Walk down the common stock aisle of a bookstore and you will notice the same subjects over and over: Value, Growth, Technical Analysis, and Options. There have been relatively few new ideas published in the past half-century. Until now.

Finally, “TrimTabs Investing: Using Liquidity Theory to Beat the Stock Market” by Charles Biderman and David Santschi says something different. They offer a better way to invest using liquidity – the relationship between the amount of shares available for purchase and the amount of cash available to buy them.

The price of all stocks, they say, is governed by the supply and demand for shares. And fair or not, supply is directly controlled by the corporations. They increase supply - or sell additional shares - through IPO’s, options, and new offerings; and they decrease supply - or buy and retire shares - through stock buybacks, privatizations, and acquisitions. The key, of course, is to buy when corporations are buying and sell when they are selling.

Being aware of demand is also important. Liquidity measures the net trading activity of corporations, insiders, mutual funds, and individual investors. Are investors buying heavily or running for the gates? Are people pouring money into mutual funds or withdrawing? In short, are there more buyers or sellers? Knowing this will give you a better sense of whether the market is heading up or down.

In his book, Biderman introduces us to liquidity theory. Like all pioneers, however, his measuring techniques need further refinement. It is a work in progress. But the ideas are thought-provoking and the potential is enormous.