Go to Jeff Salisbury LWGate Home Page.From: "Katherine Malm" <kmalm@earthlink.net>
Subject: Re: [CANSLIM] VectorVest fundies
Date: Sun, 10 Mar 2002 21:32:12 -0600
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Hi Dave,
I fully understand the questions you are asking and would like to start =
first with a clarification and then a couple of questions of you before =
I answer your question.=20
First, a clarification on RV, a minor detail, but one worth noting. RV =
is the expected return over time in *excess* of the return on a AAA =
bond. So, in your example, if the AAA bond were paying 10%, the RV would =
be 1.4 rather than 1.5. The idea is to quantify the expected return over =
a "risk free" (of course, that's debatable!) investment in a AAA bond in =
order to establish some baseline for risk/reward.
Next, two questions:
(1) When you are looking for a CANSLIM quality *company* (I'm not =
talking about the stock, but the underlying business), what does it look =
like? What gives it CANSLIM characteristics?---again, no discussion =
about anything technical with regard to the stock itself....just the =
business characteristics.
(2) If you found 2 companies that fit these characteristics, and you =
could invest in only one how would you choose between them?
The answers to these are important, because they will lay the groundwork =
for my reply. Thanks in advance for taking the time to respond.
Katherine
----- Original Message -----=20
From: Davellil5@aol.com=20
To: Davellil5@aol.com ; kmalm@earthlink.net ; =
canslim@lists.xmission.com=20
Sent: Sunday, March 10, 2002 8:16 PM
Subject: Re: [CANSLIM] VectorVest fundies
I was typing this email when my computer suddenly mailed it before it =
was=20
finished. So here it is again with the concluding comment.
Katherine, here's a fundamental question about VectorVest's Relative =
Value=20
(RV) rating of stocks.
This approach rests on an unstated assumption, i.e., that there is =
such a=20
thing as an objective value of a stock. If that assumption is true, =
and if=20
the objective value of a stock is calculated to be 50% higher than its =
current market value, then that stock has an RV of 1.5. Presumably, =
when the=20
market realizes that the stock's objective ("real") value is 50% =
higher than=20
current price, the market will be willing to pay that much more for =
the stock=20
-- sooner or later.
But if there really is no objective value for any stock, the RV =
logical=20
structure crumbles. In that case, we have to fall back on the CANSLIM =
approach that relies on patterns of stock behavior to make buy =
decisions with=20
a probability of success based upon past experience with such =
patterns, e.g.,=20
70% probability of being right.
As you say, VV may be useful mainly as a hunting ground for CANSLIM =
stocks. =20
If so, which of VV's cuts, RV? Or RT? And how fruitful? Out of =
every 100=20
stocks with VV's high ratings, how many turn out, on investigation, =
to meet=20
CANSLIM requirements?
Regards, Dave
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<BODY bgColor=3D#ffffff>
<DIV>Hi Dave,</DIV>
<DIV> </DIV>
<DIV>I fully understand the questions you are asking and would like to =
start=20
first with a clarification and then a couple of questions of you before =
I answer=20
your question. </DIV>
<DIV> </DIV>
<DIV>First, a clarification on RV, a minor detail, but one worth noting. =
RV is=20
the expected return over time in *excess* of the return on a AAA bond. =
So, in=20
your example, if the AAA bond were paying 10%, the RV would be 1.4 =
rather than=20
1.5. The idea is to quantify the expected return over a "risk free" (of =
course,=20
that's debatable!) investment in a AAA bond in order to establish some =
baseline=20
for risk/reward.</DIV>
<DIV> </DIV>
<DIV>Next, two questions:</DIV>
<DIV> </DIV>
<DIV>(1) When you are looking for a CANSLIM quality *company* (I'm not =
talking=20
about the stock, but the underlying business), what does it look like? =
What=20
gives it CANSLIM characteristics?---again, no discussion about anything=20
technical with regard to the stock itself....just the business=20
characteristics.</DIV>
<DIV> </DIV>
<DIV>(2) If you found 2 companies that fit these characteristics, and =
you could=20
invest in only one how would you choose between them?</DIV>
<DIV> </DIV>
<DIV>The answers to these are important, because they will lay the =
groundwork=20
for my reply. Thanks in advance for taking the time to respond.</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=3DDavellil5@aol.com=20
href=3D"mailto:Davellil5@aol.com">Davellil5@aol.com</A> </DIV>
<DIV style=3D"FONT: 10pt arial"><B>To:</B> <A =
title=3DDavellil5@aol.com=20
href=3D"mailto:Davellil5@aol.com">Davellil5@aol.com</A> ; <A=20
title=3Dkmalm@earthlink.net=20
href=3D"mailto:kmalm@earthlink.net">kmalm@earthlink.net</A> ; <A=20
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> Sunday, March 10, 2002 =
8:16=20
PM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> Re: [CANSLIM] =
VectorVest=20
fundies</DIV>
<DIV><BR></DIV>I was typing this email when my computer suddenly =
mailed it=20
before it was <BR>finished. So here it is again with the =
concluding=20
comment.<BR><BR><BR> Katherine, here's a fundamental question =
about=20
VectorVest's Relative Value <BR>(RV) rating of stocks.<BR><BR>This =
approach=20
rests on an unstated assumption, i.e., that there is such a <BR>thing =
as an=20
objective value of a stock. If that assumption is true, and if =
<BR>the=20
objective value of a stock is calculated to be 50% higher than its =
<BR>current=20
market value, then that stock has an RV of 1.5. Presumably, when =
the=20
<BR>market realizes that the stock's objective ("real") value is 50% =
higher=20
than <BR>current price, the market will be willing to pay that much =
more for=20
the stock <BR>-- sooner or later.<BR><BR>But if there really is no =
objective=20
value for any stock, the RV logical <BR>structure crumbles. In =
that=20
case, we have to fall back on the CANSLIM <BR>approach that relies on =
patterns=20
of stock behavior to make buy decisions with <BR>a probability of =
success=20
based upon past experience with such patterns, e.g., <BR>70% =
probability of=20
being right.<BR><BR>As you say, VV may be useful mainly as a hunting =
ground=20
for CANSLIM stocks. <BR>If so, which of VV's cuts, RV? Or=20
RT? And how fruitful? Out of every 100 <BR>stocks with =
VV's high=20
ratings, how many turn out, on investigation, to meet =
<BR>CANSLIM=20
requirements?<BR><BR>Regards, Dave<BR><BR><BR>-<BR>-To =
subscribe/unsubscribe,=20
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>
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- -"unsubscribe canslim". Do not use quotes in your email.
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