Dabum,
I've owed you a response to our PM exchange about HOFF and was fascinated by your posts here and on Big Dog's thread, so here goes. (BTW, I also have had a career in sales and am glad to see you back contributing! Your posts are always enlightening.)
I too have evolved my approach to rely less on the blind, long term buy and hold approach based on FA. I no longer believe in it, after learning about corrupt management, numbers that you can't trust, and the other transgressions we've been through.
While my background in investing is based on FA, and I now know that a little TA can make a big difference in getting in or out at the right price. As president of two investment clubs, I was continually frustrated with the attitude of "buy and forget" and once watched a $500K portfolio of tech names get slowly cut in half because the group was stubbornly stuck in Buy and Hold. I ended up leaving the group in frustration.
Jim Cramer talks a lot about "buy and homework" and has had William O'Neil on his radio show. He also preaches about taking some profits and not being a pig. I agree.
Part of my approach is also based on the NAIC principles of consistent, growing earnings and quality of management (as opposed to beaten up value stocks with a history of up and down earnings). Yet, like you say, different approaches work for different people, and that's what makes a market.
Having read O'Neil's earlier edition and being a former subscriber to IBD, I am well aware of his claims and methodologies. Also, as a former AAII member, I had seen earlier articles like the one Augie posted. But like you, I didn't give the CANSLIM approach much weight.
I am learning to be willing to "pay up" for a stock and to avoid the "bargains." It is counter-intuitive at first, but the argument behind CANSLIM and O'Neill (and the results) are sound and repeatable, IMO.
So if one can get over the chest thumping by O'Neil it seems like his approach has validity. Yet I haven't
found a way to implement it easily and regularly.
For example,I struggle with the enormity of data and the clunkiness of the paper. And I've yet to read HOW a successful trader uses the data in IBD on a regular basis. For example, the AAII article steps you through a screen using their database, but what about the IBD website and its ratings? What if you wanted to use the paper, and what about the "pivot points" he talks about? How does one screen for them in an efficient manner?
Or is AAII just interpreting his guidelines and ignoring the IBD rankings?
I guess my question for you and anyone else familiar with IBD is this: have you come across a practical and successful way to use the IBD approach? Is it as simple as buying stocks ranked 80,80,80,B,B,B or better? Are you trading out of a stock as soon as its ratings drop?
Does one focus on the IBD 100? Where the Big Money's Flowing? The highlighted or bolded names?
Yours for learning through sharing,
- Kris |
