Go to Jeff Salisbury LWGate Home Page.From: "Katherine Malm" <kmalm@earthlink.net>
Subject: Re: [CANSLIM] Industry analysis technique/tools? Was: Point of View: Why bother with fundamentals?
Date: Thu, 20 Dec 2001 12:54:13 -0600
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This is a multi-part message in MIME format. - ------=_NextPart_000_00AA_01C18955.6CE29A60 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable Hi Warren, You bring up an interesting question. As I see it, really 2 parts: (1) Is a top-down approach used in conjunction with a bottoms-up = approach? (2) Can I use IBD rankings to do this? I hope I've understood your questions properly. (1) So that I can keep my bearings, I consider a "top-down" approach one = in which you identify the industry and then "drill down" into it to find = the good stocks. "Bottoms up" is identifying the stocks first and then = swimming up through the industry as a whole. The short answer is that I = use both.=20 When I mine for strong stocks, I do not filter anything based on = industry. But once I get a list of candidates with minimum growth = characteristics, I will sort this by industry. This is a simple step = that gives me a birdseye view of represented industries and whether or = not there are multiple players. When I perform DD on the stocks of = interest, I will look at the overall trend of the industry and the = technical patterns of all of the CANSLIM quality players. Part of DD is = to identify the leaders in the group. Once I've figured that out, I = pretty much ignore everybody else in the group for further DD. My "top down" I do in a couple of ways. First is what I used to call = "themes" but have recently renamed "macrothemes" after Peter Navarro's = term. This is an ongoing list of business and legislative issues that = tend to drive larger, secular trends. For example, going into 2001, one = of my macrothemes was the likelihood that more dollars would be pumped = into A&D to make up for the neglectful tending of military strategic and = logistic supplies during the Clinton era. I don't go trolling for stocks = as a result of this. I *used* to do this, but after a couple of lousy = investments, I realized that the market has to confirm an expected move. = Here's an example. A couple of years ago, the Transportation Act of 2000 = was passed. This was particularly important because Congress had so = ignored infrastructure during the Clinton years. This Act dwarfed the = 60's Eisenhower interstate highway program by a long shot. I started = looking for construction companies, cement manufacturers, anything = related. I picked a couple of them and watched them make lousy little = moves of no importance. Lesson learned. Now, I keep these themes in my = background thinking so that if stocks like these start showing up, I = have "context" for their moves. The second and more applicable part of my top down strategy is to look = for moves in one industry vs. another. What's at an extreme high or low? = What is crossing over from downtrend to uptrend or vice versa? What has = been long out of favor and may be rotating into favor? Which industries = are moving into or out of the top 50%? Is an industry showing particular = velocity in its move? This is something that I do each week. It is = really designed to help me to focus on the right subset of my candidates = for technical review. (2) Can I use IBD rankings to do this? Well, theoretically, yes. But I = never could make any sense out of the table in the IBD. I can mark up = moves and down moves, highlight things, but for me, it has no context. = Thank goodness for computers, because viewing these things in chart = format is very helpful. When DGO and IBD didn't give me the tools I = needed, I gravitated toward the software I now use. The new DGO beta now = has features that would allow this sort of review, including the ability = to drill down to the stocks in the industry and then look at each of = their charts. The one thing to keep in mind is that the IBD industry = rankings are based on 6 months of relative price movement. That's a very = long time when the market is rotating so fiercely. Once a steady market = trend begins to play out , I would imagine it to be less of an issue, = but just something to remember when assessing industry moves based on = their data. Katherine ----- Original Message -----=20 From: Warren Keuffel=20 To: canslim@lists.xmission.com=20 Sent: Thursday, December 20, 2001 12:15 PM Subject: Re: [CANSLIM] Industry analysis technique/tools? Was: Point = of View: Why bother with fundamentals? Katharine, I gather that when you see an interesting stock you then examine the industry to see if the other players are coming along also (as = described below). My question to you is, do you do any kind of industry = analysis where you find promising industries and then look for candidate stocks within that industry? I would call this a bottom-up approach. The primary reason I raise this question is that I am trying to figure out how best to use the daily IBD industry ranking table. I know = there are a few WON comments on investors.com about this, but the big = question for me is whether it would be worthwhile for me to invest time and energy into tracking the daily or weekly movement of those 197 groups = to see patterns (if any) developing. This would be what I would call a top-down approach. Thanks, Warren Katherine Malm wrote: > Hi John, >>The last paragraph seems indicate you do use fundamentals > and sector rotation for your screening. Then youuse total technical > analysis from that point including exits. Correct?<< That is for the > most part correct, though industry analysis (sector rotation) enters > in both screening and in buy/sell decisions. I look for something = with > a fundamental story and if I like it, I watch it until the industry > and technical analysis stars align. As part of my buy review = process, > I look at the action in all players in the industry. This will help > ensure that the industry is not topping out, even though the buy > candidate looks technically sound. I also look at industry players = to > be sure that moves off the bottom show that at least 2 strong stocks > are moving. One alone, and I wait. Once I own a stock, part of my = sell > rules include continued review of other stocks in the industry. If > they begin breaking down, but my holding is strong, it goes on > warning. If other technical warning signs kick in, out it goes. My > entries and exits are definitely driven by technicals. There are > times, however, where fundamentals do play a hand in my sell rules: - -To subscribe/unsubscribe, email "majordomo@xmission.com" -In the email body, write "subscribe canslim" or -"unsubscribe canslim". Do not use quotes in your email. - ------=_NextPart_000_00AA_01C18955.6CE29A60 Content-Type: text/html; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable <!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN"> <HTML><HEAD> <META http-equiv=3DContent-Type content=3D"text/html; = charset=3Diso-8859-1"> <META content=3D"MSHTML 5.50.4611.1300" name=3DGENERATOR> <STYLE></STYLE> </HEAD> <BODY bgColor=3D#ffffff> <DIV>Hi Warren,</DIV> <DIV> </DIV> <DIV>You bring up an interesting question. As I see it, really 2 = parts:</DIV> <DIV> </DIV> <DIV>(1) Is a top-down approach used in conjunction with a bottoms-up=20 approach?</DIV> <DIV>(2) Can I use IBD rankings to do this?</DIV> <DIV> </DIV> <DIV>I hope I've understood your questions properly.</DIV> <DIV> </DIV> <DIV>(1) So that I can keep my bearings, I consider a "top-down" = approach one in=20 which you identify the industry and then "drill down" into it to find = the good=20 stocks. "Bottoms up" is identifying the stocks first and then swimming = up=20 through the industry as a whole. The short answer is that I use both. = </DIV> <DIV> </DIV> <DIV>When I mine for strong stocks, I do not filter anything based on = industry.=20 But once I get a list of candidates with minimum growth characteristics, = I will=20 sort this by industry. This is a simple step that gives me a birdseye = view of=20 represented industries and whether or not there are multiple players. = When I=20 perform DD on the stocks of interest, I will look at the overall trend = of the=20 industry and the technical patterns of all of the CANSLIM quality = players. Part=20 of DD is to identify the leaders in the group. Once I've figured that = out, I=20 pretty much ignore everybody else in the group for further DD.</DIV> <DIV> </DIV> <DIV>My "top down" I do in a couple of ways. First is what I used to = call=20 "themes" but have recently renamed "macrothemes" after Peter Navarro's = term.=20 This is an ongoing list of business and legislative issues that tend to = drive=20 larger, secular trends. For example, going into 2001, one of my = macrothemes was=20 the likelihood that more dollars would be pumped into A&D to make up = for the=20 neglectful tending of military strategic and logistic supplies = during the=20 Clinton era. I don't go trolling for stocks as a result of this. I = *used* to do=20 this, but after a couple of lousy investments, I realized that the = market=20 has to confirm an expected move. Here's an example. A couple of = years ago,=20 the Transportation Act of 2000 was passed. This was particularly = important=20 because Congress had so ignored infrastructure during the Clinton years. = This Act dwarfed the 60's Eisenhower interstate highway = program by a=20 long shot. I started looking for construction = companies, cement=20 manufacturers, anything related. I picked a couple of them and = watched them=20 make lousy little moves of no importance. Lesson learned. Now, I = keep=20 these themes in my background thinking so that if stocks like these = start=20 showing up, I have "context" for their moves.</DIV> <DIV> </DIV> <DIV>The second and more applicable part of my top down strategy is to = look for=20 moves in one industry vs. another. What's at an extreme high or low? = What is=20 crossing over from downtrend to uptrend or vice versa? What has been = long out of=20 favor and may be rotating into favor? Which industries are moving = into or=20 out of the top 50%? Is an industry showing particular velocity in = its move?=20 This is something that I do each week. It is really designed to = help me to=20 focus on the right subset of my candidates for technical review.</DIV> <DIV> </DIV> <DIV>(2) Can I use IBD rankings to do this? Well, theoretically, yes. = But I=20 never could make any sense out of the table in the IBD. I can mark up = moves and=20 down moves, highlight things, but for me, it has no context. Thank = goodness for=20 computers, because viewing these things in chart format is very helpful. = When=20 DGO and IBD didn't give me the tools I needed, I gravitated toward the = software=20 I now use. The new DGO beta now has features that would allow this sort = of=20 review, including the ability to drill down to the stocks in the = industry and=20 then look at each of their charts. The one thing to keep in mind is that = the IBD=20 industry rankings are based on 6 months of relative price movement. = That's a=20 very long time when the market is rotating so fiercely. Once a steady=20 market trend begins to play out , I would imagine it to be less of = an=20 issue, but just something to remember when assessing industry moves = based on=20 their data.</DIV> <DIV> </DIV> <DIV>Katherine</DIV> <BLOCKQUOTE=20 style=3D"PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; = BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px"> <DIV style=3D"FONT: 10pt arial">----- Original Message ----- </DIV> <DIV=20 style=3D"BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: = black"><B>From:</B>=20 <A title=3Dwkeuffel@xmission.com = href=3D"mailto:wkeuffel@xmission.com">Warren=20 Keuffel</A> </DIV> <DIV style=3D"FONT: 10pt arial"><B>To:</B> <A = title=3Dcanslim@lists.xmission.com=20 = href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>= </DIV> <DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Thursday, December 20, = 2001 12:15=20 PM</DIV> <DIV style=3D"FONT: 10pt arial"><B>Subject:</B> Re: [CANSLIM] Industry = analysis=20 technique/tools? Was: Point of View: Why bother with = fundamentals?</DIV> <DIV><BR></DIV>Katharine,<BR><BR>I gather that when you see an = interesting=20 stock you then examine the<BR>industry to see if the other players are = coming=20 along also (as described<BR>below). My question to you is, do = you do any=20 kind of industry analysis<BR>where you find promising industries and = then look=20 for candidate stocks<BR>within that industry? I would call this = a=20 bottom-up approach.<BR><BR>The primary reason I raise this question is = that I=20 am trying to figure<BR>out how best to use the daily IBD industry = ranking=20 table. I know there<BR>are a few WON comments on investors.com = about=20 this, but the big question<BR>for me is whether it would be worthwhile = for me=20 to invest time and<BR>energy into tracking the daily or weekly = movement of=20 those 197 groups to<BR>see patterns (if any) developing. This = would be=20 what I would call a<BR>top-down=20 approach.<BR><BR>Thanks,<BR>Warren<BR><BR>Katherine Malm = wrote:<BR><BR>> Hi=20 John, >>The last paragraph seems indicate you do use=20 fundamentals<BR>> and sector rotation for your screening. Then = youuse total=20 technical<BR>> analysis from that point including exits. = Correct?<<=20 That is for the<BR>> most part correct, though industry analysis = (sector=20 rotation) enters<BR>> in both screening and in buy/sell decisions. = I look=20 for something with<BR>> a fundamental story and if I like it, I = watch it=20 until the industry<BR>> and technical analysis stars align. As part = of my=20 buy review process,<BR>> I look at the action in all players in the = industry. This will help<BR>> ensure that the industry is not = topping out,=20 even though the buy<BR>> candidate looks technically sound. I also = look at=20 industry players to<BR>> be sure that moves off the bottom show = that at=20 least 2 strong stocks<BR>> are moving. One alone, and I wait. Once = I own a=20 stock, part of my sell<BR>> rules include continued review of other = stocks=20 in the industry. If<BR>> they begin breaking down, but my holding = is=20 strong, it goes on<BR>> warning. If other technical warning signs = kick in,=20 out it goes. My<BR>> entries and exits are definitely driven by = technicals.=20 There are<BR>> times, however, where fundamentals do play a hand in = my sell=20 rules:<BR><BR><BR>-<BR>-To subscribe/unsubscribe, email "<A=20 = href=3D"mailto:majordomo@xmission.com">majordomo@xmission.com</A>"<BR>-In= the=20 email body, write "subscribe canslim" or<BR>-"unsubscribe = canslim". Do=20 not use quotes in your email.</BLOCKQUOTE></BODY></HTML> - ------=_NextPart_000_00AA_01C18955.6CE29A60-- - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email.
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