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Are there any books that explain the reasons behind the value model?

The detailed question was:

Can you kindly please recommend me a book or paper to help me understand what drives the phases in a value stock (eg accumulation, markup, distribution, markdown). I see value stocks that have sound fundamentals and still a fair margin of safety but then the stock starts to trend down when there does not seem to be a real reason for doing so. Is this then just a matter of crowd behaviour? I am not trying to predict the future but just trying to understand how psychology and sentiment influence stock prices.

I am not sure there are any books that explain the patterns.

The observation of that pattern for what I call value model stocks has been around a long time. Richard Wyckoff in the early 1900s. Others in the 1930s-40s. Perhaps the best modern text is Stan Weinstein’s Secrets For Profiting in Bull and Bear Markets. However, again, he just describes and uses the pattern. I don’t think he adds to what is in my book Building Wealth in the Stock Market.

There will be a fair element of crowd behaviour in what you are seeing – when the pattern fails and when it succeeds. Also it could be that there is no news, but the smart money knows the situation is deteriorating. Probably a new accumulation zone will form much later and much lower on the chart if the business can be turned around.

This is one reason why on my model and Weinstein’s etc (it is not original), we want to see an upward breakout from accumulation. Then if a trend develops I build my position and I sell if it does not. There is no foolproof method to be right every time. It is all about entering on a set-up and then managing the investment to protect capital.