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Some times it takes a little further thought before you climb on the train.
Several years ago the HMO and drug stocks were hammered to new lows and oil
prices were plummeting to $10 a barrel. Best performer this year, HMOs. And the
banks and brokerage stocks were booming. then came the high tech stocks, and
then the cell phone, cellular craze. The mention of DNA and genetics were the
signals to untold wealth. Now it is retail and energy that is running. It does
not take a rising market to make money. It doesn't take a falling market to make
money. It takes volatility in either direction to make money. There are even
strategies to make money in a horizontal market. If you trade tech stocks you
should have made money all the way down. In fact you should have made more
money in one year then the bulls did in 6. What happens to volatility as prices
drop? volatility increases. So a CSCO or N OK at 20 is far more volatile then
a CSCO or NOK at 65. Usually the higher the price, the lower the volatility.
The answer to profits is not a particular direction, but being able to trade
both directions and have volatility as your friend. have a good week end. Ira.
Earl Adamy wrote:
> 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
> > > >
> > > >
> > > >
> > > >
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> > > >
> > > >
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