The MAGNET Method of Investing: Find, Trade, and Profit from Exceptional Stocks (Almanac Investor Series) [ハードカバー]

Let me start out by saying I believe that low-cost index mutual funds remain the best choice for most investors; and that the large majority of people who set out to do better, fail. However, I also believe that it is possible for disciplined, intelligent, serious investors to do a bit better; and that little bit can add up to a significant edge over extended periods of time.

This is one of the few investment books that will help you if you choose the latter path. It sets out a sensible strategy based on fundamental analysis with an eye toward price movements. Pure fundamental analysis works on a Warren Buffet time-scale, but attention to price can help you get the value companies at the right times, so you don't have to wait 20 years to be proven right. Pure price movements can also eke out profits, but only if you have institutional market access.

Most books of this type concentrate on blue chip value, great companies at a good price. Magnet investing is more ambitious, finding companies somewhat earlier than the usual advice, with more growth potential but less certainty. This has several advantages. It's more fun. It allows you to get a significant advantage with a smaller portion of your portfolio. It lets you concentrate more on things you know about, and where there is less institutional attention. However, that also makes it riskier if you allocate the same fraction of your portfolio; and it means your skill at implementing it makes more difference.

I like some other things about this book. It's well-written. It gives a complete system, which is important to show the author has thought everything through and so you won't neglect an essential part. But it also explains the system so you can test it against your own knowledge and beliefs before betting your retirement on it. It gives evidence of how the system worked in the past, backed up by a long period of actual application, not just a theoretical backtest. The method is complete enough to give you an idea of how well it is likely to work, which is almost as important as working. Your investing success is determined not just by rate of return, but whether your financial plan is realistic enough to succeed with that return. Finally, the method is intellectually satisfying, which is both a virtue in itself, and makes it easier to stick to during inevitable market reverses.

You don't need this book to invest, and it won't make you rich quickly. I do not use the method myself, but I employ similar principles and I learned some useful enhancements from reading it. If you're going to be an active investor, this is a good choice for a guide. If you follow the system, and watch your costs (including taxes and hidden transaction costs like bid/ask spreads), you have every chance of achieving reasonable financial goals.

What a disappointment! I bought this book after reading several 5-star reviews, but was shocked by how naive and shallow it is. The author on page 33 says that he "learned a tremendous amount from [William O'Neil's] studies." Indeed, you can see that the Magnet method is just a variant of O'Neil's CANSLIM method. Not that O'Neil's method is a good one to begin with; I think both methods are naive and useless.

The book is too verbose and repetitive. The first 3 to 4 chapters tell you nothing other than "diversification is bad." The author keeps repeating it until the reader kills himself out of boredom!
The "Magnet Method" is not described until chapter 11! And even then, it is not really described; "The Magnet Stock Selection Process is a proprietary approach..." p132 of chapter 11. So, no details at all are given; just general useless statements like "buy companies with good management" or "buy companies with high earnings growth."

The only thing I liked about the book is chapter 8 on the Baby Boomer generation and its impact (or lack there of) on the economy and financial markets. The data and analysis given in this chapter is very interesting and useful. That is the only reason I gave the book 2 stars instead of 1!

The Magnet Method of Investing is a window into the world of successful stock picking and investing. The author is straight and honest about the pitfalls of over diversification and makes it easy to understand why you should only focus on a few stocks. The book is full of examples of stocks that Mr. Kimmel looks for how he finds them. I recommended this book for anyone who wants a change from the regular `buy and hold' methodology of Wall St.