you looking for opportunities Arusha?
Irusha Peiris 1:01:45
Well, first with the market, like if we did this interview last week, I probably would have been a little bit more negative. It’s pretty remarkable over the last week how we start started to shift around but it’s some of the opportunities that I see where a lot of innovation is taking place is the FinTech, right? I mean, you have and I own I own some of these stocks. I own like upstart like upstart is one stock that then they have huge earnings and sales and they’re using AI to to really enable more loans to people who might not be as credit worthy when you’re using a FICO score to judge their credit, credit worthiness and they’ve gone through a monster run and I got out of the stock way too early. But But I got back in recently again, and that actually that’s a good reference for earnings gap to where they report your earnings lat in August, they had a big earnings gap. And that’s where all sudden you know, it started to the character started exchange for that stock. So So upstart affirm I have shares
Dave Lundgren 1:02:48
on upstart Do you think that upstart is to Fico? Which that’s another chart, you can look at FIT? Do you think that upstart is to Fico? What Netflix was to Blockbuster? Is it bad, bad? Oh,
Irusha Peiris 1:03:00
you know, I know that I you know, I didn’t think about that. But you know, it’s not a bad thought, though, too. I just don’t know enough about, like, obviously, I just don’t know enough about the industry versus like a Netflix and blockbuster. But actually, honestly, back then, when it was pretty early on. I didn’t think blockbuster was going to go out of business by 2009. I thought guaranteed that blockbuster was going out of business. But yeah, you know that that’s an interesting example. This could be like the next blockbuster, Netflix or even a game changer. Yeah, exactly. Yeah. So so it really just depends on FICO and on Fair, fair, Isaac, where are they going to dramatically really adapt this AI and come up with something that’s comparable? And I will see I don’t know the entire business will how the business relationships are one that stuff but I know from some people that I’ve spoken with who have used up star in their businesses, their sales have gone dramatically through the roof in a short amount of time. And so they’re seeing some big improvements just by using that service. So it makes sense why upstarts done so well,
Dave Lundgren 1:04:11
what else what other names you got for us?
Irusha Peiris 1:04:13
Well affirm is another one within the FinTech space now they’re not as fundamentally as strong as upstart but with with a firm they’re part they’re one of the the players in kind of the Buy Now pay later segment. That’s a growing segments so they’re well positioned for that. And I think the other interesting thing with what’s going on here is a lot of the younger audience, the millennials and Gen Zers they don’t trust credit cards that much and they don’t want to pay the late fees, you know, like us apparently we were more than happy to pay these late fees for whatever reason, but but they’re fighting back and they’re they’re refusing to pay these late fees. So the Buy Now pay later is is really appealing to them. What one one kind of risk for firms they still have a lot of revenue dependent on peloton and it’s like over 20% on that so in charge by the way, not a great one car yeah, but so peloton slows down especially with the economy reopening and people going outside a firm a firm will probably suffer but firms obviously making a lot of partnerships with Amazon Shopify Shopify own some over the phone, I think and you know, obviously Target and Walmart also that they’ve done to
Tyler Wood 1:05:29
Dave, you’re saying peloton is not a good looking chart not a firm, correct,
Dave Lundgren 1:05:33
correct peloton, maybe we could just wrap up with a quick sort of bigger picture market level observation in terms of how would you characterize how you feel about what you see today, relative to what you’ve seen over the last nine months? Do you feel like we’re starting to get some traction in the process? Are you still finding yourself wanting to stick with small experimental positions until you have more still more evidence? Where are we in that right now?
Irusha Peiris 1:05:55
Yeah, well, I’m I’m past the experimental what I’m not like kind of full positions, I’m kind of a cat positions right now. I’ve spread it out more. And that’s just there definitely are like, if you are quick to get on an upstart and all that stuff, you could, you definitely could easily have full positions in some of those stocks. But I haven’t been as quick to get on some of these stocks. So I’ll spread out more and then a little bit more conservative, just to try to prove to myself that I can make traction, the environments truly changing. It’s honestly, it’s still probably a little too early, because it’s just started off the uptrend again, and every time you think you have it, then that’s where you have that rotation. So it’s kind of it’s kind of like the trend right? it until it’s true, until you truly see that trend break or that trend change, you have to assume that the current environment that you’re in is still the environment. So that right now would be more of the kind of the rotational type type of environment in my hearing
Dave Lundgren 1:06:54
hearing you say Be patient, be patient,
Irusha Peiris 1:06:56
but but but but have exposure to the patient but don’t drift too far away. I mean, this markets continues to be very resilient, right, a couple of weeks ago look like oh, we may take another leg down and undercut some things, but it keeps fighting it and it seems to me, you know, and once again, knock on wood that we’re setting ourselves up for a year end rally, at least
Tyler Wood 1:07:18
very well said. So in the tradition of chasing the speaker out the door after class for a couple more words of wisdom. I know we’ve already kept you over an hour here Arusha. But what would you say to those Gen Z ears? Who wouldn’t even, you know, understand your Walkman reference from earlier? What what do you want to give give them in terms of closing ideas for where they can take their own investment practice?
Irusha Peiris 1:07:42
Oh, well, first, I’d say I use an iPod reference. I don’t use the Walkman reference. And they probably wouldn’t even odd reference.
Tyler Wood 1:07:51
You mean like my phone?
Irusha Peiris 1:07:57
Yeah, so for any anyone who’s getting started, I think anyone is getting started. It’s it is that patience kind of concept that we we’ve emphasized it’s not just patience, and waiting for the right setups, it’s having patience to go through the process and realize that you are going to go through your ups and downs. There are there are plenty of times where I was just ready to quit, you know, it’s like, you know, like, what am I doing my life, you know, that kind of that kind of stuff. When you get hit, you’re going through the ups and downs, the ones who end up really starting to put it together are the ones who just hang around the longest, you know, then that’s it, you know, the the markets aren’t always there to give you money. But if you’re there especially like last year, if you’re there in 2020 You just have to be there, right? You don’t even have to be a good stock picker. You just have to be there at the right time. And you’re going to be able to ride the ride some of those stocks. So this day and age, you know, now here’s here’s my grumpy old man. You know, in my days, I had to go and photocopy models from Chartbook ag just go online and there’s so many you can watch. You can listen to this podcast, on CMT, there’s tons of webinars there you go on YouTube, there’s so many things. I think people are younger these days they have the problem of having too much information. So I think it’s figure out find some people who are who’ve done this for a while who’ve survived. That’s how I like to look at myself is not more as thriving, but surviving. You know, I barely survived 2000 But it’s definitely survived 2008 The last year the pandemic sell off all these kinds of stuff. That’s like the most important thing is surviving. And that’s bill you know, that’s how we’ll describe bill is a survivor of 50 years in the market, right most people during his time did not survive that that vote that long. So it really is just keep keep going. CMT is just such an invaluable resource, the people you have access to, especially that annual event. I just couldn’t believe who was there you know and and so the I think the CMP is probably one of the best kept secrets obviously Tyler does not want want that to be a secret. But it but it is it’s you have a lot of people who are well established in the industry and you have access to them right and you can listen on webinars, you can go to some of these events, go to the CMT chapters in in your area, or the IBD meetups, I used to go to those in Boston, just anywhere you can just kind of learn from someone else has been doing and they can kind of at least point you in the right direction and what pitfalls to to avoid, that’s the biggest thing but the most important thing, just keep going it that that’s Bill O’Neil years ago signed my book, when I went to that seminar, and he wrote, you can do it. And you know, and it’s true, it’s like it’s if you can if you hang around long enough and you just keep going through the ups and downs and cut your losses and don’t blow yourself up and you might blow yourself up but come back and learn from those mistakes. That’s when you start slowly putting putting this together because this is a this is a really hard thing to do. So but it’s a very fun thing and and it’s a very human thing to
Tyler Wood 1:11:14
Russia. I can’t thank you enough for really the the authenticity you had to be you then to USC and you’re still willing to admit that you’re paying tuition to the markets day after day learning every everything you can what an excellent perspective on just the perseverance that’s required in this business. Until we get back together in person where you know this gen Zers can come meet you and Dave longeron in the flesh at a CMT symposium. Just want to say thank you about for the whole organization and fill the gap podcast for spending time with us this afternoon.
Irusha Peiris 1:11:47
It was an honor. Thank you, Tyler. Thank you, David. And yes, I definitely look forward to getting back to the live live events and meeting you guys once again in person sounds great.
Tyler Wood 1:12:03
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