RE: [CANSLIM] Fundamental Philosophies


From: "Fred Richards" <ffradrich@attbi.com>
Subject: RE: [CANSLIM] Fundamental Philosophies
Date: Thu, 5 Dec 2002 20:36:02 -0600

Previous Article (by Author): RE: [CANSLIM] NXTL, SXT "Curt Corley"
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And just how much will you charge?  Have you given any consideration to the
costs involved?  Or how many people might sign up for another stock rating
service?

It is always great to leverage off other people's work but unless you can
make a profit after all the costs both known and unknown are caculated,
don't  make the number 1 mistake of most entrepreneurs . . . failing to
consider the cost of one's time.

Since I make a few more dollars than $500 using the DGO and IBD, the cost is
only material to those who don't.
  -----Original Message-----
  From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]On Behalf Of Curt Corley
  Sent: Thursday, December 05, 2002 8:15 PM
  To: canslim@lists.xmission.com
  Subject: [CANSLIM] Fundamental Philosophies


  Hi,



  I hope you don’t mind me changing the subject name of this thread to
something a little more appropriate than NXTL and SXT.



  To answer your question:  Yes, I would certainly consider purchasing a
stock if the ROE was less than 16.5% with all other factors looking good.
As you know, I’ve purchased PECS and MNTR recently -- two stocks that were a
lot less perfect than the theoretical stock you mentioned.  I get your
point, and you are right:  an ROE below 17% certainly does not mean the
company or the stock is bad.  But here’s a situation to consider.  Let’s say
you have screened 9,100+ stocks, and came up with a dozen or so stocks that
have what you consider to be near-perfect fundamentals.  And let’s say a few
of those look like they might break out of a base formation within the next
couple of weeks.  Would you rather wait around for the possibility that
those stocks with the best fundamentals will break out?  Or would rather
purchase stocks that have already broken out but which have less stellar
fundamentals?  Within a very short time after purchasing PECS and MNTR, I
saw other stocks with better fundamentals that looked like they were ready
to make a move.  Of course, that’s a tough thing to watch, and that’s why I
put some thought into this question.  Given my situation and my personality,
I decided I would rather keep my eye on only the very best ones.  That’s why
I decided last weekend to screen only the near-perfect ones and keep an eye
on those.  And now you, Andy, and Tom are starting to make me doubt that
decision.  Thanks a lot!  :)



  Seriously now:  this has been a very educational and interesting thread.
Hopefully, by the time we are through with this, we will have figured out
the best overall stock-picking system; then we can start an on-line rating
system and screening service that doesn’t cost $500 a year.  :)



  Curt



  P.S. – I would like to open a topic up some time in the future about the
use of earnings estimates.  But this topic is enough for now.  My laptop is
over-heating.  I’m coming into work tired.  And my wife is starting to
forget my middle name.



  -----Original Message-----
  From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com] On Behalf Of kmalm
  Sent: Thursday, December 05, 2002 11:44 AM
  To: canslim@lists.xmission.com
  Subject: RE: [CANSLIM] NXTL, SXT



  Hi Curt,



  I think you've identified the stickier issues in CANSLIM and interpreting
WON's work. As both Tom and Andy have pointed out in their posts, while WON
may *seem* to be stating that ROE>=17 is a "minimum requirement' it turns
out it is a guidepost to lead you to better quality stocks. As with other
indicators, this is based on his historical view of winning stocks, meaning
that "on average" winning stocks had an ROE>=17. As with D/E, ROE can be
misleading. For example, if a company rejiggers their capital structure and
increases their outstanding shares, this will have an immediate impact on
the ROE measure. Another way of viewing it would simply be by asking a
question. That is, if you were looking at a stock and it had a "perfect" cup
with handle (ok, it's theoretical!); high RS Rank; an RS line making new
highs; met all other earnings, sales and profit margin guidelines, and broke
out on 150% of ADV, would you pass it up because it had an ROE of 16.5%? If
so, why? Does the "low" ROE mean that it is not a good company or a good
stock?



  Katherine




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<DIV><SPAN class=3D780243102-06122002><FONT face=3DArial color=3D#0000ff =
size=3D2>And=20
just how much will you charge?&nbsp; Have you given any consideration to =
the=20
costs involved?&nbsp; Or how many people might sign up for another stock =
rating=20
service?</FONT></SPAN></DIV>
<DIV><SPAN class=3D780243102-06122002><FONT face=3DArial color=3D#0000ff =

size=3D2></FONT></SPAN>&nbsp;</DIV>
<DIV><SPAN class=3D780243102-06122002><FONT face=3DArial color=3D#0000ff =
size=3D2>It is=20
always great to leverage off other people's work but unless you can make =
a=20
profit after all the costs both known and unknown are caculated, =
don't&nbsp;=20
make the number 1 mistake of most entrepreneurs . . . failing to =
consider the=20
cost of one's time.</FONT></SPAN></DIV>
<DIV><SPAN class=3D780243102-06122002><FONT face=3DArial color=3D#0000ff =

size=3D2></FONT></SPAN>&nbsp;</DIV>
<DIV><SPAN class=3D780243102-06122002><FONT face=3DArial color=3D#0000ff =
size=3D2>Since=20
I make a few more dollars than $500 using the DGO and IBD, the cost is =
only=20
material to those who don't.</FONT></SPAN></DIV>
<BLOCKQUOTE dir=3Dltr style=3D"MARGIN-RIGHT: 0px">
  <DIV class=3DOutlookMessageHeader dir=3Dltr align=3Dleft><FONT =
face=3DTahoma=20
  size=3D2>-----Original Message-----<BR><B>From:</B>=20
  owner-canslim@lists.xmission.com=20
  [mailto:owner-canslim@lists.xmission.com]<B>On Behalf Of </B>Curt=20
  Corley<BR><B>Sent:</B> Thursday, December 05, 2002 8:15 =
PM<BR><B>To:</B>=20
  canslim@lists.xmission.com<BR><B>Subject:</B> [CANSLIM] Fundamental=20
  Philosophies<BR><BR></FONT></DIV>
  <DIV class=3DSection1>
  <P class=3DMsoNormal><FONT face=3DArial color=3Dnavy size=3D2><SPAN=20
  style=3D"FONT-SIZE: 10pt; COLOR: navy; FONT-FAMILY: =
Arial">Hi,<o:p></o:p></SPAN></FONT></P>
  <P class=3DMsoNormal><FONT face=3DArial color=3Dnavy size=3D2><SPAN=20
  style=3D"FONT-SIZE: 10pt; COLOR: navy; FONT-FAMILY: =
Arial"><o:p>&nbsp;</o:p></SPAN></FONT></P>
  <P class=3DMsoNormal><FONT face=3DArial color=3Dnavy size=3D2><SPAN=20
  style=3D"FONT-SIZE: 10pt; COLOR: navy; FONT-FAMILY: Arial">I hope you =
don=92t mind=20
  me changing the subject name of this thread to something a little more =

  appropriate than NXTL and SXT. <o:p></o:p></SPAN></FONT></P>
  <P class=3DMsoNormal><FONT face=3DArial color=3Dnavy size=3D2><SPAN=20
  style=3D"FONT-SIZE: 10pt; COLOR: navy; FONT-FAMILY: =
Arial"><o:p>&nbsp;</o:p></SPAN></FONT></P>
  <P class=3DMsoNormal><FONT face=3DArial color=3Dnavy size=3D2><SPAN=20
  style=3D"FONT-SIZE: 10pt; COLOR: navy; FONT-FAMILY: Arial">To answer =
your=20
  question:<SPAN style=3D"mso-spacerun: yes">&nbsp; </SPAN>Yes, I would =
certainly=20
  consider purchasing a stock if the ROE was less than 16.5% with all =
other=20
  factors looking good.<SPAN style=3D"mso-spacerun: yes">&nbsp; =
</SPAN>As you=20
  know, I=92ve purchased </SPAN></FONT><st1:City><st1:place><FONT =
face=3DArial=20
  color=3Dnavy size=3D2><SPAN=20
  style=3D"FONT-SIZE: 10pt; COLOR: navy; FONT-FAMILY: =
Arial">PECS</SPAN></FONT></st1:place></st1:City><FONT=20
  face=3DArial color=3Dnavy size=3D2><SPAN=20
  style=3D"FONT-SIZE: 10pt; COLOR: navy; FONT-FAMILY: Arial"> and MNTR =
recently --=20
  two stocks that were a lot less perfect than the theoretical stock you =

  mentioned.<SPAN style=3D"mso-spacerun: yes">&nbsp; </SPAN>I get your =
point, and=20
  you are right:<SPAN style=3D"mso-spacerun: yes">&nbsp; </SPAN>an ROE =
below 17%=20
  certainly does not mean the company or the stock is bad.<SPAN=20
  style=3D"mso-spacerun: yes">&nbsp; </SPAN>But here=92s a situation to=20
  consider.<SPAN style=3D"mso-spacerun: yes">&nbsp; </SPAN>Let=92s say =
you have=20
  screened 9,100+ stocks, and came up with a dozen or so stocks that =
have what=20
  you consider to be near-perfect fundamentals.<SPAN=20
  style=3D"mso-spacerun: yes">&nbsp; </SPAN>And let=92s say a few of =
those look like=20
  they might break out of a base formation within the next couple of =
weeks.<SPAN=20
  style=3D"mso-spacerun: yes">&nbsp; </SPAN>Would you rather wait around =
for the=20
  possibility that those stocks with the best fundamentals will break =
out?<SPAN=20
  style=3D"mso-spacerun: yes">&nbsp; </SPAN>Or would rather purchase =
stocks that=20
  have already broken out but which have less stellar fundamentals?<SPAN =

  style=3D"mso-spacerun: yes">&nbsp; </SPAN>Within a very short time =
after=20
  purchasing </SPAN></FONT><st1:City><st1:place><FONT face=3DArial =
color=3Dnavy=20
  size=3D2><SPAN=20
  style=3D"FONT-SIZE: 10pt; COLOR: navy; FONT-FAMILY: =
Arial">PECS</SPAN></FONT></st1:place></st1:City><FONT=20
  face=3DArial color=3Dnavy size=3D2><SPAN=20
  style=3D"FONT-SIZE: 10pt; COLOR: navy; FONT-FAMILY: Arial"> and MNTR, =
I saw=20
  other stocks with better fundamentals that looked like they were ready =
to make=20
  a move.<SPAN style=3D"mso-spacerun: yes">&nbsp; </SPAN>Of course, =
that=92s a tough=20
  thing to watch, and that=92s why I put some thought into this =
question.<SPAN=20
  style=3D"mso-spacerun: yes">&nbsp; </SPAN>Given my situation and my =
personality,=20
  I decided I would rather keep my eye on only the very best ones.<SPAN=20
  style=3D"mso-spacerun: yes">&nbsp; </SPAN>That=92s why I decided last =
weekend to=20
  screen only the near-perfect ones and keep an eye on those.<SPAN=20
  style=3D"mso-spacerun: yes">&nbsp; </SPAN>And now you, Andy, and Tom =
are=20
  starting to make me doubt that decision.<SPAN style=3D"mso-spacerun: =
yes">&nbsp;=20
  </SPAN>Thanks a lot!<SPAN style=3D"mso-spacerun: yes">&nbsp;=20
  </SPAN>:)<o:p></o:p></SPAN></FONT></P>
  <P class=3DMsoNormal><FONT face=3DArial color=3Dnavy size=3D2><SPAN=20
  style=3D"FONT-SIZE: 10pt; COLOR: navy; FONT-FAMILY: =
Arial"><o:p>&nbsp;</o:p></SPAN></FONT></P>
  <P class=3DMsoNormal><FONT face=3DArial color=3Dnavy size=3D2><SPAN=20
  style=3D"FONT-SIZE: 10pt; COLOR: navy; FONT-FAMILY: Arial">Seriously =
now:<SPAN=20
  style=3D"mso-spacerun: yes">&nbsp; </SPAN>this has been a very =
educational and=20
  interesting thread.<SPAN style=3D"mso-spacerun: yes">&nbsp; =
</SPAN>Hopefully, by=20
  the time we are through with this, we will have figured out the best =
overall=20
  stock-picking system; then we can start an on-line rating system and =
screening=20
  service that doesn=92t cost $500 a year.<SPAN style=3D"mso-spacerun: =
yes">&nbsp;=20
  </SPAN>:)<o:p></o:p></SPAN></FONT></P>
  <P class=3DMsoNormal><FONT face=3DArial color=3Dnavy size=3D2><SPAN=20
  style=3D"FONT-SIZE: 10pt; COLOR: navy; FONT-FAMILY: =
Arial"><o:p>&nbsp;</o:p></SPAN></FONT></P>
  <P class=3DMsoNormal><FONT face=3DArial color=3Dnavy size=3D2><SPAN=20
  style=3D"FONT-SIZE: 10pt; COLOR: navy; FONT-FAMILY: =
Arial">Curt<o:p></o:p></SPAN></FONT></P>
  <P class=3DMsoNormal><FONT face=3DArial color=3Dnavy size=3D2><SPAN=20
  style=3D"FONT-SIZE: 10pt; COLOR: navy; FONT-FAMILY: =
Arial"><o:p>&nbsp;</o:p></SPAN></FONT></P>
  <P class=3DMsoNormal><FONT face=3DArial color=3Dnavy size=3D2><SPAN=20
  style=3D"FONT-SIZE: 10pt; COLOR: navy; FONT-FAMILY: Arial">P.S. =96 I =
would like=20
  to open a topic up some time in the future about the use of earnings=20
  estimates.<SPAN style=3D"mso-spacerun: yes">&nbsp; </SPAN>But this =
topic is=20
  enough for now.<SPAN style=3D"mso-spacerun: yes">&nbsp; </SPAN>My =
laptop is=20
  over-heating.<SPAN style=3D"mso-spacerun: yes">&nbsp; </SPAN>I=92m =
coming into=20
  work tired.<SPAN style=3D"mso-spacerun: yes">&nbsp; </SPAN>And my wife =
is=20
  starting to forget my middle name.<o:p></o:p></SPAN></FONT></P>
  <P class=3DMsoNormal><FONT face=3DArial color=3Dnavy size=3D2><SPAN=20
  style=3D"FONT-SIZE: 10pt; COLOR: navy; FONT-FAMILY: =
Arial"><o:p>&nbsp;</o:p></SPAN></FONT></P>
  <P class=3DMsoNormal style=3D"MARGIN-LEFT: 0.5in"><FONT face=3DTahoma =
size=3D2><SPAN=20
  style=3D"FONT-SIZE: 10pt; FONT-FAMILY: Tahoma">-----Original=20
  Message-----<BR><B><SPAN style=3D"FONT-WEIGHT: bold">From:</SPAN></B>=20
  owner-canslim@lists.xmission.com =
[mailto:owner-canslim@lists.xmission.com]=20
  <B><SPAN style=3D"FONT-WEIGHT: bold">On Behalf Of =
</SPAN></B>kmalm<BR><B><SPAN=20
  style=3D"FONT-WEIGHT: bold">Sent:</SPAN></B> </SPAN></FONT><st1:date =
Year=3D"2002"=20
  Day=3D"5" Month=3D"12"><FONT face=3DTahoma size=3D2><SPAN=20
  style=3D"FONT-SIZE: 10pt; FONT-FAMILY: Tahoma">Thursday, December 05,=20
  2002</SPAN></FONT></st1:date><FONT face=3DTahoma size=3D2><SPAN=20
  style=3D"FONT-SIZE: 10pt; FONT-FAMILY: Tahoma"> =
</SPAN></FONT><st1:time=20
  Minute=3D"44" Hour=3D"11"><FONT face=3DTahoma size=3D2><SPAN=20
  style=3D"FONT-SIZE: 10pt; FONT-FAMILY: Tahoma">11:44=20
  AM</SPAN></FONT></st1:time><FONT face=3DTahoma size=3D2><SPAN=20
  style=3D"FONT-SIZE: 10pt; FONT-FAMILY: Tahoma"><BR><B><SPAN=20
  style=3D"FONT-WEIGHT: bold">To:</SPAN></B>=20
  canslim@lists.xmission.com<BR><B><SPAN=20
  style=3D"FONT-WEIGHT: bold">Subject:</SPAN></B> RE: [CANSLIM] NXTL,=20
  SXT</SPAN></FONT></P>
  <P class=3DMsoNormal style=3D"MARGIN-LEFT: 0.5in"><FONT face=3D"Times =
New Roman"=20
  size=3D3><SPAN style=3D"FONT-SIZE: =
12pt"><o:p>&nbsp;</o:p></SPAN></FONT></P>
  <DIV>
  <P class=3DMsoNormal style=3D"MARGIN-LEFT: 0.5in"><FONT face=3D"Times =
New Roman"=20
  size=3D3><SPAN style=3D"FONT-SIZE: 12pt">Hi=20
  Curt,<o:p></o:p></SPAN></FONT></P></DIV>
  <DIV>
  <P class=3DMsoNormal style=3D"MARGIN-LEFT: 0.5in"><FONT face=3D"Times =
New Roman"=20
  size=3D3><SPAN style=3D"FONT-SIZE: =
12pt">&nbsp;<o:p></o:p></SPAN></FONT></P></DIV>
  <DIV>
  <P class=3DMsoNormal style=3D"MARGIN-LEFT: 0.5in"><FONT face=3D"Times =
New Roman"=20
  size=3D3><SPAN style=3D"FONT-SIZE: 12pt">I think you've identified the =
stickier=20
  issues in CANSLIM and interpreting WON's work. As both Tom and Andy =
have=20
  pointed out in their posts, while WON may *seem* to be stating that =
ROE&gt;=3D17=20
  is a "minimum requirement' it turns out it is a guidepost to lead you =
to=20
  better quality stocks. As with other indicators, this is based on his=20
  historical view of winning stocks, meaning that "on average" winning =
stocks=20
  had an ROE&gt;=3D17. As with D/E, ROE can be misleading. For example, =
if a=20
  company rejiggers their capital structure and increases their =
outstanding=20
  shares, this will have an immediate impact on the ROE measure. Another =
way of=20
  viewing it would simply be by asking a question. That is, if you were =
looking=20
  at a stock and it had a "perfect" cup with handle (ok, it's =
theoretical!);=20
  high RS Rank; an RS line making new highs; met all other earnings, =
sales and=20
  profit margin guidelines, and broke out on 150% of ADV, would you pass =
it up=20
  because it had an ROE of 16.5%? If so, why? Does the "low" ROE mean =
that it is=20
  not a good company or a good stock?<o:p></o:p></SPAN></FONT></P></DIV>
  <DIV>
  <P class=3DMsoNormal style=3D"MARGIN-LEFT: 0.5in"><FONT face=3D"Times =
New Roman"=20
  size=3D3><SPAN style=3D"FONT-SIZE: =
12pt">&nbsp;<o:p></o:p></SPAN></FONT></P></DIV>
  <DIV>
  <P class=3DMsoNormal style=3D"MARGIN-LEFT: 0.5in"><FONT face=3D"Times =
New Roman"=20
  size=3D3><SPAN=20
  style=3D"FONT-SIZE: 12pt">Katherine<o:p></o:p></SPAN></FONT></P></DIV>
  <BLOCKQUOTE style=3D"MARGIN-TOP: 5pt; MARGIN-BOTTOM: 5pt; =
MARGIN-RIGHT: 0in">
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