From: canslim-owner@xmission.com (canslim Digest) To: canslim-digest@xmission.com Subject: canslim Digest V1 #113 Reply-To: canslim@xmission.com Sender: canslim-owner@xmission.com Errors-To: canslim-owner@xmission.com Precedence: canslim Digest Wednesday, March 19 1997 Volume 01 : Number 113 In this issue: [CANSLIM] Jabil Re: [CANSLIM] Our Buys For Tomorrow & Responses To Your Responses [CANSLIM] I'll wait until it comes back a bit....? RE: [CANSLIM] Investment Question. Re: [CANSLIM] Divergence Re: [CANSLIM] Divergence [CANSLIM] Netwrok sector [CANSLIM] Martin From Sweden [CANSLIM] Tom - "Our Trip To Miami" [CANSLIM] Bob Henry - Scarce as Hen's Teeth? Re: [CANSLIM] Martin From Sweden RE: [CANSLIM] Investment Question. Re: [CANSLIM] IOM and ODIS (was Investment Question) RE: [CANSLIM] Investment Question. RE: [CANSLIM] Divergence RE: [CANSLIM] Investment Question. [CANSLIM] RE: Investment Question & Divergence Re: [CANSLIM] Jabil Re: [CANSLIM] Investment Question. Re: [CANSLIM] RE: Investment Question & Divergence Re: [CANSLIM] Divergence 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. ---------------------------------------------------------------------- Date: Wed, 19 Mar 1997 06:46:38 -0800 From: pwahl@postoffice.worldnet.att.net Subject: [CANSLIM] Jabil Anyone know anything on Jabil Circuits (JBIL)? They released earnings today of .58 versus year ago of .34? and expected earnings of .48. EPS rank is low, in the 70's, Acc/Dist also mediocre at C, RS is 99. Revenue declined from a year ago. Chart seems ok, right now undergoing a pullback after recent price runup. ------------------------------ Date: Wed, 19 Mar 1997 16:54:05 +0100 From: Johan Van Houtven Subject: Re: [CANSLIM] Our Buys For Tomorrow & Responses To Your Responses At 02:34 AM 19-03-97 -0600, you wrote: >We are adding AGI ($9.38), sorta cup with sorta handle and also >LXMO ($15.50). LXMO is a holding co for a bank. EPS= 35 RS=85 P/E=32 A/D=B 1995: .50 1996: 0.40 Funds: ? Last 4 Qs: -8%, +17%, -79%, +64% 1.3 mio shares My question: How did you select this stock? Let me guess: you started with the chart (or arrived at the chart after scanning for certain chart parameters). AGI is Alpine Group Inc: produces wire/cable for telecom etc EPS= 74 RS= 84 P/E=12 A/D= A 1995: -0.11 1996: 0.23 Last 4 Qs: N/A, +264%, + 600%, +900% 18.3 mio shares Funds own 9% I'd consider this stock (in a good market). - --- Johan Van Houtven / CLICK! ------------------------------ Date: Wed, 19 Mar 1997 17:07:57 +0100 From: Johan Van Houtven Subject: [CANSLIM] I'll wait until it comes back a bit....? For those of you who are considering waiting before it comes back a bit, here's an example of what can (and will) happen: You all remember SEMX, don't you? If not, ask Zoran. B^) Today: [SEMX] SEMICONDUCTOR PCKG MAT CO - 52 WK LOW AT 7 3/4. - --- Johan Van Houtven / CLICK! ------------------------------ Date: Tue, 18 Mar 1997 23:39:37 -0500 From: rkhenry@naxs.com (Robert Henry) Subject: RE: [CANSLIM] Investment Question. On Tuesday, March 18, 1997 11:33 AM, Craig = Griffin[SMTP:cagriffin@mindspring.com] wrote: > >The market is undergoing a correction. CANSLIM stocks don't work and = don't >show up much in down markets. You have to wait for the bull mkt to = resume. >One must be patient, it may be a few weeks or even months before the = bull is >snorting again. =20 On Tuesday, March 18, 1997 10:18 PM, Tom = Worley[SMTP:stkguru@netside.net] wrote: >Yes, this is a very difficult time to apply CANSLIM, >it works far better in a well established and defined bull mkt. Can it >work now? Yes, but it takes more work, more attention, more worry, and >quicker decision making. Opportunities are much briefer, both to buy >and to sell. So I guess what's being said here is that I need to sit tight, keep my = powder dry, and wait for buying opportunities that will surely come. Ok, = I can do that. And in the meantime I can put the time to good use by = studying and learning more about CANSLIM and the O'Neil teachings. The = more I read O'Neil's book and about CANSLIM the more excited I get about = the possibilities. Up to now the best I've done is 35%, which I sold too = soon. How often to CANSLIM buying opportunities come along? I'm guess we're = not talking about a daily thing. How long between the time you buy one = CANSLIM and you recognize and buy the next one? Weeks? Months? Years? = Are these things like picking up shells on the beach or are they scarce = as hen's teeth? - -- Bob Henry ------------------------------ Date: Wed, 19 Mar 1997 11:33:46 -0500 (EST) From: Haw-Jye Shyu Subject: Re: [CANSLIM] Divergence Dave: I am also trying to learn here. Not to defend myself, I believe I was the first one in this group saying that COMS's growth rate can not justify its PE. In the begining of this year, I picked LTV, PKX and CFI they are all on the bigboard (NYSE). I am still holding them. Although CANSLIM has chart reading as one of its element, but it also emphasizes on understanding the company business (N: new products, new management, new industrial trend...). Most of us tend to forget this critical element, because it takes hard work to get it right. Reading chart is a relative simpler and easier task. Not to mentioned the mentality of template matching. Find the cup, breakout...(I tried but with litte success). Yes, the chart does reflect the value of the stock but it is always lagging behind the true cause. A good example is ESOL! If you are going to use the index such as DOW, NASADQ or NYSE to evaluate your stock, I think, that is two more steps away from the real stuff. For me, this is good time to do bargain hunting. CSCO has dropped more than 36% from its top with current tailing PE=31.1. COMS has dropped more than 59% from its top with current tailing PE=19.3. With their market share/capital, debt ratio and the dominating role in the industry, I think it is good opportunity. What is the major changes took place during the past three months for these two growing company? Did the industrial trend change? Did they cook up the book? In bear market, a 30% drop is considered very severe. And yet, both of them surely have suffered more punishment than the bear market. I bought COMS at $38.5 (it lost 17% as of today), it sure is not a CANSLIM play. just my $0.02. HJS - ----- Begin Included Message ----- From owner-canslim@xmission.com Wed Mar 19 10:15 EST 1997 From: "David F. Cameron" Subject: Re: [CANSLIM] Divergence To: canslim@mail.xmission.com Date: Wed, 19 Mar 1997 8:21:39 CST Tom, Thanks for your response. I appreciate that when you respond, your writings are well thought out. But it really doesn't answer my concerns - maybe it can't w/o a crystal ball. I still think the divergence is a cause for concern and can't continue. Either the S&P has to fall - or the NASDAQ has to rebound some time. That may be later than sooner. But otherwise my scenario of a NASDAQ and S&P at the same "level" will happen some time. If it does, I'm done with this game and take my remaining capital into mutual funds. Tom wrote: Everybody has been saying this all along whenever one of these divergence messages pops up. I agree, BUT..... what I am trying to say is that at current rate, the multiple on the S&P will be HIGHER than that of the NASDAQ soon. THAT is my concern. THAT should not happen (or stay that way for long). Everyone seems to be saying oh the NASDAQ is more volatile because of the higher PEs. Well, folks, those PEs aren't as high anymore for the NASDAQ... Again, nice words - but then 2 months ago, the NASDAQ was 1% higher and the S & P was 7% lower. Does that mean that stock prices were a LOT more pricey on the NASDAQ then relative to the S&P. This is nice to say in hindsight - but at the start of the year, you as well as most others on this group rolled out more NASDAQ than big board stocks in front of us as potential picks. If you really believed this, you wouldn't have mentioned them. I appreciate your answer, but how do you KNOW this. One could have said the same thing at the start of '95 when the PE ratios of the NASDAQ were in the range of today's - but the PE ratio of the S&P was lower than today's. The NASDAQ outperformed the S&P in the first half of '95... I guess I'm trying to learn here - but no one is telling me anything I don't already know. Thanks for the attempt anyway. I guess what others have said is right. This just isn't a CANSLIM market, and I'm trying to play it as such - because that's what I know. My stocks (or stocks I've lost money on recently) are selling at lower PEs than the S&P, are on the NASDAQ - but keep dropping. Maybe that's a sign to follow Mike & Craig and just get out. Cheers, Dave Cameron dcameron@harper.cc.il.us - ----- End Included Message ----- ------------------------------ Date: Wed, 19 Mar 1997 17:52:51 +0100 From: Johan Van Houtven Subject: Re: [CANSLIM] Divergence At 11:33 AM 19-03-97 -0500, you wrote: >I bought COMS at $38.5 (it lost 17% as of today), it sure is not a >CANSLIM play. >HJS The once accelerating growth in the networking sector is slowing down. that is the reason for the decline of the networking stocks. I know several dealers here in Belgium that agreed with this. Personally I won't try to catch a falling knive again. Last time (a few months ago), I got hurt real bad. That's why. - --- Johan Van Houtven / CLICK! ------------------------------ Date: Wed, 19 Mar 1997 12:16:24 -0500 (EST) From: Haw-Jye Shyu Subject: [CANSLIM] Netwrok sector Johan: The growth rate of network may be slowing down (but how much?) in the US and Western Europe. How about the Eastern Europe, Russia, India and Asia? Does this slow down of grow rate (in Europe and US) justifying the price drop of the CSCO and COMS? HJS - ----- Begin Included Message ----- From owner-canslim@xmission.com Wed Mar 19 12:04 EST 1997 X-Sender: p4u00088@pophost.ping.be Date: Wed, 19 Mar 1997 17:52:51 +0100 To: canslim@mail.xmission.com From: Johan Van Houtven Subject: Re: [CANSLIM] Divergence The once accelerating growth in the networking sector is slowing down. that is the reason for the decline of the networking stocks. I know several dealers here in Belgium that agreed with this. Personally I won't try to catch a falling knive again. Last time (a few months ago), I got hurt real bad. That's why. - --- Johan Van Houtven / CLICK! - ----- End Included Message ----- ------------------------------ Date: Wed, 19 Mar 1997 11:37:39 -0600 From: "Brenda" Subject: [CANSLIM] Martin From Sweden Martin, you state you have been trying to find out how to use the CANSLIM method in the Swedish market, what is it, and how does it work. You are on the right page and I find most on this page to be good students of Mr. O'Neil and his method. I have several recommendations for you. First, get the book How To Make Money In Stocks and read it rapidly not spending a lot of time trying to understand, disect, assimilate or study any part of it the first time through. (Read it as if it were a light escape reading book). Second, go back starting with Chapter ONE, page ONE. Take each chapter and do not move onto the next until you feel you could discuss that chapter intelligently with almost anybody. Go through the entire book this way. It it takes you a week or a month, don't worry about missing something in the market while you are doing this. If a system only works once, twice or three times or only under certain circumstances then you can live without it. Third, get a charting service that allows you to look at graphs of stocks on a daily basis. I happen to use TC2000. There are others and maybe some are a lot better, however, for $.99 a day I can download as many graphs as I care to download. For $.39 I can add a years history of any stock I want to and then have it added to my base to continue following on a daily basis. Fourth, set up a portfolio on paper. Start making purchases that follow what the Book suggests. Don't make any purchase that does not meet the Books guidelines. At least once a week, read and re-read the section entitled the biggest mistakes investors make. KNOW this chapter. You will make plenty of mistakes but at least try to avoid most of the ones in this chapter. After you feel that you would not be embarrased to discuss the CANSLIM system with Mr. O'Neil himself, and after practicing what you "think" you know for at least 3-6 months ON PAPER you should be ready. Your mistakes will outnumber your successes. We here, at Up Up and A Way follow the CANSLIM approach basically. We deviate from it in three areas that we are aware. First, we might recommend a stock that does not have enough of a float (outstanding shares) for Mr. O'Neil. Second, as I understand his book, he may be selling some of a position while we are buying more of it. Third, I take that his first choice in graph shapes is a high, tight flag and second being a properly formed cup with a handle. We would much prefer a stock whose graph goes from the bottom left corner of the page, advancing steadily upward going to the top right corner of the page, the straighter the line the better. We want NO volatility if possible. Take a look at ESS. RA did it for a while. CLI also. TAM was not bad for a while. We would like to see the stock do this consistently for a minimum of NINE straight months. Now, if we buy this stock and it immediately heads south we must be the unluckiest investor ever born. Don't forget, we grade stocks weekly and grade them on EPS, REL, ACC, Group, Sponsorship, Volatility (graph's shape), and per cent of stock owned by management. We WANT stocks that grade out 95 or higher in ALL categories. We think Mr. O'Neils book is the best ever written. We consider it timely and to still work and to work very well. We read new material and none yet compares. Learn what he has to say. Then attempt to use it, even if on paper. Then, you are at a starting place. Remember, nobody can do it for you. The more homework you do on your own, the more it becomes a part of your life. The more you study and refine and increase your knowledge, the more you will see the bottom line make you smile. The hours are long and at times like this you will wonder why, BUT the rewards are great for those willing to put in the time. Also, remember, MOST will call you foolish, a gambler, crazy, and a various assortment of other non-flattering names. MOST do not understand. Once you do you will be amazed at how few WANT to understand. Buy good companies, with good earnings, with good management, owned by good perfroming Mutual fund, stocks usually breaking into new high ground and this is your best chance. If these stocks don't perfrom what other group would you expect to do better. Good luck. Study hard. Enjoy. Have fun. AND, once learned you will have something that most do not and something that nobody can ever take away. James ------------------------------ Date: Wed, 19 Mar 1997 11:58:54 -0600 From: "Brenda" Subject: [CANSLIM] Tom - "Our Trip To Miami" Tom, Glad to see some of us have still not lost our sense of humor. Laughed out loud when I read your comments. Of course, then there are a LOT of people who don't seem to like nice, sunny weather. It seems they like to continually buy those stocks that just can't go down any more. The risk on the downside is small but it just "has to" go up. I'd wait and buy this one on a pull back. That stock is fully valued and breaking into new high ground so I'd wait for it to come back. Ever heard any of these comments? If you listen to the station I do you hear them all day long. What is amazing is that most make six figure S A L A R I E S and some even seven figure S A L A R I E S. Our timing indicator that you inquired about is quite amazing. It predicted that today would also be a down day and a big down day. If this hold true throughout the day I would "expect" the indicator to tell me that either Thursday but more likely Friday would be a VERY strong day for our Wall Chart stocks. Generally, the market does the same thing but not always. It's really not that complicated and an article in Barons about two months ago was by a Big Dog that is doing the same thing DAILY but with a larger base of stocks. I wonder if his base is still that large. We are constantly refining ours and are having a tough time keeping stocks on it. Keep up the good work and keep that sense of humor. James ------------------------------ Date: Wed, 19 Mar 1997 11:50:44 -0600 From: "Brenda" Subject: [CANSLIM] Bob Henry - Scarce as Hen's Teeth? Bob, I agree with Craig that CANSLIM works better in a bull market. I also agree that there are still opportunities out there now. We have a base of stocks that has on it every single stock that has been on the Week-End Review section of IBD since 1990. We also add stocks that others bring to our attetnion and even the ones CNBC mentions. We are constantly looking for new stocks to put onto our base. We let TC2000 daily search our base for certain parameters and then once a week or at least every two weeks we go through the ENTIRE list stock by stock. Time consuming? Certainly! Worth it? You bet. We have what we call a Wall Chart. It consists of stocks whose graphs (price patterns) are still intact. Each day we summarize those stocks activity. % Up, % down, % unchanged and % closing at new 52 week highs. We ARE having a hard time keeping the list over 100 stocks right now but as long as we keep it over that it still works. RIGHT NOW, our list of wall chart stocks are AVERAGING 1 out of 4 closing each day at a new 52 week high. One week ago, it was averaging 30-40% closing EACH day at new highs. Are there opportunities there? You bet. We seem to think so. It takes a lot of work and even in todays market we are finding more stocks to invest in than we have available capital. Are the time frames smaller as Craig mentioned? You bet. Good luck in your search and if you find something good let us know. James. ------------------------------ Date: Wed, 19 Mar 1997 14:05:23 -0500 From: Hemant Rotithor Subject: Re: [CANSLIM] Martin From Sweden James Thanks for the detailed writeup. Brenda wrote: > We would much prefer > a stock whose graph goes from the bottom left corner of the page, advancing > steadily upward going to the top right corner of the page, the straighter > the line the better. We want NO volatility if possible. Take a look at ESS. > RA did it for a while. CLI also. TAM was not bad for a while. We would like > to see the stock do this consistently for a minimum of NINE straight > months. From the description, my understanding of your methodology is that your TC2000 has a scan that filters stocks based on a linear regression with a positive slope that lies within a threshold(?) and for which the volume seems to have been breaking out/increasing. What is the NINE months heuristic based on? is it based on your research or is it well known (published in a Lynch's book)? Now, if we buy this stock and it immediately heads south we must be > the unluckiest investor ever born. Don't forget, we grade stocks weekly and > grade them on EPS, REL, ACC, Group, Sponsorship, Volatility (graph's > shape), and per cent of stock owned by management. We WANT stocks that > grade out 95 or higher in ALL categories. What weights do you assign to each of these factors after you have screened the stocks is unclear. Clearly, in case of DELGF, EPS and REL were unimportant. Which ones are a must and which ones are a nice-to-have? Also, I am curious, how long back have you tested the methodology? Has it been tested in a bear market? How long has your news letter been in existence? Please understand that I am just being curious and I do not mean to offend in anyway with my questions. I see that your posts have been greatly contributing to this forum and I would encourage you to keep it up. Thanks ------------------------------ Date: Wed, 19 Mar 1997 15:42:06 -0500 (EST) From: Craig Griffin Subject: RE: [CANSLIM] Investment Question. Dave, You wrote: >This year I'm below breakeven >because most of the breakouts are failing. Once I get 2 or 3 stops hit in a row, I take a break for a while. When things are not working, either I am not working or the market is not working. >My problem this year is not the 10% rule, but the fact I've had 2 stocks gap >down giving me 30% losses. Usually there are warnings prior to gaps down. My guess is that both of those stocks had some warning action, suggest a review of both daily and weekly graphs with 50 dma and volume study. Especially take a look at weekly volume. Sometimes signals are well masked in daily action. But show up in the weekly. For example, three down weeks in a row with volume rising week to week is a red flag. Increase in volatility is often a clue. IMO 10% stops are too loose in this market (and in most markets, except for a young, strong bull mkt). O'Neil says he tries to recognize when something is not working quickly and get out with a 2 or 3% loss, or even a small gain. The 8% figure is just the final red line, below which he will not go. Often one can buy a breakout and at the end of the first day be up by 1/4 point or so, but things don't feel right. A different example, I bought QCOM recently at 60. I started out ahead that day (closed around 62). But the next day it crashed back down through 60 on volume about equal to the day before to close at around 59, retracing almost all of the prior day's progress. I was out at 59 1/2 the next day. Honoring an 8% stop would have required I wait until QCOM hit 55. Looks like it might close there today. OTOH, had it behaved differently to get to the same price point ... say with a slow drift back from 62 to 59 with higher volume up days than down, I probably would have sat with it, even at 59. The action that says "out today" even if you are ahead, will not always be as clear as in QCOM's case, of course ... And QCOM might be ok, it still has not hit the 8% hard stop, but in this market, it is worth the insurance. Compare to TAGS. It had some strong down volume the day following the breakout, but it did not retrace much of the move from the day before. The next day was up on weak volume. At this point I would be starting to worry. The next day, higher volume again and down. But the up down is basicly the spread on the stock and now the chart is starting to "form out" and looks tight. So, I worry less. The next day is up on good volume, still tight. Next day no movement, no volume. Finally the stock moves up again on strong volume, I relax, maybe buy a little bit more. Just an example to show, my finger is close to the trigger, even on the ones that end up working. Now some time has passed and the stock is coming to another critical juncture. Down two weeks in a row, very high volume this week, and approaching the 50dma. Will it hold here? Will the volume dry up as the price bottoms out? OR will it pause on the 50dma and then crash through? None of this threatens my stop directly right now, but if it does not hold in this area, I would possibly sell, depending on the price/vol behavior. I attribute a lot of the weakness in this stock to the market and would say that it is telling its holders what the market has already been saying: "maybe a good time to be in cash". But if I was sitting with it now, I would give it until tomorrow to see if it doesn't start to tighten up. This is another reason O'Neil recommends only 4 or 5 stocks, you need to look at each of their charts, every day, and maybe check them a couple of times during the day (IMO), until you are well ahead. The longer one is in them and the further ahead, the less daily checking one will tend to need. Then the 50dma becomes your signal, or maybe the 200dma eventually, or a failed breakout from the latest base (like ASND recently). >So either I was lucky in '95 or the market >has changed, or both. The market has changed. '95 was a rip snorting bull. '96 was a much narrower market. '97 is even narrower so far. '97 is definitely a trader's market, not a buy and hold style market IMO (although James seems to be doing well in spite of the odds). There are some stocks that are working, maybe James can give us some more ideas on how to identify which ones those will be. >As other posters have pointed out, quick ins-and-outs have worked >well of late. This is not really consistent with the CANSLIM >ideal. I've been slow to realize this - and have negated all >my earlier gains in the last 2 weeks. > I agree, right now, one does need to scoop profits at the first sign of weakness if one is going to be buying stocks in this market. Or stand aside and wait for the bull to resume (which has been my choice). Another option is too look at the bigger more stable names which are breaking out, like WMT last week for instance. Probably even an ok buy in here after the Merrill Lynch "Focus One" pick today (assuming one really, really wanted one's money in the market). Best regards, Craig ------------------------------ Date: Wed, 19 Mar 1997 15:42:14 -0500 (EST) From: Craig Griffin Subject: Re: [CANSLIM] IOM and ODIS (was Investment Question) Tapas, At 02:01 PM 3/17/97 -0500, you wrote: > I am a relatively new investor, I find it difficult to make any decision > (BUY MORE, SELL, WAIT ) on the following two stocks I own, > 1. IOMEGA(IOM): > I bought this stock on 20 about 6 months ago, made First general rule, don't buy more of a stock and "average down". This results in putting more money into your losing stocks. Better to put your other money to work else where (or keep it on the sidelines until the market is better). You probably bought these before knowing about buying breakouts and 8% stops. Even a 10% stop on IOM would have had you out at 18. Now that you are so far underwater, it is hard to give any advice other than "don't buy more". If you wish to reduce your risk, you could sell 1/2, for example. Or you could wait. I cannot predict what IOM will do from here at all. > > 2. OBJECT DESIGN(ODIS): > This company is leader of Object Oriented Database Management S/W, > I heard the rumor that it was a takeover target by ORCL/MSFT. > Seek your advise on this. You can't trade on rumors or tips, they will get you in trouble nearly every time. Otherwise, same advise as on IOM above. Don't buy more. As to "hold" or "sell some" or "sell all", I couldn't say. As for your initial buy - do not chase stocks that are extended by more than 10% from a valid base (8 weeks or longer). In this case, you did that and it has bitten you (of course you did not know about CANSLIM at the time). Strangely enough, I often do the best in stocks that I know very little about other than what Daily Graphs tells me. Why? Because it is too easy to fall in love with the story of the stock or the product, if you know a lot about them. And this can cloud one's judgement ("this is a good company with a great product, it just cannot go down any further" are famous last words). Why? Because the market usually knows more than you do about a company (pardon me Peter Lynch). For example, that great database system may be getting clobbered by a new release of Access from Microsoft in 6 months, or maybe IOM is finding that its margins are being eroded because of competition, or high levels of returns, or whatever. And it is very hard for you to know this. The market is often wrong about a company, but it is more often right. I only like to invest when the market's opinion and mine seem to be in sync (when the stock is breaking out of a base on >150% of average volume and meets CANSLIM characteristics). I suggest you do the paper trading recommended by James (aka "Brenda") in his recent post. Read or re-read O'Neil's book. And discipline yourself to only buy breakouts from valid bases (within 10% of the pivot point) and to cut your losses at 8% at the most. Sorry to not give you more advice on IOM & ODIS, but I can't predict. I can say that typically the earlier one takes a loss the cheaper that loss will be. Although, sometimes it is worth waiting for a little bounce first. Hope this helps. Craig ------------------------------ Date: Wed, 19 Mar 1997 16:05:09 -0500 (EST) From: Craig Griffin Subject: RE: [CANSLIM] Investment Question. Bob, At 11:39 PM 3/18/97 -0500, you wrote: >How often to CANSLIM buying opportunities come along? I'm guess we're not talking about a daily thing. How long between the time you buy one CANSLIM and you recognize and buy the next one? In a good market, the problem is deciding which ones are likely to be the best. One could buy one or two every day for several weeks on average. Then there may not be many for a month or two. Then a fresh batch comes along. At times like now, with a weak market, there are still probably several a month. Another way to quantify it: look through Daily Graphs and find all stocks with 4-5 years of earnings growth (eps up every year for the past 4 - 5 years). Then look back at the most recent base and breakout for that stock (it will almost invariably have had at least one solid base within the last year). How many do you get? 300? 500? That would be 1 or 2 every day on average over the last year. Another way to look at it, use the universe of stocks from "Your Weekend Review" in Investor's Business Daily. How many are there? 200? Probably 99% of those stocks have formed a base and broken out within the last 12 months. Remember, there are 9000 stocks or so in the 3 major markets (NASDAQ, AMEX, NYSE). If the Canslim stocks are the best 2%. Then that is at least 180 bases and breakouts per year (assuming only one base and breakout per stock). Frequently, a strong CANSLIM stock will breakout from a base, run 30%, form a new base, breakout again and run another 30%, all within the space of a year. So, they are far more common than one would think. Of course the best of the best may be only 25-50 stocks or so. Craig ------------------------------ Date: Wed, 19 Mar 1997 13:45:01 -0800 From: Brian Nash Subject: RE: [CANSLIM] Divergence Talk about divergence - just look at today's close: Symbol Change %Change $INDU -18.88 -0.3 (even though it was worse in mid-afternoon) $SPX -3.89 -0.5 $COMPQ -20.05 -1.6 (I think the Nasdaq 100 was - -1.9%) $IXCO -12.85 -2.6 (Nasdaq high-tech index off 2.6%) $PSE -5.59 -2.3 (PSE high-tech index off 2.3%) $SOX -8.74 -3.3 (Semiconductor index of 3.3%) > ---------- > From: Johan Van Houtven[SMTP:Johan.VanHoutven@ping.be] > Sent: Wednesday, March 19, 1997 11:52 AM > To: canslim@mail.xmission.com > Subject: Re: [CANSLIM] Divergence > > At 11:33 AM 19-03-97 -0500, you wrote: > > >I bought COMS at $38.5 (it lost 17% as of today), it sure is not a > >CANSLIM play. > >HJS > > The once accelerating growth in the networking sector is slowing down. > that > is the reason for the decline of the networking stocks. > > I know several dealers here in Belgium that agreed with this. > > Personally I won't try to catch a falling knive again. Last time (a > few > months ago), I got hurt real bad. That's why. > > > > --- Johan Van Houtven / CLICK! > > ------------------------------ Date: Wed, 19 Mar 1997 17:33:56 -0800 From: pwahl@postoffice.worldnet.att.net Subject: RE: [CANSLIM] Investment Question. > To: canslim@mail.xmission.com > From: Craig Griffin > > IMO 10% stops are too loose in this market (and in most markets, except for > a young, strong bull mkt). O'Neil says he tries to recognize when something > is not working quickly and get out with a 2 or 3% loss, or even a small > gain. The 8% figure is just the final red line, below which he will not go. Good point. I have been thinking of mentioning this myself. I also use the idea of a "time" stop to exit a stock. If it doesn't move after a few weeks, I may exit with the stock +/- 2% from where I bought it. I recently was in EFII, and after it dinked around near my purchase price for a couple of weeks with no forward progress, I exited at a 2 percent loss. If I would have hung around, I would have taken the 8% loss because it headed south shortly thereafter. > I agree, right now, one does need to scoop profits at the first sign of > weakness if one is going to be buying stocks in this market. Or stand aside > and wait for the bull to resume (which has been my choice). That makes at least two of us. One would need to be a more nimble trader than I am to make money. When stocks are thrashing around as they are now, even the good ones don't seem to make headway, although James would seem to have some experience that would indicate otherwise. I certainly never seem to be in the good ones in these bad market conditions. ------------------------------ Date: Wed, 19 Mar 1997 21:03:24 CST From: "David F. Cameron" Subject: [CANSLIM] RE: Investment Question & Divergence Gang, This is wordy, but I think it is insightful - if I do say so myself. Bear with me... The theme is that I want to demonstrate that the short-term approach needed to make profits today is not really all that consistent with the CANSLIM approach. This message will try to explain why. Thanks for the insightful comments. It seems many of you agree that the short term pix can pan out - and you're better off keeping your finger on the trigger in this market. Tying together the "Investment Question" thread and "Divergence" which have a lot of overlap, there seems to be a common underlying response that more volatile stocks (which CANSLIM types often are) are getting hit lately - or at least more so than non-volatile stocks. I still find it AMAZING that a huge company like Coca-Cola continues to climb and is selling at a PE much higher than INTC, TRID, and many other NASDAQ active stocks which have been talked about of late REGARDLESS of size. I am NOT a good short-term trader. My time horizon was been more to ride a move. In '95 (a rip-roaring year, to use Craig's term), I rode Tellabs up 50% in 3 months, I rode STAR up 80% in 9 months, and a few others. My interpretation of O'Neil is that his average holding period is MUCH longer than the average holding period required to make money in today's market. To use NATI as an example, Zoran bought and sold twice - holding for a couple days each time. I took a 5 day vacation, and the stock was down 15+% when I returned. In contrast, if you look at the chart examples in _How to Make Money in Stocks_, most of O'Neil's examples say something like: "Advanced 300% in next 18 months...". He DOESN'T say "Advanced 15% in next 3 days". _How to Make Money in Stocks_ emphasizes stocks which advance well over the intermediate term, and are usually higher PEs than those in the Dow 30. Now, it is NOT a CANSLIM market. Why? Intermediate term strategies as indirectly espoused by O'Neil through his examples (see above) are failing (at least for me). Higher PE stocks are getting crushed relative to the Dow 30 (Coca-Cola excepted - I consider it a high PE stock...). Again, I thank several of you (Craig, Patrick, etc...) for your words of wisdom. I'd send you a check - but all my money is gone ;-( (welll.... not quite yet). I can't do short-term stuff - so I'm getting out for now. Dave Cameron dcameron@harper.cc.il.us p.s. To HJS: I didn't mean to put you in a position to feel you had to defend yourself. I was trying to point out that if your pix were Big Board stocks (which you're right - they are/were), they weren't really CANSLIM stocks - more a blend of CANSLIM and value plays. ------------------------------ Date: Wed, 19 Mar 1997 22:08:03 -0500 From: "Tom Worley" Subject: Re: [CANSLIM] Jabil Charts no longer "ok", stock gapped up 6 pts on these results. tom w - ---------- > From: pwahl@postoffice.worldnet.att.net > To: canslim@xmission.com > Subject: [CANSLIM] Jabil > Date: Wednesday, March 19, 1997 9:46 AM > > Anyone know anything on Jabil Circuits (JBIL)? They released > earnings today of .58 versus year ago of .34? and expected earnings > of .48. EPS rank is low, in the 70's, Acc/Dist also mediocre at C, > RS is 99. Revenue declined from a year ago. Chart seems ok, right > now undergoing a pullback after recent price runup. ------------------------------ Date: Wed, 19 Mar 1997 22:15:54 -0500 From: "Tom Worley" Subject: Re: [CANSLIM] Investment Question. This is a good time to do some "paper trading" of potential CANSLIM stocks. Won't teach you all you need, since some good candidates will still be battered down by the mkt, but you can learn a lot nonetheless. And if you are really gutsy, there can be some good short term, even day trade, candidates out there as well as some potential short plays. With an orderly mkt and regular effort at reviewing, you can have a half a dozen or more candidates "on deck" just waiting for the breakout. Of course, this requires some monitoring during the trading day, but it can be done. Based on my past experience in this kind of market, I am sure O'Neill's "buy" list is very short, but he probably still manages to find several new candidates each week. tom w - ---------- From: Robert Henry To: 'CANSLIM mail list' Subject: RE: [CANSLIM] Investment Question. Date: Tuesday, March 18, 1997 11:39 PM So I guess what's being said here is that I need to sit tight, keep my powder dry, and wait for buying opportunities that will surely come. How often to CANSLIM buying opportunities come along? ------------------------------ Date: Wed, 19 Mar 1997 22:23:25 -0500 (EST) From: Deepak Kapur Subject: Re: [CANSLIM] RE: Investment Question & Divergence Dear Dave, I agree with you hundred per cent. >contrast, if you look at the chart examples in _How to Make Money >in Stocks_, most of O'Neil's examples say something like: "Advanced >300% in next 18 months...". He DOESN'T say "Advanced 15% in next >3 days". _How to Make Money in Stocks_ emphasizes stocks which >advance well over the intermediate term, and are usually higher PEs >than those in the Dow 30. The way I understood from O'Neil's book is that if you made a mistake in choosing a stock, you get out quickly if it does not behave in the way you expect it to. But to make money, you usually have to stay longer, definitely much longer than a couple of days. >Now, it is NOT a CANSLIM market. Why? Intermediate term strategies >as indirectly espoused by O'Neil through his examples (see above) >are failing (at least for me). Higher PE stocks are getting The only thing I can infer from the way most CANSLIM type stocks are behaving is that the M part of the market is not in sync with the CANSLIM method. Deepak ------------------------------ Date: Wed, 19 Mar 1997 22:28:33 -0500 From: "Tom Worley" Subject: Re: [CANSLIM] Divergence CSCO and COMS both fall into the networking group, which has shown recent loss of growth momentum and, as a group, tumbled severely. It has yet to show defined resistance/support to the downside, and altho it made one group rally recently, may still have even further to fall. Here are some quotes from an article I got today on the group: Causes of growth slowing: "slower governmental spending in Japan, weak economies in Germany, France and Italy, uncertainty about global telecom deregulation, anticipation of new products" Future growth - "need to increase bandwidth remains strong in US and abroad, continued rise in corporate info tech budgets, tying of more computers to networks, more subscribers to the Internet" More immediate cause of such severe selloff: too many in same industry coming in below earnings and/or revenue expectations Has the bull mkt ended for networking cos, absolutely not. Is there a point to get in, yes, altho I would prefer to see some consolidation first, followed by analysts trimming down their forecasts to the ridiculous level. tom w - ---------- > From: Haw-Jye Shyu > To: canslim@mail.xmission.com > Subject: Re: [CANSLIM] Divergence > Date: Wednesday, March 19, 1997 11:33 AM > > For me, this is good time to do bargain hunting. CSCO has dropped more than > 36% from its top with current tailing PE=31.1. COMS has dropped more than > 59% from its top with current tailing PE=19.3. With their market share/capital, > debt ratio and the dominating role in the industry, I think it is good > opportunity. What is the major changes took place during the past > three months for these two growing company? Did the industrial trend change? > Did they cook up the book? > > In bear market, a 30% drop is considered very severe. And yet, both of them > surely have suffered more punishment than the bear market. ------------------------------ End of canslim Digest V1 #113 ***************************** To subscribe to canslim Digest, send the command: subscribe canslim-digest in the body of a message to "majordomo@xmission.com". 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