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Strategies & Market Trends : The Amateur Traders Corner -- Ignore unavailable to you. Want to Upgrade?

To: Tom Hua who wrote (52)	7/31/2000 10:04:43 PM
From: Nick DeVito II	Read Replies (1) \| Respond to of 19633

Great thread Tom! Great post! Ash has me book marked so hopefully he will read post #52. May I be the second to offer a good joke I heard the other day. An old man is sitting on a bench in the park, when along comes a teen with spike hair all different colors, red, blue, green, yellow. The old man can not stop starring at this teen. Finally the teen looks over at the old man and says, "What you starring at old man? Haven't you ever done anything wild in your life?" The old man replied, "Got drunk once. Had sex with a parrot." The old man pauses, "Just wondering if you were my son!" Keep up the good work Tom. avid follower, nd2

To: Tom Hua who wrote (52)	7/31/2000 11:18:40 PM
From: stiltz1	Respond to of 19633

Tom: good advice; I wish I had followed it over the years; so much of trading involves the psychological factors you describe. stiltz1

To: Tom Hua who wrote (52)	8/1/2000 11:00:44 AM
From: Brent Nelson	Respond to of 19633

Tom, Thanks for the informative response. I happen to have a "real job" so I'm unable to participate in day-trading. I tend to be the more old fashioned buy-and-hold kind of guy. I'm a bit surprised that I haven't been able to come across some well documented, mechanical, stock analysis tool (almost like a worksheet) that would assist in the preliminary Due Diligence. I guess I wouldn't be shocked to find out that there are some well defined stock screening utilities that can be used to quickly filter out those stocks with glaring shortcoming, but I'm not aware of them at this time. I guess that if it got too mechanical everyone would make money :-) Thanks again for the help, Brent

To: Tom Hua who wrote (52)	8/1/2000 3:04:48 PM
From: Fundamentls	Read Replies (2) \| Respond to of 19633

A couple other due diligence tools I have found very useful as a first pass are stocksheet (www.stocksheet.com) and Smart Money (http://www.smartmoney.com/intro/stocks/ ). They include all or most of the same information as the Yahoo profile, and then some (e.g. summary of quarterly and annual financials, graphic depictions of insider trades showing the size & whether buys or sells, etc.). Smartmoney also will select and graph comparable companies, and if its choice of comparables isn't always very meaningful, it's at least a starting point. To add a few more points that might be useful to Brent or others trying to do due diligence... I also use message boards, especially SI but sometimes RB and Yahoo, for leads and industry background - taking everything for what it's worth, there are nevertheless often many nuggets of information particularly if it is an industry or technology you are not familiar with...I look for the intelligent posters (long or short), or for posters (especially on SI) whose track records I have watched over time and generally respect (such as yourself). In all cases, I look for verifiable facts and ignore opinions. A few other things I always look at are the executive and director bios (in the 10K or Proxy statement) to see how qualified they are and what they've done before, especially for a new company or a small company just getting attention (often great candidates long or short - but you absolutely have to know which!). When the key executives have only run bankrupt companies before, it tells you something much different than when they ran divisions of fortune 500 companies. The presence of one or two former successful executives of a big company is no guarantee of success. But executives and board members who have relevant skills and high-level experience are more likely to succeed than when they are either unknowns or have skills of questionable value in the context of the company's business. Also, in trying to figure out if a company is "for real," I look at who their major customers are, from the 10K and 10Q filings, and I try to figure out how much revenue is accounted for by "name" customers. It's one thing to name a lot of well-known companies as customers, it's another thing to actually be getting a lot of revenue from them. Another useful tactic with emerging companies is to do a Web search on the company name on or their key product names on the Web, and compare the number of "hits" to their key competitors. Not foolproof, but if a touted product only comes up 100 times and the competitor product comes up 10 million times, it tells you something. Often you'll find critical reviews of new products or technologies that will help to educate you. One thing I never, ever do is trust the PRs or IR departments, especially of small, unknown companies, unless they have an long and established track record of fair dealing- which is rare. It's often useful to go back and read a few months of PRs to get a flavor of whether the company is trying to sell its products or its stock. If they buy Microsoft Office for their office secretary, and issue a newsrelease describing it as "entering into a strategic licensing agreement with Microsoft (NASDAQ: MSFT)", you can bet it's a scam - and it's surprising how often a critical eye will find press releases almost that blatant. ZIXI (one of Tom's favorite shorts) would be a good company to look at if you want some examples of a place where the above techniques would have raised huge red flags. I recall a press release that seemed to say that their secure mail program was being adopted by Perot Systems...which would have been a major coup. But if you read it really, really closely it turns out it was a tiny (like three people) division of one an affiliated investment company with a similar-sounding name, and where one of the Perot brothers was involved and could be quoted. Or something like that, anyway - the details have escaped me. Most of their press releases were like that - sounded great if you just read them casually, but were nothing deals - with little or no revenue - if you read them critically. Just a few ideas - books could be written on how to DD a stock, although curiously I've never seen one that goes beyond the basic financial analysis stuff you find in business school textbooks. That stuff is important too, but if you had to do it for every stock that came across your radar, you'd never have time to do anything else! Fund