Re: [CANSLIM] Lack of Buy Candidates

From: "Gary A. Snyder" <gas175k@hotmail.com>
Subject: Re: [CANSLIM] Lack of Buy Candidates
Date: Mon, 18 Feb 2002 03:12:33 -0500
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I for one have read that 70% of stocks in a Bear market goes down and 
thought I am not buying the market I am buying a selection of very good 
stocks so 70% of the market going down does not apply. I think of the market 
as the tide going out as the swimmer is swimming in. He can still reach land 
if he is a good swimmer but it will be more difficult. gas175k


>From: "Katherine Malm" <kmalm@earthlink.net>
>Reply-To: canslim@lists.xmission.com
>To: <canslim@lists.xmission.com>
>Subject: Re: [CANSLIM] Lack of Buy Candidates
>Date: Sun, 17 Feb 2002 09:16:10 -0600
>
>Hi jans,
>
>I wouldn't say that the market direction isn't important. I'd state it a 
>bit differently---I will not simply "stay out" because the collective index 
>is behaving a certain way. If you'll bear with me, I'll try and give a 
>reasoned answer as to why.
>
>The market is a market of stocks, not a "stock market." If you are trading 
>an index, then the condition of the stock market index is meaningful 
>because you are trading "all stocks in the index." Example, trading the 
>SPY's the QQQ's, an index fund that tracks the market, etc. You are then 
>trading the "collective whole." But if I take out my Sherlock Holmes spy 
>glass, I see that under the surface, there are many stocks doing different 
>things. These represent many companies in many markets with many products 
>who serve varied economic needs. To say that "all stocks move the same 
>direction" is to assume that all products, markets, economically sensitive 
>groups move in exactly the same way at exactly the same time. They do not. 
>What *does* tend to move in tandem is human emotion. If people "believe" 
>that equities are a good investment, they will vote with their dollars. If 
>they "believe" that investing in something else is better, they will move 
>their money out of the equity markets. So, we have 2 things working against 
>each other. But....if you are an investor in individual equities, you know 
>that, despite human emotion, the US markets have *huge* amounts of money 
>that have to stay invested one way or another....guess what.....these are 
>institutional monies like pension funds, mutual funds from 401K plans, 
>insurance company monies, etc.
>
>Conclusion? There will always be *some* money moving around in the equity 
>markets. If I choose to put my money there, then I know that there will be 
>some stocks going up and some stocks going down. In some ways, that means 
>that the "index" of all stocks has far less meaning to me than the strength 
>of an individual stock because the "index" hides underlying strength. Now I 
>have to be able to spot the good stocks. Human emotion and 
>economic/business factors still play a role here, so using industry 
>movement *and* stock movement together gives me some markers to help direct 
>my attention. In CANSLIM, I know there are some underlying assumptions and 
>so I can make some conclusions based on those:
>
>--CANSLIM is not a bottom fishing strategy, therefore, find strength and 
>buy into strength
>--CANSLIM is not a "get on the band wagon first" strategy, therefore, find 
>upward movement early in the move and *follow* it up
>
>These kinds of strategies are particularly important if monies are in 
>non-marginable accounts that can't be shorted. In marginable accounts, the 
>other way to play a choppy, sideways or declining "market" is to turn 
>CANSLIM upside down and find stocks breaking down in industries breaking 
>down and short them. But, either way, the strategy is the same. Once the 
>market trends strongly one direction or another, it just means those 
>positions found early in a move can be ridden *longer.* For example, stocks 
>I rode long in late '98-'99 I got to ride for a very long time, stocks I 
>shorted in early 2000 I got to ride for many weeks. As the bear wore on, 
>the long and short rides became of shorter and shorter duration. I think of 
>it as shaking out a table cloth. The first couple of shakes get most of the 
>debris out, but then you have to shake it like the dickens in shorter and 
>shorter motions to get those tiny crumbs to let loose. Once the table cloth 
>is clean, you can put it back on the table and start a new meal.
>
>Katherine
>   ----- Original Message -----
>   From: Spencer48@aol.com
>   To: canslim@lists.xmission.com
>   Sent: Saturday, February 16, 2002 10:49 PM
>   Subject: Re: [CANSLIM] Lack of Buy Candidates
>
>
>   Katherine:
>
>        Apropos of your E-mail, then, are you stating that the Market's
>   direction isn't as important as WON says it is.  He says that about 70% 
>of
>   stocks will fall, no matter how great their earnings are, during a bear
>   market.  That's why he advises not to go long during a bear.
>
>        I've been taking this advice.  Anecdotally, based on my experience 
>in
>   the market, his advice regarding the Market's direction and when and 
>when not
>   to buy stocks always seemed valid.  However, as I understand it, you are
>   saying that strong stocks (stocks with high and accelerating earnings) 
>in
>   strong industries will do well-even during a bear.  And how do you 
>define a
>   "strong industry"?  The top 40% of IBD's 197?
>
>        I wonder if WON has ever done a statistical study on the 70% 
>failure
>   rate of strong stocks WHEN the strong stock is in a strong industry?  It
>   would be very interesting to see if the 70% falls, and by how much it 
>falls.
>   It would be even more eye-opening if he were able to statistically 
>correlate
>   the strength of the industry (during a bear) with the likelihood that 
>the
>   stock would rise or fall.
>
>   jans
>
>
>   In a message dated 2/16/2002 10:57:52 AM Eastern Standard Time,
>   kmalm@earthlink.net writes:
>
>   << I don't buy the CANSLIM party line that you should "stay out" of the
>   market if there aren't 1000's of stocks to choose from. I look for good
>   stocks with rising relative strength, strategic advantage and good 
>technical
>   strength that are members of rising and strong industry groups. I sell 
>stocks
>   that break down technically or that are members of a group that is 
>beginning
>   to break down. I short stocks/groups in industries that are breaking 
>down to
>   take advantage of the prevailing winds. I let the market tell me which 
>kinds
>   of stocks are doing well. Whether it's value/growth, small/mid/large 
>cap,
>   industry group, I'm agnostic (except that I *do* stay away from super
>   microcaps). What works, works and I have a methodology that looks for 
>what's
>   working.
>
>    The "market" is nothing more than a market of stocks. Too many people 
>focus
>   on what's *not* working and miss the many great opportunities that are 
>out
>   there. One of my mentors always says "when the market speaks, have big 
>ears."
>   I say, "when a stock and an industry speaks, have big ears." As I see 
>it, too
>   many folks are still focused on what *was* working during the last Great 
>Bull
>   market. This is the history of markets...  >>
>
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