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If you look at today’s SODA chart you can see a little after 2PM there was a big dive in the stock and a big increase in trading volume. After an initial bounce, the stock proceeded to sell-off the rest of the day.

Reuters reported around 2:08PM that Coca-Cola said their Freestyle Fountain Machine should be in 80 markets by year-end.

As you can see, this led many people on Twitter to imply Coca-Cola was now “competing” with Sodastream. The action on the stream even got @StockTwits to tweet about SODA’s move to all 125,000+ followers on StockTwits. Even @Benzinga, a leading financial news site with 11,800+ followers, tweeted about the SODA move.

The only problem is if anyone did any basic research at all you would have found the following:

1) The Coca-Cola Freestyle Fountain machine is not new. It’s been around since 2009. Link

2) The Freestyle machine is huge and is primarily marketed to restaurants. Link

3) The Freestyle machine costs 30% more than a regular soda fountain and leases out for $320/month. Link

4) And it costs $18,000. Link

So does a product that was introduced in 2009 primarily for restaurants like Subway with ingredients that cost 30% more, and costs $18,000 per machine compete with a $100 Sodastream product sold to consumers at home? Really?

It’s clear the Coca-cola is “now competing with Sodastream” innuendo all over Twitter and the trading news sites today is complete and utter bunk.

Even CNBC’s Herb Greenberg, a noted skeptic of Sodastream in the past, agreed that SODA traded on a “false rumor” today.

I love Twitter. I love StockTwits, but let’s try to do a little bit of leg-work and research before we tweet and re-tweet information. That’s all I ask.

Disclosure: At time of writing, the author is long Sodastream stock which he scaled in on today’s misinformation driven afternoon dip.

Who says you can’t find good stuff on Twitter. Here are my 5 best fundamental tweets from my Twitter feed in the last 4 months.

1. GMCR on March 9, 2011

The Tweets: I tweet that the only logical move for Starbucks (SBUX) is to do a partnership or buyout deal with Green Mountain Coffee (GMCR). I then send out an FA Alert to buy GMCR to put my money where my mouth is.

Result: The next day Starbucks announces a partnership deal with Green Mountain Coffee and FA Alert subscribers make a 27% gain in one-day (Trade screenshot Link)

2. SINA on March 2, 2011

The Tweet: I tweet that SINA is the best public stock market vehicle to play the web 2.0 internet bubble due to their ownership of the Chinese Twitter.

Result: Although I wasn’t smart enough to buy it myself, the social networking valuation bubble went into over-drive with SINA moving up from $77.15 on March 2nd to $119.35 on April 8th for a +55% move in 5 weeks.

3. NVDA and MMI on February 7, 2011

The Tweets: I tweet that Nvidia Tegra 2 tablets will flop and Nvidia is a short as that flop news comes out. I also say Motorola Mobility’s Xoom tablet will flop hard vs. Apple iPad.

Result: Nvidia Tegra 2 tablets including the Motorola Mobility Xoom flop. Nvidia (NVDA) trades from $25.32 on February 7th to $17.55 on April 8th for a decline of 30.7%. Motorola Mobility (MMI) trades from $30.88 to $24.03 in the same time period for a decline of 22%.

4. Short BGP, Long BKS on January 28-31, 2011



The Tweets: I tweeted a prediction that Borders Group will declare bankruptcy in the coming weeks and BGP will go down and BKS will go up on the news.

Result: Borders Group did declare bankruptcy and their stock BGP got de-listed. Moreover BKS did go up on the BGP bankruptcy news and FA Alert subscribers were able to bank huge gains (Trade screenshot Link)

5. Buy oil, gold, farmers, and web 2.0 holding companies on December 5, 2011

The Tweets: After ranting against Bernanke money printing, I lay out the plan on how to play QE2. Buy oil, gold, farmers, and web 2.0 internet vehicles.

Result: From December 5th to April 10th, oil trades up 27%, gold up 4%, MOO up 8%, and web 2.0 private internet valuations go up a gazillion percent (Facebook, Zynga, Groupon, etc.)

If you like what you see above, be sure to check out my two paid services below as that is where you can exclusively find my fundamental trading idea flow now:

1) FA Alert – email trade alerts: http://www.firstadopter.com/fa-alert/
2) FA Chat – trading chat room: http://www.firstadopter.com/fa-chat/

I walked into my local Apple store around 3:30PM today. There was a line of 3-4 people waiting for the iPad demo station outside. It took about a 5 minute wait to get my hands on a store demo iPad. The store employees told me they were sold out of the 64GB model, but had plenty of the 16GB and 32GB SKUs in stock. This is good news for flash memory manufacturers like Sandisk as it looks like people are leaning toward using it as a media center for all their movies, music, and photos.

I got to play around with it for about 15-20 minutes. Here are my initial impressions.

Pros
-The screen is the BEST I have ever seen on a portable device, even better than the LED display on the MacBook Pro. Stunning clarity and colors. Steve Jobs made the right choice going with an IPS panel. This IS an amazing digital photo album device.
-The extra screen space makes huge difference over the iPhone in productivity apps such as the calendar and email. You can use a physical switch to lock in orientation, which is a great new feature.
-It’s fast. Felt like 50% faster than an iPhone.
-The Book reader app / store is as good as everyone says. Amazon should truly be worried about Kindle sales.

Cons
-It felt heavy after holding it a while. I recommend getting a case with a kick-stand because it is going to get tiresome holding it for long periods of time.
-iPhone apps do not look good on the bigger screen with ugly pixelation. Not a big deal as most widely used apps will be updated for the iPad.

Net-net
-I will probably buy the 3G version later this month.
-This is the ultimate web-surfing on the couch and digital media consumption device.
-It did seem like more people in the store were there to “check it out” than buy it. In my time there, I only saw one sale.

There’s a lot of conspiracy theories out there about how the government is manipulating the stock market upwards (I’m looking at you Zero Hedge) by buying stock futures, etc. However a light bulb went off in my head after I read this Time magazine interview with Pimco’s Bill Gross on how simple the explanation is.

But secondly, there’s a ripple affect. Just speaking about Pimco’s general portfolio strategy, we’ve sold our agency mortgage securities, Fannie and Freddie, in the billions to the willing check of the Fed. They’re buying a trillion dollars of them, or have over the past 9-12 months, and so we sold them a lot of ours. Now, what did we do with the money? We bought Treasuries, we bought corporate bonds, and so the bond markets in general have benefited, as have stocks because this available money effectively flows through the capital markets. So it’s a trillion-and-a-half dollar check that won’t be there as the Fed withdraws from the market. How that affects the markets, I just don’t know. I’m not eagerly anticipating the answer, but I think it holds some surprises in 2010, not just in mortgage securities but stocks as well.

So basically Bill Gross, the largest fund manager in the world, explains it to us. The Fed has been buying $1.5 trillion worth of securities from financial firms at unnatural supply/demand and some would say inflated prices, who then use this big pile of money they get from selling to the Fed to buy other stuff like corporate bonds and stocks. This is $1.5 trillion that did not exist before. It is printed money that is flowing through the financial capital markets lifting all boats. A simple explanation for the markets’ rise.

To prove this let’s look at the timing of Fed mortgage backed security buy program announcements. In 2008 the SP500 bottomed on November 21st, 2008. I remember things being very scary then. The Fed then announced their first $500 billion mortgage backed security (MBS) buy program on November 25th, 2008 (Link). The market then rallied 25%+ off the low and topped on January 6th, 2009.

The market then tanked again and bottomed on March 6th, 2009. I remember things being even scarier then. The Fed decided to add $750 billion to the MBS buy program to the original $500 billion and $300 billion of long-term Treasuries for a total over $1.5 trillion of buying power on March 18th, 2009 (Link). In time this $1.5 trillion of printed money worked its way through the system, hence the amazing 70%+ rally.

The lesson is the next time the Fed announces another $500 billion+ capital markets buy program buy the market hand-over-fist, although I doubt this will happen anytime soon given the political climate. And the $1.5 trillion of securities that the Fed bought? Here’s what Bill Gross says about that.

They won’t sell — it’s a near impossibility to unload what they’ve purchased over past 12 months.

Invest only in things you know something about. The mistake most people make is that they listen to hot tips, or act on something they read in magazines. Most people know a lot about something, so they should just stick to what they know and buy an investment in that area. That is how you get rich. You don’t get rich investing in things you know nothing about.” – Jim Rogers

“We invest in what we know and understand.” – Jon Gray of Blackstone

“We do anything I think I understand, where I think the odds strongly favor making money.” – Warren Buffett

True that! Peter Lynch had this saying that retail investors spend dozens of hours researching what stereo or washing machine to buy, but then have no qualms about investing $10,000 in a company they know nothing about because of a “hot stock tip”. Think about how irrational that is.

What I see on Twitter is a lot of people chasing micro-caps because they are up big on silly hype press releases and “greater fool theory” momentum. It’s ALWAYS ends in tears for almost everyone that trades those kind of names. They are called micro-CRAPS for a reason. The fundamentals ALWAYS win in the end.

Want to get rich? It’s simple. Stick to what you know and nail a fundamental trend doing deep intensive research. There are no short cuts. If someone says otherwise, run away.

There are a lot of corollaries between sports and investing. We all know that winning begets winning. When things are going well, the baseball looks like a basketball. You trade better and react better. On the other hand it works the other way, where losing begets losing. Where it sometimes seems the emotional death spiral will never end.

The trick of course in having long-term success is to stay on the winning track. Some of the keys are getting back to the basics, keeping it simple, trusting in your skill-set and what you do best.

“There’s a great piece of pitching advice which is also pretty good writing advice: pitch, don’t aim. If you try too carefully to throw the ball to the exact spot you want – lower inside corner, say – you’ll lose all your natural motion and throw the ball in a straight line, incredibly easy to predict and thus to hit. A better approach is to trust your stuff. You know what you’re doing, you’ve been practicing forever. Let it fly. That’s how to throw that curve ball high over the strike zone that suddenly surprises everyone by breaking at the last second and dropping into the zone for strike three.” Source

I believe this old pitching axiom of “trust your stuff” is applicable to investing. Often I’ve tried to get too cute with an entry point or get too scared about market conditions that I wind up not executing a trade.

If you have a strong fundamental case, have done your home-work, and see a good risk/reward setup, GO FOR IT. Don’t get scared out of the position due to market volatility. Like in my Annie Duke poker trading tips post, to be a winner you have to have A LOT OF HEART.

The worst feeling in the world is missing out on a big potential gain where you had the fundamentals nailed because you were too chicken to step up to the plate and swing (missing a big trade often leads to the negative emotional death spiral). You have to “trust your stuff”

I find that Annie Duke’s tips on poker are directly applicable to trading.

Skills needed to be a good poker player (trader)
-grasp of math, probability, and game theory
-have to have “a lot of heart.” The ability to understand not only what the right play is, but to follow through with it (when you have a good trading setup, GO FOR IT)
-what separates the good from the great, is that the good know the right answer, but they don’t follow through with it
-it’s not about winning right now, but making the right decision to win in the long-run (process over specific outcome)
-be a very good reader of people and bet pattern analyzer (read what the market is discounting)

What makes a successful poker player
-someone who manages their money really well (use rational position sizes and cut losses)
-bankroll requirement for certain game (asset size), how much you can risk in a certain game (position size)
-someone who has a lot of control over the emotional aspect of the game
-poker players lose a lot because there is variance to the game. Being able to emotional handle the losses and to not allow those to affect your play going forward is KEY (don’t get emotional over losses and then try to gamble/over-trade your way back to break-even)
-there are lots of players out there who have more talent in their pinky than my whole entire body, but they’re broke and I’m not
-you work with the skills that you have and recognize the games you should be playing in (what stocks and sectors do you know? what’s your circle of competence)
-don’t play in games where other players are better than you, which is ego-driven (trading sectors and stocks you don’t know)
-manage your money well and manage your emotions well will make you successful

-no-one wants to hear you moan. what productive thing is coming out of moaning? do something constructive. analyze your hand (trade), should I have been involved in first place? don’t focus on the one piece of bad variance (bad luck)
-don’t get emotionally invested on anything at the table (be rational in trading decisions)
-you take what the opponent has done in the past hands. are they conservative? are they wild? how have they bet good/bad hands? how did they behave? constantly update that based on what they do (look for patterns in the market after news)
-come up with best strategy to efficiently and precisely take someone’s chips. she is always willing to flirt with someone on the table (just win baby. making money is the only goal)

Annie Duke Big Think Videos

I’ve been reading Sun Tzu on the Art on War and found that many of his insights are applicable to trading and investing.

—

“Now the general who wins a battle makes many calculations in his temple ere the battle is fought. The general who loses a battle makes but few calculations beforehand. Thus do many calculations lead to victory, and few calculations to defeat: how much more no calculation at all! It is by attention to this point that I can foresee who is likely to win or lose.”

“Ponder and deliberate before you make a move”

Think deeply and have a rational plan before you trade. Don’t act impulsively or recklessly.

—

“It is the rule in war, if our forces are ten to the enemy’s one, to surround him; if five to one, to attack him; if twice as numerous, to divide our army into two. If equally matched, we can offer battle; if slightly inferior in numbers, we can avoid the enemy; if quite unequal in every way, we can flee from him.”

“He will win who knows when to fight and when not to fight.”

Only trade (attack) when the conditions are right and you have the edge. When you are over-matched, out-gunned capital-wise, and things don’t make any sense, do nothing and go play videogames. Deciding on when to fight and not to fight is the critical element in victory or defeat.

—

“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”

Know your own strengths and weaknesses before the battle. If you can’t take volatility and tend to panic puke, lower your position size to a point where you can stay in the battle.

—

“Disciplined and calm, to await the appearance of disorder and hubbub amongst the enemy:–this is the art of retaining self-possession.”

When you are buying know why the other side is selling and why they are wrong. If the other side is selling because they can’t take the pain or due to margin calls, all the better. If they other side is selling due to temporary short-term news, all the better. If the other side is selling due to false news, all the better.

—

“He wins his battles by making no mistakes. Making no mistakes is what establishes the certainty of victory, for it means conquering an enemy that is already defeated.”

“The consummate leader cultivates the moral law, and strictly adheres to method and discipline; thus it is in his power to control success.”

99% of trading is about having steel hard emotional control and not making dumb mistakes. Most losses come from errors in judgement and throwing good money after bad (averaging losers) when the battle is already lost. When your initial thesis is wrong, just GET OUT.

—

“There are five dangerous faults which may affect a general:
(1) Recklessness, which leads to destruction;
(2) cowardice, which leads to capture;
(3) a hasty temper, which can be provoked by insults;
(4) a delicacy of honor which is sensitive to shame;
(5) over-solicitude for his men, which exposes him
to worry and trouble.
These are the five besetting sins of a general, ruinous to the conduct of war.”

After a hard loss don’t go into emotional levered gambling mode (”on tilt” as they say in poker). Be brave when the right opportunity comes to attack. Don’t care about what other people think of your strategy. It’s not about how brilliant or smart your method is, it’s only about making money. Just win baby.

If you liked this, be sure to check out some of my other recommended posts.

-Looks for situations where mis-pricing is large and risk is small
-He wants to understand why it is cheap and misunderstood
-Buy it cheap and don’t worry about price targets
-If he decides he is wrong on something in terms of why he bought it, he exits. Period
-Never invent reasons to hold a position if original reasons are no longer valid
-Write-up outline: what’s it worth to a value buyer, market position, profitability/cash flow. Is it a great business? What’s the FCF with normalized margins 2 years out? Why is it misunderstood? What is the opportunity? Do a valuation and business analysis of each segment of the business, comparison to other companies in the sector, financial engineering potential?
-Einhorn is known to be very disciplined at sticking to what he is good at. He is excellent at figuring out the 3 key drivers to analyze, has the courage of his convictions, and is active on the short side
-“There are lots of smart people out there. I don’t think all of them have the ability to read the rest of the players as well as David. He can actually see how stocks move on different pieces of news and judge what facts the market seems to be acting on. Then he assesses what analytical edge he has over the other players”

Sources: articles on David Einhorn and interviews with people that know him

Warren Buffett didn’t really hit his stride until he met his investment partner Charlie Munger. He is famous for converting the best investor in history from last puff cigar butt value investing to buying great franchise businesses for the long-term. Here are some general investment tips from Charlie:

-Bet very seldom
-You have to figure out where you’ve got an edge. And you’ve got to play within your own circle of competence
-Bet big when you have the odds in your favor and know something is mis-priced. Berkshire, all the billions of gains, top 10 insights account for most of it
-What determines behavior are incentives of the decision maker. Management matters
-Ultimate no-brainer, will find a few times in a lifetime, huge untapped pricing power they’re are not using
-Look for superb business hidden inside a bad mess, once you cut out the folly, big winner. (Geico)
-”Good jockeys will do well on good horses, but not broken-down nags.”