RE: [CANSLIM] Second Guessing Myself - SFCC

From: "Katherine Malm" <kmalm@earthlink.net>
Subject: RE: [CANSLIM] Second Guessing Myself - SFCC
Date: Wed, 9 Jul 2003 22:12:54 -0500
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Hi Roger,

While I believe wholeheartedly in following a set of rules when trading, and
particularly trading as a CANSLIM investor, I think that it is nearly
impossible to find a stock or business that is "perfect" in every sense of
the word. I think that it is more dangerous to take WON's guidelines and
make them into a rigid set of go/nogo parameters and I don't believe that's
what he intended. From the very first free IBD seminar that I went to many
years ago, WON always talked about exceptions and each time I've seen him at
a seminar or each time I've re-read his writings, I have understood that he
is looking for a "preponderance of evidence" when determining whether or not
to purchase a stock. My personal preference is to look first at the
soundness of the base. I think that speaks most to the worthiness of a
candidate. From there, I then look to see if the fundamentals show a
preponderance of evidence of "a good company." Then I take a quick tour
through news and significant developments to determine if there are any
smoking guns lurking about. When fundamentals are a bit lacking in one or
more areas, I take more time and skim the management discussion in the
latest SEC filing. I then try to determine what makes the company tick, what
makes it different from the competition. I determine who the company's
direct competitors are and take a look at their charts. Lastly, I look at
the industry itself to determine how other stocks are acting as a whole.
This is primarily to determine if the industry as a whole is rolling over
and/or if the leaders are rolling over and/or if the industry itself is
rising in technical strength. But for the most part, this is a
risk-assessment check, not a go/nogo parameter.

- -Katherine

Here are a couple of "Ask Bill" columns that show this "preponderance of
evidence" approach:
=====
Ask Bill O'Neil Archives
Thursday, April  10, 2003

 Q:"Many stocks breaking out lack some of the fundamentals you look for,
such as ROE of 17%. Jacob's Engineering and Advance Neuromoduation are two
examples. Do you wait for "perfection" or do you weigh the pros and cons and
go for it?"
- - Submitted from Fullerton, Calif.

 A: Generally, we will weigh the pluses and minuses if the stock is not a
perfect fit and "go for it," as you say. ANSI's return on equity is
currently unreported for 2002, but 2001 came in at 5.4%, which is an
improvement over 2000's 2.1% return on equity. In this case, given that all
other factors are fairly strong, we would accept the fact that return on
equity is improving, although it does not meet the optimal level we would
prefer. However, if we compared ANSI with, for example, ZMH, another stock
in the same group, we might decide to choose ZMH based on its 115.9% return
on equity, assuming all other factors are equal and ZMH is at a proper buy
point. The other example you cite, JEC, is showing a return on equity of
17.1% — very strong and very desirable — but earnings are growing in the
mid-teens over the past four quarters. However, we might take into account
the fact that JEC is a steady earnings performer, something that is at a
premium in the current environment, and may benefit from current trends in
that industry. So, again, we are weighing pluses and minuses and "going for
it."

=====
Ask Bill O'Neil Archives
Wednesday, July  9, 2003

 Q: "If a company with good fundamentals breaks out and becomes a leader but
its peer group is lagging, is it  still a good idea to follow it? NTE is an
example."
- - Submitted from Wilmington, N.C.

 A: Sometimes, a company may have unique characteristics, and the stock does
well even if its industry group  lags. In the case of Nam Tai Electronics
(NTE), maybe it's the fact it manufactures electronic components for  major
global companies in China. China is enjoying tremendous growth right now.
Once a stock is purchased  properly as it breaks out of a sound base and has
solid fundamentals, you should base a decision to sell only  on the action
of price and volume. Right now, Nam Tai looks positive.
=====



- -----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]On Behalf Of Roger Tawa
Sent: Wednesday, July 09, 2003 8:26 PM
To: canslim@lists.xmission.com
Subject: RE: [CANSLIM] Second Guessing Myself - SFCC


Hi Mike,

Over the last few weeks (since early to mid june), I have found the
opposite: very few "good" stocks breaking out.  This mostly likely just
means we define "good" differently.

This brings me to the real point of this email.  I am new to CANSLIM and
surely have much less experience that you do in investing.  As a newbie, I
find it easy to pick "perfect" stocks, ie. those that meet all required
criteria.  However, as soon as I see a stock that has one or two points that
may be iffy (price below 15$, ROE not quite 17%, etc.), I don't know what to
do about it.  I suppose I'll have to learn by rolling the dice every once in
a while on a less-than-perfect stock.

Any comments from other newbie CANSLIMers on how you handle this?  Thanks.

=================================================
Roger Tawa
http://tawacentral.net/
[One thing about paradigms: shift happens.]
[When you stop, you're done.]

 -----Original Message-----
From: 	owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]  On Behalf Of
michael_niemotka@baxter.com
Sent:	Wednesday, July 09, 2003 5:01 PM
To:	canslim@lists.xmission.com
Subject:	Re: [CANSLIM] Second Guessing Myself - SFCC


Kelly,

I saw the same things that you did.  For me, it is always a struggle not to
chase those stocks that break out of a nice looking pattern, but don't
having the fundies behind them.

I am sure that many people probably make some money doing just that, but I
have also seen some of them drop way back down in a hurry. From what I have
seen over the fast few weeks is that many good stocks are breaking out, you
just need to stay focussed.

Mike

Mike Niemotka , PE
Sr. Principal Engineer
Baxter Healthcare Corporation
Route 120 & Wilson Road
Round Lake, IL 60073
Tel (847) 270-4075
Fax (847) 270-4525
michael_niemotka@baxter.com



                    "Kelly Short"
                    <kelly.short@fw.us.neo       To:
canslim@lists.xmission.com
                    ris.com>                     cc:
                    Sent by:                     Subject:     [CANSLIM]
Second Guessing Myself - SFCC
                    owner-canslim@lists.xm
                    ission.com


                    07/09/2003 03:40 PM
                    Please respond to
                    canslim






I noticed today that SFCC is up 12% since breaking out on 7/8. I
reevaluated my evaluation of this stock to see if perhaps I missed a
CANSLIM candidate. I stand beside my decision not to pursue this stock
because:

Industry Score = 148/190 (and getting worse)
Quarter over Quarter Earnings Growth decelerating
Quarterly Sales Growth Rates over the trailing four quarters negatively
erradic compared to last year's Quarterly Sales Growth Rates

Would anyone argue that I was too harsh in my review of this stock? Did
anyone see a gem and get into the BO?

I will greatly appreciate anyone's opinions. Thanks!

Kelly

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