Selecting stocks

Discussion in 'Trading' started by Joe Ross, Sep 17, 2010.

  1. Stock book values, Price-Earnings Ratios, and stock dividends are not the fundamentals that determine a stock's price trend. Strong increased earnings, preferably over the last five years, are the most bullish fundamental statistic related to the price trend of a stock.

    The best P-E ratio for strong rising stocks is over 20. These stocks remain in strong bull markets about 18 months. At the end of a typical bull market move, the P-E ratio will have doubled to over 40.

    Stock traders should buy stocks that have increased earnings of 50% greater over the previous quarter minimum and show a solid earnings trend on an annual basis for five years. Be prepared to buy these stocks the moment they break out to the upside on a technical basis, or buy them when they post 52-week new highs. Wal-Mart and Tyson increased over 4000% in the decade of the 1980's. Both of these Northwest Arkansas companies met the above evaluation criteria. Another way to find good stocks is through the CANSLIM method. William O'Neil gives his excellent CANSLIM method away with a free Investor's Daily trial subscription. You might want to try it.

    When I was living on a mountain top in South Africa I had only end of day data. The expense of using the Internet was so prohibitive as to make anything else not worthwhile. That is when I developed my own method for selecting stocks. It was really quite simple, and it worked. I have shown it to many of my students and they have seen it work. The method is to look for Traders Trick Entries (TTE) ahead of Ross Hooks (Rh).

    Here is the "magic" way I did my stock selection: I hope you are ready for this! I typed in aa, ab, ac, ad, ae, af, etc. consecutively, until I found a stock that was making a TTE ahead of a Rh. For the next stock, I began with ba, bb, bc, bd, be, bf, etc. I rarely completed a letter series before I found something that met my qualifications. Furthermore, I don't recall having to use a 3-letter symbol to get the trades I wanted. The only qualification was volume, and I insisted on 400,000 shares/day. Sometimes it was drudge work doing it, but it met my other qualification -- to be able to trade from any place in the world, including a mountain top, as long as I had a telephone, a modem, and a price chart.