Al Frank (1)

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Al Frank wrote his investment letter, The Prudent Speculator, for many years.  Individuals subscribed to his letter in order to learn his techniques for successful stocks selection and get his stock recommendations.  He put his investment advice together into a book, The Prudent Speculator: Al Frank on Investing , published in 1989.  Copies of the original book are still available on Amazon.com.  I believe the revised edition, Al Frank's New Prudent Speculator, which was published in 1995, is still in print.  Mr. Frank started his book by posing the question that bedevils every beginning investor:

Given the multitude of information, possibilities, published "successful" methods, and strategies for speculating with stocks, how is one to choose?  The problem is especially vexing as apparently successful strategists dismiss their competitors' methods as seriously flawed or completely missing the point.  It is difficult to apply any of the numerous and conflicting systems when the skills involved seem to require a graduate degree in mathematics, accounting, or psychology.

Mr. Frank was a believer in fundamental analysis, specifically, value investing.  He approached investing in stocks by looking at the companies represented by the stocks.  He maintained that fundamental analysis was not that complicated and could be mastered by any individual investor willing to take the time to learn.  He described investing as follows:

Many people have been conditioned to believe that investing is an esoteric and highly skilled enterprise.  Obviously those who get paid to invest for others act as if they had irreplaceable training, high I.Q., insights and nonpublic information that gives them an advantage over the average wage earner.  Little could be further from the truth.  Successful investing involves only a handful or two of considerations that are available to anyone with a 6th-grade education.  You probably know most of them already.

Interestingly, Ben Graham felt the same way.  In his book, The Intelligent Investor, Graham advised his readers to avoid investing strategies which employed anything more complicated than some basic algebra.  This is a far cry from the investment gurus running funds today who tout their complicated  mathematical calculations run on high speed computers to search out investment opportunities.

Like Philip Carret and Benjamin Graham, Al Frank taught that simple analysis of the fundamentals of a company was the easiest way to make money in the stock market.  The essential message of all three of these value investors was the same:  an individual investor can learn how to succeed in the market on his or her own.

Keep in mind that successful investing for an individual investor is not the same as being a success on Wall Street.  A person is a success on Wall Street when he or she is able to attract the most money from people who have accepted the idea that they can not do their own investing.  The more money an investment fund manager can attract, the more fees and charges that fund manager earns.  Whether their investment strategy actually makes the most money for the investors is only important insofar as such success attracts yet more investor money, which translates into yet more fees.  As I have said all along in this blog, the folks on Wall Street are entitled to earn a living; however, the individual investor can save those fees and charges if he or she takes the time and makes the effort to learn.

We will continue with Mr. Frank in the next blog and learn more of his type of fundamental analysis.

The material from Al Frank's New Prudent Speculator by Al Frank, copyright 1995 by Al Frank, is used with permission of the copyright holders, the heirs of Al Frank.

Comments, as always, are welcome.