RE: [CANSLIM] watchlist / portfolio philosophy

From: Chris Dempsey <cdempsey@houston.oilfield.slb.com>
Subject: RE: [CANSLIM] watchlist / portfolio philosophy
Date: Fri, 18 Oct 2002 07:08:24 -0500
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Mike,

What a really good question, one that we are all trying to improve on.

I think you put on your watch list all the stocks that make your fundamental
and technical cut, also using your minimum volume and price. This list can
get well over 200. Then as a final cut, screen for only the groups moving up
in rank or have moved up in rank and are stable. Group rank performance is a
very important part of the equation. Hopefully this will put your list under
200. At lunchtime I can quickly scan up to 200 stocks on Yahoo looking for
stocks with big moves on big volume. I can then check the charts of these
stocks to see if they have an acceptable chart pattern for purchase. I have
found that this works better than trying to put together a shorter list of
stocks that appear to be close to breaking out (within 5% or so) and missing
something that you left off the shorter list because you didn't think it
could move that far prior to looking through your larger list again.

I disagree with WON on holding four to five positions. I think that 12 would
give more flexibility. I believe each position needs to be at least $2000.
I'm not saying that WON is wrong, but I work 40+ hours per week.  I have
been burnt many times when a position I am holding is downgraded by one of
the major brokerage firm. It's amazing how they can screw the little guy
with no accountability. Each position is entered with equal dollar amounts.
This allows a seven or eight percent loss to be offset with an equal, not
higher gain.

Now, to your sell question. This is the toughest part of the equation. It
sounds like you're in about four stocks. It's difficult for all stocks to go
up or down each day. If one of your stocks is hanging neutral today as you
watch another one break out with huge volume, and you trade them, what if
your stock (the one you just got rid of) is up big tomorrow and the newly
purchased one is neutral? This is why I think more than four gives you some
flexibility. With 12 positions you can sell a stock without reducing the
portfolio by 25%. A few different things can be helpful here. Watch for sell
signals in each stock you own every day. You don't have to wait for a seven
to eight percent loss before selling. Won says the average of all losses
should be five percent. If you find a good stock to invest in and your
already fully invested buy it anyway. This puts you on margin and mentally
gives you an incentive to choose and sell a poor performing stock within a
couple of days. A couple of days of margin interest, even if it were every
single week of the year, would be a very minimal expense. Take profits as
you have them until you are up for the year and can afford to hold your
better performing stocks longer. In his book WON says to take some 20%
profits, and on one of his tapes he says to sell half of all positions
reaching a 25% gain. I have noticed after reviewing the trades that I have
placed, is that they all seem to stall or fall at about a 20 to 25% gain. I
like to lighten the portfolio on Fridays. This can be done easily when you
have more than four positions, as it doesn't take you out of the market too
much. Very few Mondays start out with a jump. This gives you the weekend to
think about the next week with some cash in your portfolio.
Remember the market is always right. We are just trying to be correct as
often as we can.

- -----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]On Behalf Of
michael_niemotka@baxter.com
Sent: Thursday, October 17, 2002 9:29 AM
To: canslim@lists.xmission.com
Subject: [CANSLIM] watchlist / portfolio philosophy
All,

At the risk of jinxing the latest breakout, I will ask this question, since
it appears that M may finally be back, and that there are some sound stocks
breaking out of nice bases, and sustaining the breakouts....

That having been said, I was wonder how all of you manage your watchlist.
Say for instance you have built a list of 20 (is that too few or too many)
stocks that you are interested in.  You have noted the pivot points, and
are waiting to see what happens.  On a day to day basis, as you read IBD,
or get an idea from some other source on a stock, and after doing some
research, you decide that it could be added to your list, do you delete the
worst stock on your current list to make room for the new one?

In addition to having your watch list, say you have positions in a couple
of stocks, that you bought at the correct breakout, and to date a couple
have gone up 10-20%, and a couple are down less that 8%, or flat. All of
your capital is now in the equities.

Now, one of the stocks on your watch list breaks out on great volume......
Do you sell off the worst performer, to buy into the breakout,  I guess the
underlying question is how long do you hold a stock that you feel is sound,
and has shown no sell signs, but yet is performing flat, or less powerfully
than some of the newest breakout,

Thanks for any thoughts, let's hope this latest rally sticks!!!!

Mike Niemotka , PE


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