ktm, 2 questions if you don't mind: 1) I think I understand why you look for sector leadership, good financials, etc. since you want to make sure the stock will not completely tank. But why do you search for value using Graham/Dodd, etc? Does that help you know that a stock won't tank? Or is your goal to find a stock that will tank for awhile so you can make money on the way down only to see it resurface so that you can resell and recoup what you paid? 2) Is there any way fairly automated way to find sector/mkt leadership w/o having to examine a bazillion stocks or pay for a bazillion analyst reports?
Correction: I should have said on #1 that rather than just recoup profits, you then get pure profit since you've already broken even or better on the way down.
1) I am generally not concerned with a stock's direction at the time I buy. I like to buy during a techinically positive event (basing @ support, coming off a double bottom etc...) but the valuation is more important. The Graham/Buffett approach forces me to look at all the pertinent aspects of the financials to make sure I'm not missing anything. I have a very long checklist. Using MIR again, I checked them out very thoroughly and started to buy at a PE just below 10. The industry PE low for the last 5 years is a bit over 9, so that's a good starting point - and Mirant does better than the industry average in many areas. Now the PE is down to the 5 range and the financials are relatively strong otherwise so I feel even better about it now. Had the stock turned at 14 and headed back up, I would have made about 12% in a month and been out. I'll take that too. 2) I have not found a way to screen for sector/industry leadership. If you find a way, please let me know. I am wary of the possibility for a number of reasons. Take MSFT vs. ORCL database tools for instance. (Using rough numbers) ORCL says they have 70% market share and MSFT says 3 times as many people use their product over ORCL's. Who is the industry leader? They are both telling the truth. ORCL sells a much more expensive product to fewer people. Using sales revenue, ORCL is clearly ahead - using seats, MSFT is far ahead. I fear a screening tool would be incapable of discerning these sorts of issues.
Thx for all the ideas. I am wondering though if TA plays significantly into your strategy? To me it seems that TA would provide valuable estimates as to the pricing of the stock (overbought/oversold) and it's likelihood of heading up anytime soon. Or do you go strictly by QA types of estimates (Graham/Dodd, P/E) for this?
TA plays a very small role. I use Chaikin Money Flow to see where the motivation might be on a given day...buyers vs. sellers and I'll sometimes analyze the block trades and tape for anything unusual. In a downtrend with heavy selling, I have found that large cleanup prints are usually good reversal signs. Aside from that, it's mostly fundamental.
I also use mutlex.com's screening tools. But have difficult to download spreadsheet on WIndows ME, so I have to switch to my Windows XP to do download. anyway, Following is my criteria: 1. 6< close price < 40 2. Daily Volume >= 0.074 million 3. Sales%ChgPYQ > 10% 4. CurQEPSMean > 0.02 dollar 5. DbtLT2EqQ <= 0.75 6. CurRatioQ >= 1.2 It found 238 stocks last weekend. ktm, would you elaborate on your criteria a little bit as I believe it is difficult to set up a threshold for P/E ratio because it varies from sector to sector. Thanks for all of this,
Your screen looks good to me. Some of the relative industry/sector historicals may need to be obtained from somewhere else. It's under "ratio comparison" on Multex but I haven't found a way to screen for it. You may be able to find other websites that would have the cumulative data. I have gathered mine both manually and through industry contacts who would send me files over the years. The only addition to the screen I would make is that the stock should be optionable. Again, Multex does not have this field as part of the screening process. Based on your daily volume of 75K, I'd say 1/3 to 1/2 of your screen would not trade options. I use about 30K a day min volume, but with non-optionable stocks it's a different game. Things take much longer to play out and it's tough to get a big position unless you want to be meeting with mgmt.
Hi, have you checked out following sites already ? www.vectorvest.com Vectorvest tries to combine fundamentals and technicals in a single approach. Strong emphasis on undervalued stocks. Has it's own parameters and calculation methods to evaluate the fundamentals of companies. Their stockscreening software can make live a bit easier for investor type traders ( i.e. longterm traders ). www.wallstreetcity.com ( check their ProSearch function ) Good luck