RE: [CANSLIM] What works in this market?

From: "Pritish Shah" <pshah@lason.com>
Subject: RE: [CANSLIM] What works in this market?
Date: Thu, 17 Jul 2003 16:53:59 -0400
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Katherine,

I should add that from all the good CANSLIM candidates, these two rules
seem to be working now. 

For the alerts that I receive from breakoutwatch.com, I have found that
most of the time stocks hitting new all-time highs are a better
candidate for purchase -- especially for people like me who are not too
tuned to the market and chart-reading. Like, currently, I am not even
looking for wedges in the charts or other things.

BCGI is a clear example. The handle that formed was a weak upward
sloping handle (atleast that is what it seems to me). Couple times it
fell below 50DMA and found support at 100DMA. Yesterday, there was a
huge amount of churn (Long Legged Doji as one canslimer put it). This is
all in retrospect.

And as you are saying, sometimes the best industry to get into (during
sideways market) are industries that are looking more attractive.
Medical-Hospitals is an example. It is at the bottom (I believe 190 out
of 190 per BoW.c). The only place for Medical-Hospitals to go is UP but
when?

But the question: which stocks will become leader in the
Medical-Hospitals group? Maybe it will be USPI or maybe UHS.

I am trying to find out how to narrow down and select a stock from all
the alerts I receive from breakoutwatch.com. I saw that all the stocks
that are making a good runs are the ones that are hitting all-time
highs. ESI alert from BoW.c today is a good example. I got in at 32.99
because I saw that it was making all-time high. That was the only thing
I saw besides the industry strength 11/190. It was a successful trade so
far.

Pritish

>>> kmalm@earthlink.net 07/17/03 01:25PM >>>
Hi Pritish,

My general observation on industry groups is that mining specifically
in
"top" industry groups misses the move in the leadership in the group
itself.
This is particularly important during market periods where leadership
is
changing (sideways markets). That's primarily because the same general
monies are staying in the market, but are rotating from one group to
another
as the underlying attractiveness of that particular group changes.
During
secular bulls, where more and more money is constantly being pumped
into the
market (for example, late 90's), the leadership tends not to change as
often, so mining only among the top groups isn't as problematic.

I view industry action as a means for (1) assessing the overall risk in
the
group itself based on the action of the current leaders and (2)
supplementing a bottoms-up approach to mining which looks first for
technical strength in the stock itself, independent of group action. I
never
use it to restrict my initial pass at candidates.

All in all, I consider the most important factor in mining for CANSLIM
candidates is to find strength in the stock and in the business
itself.
These leaders may (and often do) come from industries that have lower
rankings, but the action of the leaders *pulls* the remainder of the
group
along for the ride. This happens even in non-CANSLIM groups such as
cyclicals, etc., so it's still up to us to use selection criteria to
also
find those new leaders that possess the strongest CANSLIM
characteristics.
Underlying all the fundamental numbers and technical attributes is a
company
with a growth "story." This company has strong competitive advantage,
unique
products/services, a fresh perspective on an old market, a knack for
translating invested resources into profits, and a management team that
does
this relentlessly over long periods of time. Sometimes, there is
something
unique in world events that creates these growth opportunities in a
particular industry. For example, the sudden need for heightened
security
around the world. Sometimes it's something unique about the business
itself
that drives the change within the industry. For example, the manner in
which
Home Depot redefined the home improvements retail business or the way
MacDonald's created the "technological hamburger" and the fast food
industry. That's why newer companies tend to be good CANSLIM
candidates.
They tend to be fresh faces with a fresh spin on the industry, the
markets
they serve, the products/services they offer, etc. These also tend to
be
small to mid-cap companies. That doesn't mean that a big cap company
can't
possess these characteristics. It happens every now and then when a
big
behemoth reinvents themselves. There are also times in the market
where
large cap is favored for it's apparent lower risk and/or for the
dividends
that often accompany these investment vehicles.

Technicals such as high RSRanks or stocks making new highs are simply
ways
of getting one's eyeballs on the stocks that are showing outperformance
to
the market. Reading the chart itself gives one a clearer view of
price/volume action, reflecting the manner in which the market is
perceiving
value in the stock. Due diligence lets one determine what makes the
business
tick and whether it stacks up against the CANSLIM yardstick in a way
that is
acceptable.


Katherine

- -----Original Message-----
From: owner-canslim@lists.xmission.com 
[mailto:owner-canslim@lists.xmission.com]On Behalf Of Pritish Shah
Sent: Thursday, July 17, 2003 10:48 AM
To: canslim@lists.xmission.com 
Subject: [CANSLIM] What works in this market?



I was going through and reviewing all my successful buys and I found
the
following

1) These are micro to mid cap companies (Notice: none of them were
large
cap)
2) They are hitting all-time highs (this is becoming a key factor for
me to
buy anything)

Example stocks: TCHC, TARO, APPX, WFSI, ANSI, ESI, FWHT

For some odd reason, I was expecting the big winners to be in the top
50
industry sectors. WFSI, AMHC, TCHC etc are examples of such stocks that
are
not in the top industries. ANSI, APPX, TARO, FWHT, ESI are in the top
20.

Has anybody else seen such commonalities? If yes, please share. One of
WONs
recommendation is to consider only buying stocks that are no more than
8
years old and coming out with new products.

Pritish


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