RE: [CANSLIM] Second Guessing Myself - SFCC

From: "Katherine Malm" <kmalm@earthlink.net>
Subject: RE: [CANSLIM] Second Guessing Myself - SFCC
Date: Wed, 9 Jul 2003 23:15:39 -0500
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Hi Tomas,

In general, I would say:

(1) price/chart action (Technicals first, always, and most important)
(2) fundamentals (preponderance of evidence on the specifics as well as
news, significant developments and more details as necessary)
(3) group/industry health (only as a risk assessment factor)

The reason for this is simply that one can find "a good company with good
fundamentals" but if it is not technically healthy, it doesn't matter, as
the stock is not buyable.

Katherine
- --
Here is another "Ask Bill" that gives a similar viewpoint:

Question
  Is it more efficient to do fundamental analysis of companies and then look
for favorable chart patterns, or to find chart patterns and then check the
fundamentals?

  Answer
  It is critical to analyze both the fundamentals and charts of any stock
you consider buying. But as a screening method to find ideas, you may find
it easier to start by first looking at the charts. The stock's base and
technical characteristics are what help you decide when to buy. Also, charts
often signal major trouble or a new rally in a stock before the fundamentals
do. Once you've identified stocks with good bases or breakouts, analyze the
company's earnings, sales, margins, etc. ...

- -----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]On Behalf Of Tomas
Sent: Wednesday, July 09, 2003 9:52 PM
To: canslim@lists.xmission.com
Subject: RE: [CANSLIM] Second Guessing Myself - SFCC


Katherine,

Just to recap, is this your priority order?

1) price/chart action
2) fundamentals
3) news and significant developments
4) more details of company
5) group/industry health


tomas

- --- Katherine Malm <kmalm@earthlink.net> wrote:
> 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
>
=== message truncated ===


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