Go to Jeff Salisbury LWGate Home Page.From: "Katherine Malm" <kmalm@earthlink.net>
Subject: Re: [CANSLIM] Screening
Date: Sun, 7 Jul 2002 22:14:23 -0500
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This is a multi-part message in MIME format. - ------=_NextPart_000_0113_01C22603.A6683600 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable MessageOh darn it, Duke....just when I was making such progress on that = stack of juicy poolside reading..... Actually, your question ties in well to a something I posted last week, = and that is, how are people modifying their strategies given the = accounting issues at hand? The effects on my own strategies have been = subtle....as I've always been a fundamental hound and peeked into SEC = filings for accounting and business red flags. But...over the last = couple of years, whether is was Bear induced or lightbulb-in-the-brain = induced, I've made an ever so slight shift in my thinking and approach = to mining for candidates and that shift is already reflected in what you = listed in your post. That is, I used to look first at fundamentals, find = really great companies, whether or not the current technicals were = "favorable" and then waited patiently to see if they would ever set up = and break out. Duh.... in a rotating market, and in any market for that = matter, good fundamentals don't always translate into good stocks for = purchase. That meant that I was carrying around a lot of stocks on my = master watch and biasing my view of the markets because I would often = overlook what *was* working. Now, I *always* let technical strength lead = me to stocks that are working, then weigh in on the fundamentals to see = which companies have a sustainable "N" that could potentially fuel = future growth. That means I'll stay away from defensive and cyclical = issues that are technically strong, because I know that they are short = term plays. Just to clarify the items you listed, I don't mine for EPS>=3D50. I = believe this was a "for example" I gave in one of our previous = discussions if someone were including the EPS ranking in their = filtering. It may seem heresy to mine so low, but I mine for stocks that = are "not laggards" vs "are leaders." EPS and SMR are summary indicators, = so to begin mining in the "top half" eliminates laggards without = summarily dismissing stocks which may have improving fundamentals. = (That's fairly common when coming out of a recessionary period.) That's also the reason that I mine for stocks with RS>=3D60 as long as = the RS Line is increasing in strength. That is, a stock that is gaining = strength vs. the market is of interest, because I want to see a stock = when it *begins* outperforming. That also lets you do all your = fundamental and due diligence homework while the base is still forming. = Then, you can decide if it's worth watching as it finishes its base and = sets up for a break out. If you wait to start watching only after the RS = has reached 80 or 85, it might just be too late. To your question, = however, as to whether you want to pay special attention to stocks with = very high RS's above others right now.... Not necessarily. The super = high RS's may very well be stocks in 3rd or 4th stage bases, defensives, = cyclicals, etc. In other words, stocks that typically do well in a Bear = Market and not necessarily stocks that are there because they have a = clean accounting slate. I'd be more inclined to pay particular attention = to companies that have sustained their high forward growth rates and = have managed to move sideways in price and/or printed rising RS Lines = over the last quarter or two. What changes am I making? None to what I described in previous emails. = I'm still seeking out *rising* strength, non-laggard, high forward = growth rate, good risk/reward tradeoff stocks with a sustainable = competitive advantage. Translation: First pass mining: RS>=3D60 RS Line rising Price >=3D 200 day MA Price no more than 15% below the 50 day MA Forward growth rate >=3D 15% Acceptable risk/reward tradeoff (That is, given past profitability and = future growth estimates, is not overpriced) Then and only then, I'll look at specific fundamentals: D/E, ROE, = earnings & revenue growth, operating cash flow vs. eps, etc. If I like = what I see, I dig in for due diligence. If I like what I see there, I = check the technicals on competitors and other stocks in the industry to = see if they are breaking down or setting up. At the time of purchase I = want RS>=3D70 and A/D =3D A, B, C. I think in the end that price/volume = tells the tale. There isn't a single accounting scandal (yet, anyway) in = which the stock had not already broken down technically long before the = "reason" was revealed.=20 Katherine - ----- Original Message -----=20 From: Duke Miller=20 To: CANSLIM=20 Sent: Sunday, July 07, 2002 11:43 AM Subject: [CANSLIM] Screening Ok, wake up out there!! =20 Could it be that things might possibly by some mere stretch of the = imagination...start looking up? Is it time to proceed with some = early-on mining? To that end, I went back through my CAN SLIM Keepers folder...you = know, where I put stuff my 50-something mind needs to be refreshed upon = because it's meaningful, and I'm prone to forgetting. (See anecdote at = end of this message; if it rings a bell, so to speak, you need your own = CAN SLIM Keepers Folder!). Katherine Malm is in the "from" line in my Keeper folder more than = anyone else (wonder why?), so I'm using her as the catapult for my = query. At the same time, I'm asking others to chime in, PLEASE. =20 On April 29, Katherine, you summarized your screening tactics in an = email, subject: "How are you choosing your stocks." To paraphrase: RS>=3D60 Price>=3D200dma Price>=3D50 dma -15% A/D =3D A, B, or C EPS Rating =3D>50 Meeting or exceeding these criteria, you flip through the charts to = see which are setting up, then proceed to additional scrutiny. The = following is quoting directly from your email:(hilite is mine): With respect to annual and quarterly growth, ROE, D/E, cashflow etc., = again, I look at these things in total, knowing that accounting rules = often obfuscate the "real" story. For that reason, I like to skim the = recent SEC filings if a stock makes my short due diligence list, rather = than eliminating stocks entirely just because ROE is 14.6 vs 15% for = example.=20 At the risk of interrupting Katherine's summer reading program, my = question for the week:=20 Now that the market has dipped this far, what screen changes, if any, = are you contemplating to narrow down your selections? =20 I've stated before that my feeling is the stocks that have not = succumbed as much lately (RS above 90, for instance) will be huge = winners; they are passing "obfuscated 'real' story" scrutiny. =20 Or will they? Are they more havens than performers, with the prospect = of giving way to other types of issues destined to surface into the = winners' pool? Duke >Senior Moment: >An elderly couple had dinner at another couple's house, and after >eating, the wives left the table and went into the kitchen. The two=20 >elderly gentlemen were talking, and one said, "Last night we went out = >to a new restaurant, and it was really great. I would recommend it=20 >very highly." > >The other man said, "What is the name of the restaurant?" The first = man >thought and thought and finally said, "What is the name of that = flower=20 >you give to someone you love? You know... the one that is red and has = >thorns. > >"Do you mean a rose?" > >"Yes," the man said. He turned toward the kitchen and yelled, "Hey >Rose, what's the name of that restaurant we went to last night?" > - ------=_NextPart_000_0113_01C22603.A6683600 Content-Type: text/html; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable <!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN"> <HTML><HEAD><TITLE>Message</TITLE> <META http-equiv=3DContent-Type content=3D"text/html; = charset=3Diso-8859-1"> <META content=3D"MSHTML 6.00.2716.2200" name=3DGENERATOR> <STYLE></STYLE> </HEAD> <BODY bgColor=3D#ffffff> <DIV>Oh darn it, Duke....just when I was making such progress on that = stack of=20 juicy poolside reading.....</DIV> <DIV> </DIV> <DIV>Actually, your question ties in well to a something I posted last = week, and=20 that is, how are people modifying their strategies given the accounting = issues=20 at hand? The effects on my own strategies have been subtle....as I've = always=20 been a fundamental hound and peeked into SEC filings for accounting and = business=20 red flags. But...over the last couple of years, whether is was Bear = induced or=20 lightbulb-in-the-brain induced, I've made an ever so slight shift in my = thinking=20 and approach to mining for candidates and that shift is already = reflected in=20 what you listed in your post. That is, I used to look first at = fundamentals,=20 find really great companies, whether or not the current technicals were=20 "favorable" and then waited patiently to see if they would ever set up = and break=20 out. Duh.... in a rotating market, and in any market for that matter, = good=20 fundamentals don't always translate into good stocks for purchase. That = meant=20 that I was carrying around a lot of stocks on my master watch and = biasing my=20 view of the markets because I would often overlook what *was* working. = Now, I=20 *always* let technical strength lead me to stocks that are working, then = weigh=20 in on the fundamentals to see which companies have a sustainable "N" = that could=20 potentially fuel future growth. That means I'll stay away from defensive = and=20 cyclical issues that are technically strong, because I know that they = are short=20 term plays.</DIV> <DIV> </DIV> <DIV>Just to clarify the items you listed, I don't mine for = EPS>=3D50. I=20 believe this was a "for example" I gave in one of our previous = discussions if=20 someone were including the EPS ranking in their filtering. It may seem = heresy to=20 mine so low, but I mine for stocks that are "not laggards" vs "are = leaders." EPS=20 and SMR are summary indicators, so to begin mining in the "top half" = eliminates=20 laggards without summarily dismissing stocks which may have improving=20 fundamentals. (That's fairly common when coming out of a recessionary=20 period.)</DIV> <DIV> </DIV> <DIV>That's also the reason that I mine for stocks with RS>=3D60 as = long as the=20 RS Line is increasing in strength. That is, a stock that is gaining = strength vs.=20 the market is of interest, because I want to see a stock when it = *begins*=20 outperforming. That also lets you do all your fundamental and due = diligence=20 homework while the base is still forming. Then, you can decide if it's = worth=20 watching as it finishes its base and sets up for a break out. If you = wait to=20 start watching only after the RS has reached 80 or 85, it might just be = too=20 late. To your question, however, as to whether you want to pay special = attention=20 to stocks with very high RS's above others right now.... Not = necessarily. The=20 super high RS's may very well be stocks in 3rd or 4th stage bases, = defensives,=20 cyclicals, etc. In other words, stocks that typically do well in a Bear = Market=20 and not necessarily stocks that are there because they have a clean = accounting slate. I'd be more inclined to pay particular attention to = companies=20 that have sustained their high forward growth rates and have managed to = move=20 sideways in price and/or printed rising RS Lines over the last quarter = or=20 two.</DIV> <DIV> </DIV> <DIV>What changes am I making? None to what I described in previous = emails. I'm=20 still seeking out *rising* strength, non-laggard, high forward growth = rate, good=20 risk/reward tradeoff stocks with a sustainable competitive advantage.=20 Translation:</DIV> <DIV> </DIV> <DIV>First pass mining:</DIV> <DIV>RS>=3D60</DIV> <DIV>RS Line rising</DIV> <DIV>Price >=3D 200 day MA</DIV> <DIV>Price no more than 15% below the 50 day MA</DIV> <DIV>Forward growth rate >=3D 15%</DIV> <DIV> <DIV>Acceptable risk/reward tradeoff (That is, given past profitability = and=20 future growth estimates, is not overpriced)</DIV></DIV> <DIV> </DIV> <DIV>Then and only then, I'll look at specific fundamentals: D/E, ROE, = earnings=20 & revenue growth, operating cash flow vs. eps, etc. If I like what I = see, I=20 dig in for due diligence. If I like what I see there, I check the = technicals on=20 competitors and other stocks in the industry to see if they are breaking = down or=20 setting up. At the time of purchase I want RS>=3D70 and A/D =3D A, B, = C. I=20 think in the end that price/volume tells the tale. There isn't a single=20 accounting scandal (yet, anyway) in which the stock had not already = broken down=20 technically long before the "reason" was revealed. </DIV> <DIV> </DIV> <DIV>Katherine</DIV> <DIV> </DIV> <DIV>----- Original Message ----- </DIV> <BLOCKQUOTE dir=3Dltr=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=3Ddukemill@tampabay.rr.com = href=3D"mailto:dukemill@tampabay.rr.com">Duke=20 Miller</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> Sunday, July 07, 2002 = 11:43=20 AM</DIV> <DIV style=3D"FONT: 10pt arial"><B>Subject:</B> [CANSLIM] = Screening</DIV> <DIV><BR></DIV> <DIV><SPAN class=3D093400116-07072002><FONT=20 face=3DArial></FONT></SPAN> </DIV> <DIV><SPAN class=3D093400116-07072002><FONT face=3DArial>Ok, wake up = out=20 there!! </FONT></SPAN></DIV> <DIV><SPAN class=3D093400116-07072002><FONT=20 face=3DArial></FONT></SPAN> </DIV> <DIV><SPAN class=3D093400116-07072002><FONT face=3DArial>Could it be = that things=20 might possibly by some mere stretch of the imagination...start looking = up? Is it time to proceed with some early-on = mining?</FONT></SPAN></DIV> <DIV><SPAN class=3D093400116-07072002><FONT=20 face=3DArial></FONT></SPAN> </DIV> <DIV><SPAN class=3D093400116-07072002><FONT face=3DArial>To that end, = I went back=20 through my CAN SLIM Keepers folder...you know, where I put stuff my=20 50-something mind needs to be refreshed upon because it's meaningful, = and I'm=20 prone to forgetting. (See anecdote at end of this message; if it = rings a=20 bell, so to speak, you need your own CAN SLIM Keepers=20 Folder!).</FONT></SPAN></DIV> <DIV><SPAN class=3D093400116-07072002><FONT=20 face=3DArial></FONT></SPAN> </DIV> <DIV><SPAN class=3D093400116-07072002><FONT = face=3DArial>Katherine Malm is in=20 the "from" line in my Keeper folder more than anyone else = (wonder=20 why?), so I'm using her as the catapult for my query. At = the same=20 time, I'm asking others to chime in, PLEASE. = </FONT></SPAN></DIV> <DIV><SPAN class=3D093400116-07072002><FONT=20 face=3DArial></FONT></SPAN> </DIV> <DIV><SPAN class=3D093400116-07072002><FONT face=3DArial>On April 29, = Katherine,=20 you summarized your screening tactics in an email, subject: "How are = you=20 choosing your stocks." To paraphrase:</FONT></SPAN></DIV> <DIV><SPAN class=3D093400116-07072002><FONT=20 face=3DArial></FONT></SPAN> </DIV> <DIV><SPAN class=3D093400116-07072002><FONT=20 face=3DArial>RS>=3D60</FONT></SPAN></DIV> <DIV><SPAN class=3D093400116-07072002><FONT=20 face=3DArial>Price>=3D200dma</FONT></SPAN></DIV> <DIV><SPAN class=3D093400116-07072002><FONT = face=3DArial>Price>=3D50 dma=20 -15%</FONT></SPAN></DIV> <DIV><SPAN class=3D093400116-07072002><FONT face=3DArial>A/D =3D = A, B, or=20 C</FONT></SPAN></DIV> <DIV><SPAN class=3D093400116-07072002><FONT face=3DArial>EPS Rating=20 =3D>50</FONT></SPAN></DIV> <DIV><SPAN class=3D093400116-07072002><FONT face=3DArial>Meeting or = exceeding=20 these criteria, you flip through the charts to see which are setting = up, then=20 proceed to additional scrutiny. The following is quoting = directly from=20 your email:(hilite is mine):</FONT></SPAN></DIV> <DIV><SPAN class=3D093400116-07072002><FONT=20 face=3DArial></FONT></SPAN> </DIV> <DIV><SPAN class=3D093400116-07072002>With respect to annual and = quarterly=20 growth, ROE, D/E, cashflow etc., again, I look at these things in = total,=20 knowing that <FONT color=3D#ff0000>accounting rules often obfuscate = the "real"=20 story</FONT>. For that reason, I like to skim the recent SEC filings = if a=20 stock makes my short due diligence list, rather than eliminating = stocks=20 entirely just because ROE is 14.6 vs 15% for example. = </SPAN></DIV><FONT=20 size=3D2> <P align=3Dleft></FONT><SPAN class=3D093400116-07072002>At the risk of = interrupting Katherine's summer reading program, my question for = the=20 week: </SPAN></P> <P align=3Dleft><SPAN class=3D093400116-07072002><FONT = face=3DArial>Now that the=20 market has dipped this far, what screen changes, if any, are you=20 contemplating to narrow down your selections? </FONT></SPAN></P> <P align=3Dleft><SPAN class=3D093400116-07072002><FONT = face=3DArial>I've stated=20 before that my feeling is the stocks that have not succumbed as much=20 lately (RS above 90, for instance) will be huge winners; = they are=20 passing "obfuscated 'real' story" scrutiny. </FONT></SPAN></P> <P align=3Dleft><SPAN class=3D093400116-07072002><FONT face=3DArial>Or = will=20 they? Are they more havens than performers, with the prospect of = giving=20 way to other types of issues destined to surface into the winners'=20 pool?</FONT></SPAN></P> <P align=3Dleft><SPAN class=3D093400116-07072002><FONT=20 face=3DArial>Duke</FONT></SPAN></P><SPAN class=3D093400116-07072002> <P><FONT size=3D2>><SPAN class=3D093400116-07072002>Senior=20 Moment:</SPAN></FONT></P> <P><SPAN class=3D093400116-07072002></SPAN><FONT size=3D2><SPAN=20 class=3D093400116-07072002>></SPAN>An elderly couple had dinner at = another=20 couple's house, and after</FONT></P> <P><FONT size=3D2>>eating, the wives left the table and went into = the=20 kitchen. The two </FONT></P> <P><FONT size=3D2>>elderly gentlemen were talking, and one said, = "Last night=20 we went out </FONT></P> <P><FONT size=3D2>>to a new restaurant, and it was really great. I = would=20 recommend it </FONT></P> <P><FONT size=3D2>>very highly."</FONT></P> <P><FONT size=3D2>></FONT></P> <P><FONT size=3D2>>The other man said, "What is the name of the = restaurant?"=20 The first man</FONT></P> <P><FONT size=3D2>>thought and thought and finally said, "What is = the name of=20 that flower </FONT></P> <P><FONT size=3D2>>you give to someone you love? You know... the = one that is=20 red and has </FONT></P> <P><FONT size=3D2>>thorns.</FONT></P> <P><FONT size=3D2>></FONT></P> <P><FONT size=3D2>>"Do you mean a rose?"</FONT></P> <P><FONT size=3D2>></FONT></P> <P><FONT size=3D2>>"Yes," the man said. He turned toward the = kitchen and=20 yelled, "Hey</FONT></P> <P><FONT size=3D2>>Rose,<SPAN class=3D093400116-07072002> what's = the name of=20 that restaurant we went to last night?"</SPAN></FONT></P> <P><FONT size=3D2>></FONT></P></BLOCKQUOTE></SPAN></BODY></HTML> - ------=_NextPart_000_0113_01C22603.A6683600-- - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email.
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