RE: [CANSLIM] Lessons Learned - 2 BO Failures Today

From: "Kelly Short" <kelly.short@fw.us.neoris.com>
Subject: RE: [CANSLIM] Lessons Learned - 2 BO Failures Today
Date: Wed, 16 Jul 2003 13:41:00 -0500

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Frik, Tomas, Hsu, and Katherine:

While I stepped away for lunch I received many great comments on these =
two trades- I will answer each below (to avoid multiple emails in =
response to each question):

Frik:
There were definitely some fundamental technical nicks against HUM. =
Since no stock can be a perfect CANSLIM stock I weighed HUM's negatives =
against its positives (year over year earnings growth, quarter over =
quarter sales growth, net margins increasing, yearly sales increasing). =
Perhaps I strayed from "pure" WON discipline in purchasing HUM but to me =
CANSLIM sometimes is more like reading leaves than checking off yes/no =
boxes on a particular stocks fundamental/technical measurements. This =
time, maybe I should have used a leaf from a yes/no tree.

Tomas:
Yep- busted. I thought I saw a BO coming. Learned that lesson. I just =
got tired of getting into a BO 5-8% after the BO price and thought I'd =
outsmart the game and get in early to increase my profit. We see where =
that went... As per your "using CS comment" see "reading leaves" =
response to Frik above...

Hong Hsu:
Symbol	Date		Action	Shares	Price
BSTE		7/16/2003	Sold		18		53.96
BSTE		7/14/2003	Purchase	18		56.81
HUM		7/16/2003	Sold		59		15.96	7
HUM		7/9/2003	Purchase	59		16.81	7

Katherine:
I placed 5% stop losses on the purchase price (mentioned above)


- -----Original Message-----
From: Frik Lebom [mailto:talkcanslim@hotmail.com]
Sent: Wednesday, July 16, 2003 12:36 PM
To: canslim@lists.xmission.com
Subject: Re: [CANSLIM] Lessons Learned - 2 BO Failures Today


Hi,

IMHO a real CANSLIM stock is not just a stock that have a nice technical =

"entry point". I truly believe a canslim investor should look for =
powerful=20
growth stocks that have strength to drive the price higher. In the case =
of=20
HUM, the 1st and foremost fundamental consideration, "C" in CANSLIM is=20
simply not there. Not only the stock did not meet the 25% recent quarter =

increase in EPS, it actually declined(for 2 consecutive quarters =
comparing=20
to same quarter previous year). WON also try to look for stocks that =
have=20
good ROE and profit margin, in HUM's case, both of these figures are not =
up=20
to mark too.(I personally do not blindly chase a profit margin of 18% =
like=20
WON suggest, but it really seem too low in this case,same thing with =
ROE..)

Although I always get tempted to stocks that show a good "technical =
entry=20
point", I just try to remind myself I am a CANSLIM investor, not a "cup =
with=20
handle" investor. A good cup with handle stock might be able to show=20
nearterm increase in stock price but in my opinion a trueCANSLIM stock =
have=20
a much higher chance to be my BIG winner.

Thanks,

Frik


>From: Bill Triffet <btriffet@earthlink.net>
>Reply-To: canslim@lists.xmission.com
>To: canslim@lists.xmission.com
>Subject: Re: [CANSLIM] Lessons Learned - 2 BO Failures Today
>Date: Wed, 16 Jul 2003 09:53:03 -0700 (PDT)
>
>Might I add the fundies on HUM were on the weak side for my taste. =
Handle=20
>was sloping up as well.
>
>Most of the recent BO's have had low fundies. Could be a sign?
>
>--
>Bill
>
> >>For the group:
>
>I got stopped out today on two BO purchases: HUM and BSTE. I'll share =
my
>"lessons learned" with the group so that hopefully someone will benefit =

>from
>my loss:
>
>I had done my usual due diligence on both stocks and had given them a
>"green light with reservations". Turns out I should have given more=20
>credence to
>the "with reservations" part. Upon further examination, I see that high
>institutional ownership and strange action in the handle are common in =
both
>stocks as shown below:
>
>HUM:
>Institutional Ownership =3D 68%
>Chart action =3D High volume in handle
>
>BSTE:
>Institutional Ownership =3D 99%
>Chart action =3D Wedging action in handle
>
>High institutional ownership places an equity at the mercy of =
institutions
>who can sell of huge chunks at any given time and therefore put your
>purchase in a free fall. High volume in the handle does not prove the=20
>sellers
>are "drying up" to allow the stock to move upward. The wedging action =
in=20
>the
>handle is a sell signal - a bad signal just before an expected =
breakout.
>
>These are my observations from my post-mortem of these two purchases. =
If
>anyone else sees additional items, or disagrees with my reasoning =
above,=20
>I'd
>love to hear your comments.<<
><< MESSAGE.HTML >>

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