From: canslim-owner@xmission.com To: canslim-digest@xmission.com Subject: canslim Digest V1 #7 Reply-To: canslim@xmission.com Errors-To: canslim-owner@xmission.com Precedence: canslim Digest Tuesday, 12 November 1996 Volume 01 : Number 007 In this issue: Re: [CANSLIM] Eltron Re: [CANSLIM] Eltron [CANSLIM] market comments Re: [CANSLIM] Eltron [CANSLIM] Daily digests are on hold [CANSLIM] Institutional Sponsorship Re: [CANSLIM] Institutional Sponsorship Re: [CANSLIM] market comments Re: [CANSLIM] Eltron Re: [CANSLIM] Institutional Sponsorship Re: [CANSLIM] Institutional Sponsorship [CANSLIM] eltn and strl Re: [CANSLIM] Institutional Sponsorship and COGNF [CANSLIM] ESOL [CANSLIM] HGS tricks [CANSLIM] ESOL Re: [CANSLIM] Institution Re: [CANSLIM] market comm [CANSLIM] Future Earnings Comparisons See the end of the digest for information on subscribing to the canslim or canslim-digest mailing lists and on how to retrieve back issues. ---------------------------------------------------------------------- From: "tom worley" Date: Sun, 10 Nov 1996 08:22:16 -0500 Subject: Re: [CANSLIM] Eltron When you look at PE's, concentrate on projected earnings vs cur price, use past PE ranges in that light. And, yes, declerating earnings growth should be considered, but remember it is one of many things to look at. The important thing is the entire picture. As to ELTN being on O'Neill's buy list, since you didn't hear it from me, I can't elaborate further. Just remember what I have said in the past about O'Neill's various products, esp those for his institutional customers. tom w - ---------- > From: Zoran Mitrovski > To: canslim@xmission.com > Cc: Zoran Mitrovski > Subject: Re: [CANSLIM] Eltron > Date: Saturday, November 09, 1996 10:31 PM > > > Although P/E shouldn't matter, it won't hurt to know > that the current P/E of appr. 28 is in the lower part > of the five year range 18 - 46. > > I noticed that the EPS % increases are NOT accelerating. > On the contrary... > Even the estimates show decreasing EPS % increases. > Should that bother us? > > Cheers, > Zoran ------------------------------ From: patrick.wahl@unpcbbs.cts.com (Patrick Wahl) Date: Sun, 10 Nov 1996 05:38:00 GMT Subject: Re: [CANSLIM] Eltron Sorry about 3 posts on the same subject, but I wanted to point out Eltron to everyone in case it broke out. For some reason the mail leaving here hung up for 2 days and my own posts didn't bounce back to me until today (Sunday). JE>From: jeff@scrooge.idec.sdl.usu.edu (Jeff Salisbury) JE>Patrick, the chart looks like a cup and a forming handle to me... JE>Also, I am a little confused about choosing a buy point. Should the buy poi JE>be based on a price that has broken through overhead? Or based on a price ju JE>from a base? Or based on the 52Wk high? Or, as I remember O'Neil saying, JE>should the buy point be based on volume drying up? I think all of the above are ways to buy a stock, depending on what has been going on. I bought 3 Com a couple of months ago just because it made a new 52 wk high, but really wasn't moving out of a clearly defined base. But if you look at a chart of 3 Com (COMS) you can clearly see the overhead resistance level (about 52-53), above which I took COMS to be a buy. When you have a more clearly defined base, then you want to buy just as the stock breaks out of that base if the volume is good, although I sometimes violate the volume rule. Frequently this means you are buying at a new 52 wk high. Volume drying up in a stock with a tight pattern is often a sign of an impending break out. That doesn't mean you should buy, because the stock isn't always going to breakout. I did anticipate a breakout once and it worked out ( I bought half my position in the base, half following the breakout), but I almost did the same thing with CSDS and I would have gotten killed, so on the whole I think you will be more accurate waiting for the breakout. You are only getting a price a few percent higher by waiting, but most likely improving your winning percentage considerably. Regarding Eltron, I pegged the buy point at 37 1/4 or 3/8 because that looked like a breakout from the handle. Possibly that point is a bit low, since the recent high is around 38. Generally, regarding buys, I always remember something O'Neil said somewhere (Market Wizards perhaps) - When he was starting out he looked at all the stocks the Dreyfus Fund had bought, and discovered that all of them, not even most, but all, had been bought when they made new 52 week highs. Hope all this is of some use.... ------------------------------ From: patrick.wahl@unpcbbs.cts.com (Patrick Wahl) Date: Sun, 10 Nov 1996 05:50:00 GMT Subject: [CANSLIM] market comments ST>From: "tom worley" ST>Subject: [CANSLIM] market comments ST>bet you thought I was going to tell you what happened today, didn't ya? ST>Well, surprise, this time I want you to tell me. Been pretty quiet around ST>here, let's get some chatter going in the outfield. I want to hear your ST>ideas and thoughts, not just listen to myself. My thoughts are - I never know what is going on in the market. My own market analysis is limited to keeping an eye on the utilities, a few broad indices, the bond market, new highs/new lows, adv/decl, and I check this stuff every few days. As long as a market is going up, I try not to second guess the reasons - you know, like it went up because of short covering, or Index funds bought a bunch of stuff, etc. So generally, the bond market is strong, the Utility average is up (almost the same as the bond market), the broad Indices are heading up, everyone seems happy with a democratic president and republican congress, so for now I'll hang on to my stocks. (this probably means the market has topped.) ------------------------------ From: patrick.wahl@unpcbbs.cts.com (Patrick Wahl) Date: Sun, 10 Nov 1996 05:26:00 GMT Subject: Re: [CANSLIM] Eltron ZM>I noticed that the EPS % increases are NOT accelerating. ZM>On the contrary... ZM>Even the estimates show decreasing EPS % increases. ZM>Should that bother us? Best of all is if you can catch a stock with a moderate PE with accelerating earning. However, decelerating earnings from a pretty high level still is ok for me, so long as the company is still growing at a good rate and the price patterns look good, that is, tight price action, clear breakout point. Eltron is still growing at a rate greater than its PE, so to me that means it can potentially go higher. ------------------------------ From: jeff@scrooge.idec.sdl.usu.edu (Jeff Salisbury) Date: Mon, 11 Nov 1996 10:05:12 -0600 Subject: [CANSLIM] Daily digests are on hold Everyone, In a recent posting, I mentioned that I will configure the digest to be sent out once a day. I've run into small snafu that I'm trying to work out with my ISP. I expect it will be a week or so before I have the problem resolved. In the mean time, digests will continue to be generated when the accumulated messages total 10K. Regards, Jeff Salisbury - canslim list adm ------------------------------ From: jeff@scrooge.idec.sdl.usu.edu (Jeff Salisbury) Date: Mon, 11 Nov 1996 15:21:33 -0600 Subject: [CANSLIM] Institutional Sponsorship Everyone, Of course we all know how important institutional sponsorship is when selecting a stock. I believe Mr. O'Neil says that a stock should be owned by at least one quality mutual fund. I have a question: Is it possible for a stock to be "over-owned" by mutual funds? If so, can any of you place a percentage threshold (from your own experience) that may indicate a stock is over-owned by funds? Regards, Jeff Salisbury ------------------------------ From: jeff@scrooge.idec.sdl.usu.edu (Jeff Salisbury) Date: Mon, 11 Nov 1996 15:29:50 -0600 Subject: Re: [CANSLIM] Institutional Sponsorship Sorry for the continuation: The reason for the question in the previous posting was that I was examining Cognos Inc (COGNF). They have some nice looking numbers, but funds own 41% of the outstanding shares (43.1 million). Here is an overview of their numbers from DG: EPS rank 99 RS rank 98 GRS rank 75 Growth Rate 139% Earnings Stability 12 Timeliness A Acc/Dist A Debt 3% Their price chart looks like a tight cup and handle. The handle is 10-20% above the left side of the cup. Where would you place a buy point? Regards, Jeff Salisbury ------------------------------ From: "tom worley" Date: Mon, 11 Nov 1996 20:08:16 -0500 Subject: Re: [CANSLIM] market comments - ---------- > From: Patrick Wahl > To: canslim@xmission.com > Subject: [CANSLIM] market comments > Date: Sunday, November 10, 1996 12:50 AM > > > ST>From: "tom worley" > ST>Subject: [CANSLIM] market comments > > ST>bet you thought I was going to tell you what happened today, didn't ya? > > So generally, the bond market is strong, the Utility average is up > (almost the same as the bond market), the broad Indices are heading up, > everyone seems happy with a democratic president and republican > congress, so for now I'll hang on to my stocks. (this probably means > the market has topped.) don't be so cynical, Patrick, you're starting to sound like me! Seriously, with the strength of the bond market, are you concerned about funds rotating out of the utilities? tom w ------------------------------ From: "tom worley" Date: Mon, 11 Nov 1996 20:12:38 -0500 Subject: Re: [CANSLIM] Eltron There's an excellent point here, there is no rule that says you have to buy your entire position at once at one price. The concept of buying half the position where you "think" you should buy it, then buy the other half when you are "sure" you got a winner, is good advice. O'Neill is a proponent of "averaging up". Of course, he is hell on wheels on averaging down. tom w - ---------- > From: Patrick Wahl > To: canslim@xmission.com > Subject: Re: [CANSLIM] Eltron > Date: Sunday, November 10, 1996 12:38 AM > > Sorry about 3 posts on the same subject, but I wanted to point out > Eltron to everyone in case it broke out. For some reason the mail > leaving here hung up for 2 days and my own posts didn't bounce back to > me until today (Sunday). > > > JE>From: jeff@scrooge.idec.sdl.usu.edu (Jeff Salisbury) > > JE>Patrick, the chart looks like a cup and a forming handle to me... > > JE>Also, I am a little confused about choosing a buy point. Should the buy poi > JE>be based on a price that has broken through overhead? Or based on a price ju > JE>from a base? Or based on the 52Wk high? Or, as I remember O'Neil saying, > JE>should the buy point be based on volume drying up? > > I think all of the above are ways to buy a stock, depending on what has > been going on. I bought 3 Com a couple of months ago just because it > made a new 52 wk high, but really wasn't moving out of a clearly defined > base. But if you look at a chart of 3 Com (COMS) you can clearly see the > overhead resistance level (about 52-53), above which I took COMS to be a > buy. > > When you have a more clearly defined base, then you want to buy just > as the stock breaks out of that base if the volume is good, although I > sometimes violate the volume rule. Frequently this means you are buying > at a new 52 wk high. > > Volume drying up in a stock with a tight pattern is often a sign of an > impending break out. That doesn't mean you should buy, because the > stock isn't always going to breakout. I did anticipate a breakout once > and it worked out ( I bought half my position in the base, half > following the breakout), but I almost did the same thing with CSDS and I > would have gotten killed, so on the whole I think you will be more > accurate waiting for the breakout. You are only getting a price a > few percent higher by waiting, but most likely improving your winning > percentage considerably. > > Regarding Eltron, I pegged the buy point at 37 1/4 or 3/8 because that > looked like a breakout from the handle. Possibly that point is a bit > low, since the recent high is around 38. > > Generally, regarding buys, I always remember something O'Neil said > somewhere (Market Wizards perhaps) - When he was starting out he looked > at all the stocks the Dreyfus Fund had bought, and discovered that all > of them, not even most, but all, had been bought when they made new 52 > week highs. > > Hope all this is of some use.... ------------------------------ From: "tom worley" Date: Mon, 11 Nov 1996 20:29:42 -0500 Subject: Re: [CANSLIM] Institutional Sponsorship Sorry, Jeff, I don't have a valid percentage. Personally, I like to sneak in ahead of the funds, but while knowing they will agree with my choice. Obviously they have the big bucks that can move a stock short term, and it is always nice to buy a stock and finish the day and the week in the money. The downside of a large existing fund holding is that (a) if they change their opinion they will dump and tank it and, (b) they have already bot so not as likely to buy more. On the other hand, the upside is that if they continue to like it, they will at least hold, which means those shares are out of circulation. If they mention it to their buddies (other fund managers) then even a small increase in buying can move it further. I have found funds more likely to change their position (buy more or sell) than the banks and institutions (pension funds, insurance cos, etc). Anybody else got something more specific? tom w - ---------- > From: Jeff Salisbury > To: canslim@xmission.com > Subject: [CANSLIM] Institutional Sponsorship > Date: Monday, November 11, 1996 4:21 PM > > Everyone, > > Of course we all know how important institutional sponsorship is when selecting > a stock. I believe Mr. O'Neil says that a stock should be owned by at least > one quality mutual fund. I have a question: Is it possible for a stock to be > "over-owned" by mutual funds? If so, can any of you place a percentage > threshold (from your own experience) that may indicate a stock is over-owned by > funds? > > Regards, > > Jeff Salisbury ------------------------------ From: Craig Griffin Date: Mon, 11 Nov 1996 21:01:20 -0500 (EST) Subject: Re: [CANSLIM] Institutional Sponsorship Jeff, At 03:29 PM 11/11/96 -0600, you wrote: >The reason for the question in the previous posting was that I was examining >Cognos Inc (COGNF). They have some nice looking numbers, but funds own 41% of >the outstanding shares (43.1 million). The rule of thumb is that more than 25% fund ownership is quite high and more than 50% is definitely too much. The reasons as I remember them are that the funds tend to drive up the price with their buying when accumulating a stock. Once the fund ownership is high enough, this is less likely to happen, in fact, the reverse can happen pretty easily. That said, get out your DG, flip to COGNF and follow along with me (or see PS. below for location of chart in jpeg format). My opinion is that COGNF had a nice cup with handle form from May through the first week in Sept (its relative strength line formed a cup/hdl at the same time). Note that in this cup, almost all the price action occurred below $25. The handle droops down for about a week and a half beginning the last few days of August and ending at about $23 1/2 the first week in Sept. Then there is a strong up day that breaks through 25 on volume of almost 600,000 shrs. THAT's THE DAY I WOULD BUY THE STOCK, this is the primary breakout. One could even buy the next day up to $26.25 (5%). That was the first of two more high volume days driving the price up to $28 a share. Then there is a perfect example of a pull back to the break point on lower volume over the next few days. See that day when it moves back up through $26 (just before the gap up to $30). That day is the perfect day for a pyramid buy or second chance buy as the stock seems to bounce off its pivot point at $25. Then you cross your fingers and hope it stays above $25 so you don't get stopped out. In this case of course, it does great and gaps up the next day, ending above $30 a share. From then until a week ago Friday, you've got a nice tight 5 week FLAT base with high volume from $31 to $33 (about a 10% base). Ideally, I'd like to have seen it spend three more weeks in this base without moving out. Instead, it drooped to the bottom of the base and then, had big volume and a spike upwards from about 31 1/2 to 33 1/2 in one day. I would call that a secondary breakout from a short base and might buy a half position on that day, or pyramid my original position. Last week it paused with some price action between 33 1/2 and 34 1/2, and then today resumed it's upward climb on lower volume (today was not a breakout, although it was a new high). Whew. That said, it looks great. It handled the 3/1 split in May nicely (sometimes they fall apart after a split, this one just paused to refresh). Numbers are good, as you point out. BUT,... it's just that the last valid buy point was at 33 5/8 or so, the way I read it. Add 5% and you could buy up to say 35 1/4. But it is a stretchhhh. Cause you're buying up 5% from a short base (8 weeks is the minimum we like to see, but in the strongest stocks, sometimes all they give you is 4 or 5 weeks before they move out again.) If you bought at 35 1/4, then your stop would be at 33 1/2 (5%). Coincidentally, this (33 1/2) is just about where the 10 day moving average is. A lot of advanced CANSLIM'rs will buy a strong mover on a pull back to close to the 10 dma, so there may be a little added support at 33 1/2. It's your call, as Ian Woodward would say. Hope this helps. Best regards, Craig PS. I have posted a newsgroup message to "misc.invest.stocks" with a Jpeg file attached for COGNF with a header of "COGNF jpeg file for Canslim mail list" if anyone needs a chart to follow the above discussion. ------------------------------ From: "dave" Date: Mon, 11 Nov 1996 18:14:16 +0000 Subject: [CANSLIM] eltn and strl I just looked at charts on these two stocks and I'm sharing my thoughts. I am not much of a chart reader, but it looks to me that ELTN formed a cup and broke out without a handle (probably on earnings news). What appears as a handle forming is just the gap being filled. The moving average will probably show no sideways consolidation at all. Time will tell. Someone mentioned STRL last month, so I briefly checked it out. The charts, earnings, estimates all looked good. Flat qtrly. sales yr/yr looks suspicious. Recent merger with Amsco make the financials difficult (for me anyway) to follow. I am new to the canslim approach and have been following this mailing list to learn more. I am quite impressed and intimidated by many of the posts. Two thumbs up to Craig Griffin for his thorough analysis of MASX. Back to lurker mode. Bye. ------------------------------ From: jeff@scrooge.idec.sdl.usu.edu (Jeff Salisbury) Date: Tue, 12 Nov 1996 08:46:30 -0600 Subject: Re: [CANSLIM] Institutional Sponsorship and COGNF Craig, My compliments on your analysis... Jeff Salisbury On Nov 11, 9:01pm, Craig Griffin wrote: > Subject: Re: [CANSLIM] Institutional Sponsorship > > That said, get out your DG, flip to COGNF and follow along with me (or see > PS. below for location of chart in jpeg format). . . . > Whew. > > That said, it looks great. It handled the 3/1 split in May nicely > (sometimes they fall apart after a split, this one just paused to refresh). > Numbers are good, as you point out. > > BUT,... it's just that the last valid buy point was at 33 5/8 or so, the way > I read it. Add 5% and you could buy up to say 35 1/4. But it is a > stretchhhh. Cause you're buying up 5% from a short base (8 weeks is the > minimum we like to see, but in the strongest stocks, sometimes all they give > you is 4 or 5 weeks before they move out again.) If you bought at 35 1/4, > then your stop would be at 33 1/2 (5%). Coincidentally, this (33 1/2) is > just about where the 10 day moving average is. A lot of advanced CANSLIM'rs > will buy a strong mover on a pull back to close to the 10 dma, so there may > be a little added support at 33 1/2. It's your call, as Ian Woodward would > say. > > Hope this helps. > > Best regards, > Craig > >-- End of excerpt from Craig Griffin ------------------------------ From: Zoran Mitrovski Date: Tue, 12 Nov 1996 11:08:57 -0500 (EST) Subject: [CANSLIM] ESOL Why did ESOL fall approx. 3 points today on good earnings results? Did some of the institutions (40% inst. ownership) decide to dump it? Anybody? Just for the record, a haven't bought any yet. The earnings news caught my eye. Zoran ------------------------------ From: Michael A Langston Date: Tue, 12 Nov 1996 11:55:38 -0500 Subject: [CANSLIM] HGS tricks just ruminating on why HGS are in the doldrums -- we've all seen that funds keep pushing up the liquid issues, but are avoiding the smaller caps that typify canslim -- and who can blame fund managers, when so many smaller cos stock prices were cut in half this summer -- despite a good year for index funds, a number of aggressive growth funds are experiencing relatively lousy ytd returns -- jobs are on the line here i've mentioned a few trix for guestimating when HGS come back in vogue -- one of my favs is to watch whether b/o's follow thru (and right now precious few are, with selling on good news prevailing) -- another is the iandex (which is officially dead, woodward is holed up and horan is out fishing with his cat) -- yet another is the dollar, murphy did a nice dollar-vs-small caps review yesterday on cnbc -- and here's one more (apparently little-known) trick that can help: look at the relative strength of the mutual fund index on p b3 of IBD -- note that this index is made up of small cap funds, and clearly shows the relative outperformance of canslim investing until may-june and its underperformance since so that's 4 trix folks (any others?), all currently confirming that cash, selected shorts, or maybe large cap plays are safest here -- the last of the 4 is probably the easiest to monitor -- just don't get whipsawed -- heh heh heh mike ------------------------------ From: patrick.wahl@unpcbbs.cts.com (Patrick Wahl) Date: Tue, 12 Nov 1996 04:35:00 GMT Subject: [CANSLIM] ESOL ZM>Why did ESOL fall approx. 3 points today on good ZM>earnings results? Did some of the institutions ZM>(40% inst. ownership) decide to dump it? Anybody? ZM>Just for the record, a haven't bought any yet. ZM>The earnings news caught my eye. Just speculating, since I have heard no news myself, but stocks are usually priced in expectation of certain earnings numbers, and if earnings fall short of the expected levels, even though they may seem to be very good numbers, the stock will sell off. Suspect that is what happened with ESOL. ------------------------------ From: patrick.wahl@unpcbbs.cts.com (Patrick Wahl) Date: Tue, 12 Nov 1996 04:20:00 GMT Subject: Re: [CANSLIM] Institution CA>at about $23 1/2 the first week in Sept. Then there is a strong up day that CA>breaks through 25 on volume of almost 600,000 shrs. THAT's THE DAY I WOULD CA>BUY THE STOCK, this is the primary breakout. One could even buy the next I was pretty much going to say the same thing about COGNF, but not as thoroughly. Nice analysis, once again. ------------------------------ From: patrick.wahl@unpcbbs.cts.com (Patrick Wahl) Date: Tue, 12 Nov 1996 04:14:00 GMT Subject: Re: [CANSLIM] market comm ST>don't be so cynical, Patrick, you're starting to sound like me! ST>Seriously, with the strength of the bond market, are you concerned about ST>funds rotating out of the utilities? What I think is at least a possibility is that the bond market strength is in anticipation of a slowdown in the economy. If that does happen, with the high valuations in the stock market now, we could have a fairly large decline in stocks as earnings fall, or at least earning growth slows as the economy sputters. Of course, I have worried about this before and nothing has come of it, and until proven otherwise, the trend in stocks is up. Just something for me to worry about. ------------------------------ From: "tom worley" Date: Tue, 12 Nov 1996 21:26:59 -0500 Subject: [CANSLIM] Future Earnings Comparisons One thing to keep in mind over the next 12 months or so is that most earnings reports will continue to be compared to ever better past reports. While I expect earnings comparisons overall to continue to grow (whether you look at the average of S&P 500, other indexes, individual stocks, etc) the rate/percentage of growth over the same qtr prior year will continue to shrink. It remains to see whether this will directly be reflected in a decline in avg PE (and thereby the price of stocks) or whether the marketplace will, by then, have already factored this in and look more towards consistency of earnings growth. I suspect this is one of the factors currently burdening NASDAQ since it is so loaded with tech cos who have already enjoyed some great earnings report comparisons and as result trade at high avg PE. Just a thought. tom w ------------------------------ End of canslim Digest V1 #7 *************************** To subscribe to canslim Digest, send the command: subscribe canslim-digest in the body of a message to "majordomo@xmission.com". If you want to subscribe something other than the account the mail is coming from, such as a local redistribution list, then append that address to the "subscribe" command; for example, to subscribe "local-canslim": subscribe canslim-digest local-canslim@your.domain.net A non-digest (direct mail) version of this list is also available; to subscribe to that instead, replace all instances of "canslim-digest" in the commands above with "canslim". Back issues are available for anonymous FTP from ftp.xmission.com, in pub/lists/canslim/archive. These are organized by date.