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Hi Alton,.... What's Common to Stocks that Double.
I was reading Bulkowski's Blog last Tuesday, thought you might find it interesting.
http://thepatternsite.com/Blog.html#P29
Tuesday 12/29/09. What's Common to Stocks That Double?
For the last year, I have been working on my fifth book. Part of it covers fundamental analysis, or picking stocks based on value. I just finished a chapter on stocks that double in price within five years and I thought I'd share the results with you. I used data from 1992 to 2007 on almost 1,000 stocks, but not all stocks covered the entire span. Fundamentals were provided by Value Line.
Here is the list of common elements.
Start with small cap stocks, those with market caps (shares outstanding times stock price) less than $1 billion.
Stocks priced between $5 and $20 have the highest frequency of doubling.
Look for low price to book ratio, below 2.5.
Find stocks that are reducing capital spending (cap ex).
Price to cash flow below 8 is good, below 2 is better.
Focus on stocks that do not pay dividends, but this is a 60/40 thing.
Look for companies cutting their long term debt.
Increasing net profit helps but it's not that important.
A price to earnings ratio below 25 is good, below 20 is better.
Keep the price to sales ratio below 1.0.
Look for return on equity between 8% and 14% but be flexible.
I picked the items I liked and did a scan for those fundamentals and found 31 stocks. Here's what I looked for: small caps, stocks priced from $1 to 20, price to book value less than 2.5, price to cash flow less than 2.0, PE ratio less than 25 and PSR less than 1.0. Preliminary testing showed the criteria performed well. I would add a test for reduced capital spending since that helped boost performance. I did not scan for that in the following picks, so you will have to do that yourself.
Here are the symbols...
IBKR, BBEP, MADKY, PTRY, SGU, FLY, NRF, DAC, ISLE, ACEAF, KV.A, PNCL, VRS, GOK, SPGZ, KYCN, NEGI, HAST, SNSTA, TMM, WCSTF, PSJEY, FREE, JPST, GFN, GLUX, BHO, SSY, EDAC, CVBK, NWX.J
I am NOT saying that these stocks will double next year or within the next 5. What I am saying is that these stocks share the same traits as those that did double within five years.
Hi Grabber,
Yes, that was fun. My wife came in the office, and was talking to me as I was trying to post ... got upset with me because I wasn't listening to her the way I should have. A bad thing to do on Mother's Day...:)
Congratulations,
Don
Happy Mother's Day!
The EZM method is a short-term trading strategy, completely scalable, and it will identify for a person, exactly all the GTC order points, total capital needed for a trade cycle, total number of shares to trade each time within the trade cycle, and minimum profit that can be expected when the trade cycle is completed and/or minimum profit with each sell order; plus, 100% protection from running out of cash with deep divers if the user desires to establish that parameter.
Best Regards,
Don Carlson
3. The Buy Shares and Sell Shares columns of the Rebound Moves are important for trading all the price jiggles and locking in additional profits.
2. The Sell Shares column in the Initial Upward Moves is important for 1st time GTC touches.
1. The GTC Price associated with each Price % Change -- Jiggles column is important for identifying prices for all trades.
Note: Once the Level Cost table has been developed:
In Summary:
divers if the user desires to establish that parameter.
, 100% protection from running out of cash with deep divers
and minimum profit that can be expected when the trade cycle is completed and/or minimum profit with each sell order;
total number of shares to trade each time within the trade cycle,
, total capital needed for a trade cycle,
and it will identify for a person, exactly all the GTC order points,
completely scalable,
The EZM method is a short-term trading strategy,
has centered around EZM.
Most of my recent trading
including HUSKY and EZM.
Worked on many variations,
I started using AIM 10 years back.
Happy Mother's day!
Ryan,
Re: $2,175,584.00 after 4 cycles
Are you optimizaing on the Lichello series or are you building a more generalized model that works well with all indexes and/or stocks?
Don Carlson
Hello Ganaraska,
I personally know Don Wilson and have used both the free Tango system, for mutual funds and the fee based ETF system. I currently trade a portion of my portfolio using the Tango ETF system. My returns have been exactly as DW shows in his website http://www.donsfunds.com/
Don Carlson
Hi AIMster,
Here is an interesting Asset Correlation site:
http://www.assetcorrelation.com/
The "Intra-Portfolio Diversification" value, should provide you with the 'diversification/correlation metric' that you are looking for.
There is lots of interesting correlation info on the site, including the ability to enter your own portfolio....or,
you could use "the simple, low maintenance portfolio" that they provide:
http://www.assetcorrelation.com/user/simple_asset_allocation
Don
How does one invest for inflation and deflation?
An interesting read.
http://globaleconomicanalysis.blogspot.com/2007/12/how-does-one-invest-for-inflation-and.html
Or view this for the big picture of the economy:
http://www.chrismartenson.com/crashcourse
It contains an excellent, and free, visual presentation that will provide you with a great insight into events taking place that are of extreme importance to investors.
You should start by viewing the Introduction and Chapters One and Two which are very short.
At this point you will be either intrigued enough (as I was) to view the complete 3 hour 23 minute presentation, or you will decide it isn't important to you.
Don
Tim,
If you're reviewing valuation models, you might want to take a look at the systems that Mark Hing has developed.
http://www.AutomaticInvestor.com
http://www.ValueStockSelector.com
http://www.PragmaticInvestor.com
For stock fundamental analysis, I use the Fundamental Analyzer of the AutomaticInvestor program...it ranks stock on a score of 0-10 based on various fundamental factors. ValueStockSelector works a little differently, and PragmaticInvestor probably provides the most rigorous Fundamental Analysis of stocks. There is a new release of PragmaticInvestor in the works.
Don Carlson
When to start an EZM portfolio.
Several of you have asked for copies of EZM, and many have asked how I go about selecting tickers and knowing when to start an EZM portfolio.
I trade Stocks, ETFs and Closed-end Funds.
V-Wave provides an excellent indication of how risky the market is; but, when it comes to identifying the actual candidates to consider, I use the FundBuster service http://www.fundbuster.com/
There are a ton of ways to drill down to tickers of interest. I generally start with the Cheese Charts....I think that is Wisconsin cheese from Tom's neighborhood ...if the market looks favorable, then review the top performing sectors and drill down from there. When I've drilled down to individual issues, there are ribbon charts, which are green when it's favorable to own the issue and red when when it is unfavorable...I wait for the ribbons to switch from red to green. Each week there is a video recapping the market and showing a person how to use the service
http://www.fundbuster.com/swf/2008_10_25/2008_10_25.html
When the market conditions are right and I've gotten a list of tickers of interest, I review the ZigZags in StockCharts,(e.g DUG)
http://stockcharts.com/h-sc/ui
to make sure the issues have adequate activity to use with EZM.
Don Carlson
-nothing happens without a dream
100 Years of the DOW
When you go to this site: http://home.comcast.net/~RoyAshworth/
Click on "100 Years of the DOW" in the left margin.
The green trend lines on the chart are + - 25% from the Regr line and cover the extremes. This means we could go a lot lower than 6500.
Don
-nothing happens without a dream
WB...I've been using the program for 4 years. If you understand LD-AIM and Clive's program you should not have any problem understanding EZM. Send me an e-mail and I will send you the description and a spreadsheet illustrating the concept.
Don Carlson
e-mail: dcarlson007@msn.com
-nothing happens without a dream
Tom,
As Clive does, EZM buys and sells at predefined steps. With EZM you not only can predefine those steps; but, you can predetermine your profit at the steps. Nothing goes straight up, nor straight down...so profits are made with every jiggle. The 100% downside protection, means that I have reserved enough cash for each portfolio to make buys at all the predefined steps. I take some comfort in knowing that I will never run out of cash and can always get more aggressive if the market conditions change.
Don
EZM has nothing to do with moving average cross-over nor time-diversification.
The EZM method is a short-term trading strategy, completely scalable, and it will identify for a person, exactly all the GTC order points, total capital needed for a trade cycle, total number of shares to trade each time within the trade cycle, and minimum profit that can be expected when the trade cycle is completed and/or minimum profit with each sell order; plus, 100% protection from running out of cash with deep divers if the user desires to establish that parameter.
I've set my EZM portfolios for 100% downside protection...should be picking up some nice bargins today and the next few days.
Hi Clive,
Yes, the Percentage Step does provide a Level Gain. The way you are using the ladder system is interesting, in that you never sell out of the stock....creating a simplified AIM.
EZM is more for a person that does not want to hold a stock forever; but, wants to either trade a tight range or like Low-Down AIM sell out.
Don
Clive...thanks, doing better now. Like your ladder twist of not selling out of a position...
A while back Ray Passmore had asked about using percent changes from previous price with EZM vs. percent changes from initial price. Added the feature and was surprised to see that the effect was equivalent to turning 'On' Level-Gain when using Std EZM. What really becomes a barn burner is to do both...use percent changes between prices and use Level-Gain (for EZM the Level-Gain feature only works when the price is above the initial portfolio price and Std EZM option is being used).
I also added the option to start EZM in three ways:
1. Std EZM...user initially buys enough shares to sell equal number of shares the first time there is a new Jiggle UP from Initial Price.
2. Conservative Start
a. user makes one level cost buy, and does not sell those shares until price target is met......Up Price % Chg.
b. rebound buys are not made until after the price declines from the previous GTC Price.
3. No Money Down
a. user makes no initial purchases.
b. rebound buys are not made until after the price declines from the previous GTC Price.
The back test spreadsheet can test Std EZM and Conservative Start; but, not the No Money Down option.
These days, I am using the Conservative Start option with multiple stocks. In more normal times, I prefer Std EZM with Level-Gain ON, and Percent Price Change from Previous price ON.
Don
Hi Mark,
I have a spreadsheet that will allow you to perform back testing. Data has to be downloaded from Yahoo, or some other data source, and then copy/paste into the spreadsheet. I will send you:
a. A Description of how EZM works.
b. A small spreadsheet (EZMa2.xls) that illustrates the concept.
c. A larger spreadsheet (EZMb2.xls) that allows for back testing.
Don
Deferred Sales Trust Strategy
http://activerain.com/blogsview/166966/Roundtable-Focus-Group-Visits
For those of you that may be selling some real estate holdings.
Hi Jake,
If you have a subscription with FastTrack, then I have a couple programs to share with you that will perform ZZ scans on families of symbols and/or individual symbols.
Send me an e-mail and I will send you samples.
Don Carlson
dcarlson007@msn.com
-nothing happens without a dream
Just saw this post about 3x ETFs on another board and thought some here might be interested:
Wow, hold on to your hats!
From http://www.etftrends.com/
A firm better known for its leveraged index mutual funds has filed for 36 exchange traded funds (ETFs) with the Securities and Exchange Commission (SEC) that raise the stakes.
The ETFs from Direxion Funds would deliver three times the performance (or three times the inverse) of their underlying indexes. This is a new twist, since no ETF currently offers anything more than double the exposure, leveraged or short.
The funds will cover a variety of asset classes that include sectors, international regions, real estate and even commodities, reports Heather Bell for Index Universe. The prospectus says the management fees for the funds will be 0.75%.
Hi Pierre,
Got your e-mail. This problem started popping up last May. It has not been resolved. It seems to happen with any ticker that has a 'decimal' as part of the ticker name.
Don