Welcome to the West Linn &
Surrounding Area’s
IBD Meet-Up
Thursday, April 24th, 2014
Agenda – April, 2014
• Market Condition
-
Scott O’Neil Webinar Wednesday 4/16 (0:00 – 17:41):
http://www.marketsmith.com/Learn/Webinars.aspx
• How I Build a Watch List – Method 1
• Team Based Stock Portfolio Contest
• Q&A: Specific Stock Review
How I Build a Watch List – Method 1
Definition/Key Points:
-
A list(s) of stocks that pass a set of specific criteria that represents an initial high
likelihood of buying (taking a position) and will be used as the primary source when
considering opening new positions at the right time
-
Stocks will be prioritized and buy points pre-planned. In some cases, triggered
auto-buy orders will be established within my brokerage platform
-
Once a position is opened, the stock will be moved off of the Watchlist to the
“Open Positions” list where it will be subject to further buy (secondary buy points),
sell, and portfolio “rules” depending on market conditions
-
My watchlist is not a list of all stocks I find “interesting” or stocks where I wonder
what might happen next “with this one”
-
My watchlist does not represent every stock in the various IBD lists that are building
a base or approaching or are in a proper buy zone. My watchlist is used for buyable
stocks, according to my investment personality, that pass an initial set of criteria
that I have defined
Market Condition - Correction
Key Points:
-
Typically will be mostly in cash (low percent invested)
-
Watchlist will only include stocks with early base patterns (either building right side
of base or pulling back)
-
Watch list will not include any “alternate” entry points (3 weeks tight, pull back to
50 DMA)
-
Will buy on follow through day or other signs of obvious institutional buying in the
overall market and in leading stocks
Confirmed Uptrend (< = 4 dist. days)
Key Points:
-
Typically will be mostly invested
-
Watchlist will include stocks with early base patterns and include stocks developing
alternate entries such as low volume pull backs and 3 week tight patterns
-
I will be watching stocks I have a position in for add on buy points and will add to
my positions as opportunities emerge
-
Will take new positions as opportunities emerge (will now also consider buyable
gap-ups)
Confirmed Uptrend (> = 5 dist. days)
and/or Uptrend Under Pressure
Key Points:
-
Typically will be mostly invested, however, at times will be less invested due to
stocks reaching profit goals and new base patterns being more difficult to find
-
I will be watching stocks I have a position in for alternate add on buy points but will
be much more cautious on adding to my positions (smaller)
-
Watchlist will include stocks with a strong emphasis on proper buying range from
early base patterns (either building or pulling back).
-
Watchlist will still include stocks that are exhibiting secondary buy points if no
traditional base pattern buy points emerge, but will enter small and cautious
-
Will buy as opportunities emerge (more cautious of buyable gap-ups), however,
increase level of defensive selling, take profits sooner than 20-25%
Watchlist Sources
IBD Lists:
1. IBD 50 (Monday & Wednesday: Research Tables)
2. Sector Leaders (Daily: Research Tables)
3. Big Cap 20 (Tuesday)
4. IPO Leaders (Tuesday’s & Thursday’s)
5. International Leaders (Daily: Research Tables)
6. Friday Review (Friday or MarketSmith 250 85/85)
7. Note: Other areas for sources of stocks: Multiple Features in Paper
Note:
Stocks on the watchlist can become ineligible on a daily bases by becoming
extended from proper buy zones. I move these stocks off of the watchlist and
set an alert to see if they pull back to their buy zones as 60% of leading stocks
will do this
Watchlist Criteria - Initial
Stocks my only enter the watchlist by passing the meeting the following criteria:
Stock Base:
1st or 2nd Stage; exception for Stock Base 3: 3 Digit EPS Current Quarter, 2 or 3 Digit
Sales Current Quarter
Industry Group:
IG<=40; exception for >40: 3 Digit EPS Current Quarter, 2 or 3 Digit Sales Current
Quarter (avoid single digit sales, want 20% for double digit). Cannot have both Base
and IG exceptions
Stock Rank in Industry Group (MarketSmith) for EPS, SMR, COMP:
EPS or SMR or COMP = 1,2,3 in group - can adjust to top 10% for large # of stocks in
industry group or 1, 2 for smaller # of stocks in industry group
Stock Select Ratings:
Mostly all “Pass”: EPS>=80, RS>=80, A/D=AB or C, EPS Last Qtr.>=20, Sales Last Qtr.
>=20, Price > $10, % of High < -15%, Funds > 5, any no pass ratings must have rationale
Earning Announcement:
Not within the next 5 days, maybe if within 10 days, want at least 15 days away
Watchlist Criteria - Next
Chart Review & Other Ratings & Company Story
- Volume & Price Action – Base Pattern Characteristics are good
- Price trend Above 50 DMA (10 Week Line): Exception for slightly less than 50 DMA
where pull back was on lower volume
- Up / Down Volume (looks at last 50 days) >= 1.0
- Fund Ownership increasing from last report with no sign of heavy +++ selling or if no
change in fund ownership seeing signs of obvious heavy +++ buying since last
report. At least 5 funds. Check if at least some "Best A+ funds"
- ROE > 17% (exception if entire industry group is lower then look for group
leadership)
- ROE + PTM >50 (under review)
- Liquidity : 50 DAV > 250k
- Company has strong value proposition / potential
Questions
Team Based Stock Contest
Goal:
Foster group member communication between monthly sessions, shared learning,
allow all in group to see “top” picks from different teams for investment ideas
Teams:
Would like 3-4 teams with at least 3 people per team. Need team leader volunteers to
facilitate discussions and help generate and follow contest rules
Timing:
1. Identify team leads. Eric will send note to all group members and ask group
members to contact leaders to be on their team. 1 week
2. Eric / Leaders formulate rules for contest and method of communication (google
docs) with tab for each team – everyone has access. 3 weeks
3. Official Kick-Off about 4 weeks with teams formed, stocks selected and posted by
next meet-up
Team Based Stock Contest
Rules (page 1 of 2):
1. Pick stocks from the IBD investing concept. For example – stocks coming out of
bases 1 and 2 stage preferably not late stages, how is volume and stock trading
personality behavior reacting, good growing companies – good earnings, revenue
growth, return on equity
2. Use the different search tales that IBD offers to locate and pick your stocks – IBD 50,
Big Cap 20, Sector Leaders, New America, Stock Spotlight, Your Weekly Review,
Leaderboard (IBD premium subscription service), various IBD videos that mention
stocks
3. Every participant is allotted $100,000 to invest in their choice of stocks. With these
basic rules:
‒ Cannot invest in ETFs, Mutual Funds, or any other investment instrument that
is not a stock. The idea is to gain knowledge and learn from this process, and
since the idea is to gain knowledge about stocks.
‒ Commissions will be ignored since we should not be day trading.
‒ Capped stocks selection at 10 maximum – if you pick too many stocks it is
harder to manage.
Team Based Stock Contest
Rules (page 1 of 2):
4. When submitting a stock purchase selection - a small explanation, preferable about
a paragraph, of the reason for choosing the stock, also a reason why you want to
sell when that time frame happens. Most likely the chart is going to be your reason
for selling. When submitting the purchase of a stock should include a sell target
that you are looking at.
5. All teams use standard template. Should include key points for the purchase and
sell of the equity.
Team Leader Volunteer Sign-up Sheet
Q&A: Specific Stock Review?