Q&A: Rush Vann, owner of J. Rush Vann Investment Management
Finding the right place and the right time to invest money can be tricky, but one Fort Worth investment manager says wiser investment decisions can be made using a technique called “technical analysis.”
Rush Vann is the owner of J. Rush Vann Investment Management, a firm licensed under broker-dealer and investment adviser Rhodes Securities. A Fort Worth native, Vann graduated from Trinity Valley School and Austin College and holds a master’s degree in financial management from the University of Dallas. He has worked in investment management for 36 years and also taught a course on technical analysis at Texas Christian University for seven years.
Vann said there are two types of analyses used in investment: fundamental analysis and technical analysis. While fundamental analysis looks at specific earnings, product and other details of a company, technical analysis looks at supply and demand, relative strength, trends and other factors.
Vann talked with Fort Worth Business about technical analysis and how using this technique can benefit investors.
In a nutshell, what is fundamental analysis, and what is technical analysis?
Both of these tools go hand in hand. Fundamental analysis deals with the company specifics (i.e., earnings, new products, sales, balance sheet data, etc.). Fundamentals help tell an investor “what to buy.” Technical analysis deals with supply-and-demand characteristics of the security through analysis of charts, graphs, relative strength, sector rotation and the overall direction of the various asset classes. Technical analysis tells one “when to buy.”
How do fundamental analysis and technical analysis compare with one another?
They are complimentary tools to get to the same conclusion. Fundamental investors focus on whether a security appears to be overvalued or undervalued based on analysis of specific company data as mentioned above. Technicians spend more time looking at supply and demand. A great company can stay cheap a lot longer than a client has patience. It is more important for those investors utilizing technical analysis to identify positive/negative trends for a sector than to buy a stock just because it appears to be a good company.
You specialize in technical analysis. Why focus on technical as opposed to fundamental?
In study after study, fundamental securities analysts had “buy” ratings on the companies they follow over 90 percent of the time. The industry is very good at telling one when to buy, just not good at all telling one when to sell. I learned that unfortunate fact very early in my career when an experienced broker advised this young, newly licensed rookie to “just go find a stock and sell it.” It was during the 1980s oil boom and the stock I selected was an offshore driller. The analyst recommended the stock to me at $36 per share. He kept it on his buy list until the day they filed bankruptcy. What do you tell a client when that happens? There had to be a better way. Technical analysis gives me that extra tool to manage the security. It’s an unemotional discipline. The security is either in an uptrend with positive technical attributes or it isn’t. Avoid those that aren’t and have an exit strategy for those that are.
What are some common mistakes brokers tend to make?
Buying a good company because the stock is cheap. Putting too much credence in brokerage analyst recommendations. Industry analysts tend to run in a herd. Think outside the box a little.
How should businesses utilize technical analysis?
Most do it without even considering what it is called. Plotting sales growth, determining whether that particular industry is experiencing growth or decline. Retail companies, homebuilders, car manufacturers, just to name a few, all measure and follow supply and demand.
What are some investment tips you can give our readers?
I taught a course for seven years at TCU through the Extended Education Department on technical analysis and found that most investors focus 80 percent of their efforts on what company to buy and don’t pay attention to the direction of the overall market or the sector. Great investors first identify which way the market is going, then analyze which sectors of the market are performing better than others. Is technology, health care, etc., outperforming energy and materials? Then, they find individual securities or ETF’s [exchange-traded funds, a type of security with the top individual stocks of a sector] that will give them the best opportunity to succeed.