Re: Fundamental Philosophies (was: [CANSLIM] NXTL, SXT)

From: AJAskey@aol.com
Subject: Re: Fundamental Philosophies (was: [CANSLIM] NXTL, SXT)
Date: Fri, 6 Dec 2002 22:57:14 EST
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Good question that I had to think about.  I guess there are no absolutes I go 
by but there are some criteria that needs perfection elsewhere to be 
overlooked.

1) I require insiders to own at least 5%.  This is the number WON cites and 
it seems like a good cut off.  But I would probably buy a "perfect" stock 
that had 4.5% insider ownership and the insiders had just purchased 2% last 
quarter.

2) Growth of 25%.  I look at growth so many ways with my Stock Investor Pro 
formulas that this does not require any one metric to be 25%.  I look at 3 
year average EPS and Sales growth, 3 year least-squares fit EPS and Sales 
growth,  TTM month growth, most recent quarter growth, estimated growth for 
the upcoming quarter.  I look for a nice trend upwards.  FOSL had negative 
growth but the trend line was very nicely up.  Since the most recent and 
estimated upcoming quarters are 25%+ it is on my list. 

3) Cash Flow per Share (CFPS).  WON suggests this should be 20% greater than 
EPS.  This makes sense but I've seen some companies (THO for one) that were 
at 1.1 for CFPS but at 2.0+ for Free CFPS and Operating CFPS.  I think this 
was a function of the way some items were recorded and THO is on my list.

4)  ROE.  I use a ROE equation with equity calcuated at the beginning of the 
period instead of the average of the TTM that is usually shown.  (This is how 
Buffett suggests doing it and I use it to tell people I am a "value" investor 
- - LOL).  Since this is not the ROE that IBD or MarketGuide shows, I may or 
may not meet the 17 as defined by others.  If I see ROE is 15 but it is 
trending upward then I don't automatically omit the stock.  One note is that 
stocks meeting my growth criteria rarely have an ROE less than 15 as ROE and 
growth are coupled in the math.

5.)  I don't pay much attention to margins unless net is only 2 or 3%.  I've 
only found hospital type stocks that have  CANSLIM like growth with this low 
margins.  Usually something with this low margins will not be growing long.

Everything else is a secondary characteristic that I will overlook if the 
chart is great.

Andy

In a message dated 12/6/2002 8:33:17 AM Central Standard Time, 
kmalm@earthlink.net writes:


> If you were to pare down WON's work, what are the absolutes?


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<HTML><FONT FACE=arial,helvetica><FONT  SIZE=2>Good question that I had to think about.&nbsp; I guess there are no absolutes I go by but there are some criteria that needs perfection elsewhere to be overlooked.<BR>
<BR>
1) I require insiders to own at least 5%.&nbsp; This is the number WON cites and it seems like a good cut off.&nbsp; But I would probably buy a "perfect" stock that had 4.5% insider ownership and the insiders had just purchased 2% last quarter.<BR>
<BR>
2) Growth of 25%.&nbsp; I look at growth so many ways with my Stock Investor Pro formulas that this does not require any one metric to be 25%.&nbsp; I look at 3 year average EPS and Sales growth, 3 year least-squares fit EPS and Sales growth,&nbsp; TTM month growth, most recent quarter growth, estimated growth for the upcoming quarter.&nbsp; I look for a nice trend upwards.&nbsp; FOSL had negative growth but the trend line was very nicely up.&nbsp; Since the most recent and estimated upcoming quarters are 25%+ it is on my list. <BR>
<BR>
3) Cash Flow per Share (CFPS).&nbsp; WON suggests this should be 20% greater than EPS.&nbsp; This makes sense but I've seen some companies (THO for one) that were at 1.1 for CFPS but at 2.0+ for Free CFPS and Operating CFPS.&nbsp; I think this was a function of the way some items were recorded and THO is on my list.<BR>
<BR>
4)&nbsp; ROE.&nbsp; I use a ROE equation with equity calcuated at the beginning of the period instead of the average of the TTM that is usually shown.&nbsp; (This is how Buffett suggests doing it and I use it to tell people I am a "value" investor - LOL).&nbsp; Since this is not the ROE that IBD or MarketGuide shows, I may or may not meet the 17 as defined by others.&nbsp; If I see ROE is 15 but it is trending upward then I don't automatically omit the stock.&nbsp; One note is that stocks meeting my growth criteria rarely have an ROE less than 15 as ROE and growth are coupled in the math.<BR>
<BR>
5.)&nbsp; I don't pay much attention to margins unless net is only 2 or 3%.&nbsp; I've only found hospital type stocks that have&nbsp; CANSLIM like growth with this low margins.&nbsp; Usually something with this low margins will not be growing long.<BR>
<BR>
Everything else is a secondary characteristic that I will overlook if the chart is great.<BR>
<BR>
Andy<BR>
<BR>
In a message dated 12/6/2002 8:33:17 AM Central Standard Time, kmalm@earthlink.net writes:<BR>
<BR>
<BR>
<BLOCKQUOTE TYPE=CITE style="BORDER-LEFT: #0000ff 2px solid; MARGIN-LEFT: 5px; MARGIN-RIGHT: 0px; PADDING-LEFT: 5px">If you were to pare down WON's work, what are the absolutes?</BLOCKQUOTE><BR>
<BR>
</FONT></HTML>
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