Re: [CANSLIM] Canslim Evaluation Tool

From: Spencer48@aol.com
Subject: Re: [CANSLIM] Canslim Evaluation Tool
Date: Wed, 3 Apr 2002 15:31:35 EST

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Mike:

     I agree with nearly all your demurrals (I think Tim made a good point 
and one I hadn't considered regarding the 50 vs. the 200, and Tom's Cash-Flow 
conclusion is one that is significant (especially in these Enron-ic days).  
However, the chart at first look seemed very nice to me also as did its 
quarterly sales and earnings figures. 

     However, this is why I didn't put it on my Watchlist.  Although, it 
seems to be in a downtrend since its Oct. 22.2 high (and I agree that most 
C&H's must be [especially if they are long lasting]), what predicts strength 
in its chart  is that the up vol and down vol (during the basing) seem to be 
appropriate for an up-and-coming stock.  But, in my opinion, there doesn't 
really seem to be any worthwhile rise up from which the base should form.  

     There is an price rise to the left lip (since July to Oct. it went over 
100%) but to me that rise appears to wide, loose and elongated to consider.  
Also a 25% rise from Sept. to Oct. doesn't seem like a strong enough rise to 
me for a more than 7 month C&H.   As far as I'm concerned, what cinches my 
conclusion of disregarding it is, as Tom observed, it's poor cash-flow.  (As 
I understand it, a company's cash-flow should generally be more than its 
earnings (because of non-cash expenses like depreciation and amortization.  
However, if R&D is high, I probably would make an exception-since a lot of 
cash might be outflowing to support R&D before being accounted in as 
"Cash-Flow.)      

jans


In a message dated 4/3/2002 3:03:51 AM Eastern Standard Time, 
mikegibbons@proactech.com writes:

<< To Tim,
 
 I wonder if you would pour such similar scorn on other stocks that rate a 94
 on Investors.com (with two best in groups!).
 
 Yes it's 30% below it's high but does that disqualify it as a CANSLIM stock?
 Also, as I understand CANSLIM, there is nothing in the definition that
 speaks of 50 or 200dma's, although they may well be additional metrics to
 add to the mix of decision making tools. If I'm wrong please correct me.
 
 To Tom's more rational response, I would make the following comments and ask
 for more commentary:
 
 - overhead resistance? when stocks start climbing the right side of the cup,
 the overhead resistance is always there, but many overcome it. We try to
 identify such potential candidates. Would a stock that's 30% off it's high
 be automatically excluded from consideration.
 
 - industry is a D: yup, few stocks are perfect
 
 - no buying? As I see it, the stock experienced buying from 3/4 to 3/7 and
 then formed a classic downward wedging handle. It then rose again and is
 forming a second handle. Is there another source of information I'm missing
 apart from what's in the chart?
 
 - cash flow: Not part of the CANSLIM definition as I understand it but maybe
 I should incorporate it into the analysis. What should be the parameters?
 
 - earnings forecast of "only 12% growth": again not a formal CANSLIM
 component, but I wonder what the average forecast is? 12% sounds pretty good
 to me in an economy that may grow 3.5% if we're lucky. What would be the
 standard that you would look for?
 
 I have no interest in touting this stock, but it came on to my radar screen
 and I shared it with you all as the best CWH and CANSLIM candidate I have
 seen recently. This is the type of discussion I had hoped to generate so I
 can improve the tool. Thank you for your input - I look forward to your
 responses.
 
 Aloha,
 
 Mike Gibbons >>

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