I am the "PestLaw" David Zimmer mentions in the initial posting that started this message board. David graciously gives me credit for first publicly spotting THNK as a hot stock when it was trading a week and a half ago at 11 on growing volume.
Some of you who have followed my market activities through various postings have privately asked how I pick stocks. Although I'm happy to respond to private e-mail, I thought it might help to provide a more public response.
Essentially, I rely heavily on the published version of DailyGraphs (also available at www.dailygraphs.com) and loosely follow the CANSLIM method (but not religiously). Essentially, I look for companies that have a high Relative Strength rating of 80 or above, and an EPS rating of at least 70. Within those stocks, I look for companies that have been in a period of price consolidation or a clear base (for example, the handle stage of a cup with handle formation). I then look for heavy volume of around twice normal and for companies that are leaders in their field. Finally, I only buy if the company has shown large growth in quarterly EPS and revenues, has less than 25MM shares outstanding, and has less than 15% of the stock held by mutual funds. I find these criteria indicate that the company has not yet been discovered by large institutional buyers who usually will rapidly drive the price up once they all start piling on board.
If you find a company that meets these criteria, you usually have a winner that's about to take off. Sometimes it won't, however, and I NEVER hold if the price drops around 8% below my purchase price.
Applying these criteria (with some minor exceptions), my most recent holdings have been LGWX (in at 10, out at 13 3/4 in only two weeks), THNK (in last week at 13 1/2 and holding, but had intended to buy at 11 until I was sidetracked with the acquisition of LGWX) and my newest purchase this morning of HAUP (in at 8 9/16 with expectations of going into the teens over the next several days).
I have to give credit to David Zimmer, however, for suggesting I look at HAUP. I looked, I liked, I bought! And I've already seen a 10% gain in one day!
I suggest you also look at HAUP. It began its rise today and has a great future. It designs the add-in board that will be needed to use the TV function that will be included in the soon-to-be released version of Microsoft's Windows 98.
I hope this helps. Do me a favor and let me know of any stocks you find that fit my criteria. As with David Zimmer, I'm happy to swap ideas with those who follow similar investment strategies. |
