From: owner-canslim-digest@lists.xmission.com (canslim-digest) To: canslim-digest@lists.xmission.com Subject: canslim-digest V2 #1859 Reply-To: canslim Sender: owner-canslim-digest@lists.xmission.com Errors-To: owner-canslim-digest@lists.xmission.com Precedence: bulk Content-Transfer-Encoding: quoted-printable X-No-Archive: yes canslim-digest Wednesday, November 28 2001 Volume 02 : Number 1859 In this issue: Re: [CANSLIM] Re: (CANSLIM) Things I Learned Re: [CANSLIM] Re: (CANSLIM) Things I Learned ---------------------------------------------------------------------- Date: Wed, 28 Nov 2001 09:05:08 -0500 From: "Tom Worley" Subject: Re: [CANSLIM] Re: (CANSLIM) Things I Learned This is a multi-part message in MIME format. - ------=_NextPart_000_00AD_01C177EB.C77F1960 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable Hi Katherine, I am not a "group follower", and give very little weight to GRS, = contrary to WON's guidance (just one of my many CANSLIM sins). But I = know that many members of this group use the group ranking, strength or = trends as their starting point in finding picks. So I find it hard to = understand how having only two performers in a large group that is = otherwise trending down would be sufficient to offset the negative group = trend. I agree with what you say below, certainly some groups are a real hodge = podge of companies. And the stellar performance and fundies of one can = be confirmed by the performance of a competitor. But likewise, another = competitor could also offset that. And a broader industry group could = also provide a broader indication of the generalized industry trend, to = which one or two companies have simply failed to follow, YET. If Group RS is a fundamental part of your process in picking stocks, I = just don't see how you can disregard the group RS if you have two good = stocks in that group. Tom Worley stkguru@netside.net AIM: TexWorley ----- Original Message -----=20 From: Katherine Malm=20 To: canslim@lists.xmission.com=20 Sent: Wednesday, November 28, 2001 8:34 AM Subject: Re: [CANSLIM] Re: (CANSLIM) Things I Learned >>If you have two stocks with high RS, this is enough to satisfy the = Group RS. This was news to me, and doesn't make a lot of sense, either. =20 Tom, Chris =20 I have a slightly different perspective on this one. Often times, when = a group is composed of many members, you'll find that their business = models don't really "match." In this case, I always find the direct = competitors of the stock in question and look at its performance against = just these stocks. If these are moving up in tandem, it says something. = Also, my belief is different than WON's. I am always looking for = *rising* industries, not necessarily *top* industries. If a particular = stock is rising in a group that is not yet a "top" industry, it is very = often the strongest stock in the group. But, you want to be sure there = is some additional confirmation of the move. WON *does* say that you do = not want a lone wolf, you always want to see at least one additional = stock in the "group" moving up as well. And just to be complete, the = stocks should, of course have all the requisite fundamental = characteristics: accelerating sales & earnings, ROE>=3D17%, cash flow = closely mirroring EPS, an "N", sound financials, and sound strategic = planning and execution. =20 Katherine ----- Original Message -----=20 From: Tom Worley=20 To: canslim@lists.xmission.com=20 Sent: Wednesday, November 28, 2001 6:25 AM Subject: Re: [CANSLIM] Re: (CANSLIM) Things I Learned Chris, I would also like to add my thanks for you spending your time = in effort in giving us this report. I found it informative and well = worth reading, as well as some new material. I have thrown in some = comments below. Tom Worley stkguru@netside.net AIM: TexWorley ----- Original Message -----=20 From: Chris Mc=20 To: canslim@lists.xmission.com=20 Sent: Tuesday, November 27, 2001 7:02 PM Subject: [CANSLIM] Re: (CANSLIM) Things I Learned =20 Well - here goes - I hope Paul is right! I recently attended the IBD Seminar in L.A. and wanted to share = a few of my learnings with you. Please know that I am still in the = learning curve and just starting my second reading of HTMMIS so this is = my understanding of some of the comments and perhaps you can answer a = few questions for me. Asset allocation - 30-40% in this market, 3 to 4 stocks. WON = compared this market to a 75 mph freeway and it's now at 5 mph - slow = and tough. It's down so much, there's no base and we are gradually = coming off the bottom, but a slow process and sooner or later the = momentum will return. Doing what it should be doing. Hit bottom and = turned. Correcting for euphoria similar to the 1962 period which took = time to recover because it was damaged so seriously. Could be 3 - 6 - 9 = - - 18 months before we see patterns - coming out of the grave. Patience, = and time. I thought because of M we shouldn't be in the market at all but = I guess if you are confident in what you're doing, it's o.k. to break a = few rules?? It's not so much that you are breaking rules to be partially = invested at this point. While a switch from bear to bull was only = confirmed by the DOW 30 (only one to gain 20% from the low), "M" has = been much stronger since Sept 21. So limited investing is still within = CANSLIM guidelines. That also goes to the other comment of no pyramiding = up, buy it right, but don't add to the position (something I have been = violating in my VR Fund with some success, so personally don't agree = with this point). =20 Small or large cap - Doesn't make any difference. Funds have = gotten bigger and bigger, and they have enormous buying power for big = cap stocks as well as small ones. The key thing is that, is the pattern = exactly right, are the earnings there, the market right, all the other = things. AOL was trading 7 Million shares a day, it was a big cap stock = and went up 400-500%. I think the difference still remains that is is = far easier for a small cap to show 20-50% or more earnings growth than = for a big cap. But the big cap gives you more stability and safety in = this kind of "M". Chart discussions of PECS, CYTC, EASI, L3 - straight off the = bottom, no pullback. These are the ones that are risky in this market = environment -they run too far, too fast. 2 out of 3 stocks like this = aren't making it. If you know enough about the company and you're = convinced everythings alright, maybe it'll work. Bigger cap stocks are a little bit safer and sounder because if = you're wrong, it's going to cost you more than 1 or 2 points.=20 Pivot - in this market, buy at the pivot. No pyramiding in this = market. OK to buy within 5% of pivot in a bull market. =20 Have you heard this before or is this a "Revision"? I would say = it's a reflection of "M" and the number of failed breakouts. Take a = partial position and manage it. If you bought right, make a limited = amount of money. But if you pyramid, and it then fails, your follow on = buys will wipe out your success from the first buy. =20 Charts - A lot of the charts don't seem to be working, a lot of = the breakouts seem to be failing. It's not that the charts are not = working, you're buying bad bases that are faulty and have something = wrong with them, they're incorrect bases. Handles can be looser and cups may be deeper coming out of a = bear market. Cups and handles should be porportional - small cup, small = handle. Big cup, longer handle. If it's not a C&H, not a double bottom, not a flat base, it's a = nothing. After you go through all the models, it has to fit or it's a = nothing. (My den is now wallpapered in Chart Patterns) There are very few sound bases - not there yet. Easy to get = sucked in - great story, great earnings, but we're in a tough market and = you can't play aggressively. AZO is an exception and one of the few = stocks that worked although extended now. =20 Tom - do you think the pattern broke on EPIQ and do you see = anything that caused it to break or was it just a function of the = market? When you do the WWW, are you looking at Daily or Weekly charts? = Aside from the article in IBD, and the downgrade by AG Edwards, you can = add in that the company has been moving very fast with two stock splits = this year, plus registering 1.3 million restricted shares, plus having = options trading, plus another cash acquisition, plus up several hundred = percent for the year. The two stocks splits are worrying some investors = according to a board I visited on yahoo. Because of the added liquidity, = and likely now the options, short position is up 13% to 8.3 days. That = equates to better than 1.6 million shares, or 21% of the float. Of = course, that may have dropped a lot in the past week. The collapse on = 11/21 didn't quite break the pattern, and we saw a small recovery. But = yesterday's fall, which broke to the bottom of the short base at $30, = did end the breakout pattern and further weaken the chart. I am not = trying to buy just now, and would not be surprised by further price = deterioration, where I will buy because of my belief long term in the = business model. For WWW, I use Daily Charts and only look at the latest six = months. =20 Fallen Angels - There were lots of chart discussions - CSCO, = SUNW, ORCL and it seemed alot of them were similar. No base, thick = overhead supply, no prior uptrend, have probably hit bottom but are they = going to be leaders again? Sooner or later they get into a big = stalling thing, they just don't do much for 3 - 4 - 5 months while = something else is moving better.=20 =20 It seems every chart I look at has the same pattern. So we wait = for a base to form but while we're waiting, it's gone up 50-100%?? Not = that many have gone up that far, even from their recent lows. And = remember many are down as much as 90% from their high of the past 12-18 = months, so even a double from recent lows still leaves them a very long = way to go for a true new high. =20 9/11 - Caused a panic and a bad break in a lot of things and it = explains it but don't make an alibi for the stock and say it broke 20 = points but the reason was this, therefore it's o.k.? Is the pattern = right or not? Don't make excuses or alibis for stocks. =20 If you don't have the C & A, you better have the N & L. (Isn't = this another mortal sin?) M counts for at least 50% of the whole = ballgame.=20 =20 If you have two stocks with high RS, this is enough to satisfy = the Group RS. This was news to me, and doesn't make a lot of sense, = either. =20 Lots of revisions in next edition of HTMMIS - should be out in = January. (I suppose to some extent we learn of revisions as they = develop, i.e. buy within .10 of pivot and not .13 but I think it's good = there are some revisions as conditons change - ?) =20 I thought the seminar was well organized, staff friendly and = welcoming. WON spoke for almost the entire session, except an hour in = the AM and an hour in the PM, had a group constantly surrounding him and = even took questions during lunch. It was such a terrific opportunity to = see and listen to WON and I would highly recommend the seminar to anyone = interested in the market, although they do call it "Advanced" and you = need to have some understanding of CANSLIM. They did not push IBD or = DGO, but merely explained the services offered and were very = accommodating in answering questions. =20 =20 The seminar was extremely worthwhile for me but it seems the = more I learn, the more I have to learn. Did anyone else attend? = Comments appreciated. =20 Chris Mc =20 - ------=_NextPart_000_00AD_01C177EB.C77F1960 Content-Type: text/html; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable
Hi Katherine,
 
I am not a "group follower", and give very little = weight to=20 GRS, contrary to WON's guidance (just one of my many CANSLIM sins). But = I know=20 that many members of this group use the group ranking, strength or = trends as=20 their starting point in finding picks. So I find it hard to understand = how=20 having only two performers in a large group that is otherwise trending = down=20 would be sufficient to offset the negative group trend.
 
I agree with what you say below, certainly some = groups are a=20 real hodge podge of companies. And the stellar performance and fundies = of one=20 can be confirmed by the performance of a competitor. But likewise, = another=20 competitor could also offset that. And a broader industry group could = also=20 provide a broader indication of the generalized industry trend, to which = one or=20 two companies have simply failed to follow, YET.
 
If Group RS is a fundamental part of your process in = picking=20 stocks, I just don't see how you can disregard the group RS if you have = two good=20 stocks in that group.
 
Tom Worley
stkguru@netside.net
AIM:=20 TexWorley
----- Original Message -----
From:=20 Katherine=20 Malm
To: canslim@lists.xmission.com =
Sent: Wednesday, November 28, = 2001 8:34=20 AM
Subject: Re: [CANSLIM] Re: = (CANSLIM)=20 Things I Learned

>>If you have two=20 stocks with high RS, this is enough to satisfy the Group RS. This was news to me, and doesn't make a lot of sense,=20 either.
 
Tom, Chris
 
I have a = slightly different=20 perspective on this one. Often times, when a group is composed of many = members, you'll find that their business models don't really "match." = In this=20 case, I always find the direct competitors of the stock in question = and look=20 at its performance against just these stocks. If these are moving up = in=20 tandem, it says something. Also, my belief is different than WON's. I = am=20 always looking for *rising* industries, not necessarily *top* = industries. If a=20 particular stock is rising in a group that is not yet a "top" = industry, it is=20 very often the strongest stock in the group.  But, you want to be = sure=20 there is some additional confirmation of the move. WON *does* say that = you do=20 not want a lone wolf, you always want to see at least one additional = stock in=20 the "group" moving up as well. And just to be complete, the stocks = should, of=20 course have all the requisite fundamental characteristics: = accelerating sales=20 & earnings, ROE>=3D17%, cash flow closely mirroring EPS, an = "N", sound=20 financials, and sound strategic planning and execution.
 
Katherine
----- Original Message -----
From:=20 Tom=20 Worley
To: canslim@lists.xmission.com =
Sent: Wednesday, November 28, = 2001 6:25=20 AM
Subject: Re: [CANSLIM] Re: = (CANSLIM)=20 Things I Learned

Chris, I would also like to add my thanks for = you spending=20 your time in effort in giving us this report. I found it informative = and=20 well worth reading, as well as some new material. I have thrown in = some=20 comments below.
 
Tom Worley
stkguru@netside.net
AIM:=20 TexWorley
----- Original Message ----- =
From:=20 Chris Mc=20
To: canslim@lists.xmission.com =
Sent: Tuesday, November 27, = 2001 7:02=20 PM
Subject: [CANSLIM] Re: = (CANSLIM)=20 Things I Learned

 
Well - here goes - I hope Paul = is=20 right!
 
I recently attended the IBD = Seminar in=20 L.A. and wanted to share a few of my learnings with you.  = Please=20 know that I am still in the learning curve and just = starting my=20 second reading of HTMMIS so this is my understanding = of some=20 of the comments and perhaps you can answer a few questions for = me.
 
Asset=20 allocation - 30-40% in this = market, 3 to=20 4 stocks.  WON compared this market to a 75 mph freeway and = it's=20 now at 5 mph - slow and tough.  It's down so much, there's = no base=20 and we are gradually coming off the bottom, but a slow process = and=20 sooner or later the momentum will return.  Doing what it = should be=20 doing.  Hit bottom and turned.  Correcting for = euphoria=20 similar to the 1962 period which took time to recover because it = was=20 damaged so seriously.  Could be 3 - 6 - 9 - 18 months = before we see=20 patterns - coming out of the grave.  Patience, and=20 time.
 
I thought because of M we = shouldn't be=20 in the market at all but I guess if you are confident in what = you're=20 doing, it's o.k. to break a few rules?? It's=20 not so much that you are breaking rules to be partially invested = at this=20 point. While a switch from bear to bull was only confirmed by = the DOW 30=20 (only one to gain 20% from the low), "M" has been much stronger = since=20 Sept 21. So limited investing is still within CANSLIM = guidelines. That=20 also goes to the other comment of no pyramiding up, buy it = right, but=20 don't add to the position (something I have been violating in my = VR Fund=20 with some success, so personally don't agree with this=20 point).
 
Small or large cap=20 - Doesn't make any difference.  Funds have = gotten=20 bigger and bigger, and they have enormous buying power for big = cap=20 stocks as well as small ones.  The key thing is that, is = the=20 pattern exactly right, are the earnings there, the market right, = all the=20 other things.  AOL was trading 7 Million shares a day, = it was=20 a big cap stock and went up 400-500%. I=20 think the difference still remains that is is far easier for a = small cap=20 to show 20-50% or more earnings growth than for a big cap. But = the big=20 cap gives you more stability and safety in this kind of=20 "M".
 
Chart discussions=20 of PECS, CYTC, EASI, L3 - straight off the bottom, no=20 pullback. These are the ones that are risky in this market=20 environment -they run too far, too fast.   2 out of 3 = stocks=20 like this aren't making it.  If you know enough about the = company=20 and you're convinced everythings alright, maybe it'll=20 work.
 
Bigger cap stocks are a little = bit safer=20 and sounder because if you're wrong, it's going to cost you = more=20 than 1 or 2 points. 
 
Pivot - = in this=20 market, buy at the pivot.  No pyramiding in this = market.  OK=20 to buy within 5% of pivot in a bull market.
 
Have you heard this before = or is this a=20 "Revision"? I would say it's a = reflection of=20 "M" and the number of failed breakouts. Take a partial position = and=20 manage it. If you bought right, make a limited amount of money. = But if=20 you pyramid, and it then fails, your follow on buys will wipe = out your=20 success from the first buy.
 
Charts - A lot = of the=20 charts don't seem to be working, a lot of the breakouts = seem to be=20 failing.  It's not that the charts are not working, you're = buying=20 bad bases that are faulty and have something wrong with them, = they're=20 incorrect bases.
Handles can be looser and cups = may be=20 deeper coming out of a bear market.  Cups and handles = should be=20 porportional - small cup, small handle.  Big cup, longer=20 handle.
If it's not a C&H, not a = double bottom,=20 not a flat base, it's a nothing.  After you go through all = the=20 models,  it has to fit or it's a nothing.  (My den is = now=20 wallpapered in Chart Patterns)
There are very few sound bases = - - not there=20 yet.  Easy to get sucked in - great story, great = earnings, but=20 we're in a tough market and you can't play aggressively.  = AZO is an=20 exception and one of the few stocks that worked although = extended=20 now.
 
Tom - do you think the = pattern broke on=20 EPIQ and do you see anything that caused it to break or was it = just a=20 function of the market?  When you do the WWW, are you = looking at=20 Daily or Weekly charts? Aside from = the article=20 in IBD, and the downgrade by AG Edwards, you can add in that the = company=20 has been moving very fast with two stock splits this year, plus=20 registering 1.3 million restricted shares, plus having options = trading,=20 plus another cash acquisition, plus up several hundred percent = for the=20 year. The two stocks splits are worrying some investors = according to a=20 board I visited on yahoo. Because of the added liquidity, and = likely now=20 the options, short position is up 13% to 8.3 days. That equates = to=20 better than 1.6 million shares, or 21% of the float.  Of = course,=20 that may have dropped a lot in the past week. The collapse on = 11/21=20 didn't quite break the pattern, and we saw a small recovery. But = yesterday's fall, which broke to the bottom of the short base at = $30,=20 did end the breakout pattern and further weaken the chart. I am = not=20 trying to buy just now, and would not be surprised by further = price=20 deterioration, where I will buy because of my belief long term = in the=20 business model.
 
For WWW, I use Daily Charts = and only=20 look at the latest six months.
 
Fallen Angels = - - There were=20 lots of chart discussions - CSCO, SUNW, ORCL and it seemed alot = of them=20 were similar.  No base, thick overhead supply, no prior = uptrend,=20 have probably hit bottom but are they going to be leaders=20 again?   Sooner or later they get into a big stalling = thing,=20 they just don't do much for 3 - 4 - 5 months while something = else is=20 moving better. 
 
It seems every chart I look = at has the=20 same pattern.  So we wait for a base to form but while = we're=20 waiting, it's gone up 50-100%?? Not = that many=20 have gone up that far, even from their recent lows. And remember = many=20 are down as much as 90% from their high of the past 12-18 = months, so=20 even a double from recent lows still leaves them a very long way = to go=20 for a true new high.
 
9/11 - Caused = a panic=20 and a bad break in a lot of things and it explains it=20 but don't make an alibi for the stock and say it broke = 20=20 points but the reason was this, therefore it's o.k.?  Is = the=20 pattern right or not?  Don't make excuses or = alibis for=20 stocks.
 
If you don't have the C & = A, you better=20 have the N & L.  (Isn't this another mortal=20 sin?)  M counts for at least 50% of the whole=20 ballgame. 
 
If you have two stocks with = high RS, this=20 is enough to satisfy the Group RS. This = was news to=20 me, and doesn't make a lot of sense, either.
 
Lots of revisions in next = edition of HTMMIS=20 - should be out in January.  (I suppose to some extent = we learn=20 of revisions as they develop, i.e. buy within .10 of pivot and = not .13=20 but I think it's good there are some revisions as conditons = change=20 - ?)
 
I thought the seminar was well = organized,=20 staff friendly and welcoming.  WON spoke for almost the = entire=20 session, except an hour in the AM and an hour in the PM, = had a=20 group constantly surrounding him and even took questions during=20 lunch.  It was such a terrific opportunity to see and=20 listen to WON and I would highly recommend the seminar to = anyone=20 interested in the market, although they do call it "Advanced" = and you=20 need to have some understanding of CANSLIM.  =  They did=20 not push IBD or DGO, but merely explained the services = offered and=20 were very accommodating in answering questions.  =
 
The seminar was extremely=20 worthwhile for me but it seems the more I learn, the = more=20 I have to learn.  Did anyone else attend?  = Comments=20 appreciated.
 
Chris Mc
 
- ------=_NextPart_000_00AD_01C177EB.C77F1960-- - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: Wed, 28 Nov 2001 08:07:01 -0600 From: "Katherine Malm" Subject: Re: [CANSLIM] Re: (CANSLIM) Things I Learned This is a multi-part message in MIME format. - ------=_NextPart_000_01B5_01C177E3.A87F96A0 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable Hi Tom, Here's the problem and the reason why my approach would still hold, = i.e., you replied: >>.So I find it hard to understand how having only two performers in a = large group that is otherwise trending down would be sufficient to = offset the negative group trend. I would never be interested in a industry that was *declining*. I am = only interested in a group that is *RISING.* Very different animal = there. I never mine for candidates based on GRS because it hides rising = groups and rising stocks. If the GRS is low, but there are stocks in the = group that are doing well, that speaks to me. In particular, in a bear = market, I want to be mining for stocks that show their ability to buck = the trend. Very important for uncovering the gems. Similarly, if you = mine for candidates based on "high" GRS, you are more likely to be = focused on groups that are getting ready to top out. My motto: top = stocks top out and then they decline. I don't want to be there. I want = to be in the stocks coming up in ranks as they *become* top stocks. When = their run is over, I get out. In the Great Bull, this may have taken = months or years. In the Great Bear, this process can take a few weeks. >>I am not a "group follower", and give very little weight to GRS I think this is a dangerous practice. Witness TARO as our list's recent = example, so good in fact that the IBD chose to use it themselves as an = example. Being unaware of group action hides the "truth" about = institutional money's "feel" about the group. A bit like letting the = big dog do the sniffing for you. To make big money over a long period of = time, we *must* be in the right stocks in the right industries. Katherine ----- Original Message -----=20 From: Tom Worley=20 To: canslim@lists.xmission.com=20 Sent: Wednesday, November 28, 2001 8:05 AM Subject: Re: [CANSLIM] Re: (CANSLIM) Things I Learned Hi Katherine, I am not a "group follower", and give very little weight to GRS, = contrary to WON's guidance (just one of my many CANSLIM sins). But I = know that many members of this group use the group ranking, strength or = trends as their starting point in finding picks. So I find it hard to = understand how having only two performers in a large group that is = otherwise trending down would be sufficient to offset the negative group = trend. I agree with what you say below, certainly some groups are a real = hodge podge of companies. And the stellar performance and fundies of one = can be confirmed by the performance of a competitor. But likewise, = another competitor could also offset that. And a broader industry group = could also provide a broader indication of the generalized industry = trend, to which one or two companies have simply failed to follow, YET. If Group RS is a fundamental part of your process in picking stocks, I = just don't see how you can disregard the group RS if you have two good = stocks in that group. Tom Worley stkguru@netside.net AIM: TexWorley ----- Original Message -----=20 From: Katherine Malm=20 To: canslim@lists.xmission.com=20 Sent: Wednesday, November 28, 2001 8:34 AM Subject: Re: [CANSLIM] Re: (CANSLIM) Things I Learned >>If you have two stocks with high RS, this is enough to satisfy the = Group RS. This was news to me, and doesn't make a lot of sense, either. Tom, Chris I have a slightly different perspective on this one. Often times, = when a group is composed of many members, you'll find that their = business models don't really "match." In this case, I always find the = direct competitors of the stock in question and look at its performance = against just these stocks. If these are moving up in tandem, it says = something. Also, my belief is different than WON's. I am always looking = for *rising* industries, not necessarily *top* industries. If a = particular stock is rising in a group that is not yet a "top" industry, = it is very often the strongest stock in the group. But, you want to be = sure there is some additional confirmation of the move. WON *does* say = that you do not want a lone wolf, you always want to see at least one = additional stock in the "group" moving up as well. And just to be = complete, the stocks should, of course have all the requisite = fundamental characteristics: accelerating sales & earnings, ROE>=3D17%, = cash flow closely mirroring EPS, an "N", sound financials, and sound = strategic planning and execution. Katherine ----- Original Message -----=20 From: Tom Worley=20 To: canslim@lists.xmission.com=20 Sent: Wednesday, November 28, 2001 6:25 AM Subject: Re: [CANSLIM] Re: (CANSLIM) Things I Learned Chris, I would also like to add my thanks for you spending your = time in effort in giving us this report. I found it informative and well = worth reading, as well as some new material. I have thrown in some = comments below. Tom Worley stkguru@netside.net AIM: TexWorley ----- Original Message -----=20 From: Chris Mc=20 To: canslim@lists.xmission.com=20 Sent: Tuesday, November 27, 2001 7:02 PM Subject: [CANSLIM] Re: (CANSLIM) Things I Learned Well - here goes - I hope Paul is right! I recently attended the IBD Seminar in L.A. and wanted to = share a few of my learnings with you. Please know that I am still in = the learning curve and just starting my second reading of HTMMIS so this = is my understanding of some of the comments and perhaps you can answer a = few questions for me. Asset allocation - 30-40% in this market, 3 to 4 stocks. WON = compared this market to a 75 mph freeway and it's now at 5 mph - slow = and tough. It's down so much, there's no base and we are gradually = coming off the bottom, but a slow process and sooner or later the = momentum will return. Doing what it should be doing. Hit bottom and = turned. Correcting for euphoria similar to the 1962 period which took = time to recover because it was damaged so seriously. Could be 3 - 6 - 9 = - - 18 months before we see patterns - coming out of the grave. Patience, = and time. I thought because of M we shouldn't be in the market at all = but I guess if you are confident in what you're doing, it's o.k. to = break a few rules?? It's not so much that you are breaking rules to be = partially invested at this point. While a switch from bear to bull was = only confirmed by the DOW 30 (only one to gain 20% from the low), "M" = has been much stronger since Sept 21. So limited investing is still = within CANSLIM guidelines. That also goes to the other comment of no = pyramiding up, buy it right, but don't add to the position (something I = have been violating in my VR Fund with some success, so personally don't = agree with this point). Small or large cap - Doesn't make any difference. Funds have = gotten bigger and bigger, and they have enormous buying power for big = cap stocks as well as small ones. The key thing is that, is the pattern = exactly right, are the earnings there, the market right, all the other = things. AOL was trading 7 Million shares a day, it was a big cap stock = and went up 400-500%. I think the difference still remains that is is = far easier for a small cap to show 20-50% or more earnings growth than = for a big cap. But the big cap gives you more stability and safety in = this kind of "M". Chart discussions of PECS, CYTC, EASI, L3 - straight off the = bottom, no pullback. These are the ones that are risky in this market = environment -they run too far, too fast. 2 out of 3 stocks like this = aren't making it. If you know enough about the company and you're = convinced everythings alright, maybe it'll work. Bigger cap stocks are a little bit safer and sounder because = if you're wrong, it's going to cost you more than 1 or 2 points.=20 Pivot - in this market, buy at the pivot. No pyramiding in = this market. OK to buy within 5% of pivot in a bull market. Have you heard this before or is this a "Revision"? I would = say it's a reflection of "M" and the number of failed breakouts. Take a = partial position and manage it. If you bought right, make a limited = amount of money. But if you pyramid, and it then fails, your follow on = buys will wipe out your success from the first buy. Charts - A lot of the charts don't seem to be working, a lot = of the breakouts seem to be failing. It's not that the charts are not = working, you're buying bad bases that are faulty and have something = wrong with them, they're incorrect bases. Handles can be looser and cups may be deeper coming out of a = bear market. Cups and handles should be porportional - small cup, small = handle. Big cup, longer handle. If it's not a C&H, not a double bottom, not a flat base, it's = a nothing. After you go through all the models, it has to fit or it's = a nothing. (My den is now wallpapered in Chart Patterns) There are very few sound bases - not there yet. Easy to get = sucked in - great story, great earnings, but we're in a tough market and = you can't play aggressively. AZO is an exception and one of the few = stocks that worked although extended now. Tom - do you think the pattern broke on EPIQ and do you see = anything that caused it to break or was it just a function of the = market? When you do the WWW, are you looking at Daily or Weekly charts? = Aside from the article in IBD, and the downgrade by AG Edwards, you can = add in that the company has been moving very fast with two stock splits = this year, plus registering 1.3 million restricted shares, plus having = options trading, plus another cash acquisition, plus up several hundred = percent for the year. The two stocks splits are worrying some investors = according to a board I visited on yahoo. Because of the added liquidity, = and likely now the options, short position is up 13% to 8.3 days. That = equates to better than 1.6 million shares, or 21% of the float. Of = course, that may have dropped a lot in the past week. The collapse on = 11/21 didn't quite break the pattern, and we saw a small recovery. But = yesterday's fall, which broke to the bottom of the short base at $30, = did end the breakout pattern and further weaken the chart. I am not = trying to buy just now, and would not be surprised by further price = deterioration, where I will buy because of my belief long term in the = business model. For WWW, I use Daily Charts and only look at the latest six = months. Fallen Angels - There were lots of chart discussions - CSCO, = SUNW, ORCL and it seemed alot of them were similar. No base, thick = overhead supply, no prior uptrend, have probably hit bottom but are they = going to be leaders again? Sooner or later they get into a big = stalling thing, they just don't do much for 3 - 4 - 5 months while = something else is moving better.=20 It seems every chart I look at has the same pattern. So we = wait for a base to form but while we're waiting, it's gone up 50-100%?? = Not that many have gone up that far, even from their recent lows. And = remember many are down as much as 90% from their high of the past 12-18 = months, so even a double from recent lows still leaves them a very long = way to go for a true new high. 9/11 - Caused a panic and a bad break in a lot of things and = it explains it but don't make an alibi for the stock and say it broke 20 = points but the reason was this, therefore it's o.k.? Is the pattern = right or not? Don't make excuses or alibis for stocks. If you don't have the C & A, you better have the N & L. = (Isn't this another mortal sin?) M counts for at least 50% of the whole = ballgame.=20 If you have two stocks with high RS, this is enough to satisfy = the Group RS. This was news to me, and doesn't make a lot of sense, = either. Lots of revisions in next edition of HTMMIS - should be out in = January. (I suppose to some extent we learn of revisions as they = develop, i.e. buy within .10 of pivot and not .13 but I think it's good = there are some revisions as conditons change - ?) I thought the seminar was well organized, staff friendly and = welcoming. WON spoke for almost the entire session, except an hour in = the AM and an hour in the PM, had a group constantly surrounding him and = even took questions during lunch. It was such a terrific opportunity to = see and listen to WON and I would highly recommend the seminar to anyone = interested in the market, although they do call it "Advanced" and you = need to have some understanding of CANSLIM. They did not push IBD or = DGO, but merely explained the services offered and were very = accommodating in answering questions. =20 The seminar was extremely worthwhile for me but it seems the = more I learn, the more I have to learn. Did anyone else attend? = Comments appreciated. Chris Mc - ------=_NextPart_000_01B5_01C177E3.A87F96A0 Content-Type: text/html; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable
Hi Tom,
 
Here's the problem and the reason why = my approach=20 would still hold, i.e., you replied:
 
>>.So I find it=20 hard to understand how having only two performers in a large group that = is=20 otherwise trending down would be sufficient to offset=20 the negative group trend.
 
I would never be interested in a = industry that was=20 *declining*. I am only interested in a group that is *RISING.* Very = different=20 animal there. I never mine for candidates based on GRS because it hides = rising=20 groups and rising stocks. If the GRS is low, but there are stocks in the = group=20 that are doing well, that speaks to me. In particular, in a bear market, = I want=20 to be mining for stocks that show their ability to buck the trend. Very=20 important for uncovering the gems. Similarly, if you mine for candidates = based=20 on "high" GRS, you are more likely to be focused on groups that are = getting=20 ready to top out. My motto: top stocks top out and then they decline. I = don't=20 want to be there. I want to be in the stocks coming up in ranks as they = *become*=20 top stocks. When their run is over, I get out. In the Great Bull, this = may have=20 taken months or years. In the Great Bear, this process can take a few=20 weeks.
 
>>I am not a=20 "group follower", and give very little weight to GRS
 
I think this is a dangerous practice. = Witness TARO=20 as our list's recent example, so good in fact that the IBD chose to use = it=20 themselves as an example. Being unaware of group action hides the = "truth" about=20 institutional money's  "feel" about the group. A bit like = letting the=20 big dog do the sniffing for you. To make big money over a long period of = time,=20 we *must* be in the right stocks in the right=20 industries.
 
Katherine
 
----- Original Message -----
From:=20 Tom = Worley=20
Sent: Wednesday, November 28, = 2001 8:05=20 AM
Subject: Re: [CANSLIM] Re: = (CANSLIM)=20 Things I Learned

Hi Katherine,
 
I am not a "group follower", and give very little = weight to=20 GRS, contrary to WON's guidance (just one of my many CANSLIM sins). = But I know=20 that many members of this group use the group ranking, strength or = trends as=20 their starting point in finding picks. So I find it hard to understand = how=20 having only two performers in a large group that is otherwise trending = down=20 would be sufficient to offset the negative group trend.
 
I agree with what you say below, certainly some = groups are a=20 real hodge podge of companies. And the stellar performance and fundies = of one=20 can be confirmed by the performance of a competitor. But likewise, = another=20 competitor could also offset that. And a broader industry group could = also=20 provide a broader indication of the generalized industry trend, to = which one=20 or two companies have simply failed to follow, YET.
 
If Group RS is a fundamental part of your process = in picking=20 stocks, I just don't see how you can disregard the group RS if you = have two=20 good stocks in that group.
 
Tom Worley
stkguru@netside.net
AIM:=20 TexWorley
----- Original Message -----
From:=20 Katherine=20 Malm
Sent: Wednesday, November 28, = 2001 8:34=20 AM
Subject: Re: [CANSLIM] Re: = (CANSLIM)=20 Things I Learned

>>If you have two=20 stocks with high RS, this is enough to satisfy the Group RS. This was news to me, and doesn't make a lot of = sense,=20 either.
 
Tom, = Chris
 
I have a = slightly different=20 perspective on this one. Often times, when a group is composed of = many=20 members, you'll find that their business models don't really = "match." In=20 this case, I always find the direct competitors of the stock in = question and=20 look at its performance against just these stocks. If these are = moving up in=20 tandem, it says something. Also, my belief is different than WON's. = I am=20 always looking for *rising* industries, not necessarily *top* = industries. If=20 a particular stock is rising in a group that is not yet a "top" = industry, it=20 is very often the strongest stock in the group.  But, you want = to be=20 sure there is some additional confirmation of the move. WON *does* = say that=20 you do not want a lone wolf, you always want to see at least one = additional=20 stock in the "group" moving up as well. And just to be complete, the = stocks=20 should, of course have all the requisite fundamental = characteristics:=20 accelerating sales & earnings, ROE>=3D17%, cash flow closely = mirroring=20 EPS, an "N", sound financials, and sound strategic planning and=20 execution.
 
Katherine
----- Original Message ----- =
From:=20 Tom=20 Worley
To: canslim@lists.xmission.com= =20
Sent: Wednesday, November = 28, 2001=20 6:25 AM
Subject: Re: [CANSLIM] Re: = (CANSLIM)=20 Things I Learned

Chris, I would also like to add my thanks for = you=20 spending your time in effort in giving us this report. I found it=20 informative and well worth reading, as well as some new material. = I have=20 thrown in some comments below.
 
Tom Worley
stkguru@netside.net
AIM:=20 TexWorley
----- Original Message ----- =
From:=20 Chris=20 Mc
To: canslim@lists.xmission.com= =20
Sent: Tuesday, November = 27, 2001=20 7:02 PM
Subject: [CANSLIM] Re: = (CANSLIM)=20 Things I Learned

 
Well - here goes - I hope Paul = is=20 right!
 
I recently attended the IBD = Seminar in=20 L.A. and wanted to share a few of my learnings with you.  = Please=20 know that I am still in the learning curve and just = starting my=20 second reading of HTMMIS so this is my understanding = of some=20 of the comments and perhaps you can answer a few questions for = me.
 
Asset=20 allocation - 30-40% in this = market, 3=20 to 4 stocks.  WON compared this market to a 75 mph = freeway and=20 it's now at 5 mph - slow and tough.  It's down so much, = there's=20 no base and we are gradually coming off the bottom, but a slow = process=20 and sooner or later the momentum will return.  Doing what = it=20 should be doing.  Hit bottom and turned.  Correcting = for=20 euphoria similar to the 1962 period which took time to recover = because=20 it was damaged so seriously.  Could be 3 - 6 - 9 - 18 = months=20 before we see patterns - coming out of the grave.  = Patience, and=20 time.
 
I thought because of M we = shouldn't=20 be in the market at all but I guess if you are confident in = what=20 you're doing, it's o.k. to break a few rules?? It's not so much that you are breaking rules = to be=20 partially invested at this point. While a switch from bear to = bull was=20 only confirmed by the DOW 30 (only one to gain 20% from the = low), "M"=20 has been much stronger since Sept 21. So limited investing is = still=20 within CANSLIM guidelines. That also goes to the other comment = of no=20 pyramiding up, buy it right, but don't add to the position = (something=20 I have been violating in my VR Fund with some success, so = personally=20 don't agree with this point).
 
Small or large cap=20 - Doesn't make any difference.  Funds have = gotten=20 bigger and bigger, and they have enormous buying power for big = cap=20 stocks as well as small ones.  The key thing is that, is = the=20 pattern exactly right, are the earnings there, the market = right, all=20 the other things.  AOL was trading 7 Million shares = a day,=20 it was a big cap stock and went up 400-500%. I think the difference still remains that = is is far=20 easier for a small cap to show 20-50% or more earnings growth = than for=20 a big cap. But the big cap gives you more stability and safety = in this=20 kind of "M".
 
Chart discussions=20 of PECS, CYTC, EASI, L3 - straight off the bottom, no=20 pullback. These are the ones that are risky in this = market=20 environment -they run too far, too fast.   2 out of = 3 stocks=20 like this aren't making it.  If you know enough about the = company=20 and you're convinced everythings alright, maybe it'll=20 work.
 
Bigger cap stocks are a little=20 bit safer and sounder because if you're wrong, it's going = to cost you more than 1 or 2 points. 
 
Pivot - = in this=20 market, buy at the pivot.  No pyramiding in this = market.  OK=20 to buy within 5% of pivot in a bull market.
 
Have you heard this = before or is this=20 a "Revision"? I would say it's a = reflection=20 of "M" and the number of failed breakouts. Take a partial = position and=20 manage it. If you bought right, make a limited amount of = money. But if=20 you pyramid, and it then fails, your follow on buys will wipe = out your=20 success from the first buy.
 
Charts - A = lot of the=20 charts don't seem to be working, a lot of the breakouts = seem to=20 be failing.  It's not that the charts are not working, = you're=20 buying bad bases that are faulty and have something wrong with = them,=20 they're incorrect bases.
Handles can be looser and = cups may be=20 deeper coming out of a bear market.  Cups and handles = should be=20 porportional - small cup, small handle.  Big cup, longer=20 handle.
If it's not a C&H, not a = double=20 bottom, not a flat base, it's a nothing.  After you go = through=20 all the models,  it has to fit or it's a nothing.  = (My den=20 is now wallpapered in Chart Patterns)
There are very few sound = bases - not=20 there yet.  Easy to get sucked in - great story, = great=20 earnings, but we're in a tough market and you can't play=20 aggressively.  AZO is an exception and one of the few = stocks that=20 worked although extended now.
 
Tom - do you think the = pattern broke=20 on EPIQ and do you see anything that caused it to break or was = it just=20 a function of the market?  When you do the WWW, are you = looking=20 at Daily or Weekly charts? Aside = from the=20 article in IBD, and the downgrade by AG Edwards, you can add = in that=20 the company has been moving very fast with two stock splits = this year,=20 plus registering 1.3 million restricted shares, plus having = options=20 trading, plus another cash acquisition, plus up several = hundred=20 percent for the year. The two stocks splits are worrying some=20 investors according to a board I visited on yahoo. Because of = the=20 added liquidity, and likely now the options, short position is = up 13%=20 to 8.3 days. That equates to better than 1.6 million shares, = or 21% of=20 the float.  Of course, that may have dropped a lot in the = past=20 week. The collapse on 11/21 didn't quite break the pattern, = and we saw=20 a small recovery. But yesterday's fall, which broke to the = bottom of=20 the short base at $30, did end the breakout pattern and = further weaken=20 the chart. I am not trying to buy just now, and would not be = surprised=20 by further price deterioration, where I will buy because of my = belief=20 long term in the business model.
 
For WWW, I use Daily = Charts and only=20 look at the latest six months.
 
Fallen = Angels - There=20 were lots of chart discussions - CSCO, SUNW, ORCL and it = seemed alot=20 of them were similar.  No base, thick overhead supply, no = prior=20 uptrend, have probably hit bottom but are they going to be = leaders=20 again?   Sooner or later they get into a big = stalling thing,=20 they just don't do much for 3 - 4 - 5 months while something = else is=20 moving better. 
 
It seems every chart I = look at has=20 the same pattern.  So we wait for a base to form but = while we're=20 waiting, it's gone up 50-100%?? Not = that many=20 have gone up that far, even from their recent lows. And = remember many=20 are down as much as 90% from their high of the past 12-18 = months, so=20 even a double from recent lows still leaves them a very long = way to go=20 for a true new high.
 
9/11 - = Caused a panic=20 and a bad break in a lot of things and it explains it=20 but don't make an alibi for the stock and say it = broke 20=20 points but the reason was this, therefore it's o.k.?  Is = the=20 pattern right or not?  Don't make excuses or = alibis for=20 stocks.
 
If you don't have the C & = A, you=20 better have the N & L.  (Isn't this another = mortal=20 sin?)  M counts for at least 50% of the whole=20 ballgame. 
 
If you have two stocks with = high RS, this=20 is enough to satisfy the Group RS. This = was news=20 to me, and doesn't make a lot of sense, = either.
 
Lots of revisions in next = edition of=20 HTMMIS - should be out in January.  (I suppose to = some extent=20 we learn of revisions as they develop, i.e. buy within .10 of = pivot=20 and not .13 but I think it's good there are some = revisions as=20 conditons change - ?)
 
I thought the seminar was = well organized,=20 staff friendly and welcoming.  WON spoke for almost the = entire=20 session, except an hour in the AM and an hour in the PM, = had a=20 group constantly surrounding him and even took questions = during=20 lunch.  It was such a terrific opportunity to see and=20 listen to WON and I would highly recommend the seminar to = anyone=20 interested in the market, although they do call it "Advanced" = and you=20 need to have some understanding of CANSLIM.  =  They did=20 not push IBD or DGO, but merely explained the services = offered=20 and were very accommodating in answering questions. =20
 
The seminar was extremely=20 worthwhile for me but it seems the more I learn, the = more=20 I have to learn.  Did anyone else attend?  = Comments=20 appreciated.
 
Chris Mc
 
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