MiB: Ned Davis on Managing Mistakes

Ned Davis could be the most respected Technical Analyst working today. He co-founded Ned Davis Research in 1980 along with Ed Mendel and others. He is the author of Being Right or Making Money as well as The Triumph of Contrarian Investing: Crowds, Manias, and Beating the Market by Going Against the Grain.

NDR quickly developed a reputation as independent, institutional research company by offering unbiased, in-depth financial analysis. The firm was sold to Euromoney in 2011 for $173 million.

Davis states “We are in the business of making mistakes. The only difference between the winners and the losers is that the winners make small mistakes, while the losers make big mistakes.”

He notes that all successful investors share four basic traits:

1. They look at objective indicators. Removing the emotions from the investing process, they focus on data instead of reacting to events;

2. They are Disciplined: The data drives decision making with pre-established rules. External factors do not influence them;

3. They have Flexibility: The best investors are open-minded to new ideas, or revisiting previous thoughts;

4. They are Risk adverse: Not always obvious to investors, it is a crucial part of successful investing.

Footnote: Ned Davis was one of the people who help create the idea for Masters in Business; he was one of the very first person I interviewed — it was over the phone, its unedited, and is very rough (if you can tolerate it, the original interview is here). But the seeds of the idea for this podcast were planted with that interview.

All of the books Davis references are here.

You can stream/download the full conversation, including the podcast extras, on iTunes, Soundcloud, Overcast, and Bloomberg. Our earlier podcasts can all be found on iTunesSoundcloudOvercast and Bloomberg.

Next week, we speak with Anindya Ghose is the Heinz Riehl Chair Professor of Business at New York University’s Stern School of Business and the Director of the Masters of Business Analytics program at NYU; he is the author of Tap: Unlocking the Mobile Economy.

 

 

 

Books by Ned Davis 

Being Right or Making Money by Ned Davis

Markets in Motion by Ned Davis

The Triumph of Contrarian Investing: Crowds, Manias, and Beating the Market by Going Against the Grain by Ned Davis

 

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Ned Davis favorite Books

The Big Board: A History of the New York Stock Market by Robert Sobel

Martin Zweig’s Winning on Wall Street by Martin Zweig

Extraordinary Popular Delusions and The Madness of Crowds by Charles MacKay

Technical Analysis of Stock Trends by Robert Edwards

Stock Market Logic: A Sophisticated Approach to Profits on Wall Street by Norman Fosback

 

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