Re: [CANSLIM] Today's IBD "Big Picture" comments...

From: "Bill Triffet" <btriffet@earthlink.net>
Subject: Re: [CANSLIM] Today's IBD "Big Picture" comments...
Date: Wed, 1 May 2002 10:48:09 -0700
Next Article (by Subject): RE: [CANSLIM] Today's IBD "Big Picture" comments... "Mike Gibbons"
Previous Article (by Subject): Re: [CANSLIM] Today's IBD "Big Picture" comments... "Bill Triffet"
Top of Thread: [CANSLIM] Today's IBD "Big Picture" comments... "Bill Triffet"
Next in Thread: RE: [CANSLIM] Today's IBD "Big Picture" comments... "Mike Gibbons"
Articles sorted by: [Date] [Author] [Subject]
Hi Katherine,

I completely agree with your "Core Sprite of Canslim" (sniped and
printed...). I realize now that HTMMIS was using "rules" to instill these
concepts. Problem for me and many others I'm sure was we looked at the rules
and not the concepts. I couldn't see the forest for the trees! The 24
Lessons book does a better job at this I think.

We always played the "is this the follow-thru day" game here. While the
Russell was having follow-thru after follow-thru, I was still looking at the
three major market indexes for conformation.

While your right about the risk in a general down market, I see if I keep
the same solid loss cutting strategy in place, there are still gems to be
found without the general markets "ok".

- -Bill


- ----- Original Message -----
From: "Katherine Malm" <kmalm@earthlink.net>
To: <canslim@lists.xmission.com>
Sent: Wednesday, May 01, 2002 10:24 AM
Subject: Re: [CANSLIM] Today's IBD "Big Picture" comments...


Hi Bill,

You've brought up an excellent issue and that is "what *is* CANSLIM"? I
think reading HTMMIS is a lot like reading the Bible. Each person can read
the same text, the same translation, and they will come away with a
different interpretation of "what it means." I reread HTMMIS constantly,
seeing new passages and new points of view given my new experiences over
time. In the last couple of years I've come to believe that there is a core
set of "golden rules" at the heart of CANSLIM that are universal to the
style, but the implementation of those golden rules may be different from
one person to the next. Contrary to DanF's point of view, I don't see IBD as
"jerking our chain" but instead see this as proof of my point of view. That
is, even within the IBD (and CANSLIM), there are seeming contradictions.
Their 20 points will say one thing, but they will give examples of winning
stocks that demonstrate exceptions. Bottom line for me is that there's a big
difference between "restrictive rules" and "general guidelines" and there's
no substitute for understanding the core concepts that make up the CANSLIM
style. For example, in a secular Bull where nearly every stock is in an
uptrend and above the 200dMA, the biggest task is to pick "the best" of
those going up. During downtrending or sideways markets, the first task is
to identify those stocks/groups that are technically superior, and then,
within those groups to find the best fundamental stories. The difference
between those 2 markets is simply that the risk of being wrong in a secular
bull vs downtrending/sideways markets is smaller, so the tuition for making
errors is smaller. But the tuition is *always* there, just more severe and
obvious in tougher markets.

This is how I'd express the "core spirit of CANSLIM":

- -Use technical strength to draw your eye to stocks that are working. This
can be expressed by relationship to intermediate term moving averages
(50/200 day MA's), rising RS, new highs, accumulation/distribution, up/down
ratios, strong groups, increasing institutional ownership, strong style
subsectors of the market, etc. Make purchases only on appropriate technical
patterns.
- -Select only stocks with superior forward growth estimates. Yes, estimates
can be wrong, but if the technicals are also strong, at least the market is
confirming this expectation (for the moment). Confirm these estimates with
appropriate due diligence so that  you understand what makes this growth
possible.
- -Select only stocks with superior financials. That means not only a
demonstrated ability to grow earnings and revenues, but financial stability
that will allow them to weather the tough times and/or continue their
strategy for continued growth. That means a strong balance sheet, sufficient
cash flow, excellent returns on equity invested, etc.
- -Select only stocks with sufficient liquidity to allow easy entry/exit when
the time is right technically.
- -Preserve capital above all else. When you make a mistake, move on and
reinvest the remaining capital in what *is* working.
- -Know how to read a chart so that you can exit and keep profits at the
appropriate time. In secular bull markets, you can ride out consolidations
knowing that there is a greater likelihood that the same stocks and groups
will continue their upward trek. In downtrending/sideways markets, you
cannot afford to sit through the consolidation because the risk that the
stock/sector/style will fall out of favor is greater. Step aside as the
consolidation starts, move to strength elsewhere, come back when/if the
consolidation ends and continues upward. If a secular bull starts again,
you'll be in the right stocks already and can just ride them longer.
- -Know how to identify and track a group of stocks that gives you the "pulse
of your market." If the pulse is poor, stand aside or learn to short them as
they fail.
- -Always do post analysis and use successes and failures as building blocks
to becoming a better investor. Be honest about what you are doing right or
wrong. It's just like budgeting or dieting. Obviously, if you're gaining
weight or saving less than your plan, you need to change something.

Katherine

- ----- Original Message -----
  From: Bill Triffet
  To: canslim
  Sent: Wednesday, May 01, 2002 11:12 AM
  Subject: [CANSLIM] Today's IBD "Big Picture" comments...


  Well friends, it seems that today's IBD confirms what I've thought about
the
  M in canslim - It's not necessarily based on the readings of the three
major
  market indexes ( a big departure from HTMMIS).

  I'm paraphrasing the last three paragraphs of "The Big Picture"(there are
  stiff copyright disclaimers at IBD):

  It will take a few days to see if the rotation BACK into the Dow, Naz, and
  S&P is valid. There should be a big move in heavier volume by the end of
the
  week to confirm it.

  It goes on to say it's a "nonissue" for growth investors since small and
  mid-cap stocks along with medical, consumer and defense are doing well
  despite the big averages. If they hold up, it says, the major averages
could
  improve.

  Also mentions "careful trading" with tight loss cutting is key.

  My point? IMHO, IBD is marketed for many types of investors. Pure canslim
  (if there is such a thing) is just one of them.

  I think perhaps it's time for me to look at growth investing with a
canslim
  approach. I'm starting to see several here have done this to great success
  (though with very close watching). Including things such as a lower but
  advancing RS as opposed to just a high rating and not be afraid to jump
into
  stocks in an upwards trending sector though the market is flat or down IF
  they have good fundies.

  Several times this and last year I saw stocks and groups moving ahead but
  stayed out due to the major indexes downward trend. Comments?

  Btw, for Fred, it suggests there's heavy distribution out of gold and
  precious metals by investors.

  Bill Triffet



- -
- -To subscribe/unsubscribe, email "majordomo@xmission.com"
- -In the email body, write "subscribe canslim" or
- -"unsubscribe canslim".  Do not use quotes in your email.
Go to Jeff Salisbury LWGate Home Page.