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I picked up the Investor's Reference Library screening tools a couple of
months ago and they have provided a lot of insight regarding the flow of
money into stocks. The premise is basically taken from O'Neill's CANSLIM
methodology and it works: buy the strongest stocks in the strongest sectors
and require strong earnings and strong accumulation. In a declining market
one must be far more careful however there are sectors and stocks making new
highs every day. There is no way to measure strength and demand long before
the strength is exhibited so the trick is to identify it early on when it is
showing up and then riding the trend ... in many cases those stocks will be
at or near recent highs but have the strength to carry much higher.
With respect to energy, there are times when sea changes occur and, as you
know, I believe energy scarcity is one of those changes which will be with
us for 3-5 years. Wall Street is one giant stock marketing organization and
it always needs a story with which to peddle stocks ... tech stocks were the
last story and I believe energy is quite likely the next story. You are
correct in remembering that energy stocks have several times been elevated
to astronomical PE's and that they, like tech stocks, were ultimately
trashed ... the trick I think is to not get too piggish but with a half
dozen Exploration & Production stocks carrying PE's of 5-8 and rapidly
rising earnings, I'm not yet concerned. The drillers I own do carry higher
PE's along with rising earnings and I'm keeping a close eye on them however
the institutions are accelerating their purchases (block trades) so I don't
think it's time to bail. The issue which makes the PE expansion proposition
a bit more dicey than prior history is a bear market in equities ... a
factor which keeps me very cautious. Were we in a bull market, I would be
buying aggressively on all dips and holding for 2-3 years, but for now I am
playing it week by week adding a bit here and a bit there as new candidates
emerge from the pack and old one's prove themselves worthy of increased
commitment.
My project for now is to build a shopping list which is ready to go when I
have buy signals on the market. Among the stocks I'm digging into which show
signs of accumulation: IKN, LIN, ANF, APOL, HSE, ACS, ANF, THQI, KMI, BGC,
BMET, MCCC, CHBS, RCII, EAT, PNRA - none of these are yet firmly ensconced
on my buy list because I have not completed due diligence. I've purposely
omitted all stocks which I hold (all of which are energy) and I sold RCII
late last week but will consider repurchase on retracement.
Earl
----- Original Message -----
From: "Don Ewers" <dbewers@xxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Sunday, March 11, 2001 10:27 AM
Subject: Re: [RT] Valuation - Tech
> Earl,
> I would agree we are close to a "bounce point" or should be which is why I
> am "looking" to see what some sort of analysis might "show" since the
> emotions are running pretty high in this sector. I have always been told
> "Buy panic and sell euphoria". The energy sector has done well (I know you
> have a boatload Earl, congrats) but with money flows as they are, my
concern
> is chasing stocks that have already made big moves. Value has been
recently
> the game today but it is also possible for it to become overvalued, some
say
> it is too late to invest there.
>
> The charts tell us allot certainly. Are they buying this or selling this
(as
> Ira mentioned). Pretty obvious what they have doing in tech which is
massive
> selling and energy /value stocks massive buying. Maybe it is just that
> simple. I did witness what happened to energy stocks after they peaked in
> the early seventies. This tech decline has many similarities when you look
> at it. And you are certainly correct any sector that witnesses these
> dramatic moves, frequently goes into "hibernation" for long periods of
time
> thereafter. Energy stocks sure did after the decline in the seventies.
That
> is why the "valuation question" can be helpful no matter which sector is
> being considered for investment, which is why I thought it may be worth a
> peak.
> Thanks for the input all . . . this helps. I will share anything I feel
> warrants a post to the list.
> don ewers
> ----- Original Message -----
> From: "Earl Adamy" <eadamy@xxxxxxxxxx>
> To: "RealTraders" <realtraders@xxxxxxxxxxxxxxx>
> Sent: Sunday, March 11, 2001 9:17 AM
> Subject: Re: [RT] Valuation - Tech
>
>
> > Before we get too enthusiastic about building a tech portfolio, let's
keep
> > in mind that in the larger picture, the NASDAQ is probably very close to
a
> > 500-900 point bear market rally to be followed by yet another leg down.
> The
> > bearish wave count is reinforced by the NASDAQ's total inability to
> > successfully challenge the top of the channel during a 2200 point (52%)
> > decline from the 01Sep01 high. Attached is an AGet weekly chart with
> weekly
> > wave counts and MOB's and a another set (log scale) using weekly close
> only
> > data which compares the current decline to the 1972 crash. One should
keep
> > in mind that the 1970's bubble did not begin to approach the scope of
the
> > current mania so this decline in the NASDAQ is likely to be more
> protracted.
> >
> > On a more optimistic note, my NYSE and NASDAQ breadth models, which have
> > been locked in sell mode for well over a month have completed the basing
> > required to trigger a buy signal on the first day on which decent
breadth
> > returns to the market.
> >
> > Finally, I would suggest that one might do well to forget about bottom
> > fishing techs (the Nifty Fifty of the 70's took years to recuperate) and
> > look at stocks in sectors which are on the positive end of investor and
> > institutional money flows (recent examples include retail, health, and
> > energy). There are stocks which have been climbing all through this last
> > decline. My weekend sector screens show accelerating accumulation in the
> > energy, transportation, defence, and a small amount in some of the
> > electronics sectors e.g Laser Systems.
> >
> > Earl
> >
> > ----- Original Message -----
> > From: "Don Ewers" <dbewers@xxxxxxxxxxxxx>
> > To: "Real Traders" <realtraders@xxxxxxxxxxxxxxx>
> > Sent: Sunday, March 11, 2001 6:37 AM
> > Subject: [RT] Valuation - Tech
> >
> >
> > > Avoiding trying to figure when and where the NASDAQ will potentially
> turn
> > > for the moment, what is the criteria one should use to invest again in
> > > technology.
> > >
> > > If possible let us also avoid an economic turn which understandably is
a
> > big
> > > part of the formula as is "product", market potential and so on. It is
> > > certainly not just price (XYZ has dropped below $20).
> > >
> > > Past earning performance, price to sales, price to book . . . . what
> does
> > > the "institutional" investor use to decide when to step in and
"invest"
> > once
> > > again in this sector (or should I say carnage) assuming their
investment
> > > horizon extends out for 1-2 years maybe more.
> > >
> > > Is there anyone on the list that knows what they look at
(understanding
> > > there may be better areas to invest in such as energy, value companies
> > etc.
> > > right now).
> > >
> > > Bottom line when will the Intel's, Sun Micro's, Cisco's, Microsoft's,
> LSI
> > > Logic, ADC Telecommunications have "value"? Thoughts anyone. Does this
> > > really represent a significant opportunity today for one who has so
far
> > > avoided this massive drop, as some are touting?
> > >
> > > The charts should tell us when to invest and that may be the ultimate
> > > answer, but for the moment is there any "fundamental's" one could look
> at
> > > also.
> > > don ewers
> > >
> > >
> > >
> > >
> > > To unsubscribe from this group, send an email to:
> > > realtraders-unsubscribe@xxxxxxxxxxxxxxx
> > >
> > >
> > >
> > > Your use of Yahoo! Groups is subject to
> http://docs.yahoo.com/info/terms/
> > >
> > >
> > >
> >
> >
> >
> > To unsubscribe from this group, send an email to:
> > realtraders-unsubscribe@xxxxxxxxxxxxxxx
> >
> >
> >
> > Your use of Yahoo! Groups is subject to
http://docs.yahoo.com/info/terms/
> >
> >
>
>
>
> To unsubscribe from this group, send an email to:
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>
>
>
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>
>
>
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