[CANSLIM] Health of the small cap growth sector

From: "Tom Worley" <stkguru@bellsouth.net>
Subject: [CANSLIM] Health of the small cap growth sector
Date: Sun, 28 Jul 2002 10:15:47 -0400

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With some time on my hands this weekend and so few stocks worth looking at,
I decided to expand my normal review of stocks in my VR (Virtual Reality)
Fund. Since we are well into the quarterly earnings reporting, I wanted to
assess which ones had reported, and the quality and direction of the
results, more than looking at how the chart looked. Basically, a drop back
to more emphasis on fundamentals. I used my VR Fund rather than what I own,
or indexes, as it gave me a broader review of stocks with expected strong
growth.

In all, I was looking at 42 different stocks, mostly under $500 million
market capitalization. Most I already hold in the Fund, several of which
have not yet been purchased but are being monitored, or I missed an initial
entry point and am waiting to see if I can find an appropriate (tho higher)
entry.

Of the 42, 18 have reported for the period ending 6/30/02, and of these 14
were up year over year, and most were also up sequentially. Three were down
either sequentially or year over year, or both. One was flat sequentially,
but still up strong year over year. Of the remainder, 19 have yet to report,
and the remaining 5 are on a non-standard fiscal year with the quarter
ending other than 6/30/02.

Of the 19 yet to report, I sold one last week (naturally it immediately
spiked 35%) for a loss, and dropped another from watching because of its
fall in the past week. Very few of the 42 have good charts right now, altho
several were forming long consolidation patterns. I am encouraged, however,
with the earnings results, and continue to believe that fundamentals will
win out in the long term. I suspect a similar review of mid cap, and higher
priced, stocks would show similar results.

"M" is clearly still saying to remain in cash for now. CANSLIM says to take
this time to find the future leaders, and be ready for when they emerge into
a more favorable market. This review confirmed my belief that, at least in
the small cap growth sector, earnings are improving, fundamentals are
intact, and in time "M" will begin to reflect this. Although the market did
look healthier last week, there is still not conclusive evidence that a
bottom has been reached. More and more, though, it is looking to me like
this will be a bottom reached without screaming evidence of capitulation.

Good luck to all,

Tom Worley
stkguru@bellsouth.net
AIM: TexWorley



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