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To: Dale Baker who wrote (35153)	10/11/2003 10:06:45 AM
From: Dale Baker	Respond to of 118717

While musing on the total lack of media coverage for MAXF's 5-bagger bounce off its post-9/11 lows, I looked up the CANSLIM formula, to see if IBD is likely to catch on anytime soon. If what I found is accurate, MAXF is shaping up as a decent CANSLIM prospect. C = Current quarterly earnings per share. They should be up a minimum of 20% over the year earlier. In fact, of the 500 best performing stocks O'Neil studied in the 38 years from 1953 to 1990, three out of four had earnings increases averaging more than 70% in the latest publicly reported quarter before the stocks began their major price advance. The one out of four that didn't show solid quarterly increases did so in the very next quarter, and those increases averaged 90%! MAXF Q2 earnings were up more than 100% from Q2 2002. A = Annual earnings per share. There should be meaningful growth over the last five years. The annual compounded growth rate of earnings in the superior firms should be from 15% to 50%, or even more, per year. MAXF annual earnings up from .22 in 1999 to 1.53 in 2002. N = New product/management/price high. = New product/management/price high. = New product/management/price high. Usually it is a new product or service that causes the big earnings acceleration we're looking for. MAXF has added several new divisions and key personnel in the last year. S = Supply/Demand: Small Cap + Volume Supply and demand dictates the price of almost everything in your life. The law of supply and demand is more important than all the analyst opinions on Wall Street. The price of a stock with 400 million shares is hard to budge up because of the large supply of stock available. Yet, if a company has only 2 or 3 million shares outstanding, a reasonable amount of buying can push the price up rapidly because of the small available supply. If you are choosing between two stocks to buy, one with 60 million shares outstanding and one with 10 million shares, with all other factors equal, the smaller one will usually be the bigger mover. Stocks that have a large percentage owned by top management are generally better prospects. Again referencing O'Neil's 38 year study, more than 95% of the companies had less than 25 million shares outstanding when they had their greatest period of earnings improvement and stock price performance. MAXF float is under 10 million shares with significant insider ownership and options. L = Leader or Laggard? Which is your stock? People often buy stocks they're comfortable and familiar with, like an old pair of shoes. Usually these are draggy slow-pokes rather than leaping leaders. It is really important to look at how your stock is performing in relation to the overall market. The 500 best performing stocks from 1953 to 1990 averaged a relative price strength of 87 (scale of 1-99) just before they began their major advances in price. Avoid laggard stocks and look for genuine leaders. MAXF RS was 87 a month ago and probably higher now. I = Institutional Sponsorship = Institutional Sponsorship = Institutional Sponsorship It takes big demand to move a stock significantly higher in price. Institutional buyers are the most powerful source. You don't need a large number of institutional owners, but should have at least a few. No institutional sponsorship in a stock is a bad sign because odds are that many institutional investors looked at the stock and passed it over. The things we are looking for with C-A-N-S-L-I-M are really signs that the bigger money (mutual funds, banks, insurance companies, pension funds, etc.) is coming into the stock. See that there is a better-than-average performance record by at least a few of the institutional owners. Another good thing about some institutional sponsorship is that it provides buying support for the stock. Beware of stocks that become "overowned". By the time performance is so obvious that almost all institutions own it, it is probably too late. Pay attention to whether the number of institutional owners is increasing or decreasing. Yahoo data shows 10 funds holding 16% of MAXF - could be higher but the number has grown steadily over the last year. M = Market Direction = Market Direction = Market Direction You can be right on everything else, but if you are wrong about the direction of the broad market you are still likely to lose money. The best way to analyze the overall market is to follow and understand every day what the general averages are doing. The difficult to recognize, but meaningful changes in the behavior of the market averages at important turning points is the best indicator of the condition of the whole market. Market hit new 52-week highs last week. All in all, MAXF looks promising, unless IBD has a minimum volume figure before they will list a stock in their IBD 100 list.