Australian (ASX) Stock Market Forum

How to pick a stock that multiplies?

Ken:

I generally agree with all that is said. I also prefer 4 or so well researched stocks, to a more diverse portfolio. I am in NZ, and spread stocks in different industries between Australia, NZ, Canada and Norway.

Because my holdings are longer term than some (6mths - 5 years) even when the technicals / charts look positive, I then talk with staff and, if possible, visit sites. An alternative to visiting is to look in the local magazines (ie at a community newpaper level), particularly with the smaller companies.

Locals are often very well tuned in to the small companies, the credibility of the board members, its ability to pay debts on time (a surprisingly good indicator of a well run company, at a time when there are plenty of mining companies who are unlikely to be able to fund exploration or undertake the work required to actual mine anything) and whether they know what they are doing.

I also check public records. For example, with mining stocks, I check the licence / tenement applications databases in the regions. Often, the companies public the licences granted, but not those that they have applied for but have not been granted.

I also consider geo-political issues. A current (and easy) example, is WA. If your investing style is short term then, given the current premier, uranium licences in that region may be of limited use. In the longer term, perhaps it is less of an issue.

Can I suggest care with companies whose board and ceo have been reserved substantial options (say 25% or greater of the total shares) exercisable for for substantila discounts (ie less than 50% of the shre price at the time of grant). It show a lack of shareholder focus and has a significant dilution, and depression, effect.

The Weinstein analysis is a simple and sometimes effective method that I see some use (for shorter term trades) and you can but the book on that and find plenty of free information on line.

If you want a free, and good, charting program, then I commend www.bigcharts.com.

I think that the trick is not picking a good stock, of which there are acutally quick a few, but timing the purchase. That is why I am happy to by on good fundamentals and at an undervalue, and wait for a breakout. If the fundamentals are good, the downside risk is also more limited and, even with the best research, shares can always go down.
 
Hi Dutchy,

Here's my AmiBroker code that flags my possible Weinstein trades. It generates about 10 buy signals a day. At the moment I'm just using MACD as the exit.


**********************************************

// WeinsteinScanner v2 amibroker version
// here we define buy conditions and name each one as a variable
PositionSize = -10; // always invest only 10% of the current Equity
Cond1=Volume > 1000000;// Volume greater than....
cond2=H > EMA(C,15); // todays high is greater than the 15 day Exp MA of closes
cond3=C < 3.00; // only trading in stocks less than $3
cond4=C > O; // todays close higher than open
cond5=HHVBars(H,150) == 0; // highest high over the past 150 periods
cond6=C > .01; // only trading in stocks greater than $0.01

// the following line is the trigger if all conditions satisfied
Buy=cond1 AND cond2 AND cond3 AND cond4 AND cond5 AND cond6;


Filter = Buy; // lists exploration results conforming to our buy criteria
AddColumn(Buy, "buy", 1.0); //


//SELL
// ApplyStop( stopTypeLoss, stopModePercent, amount=10 );
// fast = Optimize("fast", 12, 5, 20, 1 );
// slow = Optimize("slow", 26, 10, 25, 1 );
// Sell=Cross(Signal(fast,slow),MACD(fast,slow));


// shape = Buy * shapeUpArrow + Sell * shapeDownArrow;
// PlotShapes( shape, IIf( Buy , colorGreen, colorRed ), 0, IIf( Buy , Low, High));

**********************************************
 
An early entry is a good start. However more importantly: you need to let them run. I've made the mistake in the past of selling off (part of) a holding once the sp moved up say 50% or 100%. BIG MISTAKE. If you're on a winner, keep on it and don't sell until you have at least a six bagger or when your win reduces significantly in a short timeframe.
 
Hi,
Something to ponder ------

In a strong bull market - try "trading " from the monthly chart, mostly very good signals, and by the time it shows up on the monthly, the dangerous part of the trade is over (the start)

Do I trade from the monthly? - no, but I wish I had over the last few years, :( Basically, I'm still the amateur looking for the excitement of the chase, although I should know better.)
I know, I KNOW. Trading should be carried out without emotion to be done efficiently, but then again --- ;)

I only trade stocks less than $5.

Have a look at the monthlies

Maybe the way to go is to take out the trade on the daily, (keep the initial $risk low), then switch to the higher time frame charts to make you more risk taking and keep you in the trade longer.(let your profits run)

We tend to fall over mostly due to taking risks at the start of the trade, ie not taking our stops and taking the "she'll be right mate" type attitude and when we do hit a winner, we tend to take our profits too early (especially if we have recently experienced a few losers). When we hit on a winner, we should become more of a risk taker and give our winner a chance of becoming our trade of the year

Cheers
Peter
PS I still do ok with my present style of trading
 
Wow....it's amazing what you can find when you type in the right words into the 'SEARCH TAB".....WOW!!!

I saw this on another site and just had to spread it around a bit, it was posted 6 or so months ago and some here have already been in on the mentioned share, i think...but the baisic 15 points are well worth pondering when picking small caps, and I wish I had this info when I first bought in to any share....:banghead:

QUOTE......

I've been re-reading Philip Fisher's investment classic Common Stocks and Uncommon Profits to see how his 15 criteria for picking great growth stocks relate to SLA.

(For those who haven't heard of him, Fisher was an American fund manager from the 1930s to the 1970s with a remarkable track record for picking great growth stocks and widely considered to be the father of the growth style of investing in much the same way Benjamin Graham and Warren Buffett are considered to be the fathers of the value style of investing.)

I'll run through Fisher's 15 points for picking great growth stocks one by one with my own comments on how I think SLA stacks up. I'd also really appreciate some comments and feedback from others who have been following the company for far longer than me and have researched it in far greater depth to see how they think SLA rates.

One final clarification before I begin, in Fisher's words " A company could well be an investment bonaza if it failed fully to qualify on a very few of them (ie a few of the 15 points). I do not think it could come up to my definition of a worthwhile investment if it failed to qualify on many."

1) Do the products have enough market potential to increase sales for the next few years?

I think we'd all agree a resounding yes !!!

2) Does management have the drive to continue increasing total sales through innovation?

Again a resounding yes! one only has to look at the R&D pipeline.

3) How effective is the conpany's R&D relative to its size?

Phenomenal !!!

4) Is the sales and marketing organization above-average?

Probably to early to tell, but the early signs are encouraging.

5) Does the company have good profit margins?

Although we don't know the exact profit margins at this stage, they should be very high.

6) How is the company improving profit margins?

SibEx acquisition and new methods for Ropren delivery are 2 significant examples.

7) Does the company treat workers well?

I'm not in a position to make an informed comment here. From my limited dealings with them, they appear to have a happy and motivated staff. Can Charles or anyone who has had more dealings with the company than me give some feedback?

8) Does the company treat executives well?

I think Fisher was referring to larger organisations than SLA here with many layers of management. Probably too early to tell here.

9) Does the company have a deep management bench?

A subjective call here, but IMHO Denis and Vagif with the help of Peter, Charles, Gene and Victor Roschin make a great management team. Too early to comment on the new appointments.

10) Does the company control cost and accounting well?

Exceptionally well!!!

11) Does the company stand out amongst competitors in any way (particular to industry)?

Does it what! Try treatments for previously incurable conditions and diseases without side effects !!!

12) Is the company long-range forward-looking?

Excellent strategic management looking forward a long way!

13) Is the company going to dilute shareholders excessively?

Refer to point 10. An exceptionally frugal management who have their interests aligned with shareholders.

14) Does the company speak freely of the good as well as the bad?

I'd appreciate some comments here from those who go back with the company longer than me. As far as I can tell in my dealings with them, and going on the open and frank way in which Denis and Vagif spoke and answered questions at the AGM, I'd say not a problem.

15) Does the management have unquestionable integrity? ( Fisher regarded this point as the most essential)

Again a subjective call, But IMHO an unequivocal yes!!!

So... to sum up, I think SLA passes Fisher's criteria for a potentially great growth stock with flying colours.


good stuff I recon....opinions appreciated......:eek:
 
Well my opinion is that Fundamental analysis of this kind is subjective.
Thats why I like technical analysis like this as its vitally clear.
 

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Tech/a

first chart presumably SLA and the second?

Are you tring to show a likely outcome?

Thanx
 
No I'm simply answering the question of how I pick stocks which have the potential to multiply.

Its a move which happenned a over 12 mths ago in BDG.
 
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