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

From: "Katherine Malm" <kmalm@earthlink.net>
Subject: Re: [CANSLIM] Today's IBD "Big Picture" comments...
Date: Wed, 1 May 2002 12:24:58 -0500
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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 -----=20
  From: Bill Triffet=20
  To: canslim=20
  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

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<DIV>Hi Bill,</DIV>
<DIV>&nbsp;</DIV>
<DIV>You've brought up an excellent issue and that is "what *is* =
CANSLIM"? I=20
think reading HTMMIS is a lot like reading the Bible. Each person can =
read the=20
same text, the same translation, and they will come away with a =
different=20
interpretation of "what it means." I reread HTMMIS constantly, seeing =
new=20
passages and new points of view given my new experiences over time. In =
the last=20
couple of years I've come to believe that there is a core set of "golden =
rules"=20
at the heart of CANSLIM that are universal to the style, but the =
implementation=20
of those golden rules may be different from one person to the next. =
Contrary to=20
DanF's point of view, I don't see IBD as "jerking our chain" but instead =
see=20
this as proof of my point of view. That is, even within the IBD (and =
CANSLIM),=20
there are seeming contradictions. Their 20 points will say one thing, =
but they=20
will give examples of winning stocks that demonstrate exceptions. Bottom =
line=20
for me is that there's a big difference between "restrictive rules" and =
"general=20
guidelines" and there's no substitute for understanding the core =
concepts that=20
make up the CANSLIM style. For example, in a secular Bull where nearly =
every=20
stock is in an uptrend and above the 200dMA, the biggest task is to pick =
"the=20
best" of those going up. During downtrending or sideways markets, the =
first task=20
is to identify those stocks/groups that are technically superior, and =
then,=20
within those groups to find the best fundamental stories. The difference =
between=20
those 2 markets is simply that the risk of being wrong in a secular bull =
vs=20
downtrending/sideways markets is smaller, so the tuition for making =
errors is=20
smaller. But the tuition is *always* there, just more severe and =
obvious&nbsp;in=20
tougher markets.</DIV>
<DIV>&nbsp;</DIV>
<DIV>This is how I'd express the "core spirit of CANSLIM":</DIV>
<DIV>&nbsp;</DIV>
<DIV>-Use technical strength to draw your eye to stocks that are =
working. This=20
can be expressed by relationship to intermediate term moving averages =
(50/200=20
day MA's), rising RS, new highs, accumulation/distribution, up/down =
ratios,=20
strong groups, increasing institutional ownership, strong style =
subsectors of=20
the market, etc. Make purchases only on appropriate technical =
patterns.</DIV>
<DIV>-Select only stocks with superior forward growth estimates. Yes, =
estimates=20
can be wrong, but if the technicals are also strong, at least the market =
is=20
confirming this expectation (for the moment). Confirm these estimates =
with=20
appropriate due diligence&nbsp;so that &nbsp;you understand what makes =
this=20
growth possible.</DIV>
<DIV>-Select only stocks with superior financials. That means not only a =

demonstrated ability to grow earnings and revenues, but financial =
stability that=20
will allow them to weather the tough times and/or continue their =
strategy for=20
continued growth. That means a strong balance sheet, sufficient cash =
flow,=20
excellent returns on equity invested, etc.</DIV>
<DIV>-Select only stocks with sufficient liquidity to allow easy =
entry/exit when=20
the time is right technically.</DIV>
<DIV>-Preserve capital above all else. When you make a mistake, move on =
and=20
reinvest the remaining capital in what *is* working.</DIV>
<DIV>-Know how to read a chart so that you can exit and keep profits at =
the=20
appropriate time. In secular bull markets, you can ride out =
consolidations=20
knowing that there is a greater likelihood that the same stocks and =
groups will=20
continue their upward trek. In downtrending/sideways markets, you cannot =
afford=20
to sit through the consolidation because the risk that the =
stock/sector/style=20
will fall out of favor is greater. Step aside as the consolidation =
starts, move=20
to strength elsewhere, come back when/if the consolidation ends and =
continues=20
upward. If a secular bull starts again, you'll be in the right stocks =
already=20
and can just ride them longer.</DIV>
<DIV>-Know how to identify and track a group of stocks that gives you =
the "pulse=20
of your market." If the pulse is poor, stand aside or learn to short =
them as=20
they fail.</DIV>
<DIV>-Always do post analysis and use successes and failures as building =
blocks=20
to becoming a better investor. Be honest about what you are doing right =
or=20
wrong. It's just like budgeting or dieting. Obviously, if you're gaining =
weight=20
or saving less than your plan, you need to change something.</DIV>
<DIV>&nbsp;</DIV>
<DIV>Katherine</DIV>
<DIV>&nbsp;</DIV>
<DIV>----- Original Message ----- </DIV>
<BLOCKQUOTE=20
style=3D"PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; =
BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
  <DIV=20
  style=3D"BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: =
black"><B>From:</B>=20
  <A title=3Dbtriffet@earthlink.net =
href=3D"mailto:btriffet@earthlink.net">Bill=20
  Triffet</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</A> </DIV>
  <DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Wednesday, May 01, 2002 =
11:12=20
  AM</DIV>
  <DIV style=3D"FONT: 10pt arial"><B>Subject:</B> [CANSLIM] Today's IBD =
"Big=20
  Picture" comments...</DIV>
  <DIV><BR></DIV>Well friends, it seems that today's IBD confirms what =
I've=20
  thought about the<BR>M in canslim - It's not necessarily based on the =
readings=20
  of the three major<BR>market indexes ( a big departure from=20
  HTMMIS).<BR><BR>I'm paraphrasing the last three paragraphs of "The Big =

  Picture"(there are<BR>stiff copyright disclaimers at IBD):<BR><BR>It =
will take=20
  a few days to see if the rotation BACK into the Dow, Naz, =
and<BR>S&amp;P is=20
  valid. There should be a big move in heavier volume by the end of =
the<BR>week=20
  to confirm it.<BR><BR>It goes on to say it's a "nonissue" for growth =
investors=20
  since small and<BR>mid-cap stocks along with medical, consumer and =
defense are=20
  doing well<BR>despite the big averages. If they hold up, it says, the =
major=20
  averages could<BR>improve.<BR><BR>Also mentions "careful trading" with =
tight=20
  loss cutting is key.<BR><BR>My point? IMHO, IBD is marketed for many =
types of=20
  investors. Pure canslim<BR>(if there is such a thing) is just one of=20
  them.<BR><BR>I think perhaps it's time for me to look at growth =
investing with=20
  a canslim<BR>approach. I'm starting to see several here have done this =
to=20
  great success<BR>(though with very close watching). Including things =
such as a=20
  lower but<BR>advancing RS as opposed to just a high rating and not be =
afraid=20
  to jump into<BR>stocks in an upwards trending sector though the market =
is flat=20
  or down IF<BR>they have good fundies.<BR><BR>Several times this and =
last year=20
  I saw stocks and groups moving ahead but<BR>stayed out due to the =
major=20
  indexes downward trend. Comments?<BR><BR>Btw, for Fred, it suggests =
there's=20
  heavy distribution out of gold and<BR>precious metals by=20
  investors.<BR><BR>Bill Triffet</BLOCKQUOTE></BODY></HTML>

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