Go to Jeff Salisbury LWGate Home Page.From: "Katherine Malm" <kmalm@earthlink.net>
Subject: RE: [CANSLIM] More about ELON
Date: Wed, 11 Jun 2003 18:36:34 -0500
Previous Article (by Subject): [CANSLIM] More about ELON "Harold Josephson"
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Hi Harold,
I don't remember the specific context of the ELON comments, so will answer more
generically:
(1) Rank in industry is helpful in accessing whether a stock is currently a
leader or laggard, but that is only one of many considerations when choosing a
stock for purchase.
(2) Rank in industry can be based on many things, either separately or in
tandem. Even the IBD ranks the stocks within the industry based on several
different factors, all independently presented. So, for example, the stock might
be first fundamentally, 10th ranked by RSRank, 17th based on overall technical
condition, and 9th based on some combination of factors. By the way, IBD
composite scores do not weight all factors equally and they do not reveal what
percentage weight they place on each of those factors in order to derive the
score. I prefer instead to look separately at technicals, fundamentals, RSRank
and general "health" of other stocks in the industry to determine leader/laggard
status of any one stock. For example, a stock might be first fundamentally, but
that doesn't mean squat if the stock is in lousy technical shape. I don't want
that high fundamental score cranking up the composite ranking of the stock for
purposes of ranking it within the industry itself.
(3) All ranking systems force order a list of stocks, and therefore can be
highly volatile. Today something might be 14th, tomorrow it might be first.
Here's an example: Let's say today that stock A has an RSRank of 97. Let's say
there are 12 other stocks in the industry with RSRank = 98. That means it ranks
13th in the industry simply because it's one lousy RSRank notch below the
others. All in all, that rank doesn't tell me very much. Is it a "strong" stock?
Yes. By virtue of the forced ordering, however, it is labeled a "slacker" in the
industry. If tomorrow its RSRank jumps to 99 while the other 13 stocks stay at
98, guess what? It shoots from 14th to 1st in a heartbeat.
(4) Along the same lines, when a stock sets up, it could very easily have an
RSRank of 70 or 71, but within one or two days *after* breaking out, the RSRank
can shoot up to 80 in a heartbeat. If one were looking at a rank in industry
based on this particular ordering and say, pass something up because it is
ranked 6th or 7th, they will be surprised as all get out when a couple of days
later, the stock is now ranked 1st or 2nd in the industry. The same sort of
phenomenon would hold true for any factor which changes rapidly. The change in
scoring or ranking will move the stock up or down within the industry very
quickly.
(5) Timing is *everything* when it comes to selecting stocks. I would never hold
off on purchasing a good stock that has a low risk entry, a solid setup, has a
competitive advantage, shows leadership qualities, is showing outperformance to
the market and meets all my personal requirements in favor of waiting for
something else that may or may not set up and offer a good buying opportunity.
This is particularly true early in a rally. The sooner you can get on board with
high quality stocks with low risk entries while the rally is still young, the
greater the likelihood you can ride these first movers for substantial gains.
Wait around for another stock (all else being equal) and you spend too much time
in cash when the opportunities present themselves. That said, I would never jump
on board a stock that doesn't meet my personal criteria simply because it is an
early mover.
Bottom line, I think a rank in industry is a helpful guide in determining if
there might be better stocks available, but I would never make a go/no go
decision based on that factor in and of itself. My impression is that WON has
always pressed this point more from the point of view of evaluating the true
leadership qualities of the business itself. Rank in industry and/or industry
rank are guideposts, but they tell very little about the technical strength,
competitive characterisitcs and.or fundamental track record of the stock itself.
Those things I think are far more important in determining "leadership."
Katherine
-----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]On Behalf Of Harold Josephson
Sent: Wednesday, June 11, 2003 3:06 PM
To: canslim@lists.xmission.com
Subject: [CANSLIM] More about ELON
Hi Katherine,
I have a question re a remark you made recently about ELON. You said . . .
"So, all in all, I'd look at the quality of ELON's current base, then look at
the preponderance of evidence fundamentally, then look at the industry to see
how the group is behaving overall, and then check to be sure ELON is the best
the group and/or the market has to offer."
What would you advise if ELON is, say, only the 4th best stock in its group (I
use IBD for this ranking) but is the only one breaking out? Would you wait for
a higher ranked stock to breakout, go forward with your buy or pass for now?
Thanks
Harold
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<DIV><SPAN class=3D937510523-11062003>Hi Harold,</SPAN></DIV>
<DIV><SPAN class=3D937510523-11062003></SPAN> </DIV>
<DIV><SPAN class=3D937510523-11062003>I don't remember the specific =
context of the=20
ELON comments, so will answer more generically:</SPAN></DIV>
<DIV><SPAN class=3D937510523-11062003></SPAN> </DIV>
<DIV><SPAN class=3D937510523-11062003>(1) Rank in industry is helpful in =
accessing=20
whether a stock is currently a leader or laggard, but that is only one =
of many=20
considerations when choosing a stock for purchase.</SPAN></DIV>
<DIV><SPAN class=3D937510523-11062003></SPAN> </DIV>
<DIV><SPAN class=3D937510523-11062003>(2) Rank in industry can be based =
on many=20
things, either separately or in tandem. Even the IBD ranks the stocks =
within the=20
industry based on several different factors, all independently =
presented. So,=20
for example, the stock might be first fundamentally, 10th ranked by =
RSRank, 17th=20
based on overall technical condition, and 9th based on some combination =
of=20
factors. By the way, IBD composite scores do not weight all factors =
equally and=20
they do not reveal what percentage weight they place on =
each of=20
those factors in order to derive the score. I prefer instead to look =
separately=20
at technicals, fundamentals, RSRank and general "health" of other stocks =
in the=20
industry to determine leader/laggard status of any one stock. For =
example, a=20
stock might be first fundamentally, but that doesn't mean squat if the =
stock is=20
in lousy technical shape. I don't want that high fundamental score =
cranking up=20
the composite ranking of the stock for purposes of ranking it within the =
industry itself.</SPAN></DIV>
<DIV><SPAN class=3D937510523-11062003></SPAN> </DIV>
<DIV><SPAN class=3D937510523-11062003>(3) All ranking systems force =
order a list=20
of stocks, and therefore can be highly volatile. Today something might =
be 14th,=20
tomorrow it might be first. Here's an example: Let's say today that =
stock A has=20
an RSRank of 97. Let's say there are 12 other stocks in the industry =
with RSRank=20
=3D 98. That means it ranks 13th in the industry simply because it's one =
lousy=20
RSRank notch below the others. All in all, that rank doesn't tell me =
very much.=20
Is it a "strong" stock? Yes. By virtue of the forced ordering, however, =
it is=20
labeled a "slacker" in the industry. If tomorrow its RSRank jumps to 99 =
while=20
the other 13 stocks stay at 98, guess what? It shoots from 14th to 1st =
in a=20
heartbeat.</SPAN></DIV>
<DIV><SPAN class=3D937510523-11062003></SPAN> </DIV>
<DIV><SPAN class=3D937510523-11062003>(4) Along the same lines, when a =
stock sets=20
up, it could very easily have an RSRank of 70 or 71, but within one =
or two=20
days *after* breaking out, the RSRank can shoot up to 80 in a heartbeat. =
If one=20
were looking at a rank in industry based on this particular ordering and =
say,=20
pass something up because it is ranked 6th or 7th, they will be =
surprised as all=20
get out when a couple of days later, the stock is now ranked 1st or 2nd =
in the=20
industry. The same sort of phenomenon would hold true for any factor =
which=20
changes rapidly. The change in scoring or ranking will move the stock up =
or down=20
within the industry very quickly.</SPAN></DIV>
<DIV><SPAN class=3D937510523-11062003></SPAN> </DIV>
<DIV><SPAN class=3D937510523-11062003>(5) Timing is *everything* when it =
comes to=20
selecting stocks. I would never hold off on purchasing a good stock that =
has a=20
low risk entry, a solid setup, has a competitive advantage, shows =
leadership=20
qualities, is showing outperformance to the market and meets all my =
personal=20
requirements in favor of waiting for something else that may or may not =
set up=20
and offer a good buying opportunity. This is particularly true =
early in a=20
rally. The sooner you can get on board with high quality stocks with low =
risk=20
entries while the rally is still young, the greater the likelihood you =
can ride=20
these first movers for substantial gains. Wait around for another stock =
(all=20
else being equal) and you spend too much time in cash when the =
opportunities=20
present themselves. That said, I would never jump on board a stock that =
doesn't=20
meet my personal criteria simply because it is an early =
mover.</SPAN></DIV>
<DIV><SPAN class=3D937510523-11062003></SPAN> </DIV>
<DIV><SPAN class=3D937510523-11062003>Bottom line, I think a rank in =
industry is a=20
helpful guide in determining if there might be better stocks available, =
but I=20
would never make a go/no go decision based on that factor in and of =
itself. My=20
impression is that WON has always pressed this point more from the point =
of view=20
of evaluating the true leadership qualities of the business itself. Rank =
in=20
industry and/or industry rank are guideposts, but they tell very little =
about=20
the technical strength, competitive characterisitcs and.or fundamental =
track=20
record of the stock itself. Those things I think are far more important =
in=20
determining "leadership."</SPAN></DIV>
<DIV><SPAN class=3D937510523-11062003></SPAN> </DIV>
<DIV><SPAN class=3D937510523-11062003>Katherine</SPAN></DIV>
<DIV><SPAN class=3D937510523-11062003></SPAN><FONT face=3DTahoma =
size=3D2><SPAN=20
class=3D937510523-11062003><FONT face=3D"Times New Roman"=20
size=3D3> </FONT></SPAN></FONT></DIV>
<DIV><FONT face=3DTahoma size=3D2><SPAN=20
class=3D937510523-11062003> </SPAN>-----Original =
Message-----<BR><B>From:</B>=20
owner-canslim@lists.xmission.com =
[mailto:owner-canslim@lists.xmission.com]<B>On=20
Behalf Of </B>Harold Josephson<BR><B>Sent:</B> Wednesday, June 11, 2003 =
3:06=20
PM<BR><B>To:</B> canslim@lists.xmission.com<BR><B>Subject:</B> [CANSLIM] =
More=20
about ELON<BR><BR></DIV></FONT>
<BLOCKQUOTE dir=3Dltr style=3D"MARGIN-RIGHT: 0px">
<DIV class=3DSection1>
<P class=3DMsoPlainText><B><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt">Hi Katherine,</SPAN></FONT></B></P>
<P class=3DMsoPlainText><B><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt"></SPAN></FONT></B> </P>
<P class=3DMsoPlainText><B><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt">I have a question re a remark you made =
recently about=20
ELON. You </SPAN></FONT></B>said . . .</P>
<P class=3DMsoPlainText><B><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt"></SPAN></FONT></B> </P>
<P class=3DMsoNormal><B><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Arial">"So, =
all in=20
all, I'd look at the quality of ELON's current base, then look at the=20
preponderance of evidence fundamentally, then look at the industry to =
see how=20
the group is behaving overall, and then check to be sure ELON is the =
best the=20
group and/or the market has to offer."</SPAN></FONT></B></P>
<P class=3DMsoNormal><B><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: =
Arial"></SPAN></FONT></B> </P>
<P class=3DMsoNormal><B><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Arial">What =
would you=20
advise if ELON is, </SPAN></FONT></B><B><FONT face=3DArial =
size=3D2><SPAN=20
style=3D"FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: =
Arial">sa</SPAN></FONT></B><B><FONT=20
face=3DArial size=3D2><SPAN=20
style=3D"FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Arial">y, =
only the 4th=20
best stock in its group (I use IBD for this ranking) but is the only =
one=20
breaking out? Would you wait for a higher ranked stock to =
breakout, go=20
forward with your buy or pass for now?</SPAN></FONT></B></P>
<P class=3DMsoNormal><B><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: =
Arial"></SPAN></FONT></B> </P>
<P class=3DMsoNormal><B><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: =
Arial">Thanks</SPAN></FONT></B></P>
<P class=3DMsoNormal><B><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: =
Arial"></SPAN></FONT></B> </P>
<P class=3DMsoNormal><B><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: =
Arial">Harold</SPAN></FONT></B></P>
<P class=3DMsoPlainText><B><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt"></SPAN></FONT></B> </P>
<P class=3DMsoPlainText><B><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt"></SPAN></FONT></B> </P>
<P class=3DMsoPlainText><B><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt"></SPAN></FONT></B> </P>
<P class=3DMsoPlainText><B><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt"></SPAN></FONT></B> </P>
<P class=3DMsoPlainText><B><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt"></SPAN></FONT></B> </P>
<P class=3DMsoPlainText><B><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt"></SPAN></FONT></B> </P>
<P class=3DMsoPlainText><B><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt"></SPAN></FONT></B> </P>
<P class=3DMsoPlainText><B><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-SIZE: =
10pt"></SPAN></FONT></B> </P></DIV></BLOCKQUOTE></BODY></HTML>
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