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IFB34: The Truth about Analyst Reports Interview with Sasha Evdakov

 

analyst reports

Welcome to Investing for Beginners podcast I’m Dave Ahern, and Andrew Sather is as well. Tonight we’re going to have a special guest with us.

What we are going to learn in this episode:

  • The difference between fundamentals and technical analysis
  • Having a great mental state of mind helps your investing.
  • The motivation behind analysts recommendations
  • How to make education part of your everyday routine

His name is Sasha, and we’re going to have a little conversation between all of us so without any further ado Sasha, wouldn’t you go ahead and tell the two or three people that are not familiar with you out there a little bit about you.

Sasha: Hey thanks for having me. A little bit about me as far as I guess my background goes that’s related when it comes to stock trading. I mean I got into stock trading when I was a young teenager, and a lot of that comes from taking the funds that I had when I used to do a lot of web development.

So my mom was into investing simply because she was a private healthcare nurse and all the older folks. What they did in Florida was watch their investors, watch what their investments and see how things were going.

And slowly she got interested in that and slowly I got interested in that and all the money that I made from the web development, graphic design field and marketing as well.

As time went forward, I went ahead and put those on investments, had a lot of losses at the beginning of course. One of the larger ones was around fifteen sixteen thousand dollars when I was still a teenager. And you know took me probably about seven-eight years to put the puzzle pieces together slowly after college there started to put things together and that’s when a lot of things fell into place and a lot more consistent at that point.

So I was always big into education, teaching martial arts as well early on in my years and because I loved education. Was a study not read a lot of books, video courses anything I could get my hands on. I decided to sell a bunch of my old businesses like my web design business photography business, a lot of the graphic design entities that I owned and went into just teaching investing.

Now doing full-time investing in teaching investing pretty much or business related things. So that’s the quick summary as far as my background in history. And now that’s kind of what I do is I just in my spare time I write books and create video courses and online videos.

Most of it 99% is free, and I’m watching my investments pretty much every single day. And as I look at the screen left, and right I’ll also dabble in write a little book. So that’s kind of what I do on a day to day basis.

Andrew: you’re very modest because you do have a large time on YouTube over at tradersfly.com. Can you talk just a little bit by the way you approach the markets? Is there I know there is a general strategy can you just maybe cover that on a like 101 basic level of how you look at the markets and where you see opportunity and how like what the action plan is to capitalize on that opportunity?

Sasha: okay the way I look at the markets is going to be more different than I think many other people look at it. And I say this because I’ve had a lot of coaching students that I’ve worked with especially at the beginning of the way that I see initially people get attracted to the markets.

The way that they see things in the way that I look at things a lot of people look we’re trained especially through a lot of the news media through a lot of articles. And even so many books to concentrate and focus a lot on fundamentals and focus a lot on the company’s focus.

What the companies do and that’s great from a larger perspective when you’re looking at a 5-10 year investment or hold period. If you’re more active it’s going to be a lot different you should focus more on the technical side of things.

That is simply because the technology will always dominate the fundamentals. There will always be as I said it more important because when emotions kick in the fundamentals don’t apply when Steve Jobs has cancer. They don’t care how great the company did when those things come about.

Now in general when you have great fundamentals you have great charts or great technicals. When you have great charts, you typically have great fundamentals.

So for me, the way I look at things is I look at the technical side of things when it comes to trading. So I’m always looking more on charts it’s a 99% of the things I look at is chart base. Will I scan the earnings reports and things like that from time to time?

Yeah probably, but once you get familiar with the companies, you trade I’ll typically trade the same stocks over and over again or ETFs depending on what I’m trading. Or if I’m getting options in the mix and I also look more so at the numbers I don’t care if they’re selling umbrellas, underwear, pantyhose it doesn’t matter what’s moving.

What matters is that the boys or the hedge funds are getting into it. It’s crowd psychology the more people are flocking to it or its building momentum like a snowball moving lower and lower or down a hill.

That’s the ones I want to get into, or in other words, you could say the more people that are behind a car that’s run out of gas. To push it up a hill if you have five people that’s not a lot, once you get into 50 people a hundred people to push that car up a hill it’s a lot easier to push it up a hill.

That’s what I try to do is find that momentum, and it doesn’t matter if you’re doing stocks or ETFs options. It all works in the same way because it’s that crowd behavior, once one person gets on the dance floor, you might see a second a third a fifth and then more and more people are good to get into it. And that’s what I do, and I try and always take profits into strength.

Take a half take a quarter, and you always move in the direction that the markets are moving in. But I also try to be a little more contrarian when you have a really big up day I typically do a bit of selling. When you have a really big down day, I typically try to do a bit of buying.

So that’s kind of my basic approach you could say.

Andrew: I like how you say the market is very emotional and I wrote this in my free ebook that you have a market that has a ton of fear and a ton of greed, and then you take numbers, and that’s the solution to this emotional place, and so there are lots of ways to skin a cat. You talk about taking a more active approach obviously Dave, and I have a very passive approach in the sense that once we do the research. We’re holding for a long time and hoping that those fundamentals and the price catches up with where the fundamentals are.

So I think a big difference between you and us obviously is the active component of that. So what does that entail as far as I guess you’re day to day or you know how much time are you spending going in and out of positions? And like you said – I guess it’s not limited to stocks in the ETF.

So a big trend recently this is September 2017 is the coins like Bitcoin and Ephemeral and all those. So are you dabbling in those as well?

Sasha: no, I don’t dabble in a lot. Of questions on my channel about all these things make a video on cryptocurrencies.

No, I don’t dabble at all. I don’t touch investments I have no clue about it’s like me getting into classic cars. I don’t know how to value that or value the appreciation of that or how to tweak those things.

So for me, I don’t get into Bitcoin, can you make a lot of money from it maybe? Can you lose a lot of money from it yeah maybe? So for me, it’s not my core area of expertise I could probably you could say gamble a little and throw some money that way. But now I’m getting into the gambling side of things.

There’s no consistency behind that, so at least I don’t see it for myself and for anybody listening that’s you have to know yourself in this business or within investing. If your personality has a slow rhythm, then you should be trading slower. If you have a wavelength that’s a little more active A-type personality, then you can be more active.

You know and that all comes with the time of course experience and many other factors.

You can’t drive a racecar 300 miles an hour the first time you learn to drive a car. You know the time to get there.

Andrew: so it does sound like you’re looking more pass just the charts. It’s not just strictly a chart you’re getting familiar with the companies or the ETF for trading.

Sasha: well usually I mean by the time you trade for a couple of years you know that this handful of stocks you’re trading. So you already know how they move behave act squawk talk. If something happens you know how they’re going to react so by then you don’t need to study the company’s internals as much.

But as with any company, just like with a Wells Fargo can have major issues. You’re looking at you know companies that are hiding things for 3-4 years, and you won’t see that in the reports. They’re not going to say hey we’re fraudulent just like with Enron, or you know pick any company.

Lehman Brothers they won’t go out and tell that. So for me by then I’m just looking at price action because that’s all that matters. The number one thing and investing it always comes down to price, that’s how you make your money whether you’re trading options, whether you’re trading, just investing in the dividend.

It comes down to the price, so I look at the price and what’s the price going to do. Of course, volume and the behavior or the action will also dictate how reliable is that move or how because price can keep going higher.

But if as I mentioned earlier if you only have one guy pushing, that car up a hill eventually it gets tired. Can’t do that for 20 hours, so you know you want the volume you want buyers stepping up, and that’s kind of what the charts internally tell me.

Andrew: but of course it takes a handful of years to learn that as well, and you mentioned the analysts are you know reports and I saw a video you did on YouTube where you’re talking about the analyst reports.

You know things like earnings reports and kind of how the stock can move as a reaction to how a company does compare to projections. Can you talk a little bit about so I watched the video I know you concluded that you couldn’t rely on these things? But can you talk about why that beginner should be aware of this phenomenon and then why they should be wary of what these analysts say and those reports?

Sasha: Well, there’s a couple of factors. Number one that the biggest issue that most people don’t even think about. It’s not like anyone’s trying to scam you when it comes to analyst reports. That’s not really what I’m a number that’s not the biggest issue.

The biggest issue is you rely on someone else to make an influence trading decision for you, or an influencer investing decision for you and their goals, their evaluations may not be in line with you. So when it they say longer-term and stock is going to hit 120 dollars a share.

What does longer-term mean? So you have to take that into a context that the first thing you need to be aware of is always understanding yourself, your investment horizon your risk levels and if that stock is selling off, are you going to be calm enough to kind of hold in there.

So the biggest issue the first issue is yourself and knowing that hey you can go ahead and continue moving forward in your plan, in your strategy and do what you need to do regardless of what the analyst’s report says.

So you’re still trading on your own decision, so that’s the first issue. The second issue is you got to remember that they’re getting paid to analyze stocks and they’re getting paid for from company’s right.

The weather they’re contracted whether they’re working for a company research company. I’m not going to mention any names but keep in mind like when you’re in school whether that’s high school and everybody has kind of a talking point that they talk about.

What they did over the weekend, well if everybody’s having a good time or fun time and they mentioned, hey I went to the pool one guy went to the zoo. You probably say hey you know I did this and this fun thing as well.

You’re not going to say that I went ahead and had a boring afternoon you know cleaning toilets with my mom. So you get into that crowd psychology as well because they need to keep their job. That’s their number one thing really, and the way they keep their job is to please their boss.

So if you’re looking at all the test papers in high school and you have an open test where you can look in your friend if you want. And if everybody marks a certain stock for a hundred and twenty-one guy marks one thirty, and there’s no right or wrong answer 150 for another guy you know.

And you think it’s going down to 70 well you know you might write an 85 or 90 simply for that behavior and when you look at just day to day world or life. You know people do that in daily conversations because we again want to be a part of something.

That’s number one that’s the group thing and number two they want to keep their job now of course. They want to hit their target as well but I mean it’s, in the end, it’s just a report it doesn’t mean that you need to value that report as gold.

And that’s what the stock is going to do because it can do anything. I mean I think people get too sucked into these reports as being hey well this stock is rated five stars and this stock is going to go to 135 as a target. When in reality it’s hey you know that’s it’s just a report and some of these reports.

I have to tell you they actually well not analyst specifically but some of the people on TV they actually are doing the opposite of what’s going on and what they’re saying on TV but the analyst reports not as much because they actually are looking to hit their targets, but you know you have to be mindful also the people that come onto the TV those aren’t necessarily analysts, but they still can also influence you from that perspective of making those decisions for your trade.

That’s funny how few sorry go ahead I hope that makes sense and I hope I wasn’t too off topic there.

Andrew: so no yeah it’s funny how if you watch CNBC or any of the other financial media on TV like you said if you take an outside approach and just be more observant.

Rather than looking at whether they are saying but looking at maybe why are they saying these things? The little kind of structure where they’ll bring in certain companies in a promotional way, and it has not so much to do with if a company is what they see is a good price. You know a good future in the market per se but is it something that people want to hear about. So there’s a lot of conflicting incentive you talk about the analysts again.

The risk-reward for that particular analyst like you said not only do they want to be part of the crowd. They want to keep their job, and you might have a conviction on a certain price target, but you know the difference like you said between like a 70 or 85.

It doesn’t pay any more to be that much more accurate. So you’ll not want to stick out as extremely as the rest of the group. So you might again be more conservative with the number you kind of put out for that report.

Sasha: absolutely, I mean if I had a job in that spectrum or in that kind of the way I mean I definitely wouldn’t want to be way out in left field. Because everybody’s going to think you’re crazy if you say the world is round. But you know 500 years ago that’s what happened. I think we see that a lot with the hedge funds and mutual funds – I think more so nature funds and hedge funds that these same type of forces are going on in the same type of incentives.

And so it can bring a lot of opportunity for the individuals such as you the listener. If they’re willing to educate themselves in how to be set up like a prudent system for themselves where they can kind of put the odds all in their favor. While not falling victim to the crowd biases, the crowd emotions the fear the greed.

I mean just by doing that alone and being willing to stick out from the crowd. That’s a huge advantage, and you combine that with a strategy that’s proven to work and the drive to educate yourself and to master that type of thing.

I think it has a big profit potential for even somebody who’s just average with an average salary to make some significant wealth for themselves.

Sasha: absolutely and not to mention you save a lot of time when you don’t have to watch TV. You can do so many better things living with you know your family, spending good quality time, having cake. Whatever you want to do, going exercising reading a book.

Once you cut that out, it clears the clutter from your mind, and you know you start to trade tenfold hundredfold better. So I mean you don’t need it I have to tell you don’t need a lot of the news the articles.

Once I cut that out as the trading increased quite a bit and you can try it for a month six months.

Just get rid of the cable, get rid of a lot of the news feeds. Those kinds of things that are a lot better sticking to your plan your strategy and you know keep it simple.

Andrew: yeah I think there needs to be a big focus on what kind of content are you consuming. You know is it is it candy or is it vegetables. Is it just stuff that just kind of fills and you know the media is just putting up there is filler or is it stuff that is actionable, and that empowers you and makes your skills that much better.

So Sasha what do you say to people when they say things like oh whoa if this is so successful for you why do you share it with others? Aren’t you know, there can be like haters or people who are just very doubtful, or they’ll say things like there’s not enough to go around kind of.

Aren’t you supposed to be taking all these for yourself instead of sharing it with others whether you have to say that people who have that kind of a mindset?

Sasha: usually the people that I find that have that mindset just being around for so long. It’s usually the people who are less successful, and it’s usually the people who are not there yet.

When you achieve success, and when you have enough money you feel good about yourself. You feel confident; you feel comfortable, you’re not worried so much about what other people say regarding your success because you know you’ve got it you know you’ve made it.

So as far as sharing concepts and ideas when you’re successful you want to contribute to the world. That’s why there are people that start charities why do a lot of people like Bill Gates start some very amazing charities or Mark Zuckerberg.

analyst reports

Well, it’s because well what do you got to do with your time now well you might as well help some people because well you have enough money for your lifestyle and your level. You know not everybody’s a multibillionaire but you know at once you have a certain lifestyle and routine. You know your quality of life is good and you’re comfortable there everybody has different points and levels and when you find that and you’re there and you’re good.

Then you’ll also help and contribute, but there’s always going to be people who are haters. There’s always going to be people who doubt you people who don’t believe you.

A lot of this also I say is you know if you’re in that boat right now and you’re listening, and you don’t have success. Then you might want to switch that around because it’s kind of like a magnet thing.

If I say hey I don’t like wealthy people then naturally subconsciously in me, it’s going to push the wealth out of my life because hey I don’t want to be wealthy because I see wealthy people as bad. So if you’ve heard the cons, then you know we attract what we talked about.

Discuss those kinds of things the same kind of thing with people you attract the year. Five closest friends are typically the activities that you do as well and the same thing here I mean if you say hey I don’t like wealthy people I don’t believe this guy I don’t believe that guy.

Well then figure out what it is that you do believe in what is it that you want to go for and because that’s what’s going to end up happening. But if you always have that mindset that thought process. It’s going to keep you where you’re at right now by changing it changing it to something else will change your life because if you’ve had the same mental process the same thoughts the same concepts in your mind for years. And you’re at the same place as you were for years and I think it’s usually time for a change what do you have to lose what do you have to lose.

Andrew: I like that idea, so it’s just thinking you know the mentality becomes reality kind of thing. But there’s more to that because as you start thinking about things, it’s kind of like a purchase you know you start thinking about a car. A certain car and then you eventually buy it.

But that’s it all starts with the thought you know when you do the research then more things happen, and with investing the same thing, it starts with a thought.

I have an idea I want to invest well why do you want to invest well? I have the vision of going on traveling or trips and again and then well as you start investing you might go on more trips, and there you go. But if you don’t believe in certain things if you say hey well this isn’t going to work for me or I can’t do this.

Well, chances are you probably won’t because it’s not motivating enough for you to attract towards it or you need something that’s motivating. Carrot-and-stick model you need something that pushes you away from the thing that you hate.

So if you’re around drug dealers, a lot of bad people who are influencers then if it’s a pain is so strong that you don’t want to be around those people or you don’t want to be unsuccessful.

Let’s just say, or you don’t want to be powerless then you’re motivated towards power you’re motivated towards highly influential people. You’ve motivated towards success anyway for me I’m the negative, negative motivator rather than the positive motivator.

The positive things never work for me it’s always negative like this is going to be bad for you, so you better do it. So for me, that’s what always works, and my spouse always says you’re a hypochondriac, so I always take my medicine, my multivitamins all that good stuff because I’m worried that something’s going to happen.

Well a lot less so then I want to be healthy it’s more of hey I don’t I don’t want that to happen. So you’re waking those with a cold sweat, and they’ll deny picture you in the box generate disease.

Andrew: right so you know you got to find yourself, your way that’s the same and the best thing you got to know you first if there’s somebody out there who is a beginner and thinks that the technical side of the market is intriguing and would like to get started.

Obviously, we’ll let you talk about your services as well but what’s one thing that you would push them in the direction they get them springboarded to start to build this kind of momentum and positive thinking that can help them in their journey to becoming a technical analysis trader.

Sasha: I do have quite a handful of free things on my website, so there’s a getting started page for quick reference. You can go to criticalcharts.com, and there’s a lot of services there, but the main site is Tradersfly.com. And there’s a start here page that’s free; there’s like 25 or 30 videos where I’m just constantly adding some good getting started videos there that you can look at and that’s a good starting point for charts.

But a lot of people they focus on the outer game which is the charts but really if you study a little more on let’s say human behavior. In psychology pick up anything those kinds of books it’ll push you more to understanding how technical analysis works. Because it comes down to psychology, think about it when you have 500 people on a dance floor that can only hold 300 people, and then the fire alarm with water starts squirting above you and everybody panics and runs for the door.

Well, that’s what a sell-off is all about, there are only a few doors, and not everybody can get out that quick so you know take a look at the trader say a site with the getting started page that’ll give you a lot of good free videos, free information.

I also have a couple of books about the stock market, a market chart series where we just analyze a few different charts that you can look at and just look at some technical basis and then there are a few courses as well but you know getting started it’s all just about looking at a couple of free videos. Picking up a book and then you’ll see if it matches your investing style. You don’t have to pick up everything right away; it doesn’t have to be even my material just watch a video or two about it you know pick up one book about it and see if it resonates with you.

If it doesn’t, great move on. If it does then by all means you know, it’s something maybe you want to investigate further, but it needs to match your core principles on investing. And I mean when I started out – it wasn’t just read a book about value investing and become a full-fledged value investor.

I remember dipping my toes and all sorts of different types of strategies I read about everything, and then I found what spoke most to me. What came simple you know because there’s going to be certain concepts and you know one person can be studying to be a doctor the other one can be studying to be an engineer they look at each other material and it’s just complete like a different language and it one person’s brain might work and gravitate towards a certain idea or concept than another person. So I think it’s important to kind of look at all of those and at least get a sampling of what the different strategies in the market are because there are a lot of strategies or they’re successful in the market there’s not just one way everybody’s going to think.

And you’re going to have your preference on what the best way is for yourself but again this for yourself. So I think it’s very important to be educated and to have that base of knowledge. If this is something that you’re going to pursue is to have a base of knowledge have a basic understanding and then specialize as you move along as you build momentum towards a certain type of way and I think

Andrew: obviously you have a lot of great resources. Like you said you got videos, you have your website trailer tradersfly.com.

I know you’re on YouTube and you have a podcast too as well, don’t you?

Sasha: well I just do put the YouTube videos that are on the podcast. So it’s just same content there, but it’s usually the longer videos, so it’s not the simple videos. But I created a podcast out of it, but it’s directly for people who just want to listen to something rather than watch a video.

So you could say that’s a podcast, but it’s just a different form of the video.

Andrew: Okay, cool so yeah I mean you’re all over the place kind of like me. Check out, Sasha. It was great talking to you, know it’s funny you talked about the fire alarm you know if that goes off and people scattered to the exits.

I wish I knew the name of the YouTube video. But there’s this one video it has a couple of million views where it’s like this festival, and this dude’s just like basically just going. Not just he’s just so carefree, and he starts dancing and this festival nobody’s dancing, and then it just takes one other person to go up, and then they were both like dancing with each other and then before you know it like picks up momentum and by the end of the video like the whole festivals there dancing with them.

It was like one of the craziest things craziest examples of the crowd that you could have ever seen and it’s so cool to see it like in video format like it was and it’s like and once what it’s like success begets success and that power just attracts people in such a powerful way.

I think you see that happen a lot in the market too.

Sasha: yeah I think I mentioned that actually in one of my videos is the Sasquatch music festival 2009.

Andrew: that’s funny emergent so yeah I did on one a momentum I call that momentum when you build momentum. I think I used an example there on my videos but yeah I mean that videos been seen so many times but it’s yeah it’s the whole concept of yeah things moving and moving and moving and building energy, and that’s what happens but yeah it’s it does make a good point on the psychology front.

Andrew: yeah, I think I was like watching videos on how to dance or something, and I stumble on that. Even when I’m pursuing things outside of investing in the stock market always circles back around. Psyche man, guess I’ve locked it anyway. Sasha, thanks for your time thanks for joining us on the podcast.

I think you had some great ideas and some good stepping stones and good insights on the market and again if people are interested to check them out at Tradersfly.com for videos resources, books, video courses all that kind of good stuff.

Sasha: Well, thank you for having me always, a pleasure chatting with you.