- Oliver Kell, a US Investing Championship contender, pieced together his trading strategy by borrowing tactics from the most renowned investors.
- Kell is in third place in the 2020 US Investing Championship, with a 359.4% return through July.
- He refers to his trading methodology as a "techno-fundamental trend follower" and looks to trade companies that are changing the world as we know it.
- He listed three stocks that have helped contribute to his extraordinary performance.
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From an early age, Oliver Kell, a 2020 US Investing Championship contender, was captivated by financial markets.
"I kind of always knew what the markets were," he told How to Make Money in Stocks" text upon him.
"Once I opened it up, it really just hit me ... hit me right away," he said. "And I started learning about charts, price action, volume. And I would say by the end of my time at that hedge fund, I was really actually starting to learn how to make money."
Fast-forward to today, and it's safe to say that Kell is putting that text to good use. His trading performance as of July 31 was a staggering 359.4%, putting him in third place in the 2020 US Investing Championship.
Here's how he's doing it.
Kell has found success by dovetailing different trading approaches from the most renowned investors with his professional experience. Legendary investors such as O'Neil, Jesse Livermore, and Peter Lynch top his list of influences.
From O'Neil, Kell leverages the CANSLIM stock-picking methodology. From Lynch, Kell channels the illustrious investor's buy-what-you-know approach. From Livermore, he employs timeless trading lessons, including pyramiding into and out of positions.
"I would consider myself to be like a techno-fundamental trend follower," he said. "The CANSLIM method — or William O'Neil's method — is the backbone, combined with Peter Lynch, as to how I actually pick the stocks that I want to trade."
For the uninitiated, O'Neil's CANSLIM methodology focuses on (C)urrent earnings per share, (A)nnual earnings per share, something (N)ew, (S)hares outstanding, and (L)eaders or laggards to unearth stocks that look primed to rally.
"I'm usually trading stocks that I know the business or use the product and they've got big earnings, big sales," he said. "I like to trade kind of what I consider to be story stocks."
At any given time, Kell holds six to 12 stocks that he knows inside and out, with the top three to five positions making up the bulk of his portfolio. To help him ride the trend of a stock, he uses the 10- and 20-day exponential moving averages and partly moves in and out of positions to help control his risk.
Kell knows if his thinking behind a purchase is either sound or incorrect by how his stocks trade around those moving averages. If an average is breached in either direction, Kell will likely reassess his position.
"I'm looking for stocks that are breaking out of bases," he said. "I want a stock that can change the way we live or is changing the way we do things day in and day out."
As far as risk management is concerned, Kell puts his maximum stop loss at about 3%. But he may give the stock a little more leeway if he's not done building his position. When a stock gets extended (on the upside) from its 10-day moving average, Kell will generally take some profits off the table.
"I'm looking for stocks that can rally a hundred, 200, 300%," he said. "I don't want to buy a stock that's cyclical in nature, or that I think might rally 20%."
It's Kell's strict focus on money management, trend following, technical analysis, and "story stocks" that he attributes to his outsize gains thus far. Today he's holding Tesla (TSLA), Livongo (LVGO), and Fastly (FSLY), but he won't hesitate to abandon (or add to) his positions if they cease (or continue) to meet his criteria moving forward.
"I traded for all these big hedge funds for years, and I really thought, you know, there's guys running tons of money who I thought had no idea what they're doing," he said. "You enter a competition like this to measure yourself against everybody else."