The Importance of Being Earnest in Investment Research

| About: Catamaran Corp. (CTRX)

When it comes to investing in the markets, those seeking alpha hunger for that extra "edge" which makes the difference between winners and losers. From where does one get this "edge"? Research analysts, bloggers, and other sources experienced and dedicated to following the markets? Perhaps…

Like Mad Money’s Jim Cramer, I am a big advocate for homework and my primary objective with this blog is to inspire further research on potential investment opportunities and ideas. A reader recently commented on a report that was republished at a popular investment research blog website. It was regarding one of the Weekly Babies with Bathwater reports and concerned the stock ticker SXCI. He wrote: "SXCI is down another 10% today, that is why these sort of articles with very little detail barely help investors long some of these names."

Due to my busy schedule, I rarely have time to reply to such, if any commentaries, and believe that I can best serve my audience by focusing on further market research and analysis. Those who know me personally would best describe me as an "impatient gentleman". In a sincere desire to help the reader, I responded with what I think may be good advice for many self-directed investors. Like your editor, it is a little rough around the edges, but here goes:

"Reader, I usually don’t reply but as I sense your frustration, I will try my best. (I have much more patience with the market than I do with people.)

Determination of oversold stocks is based upon a proprietary algorithm that is non-related to stochastics or relative strength although these indicators overlap sometimes.

As a money manager and ex-hedge fund manager, I may be looking at the same market, but through a different prism. I don’t know what your investment process is, so I can’t say. Oversold stocks can remain oversold for quite a while as markets can behave irrationally a helluva lot longer than most can remain solvent.

The objective of this screen is not to recommend a buy, sell, or hold on a specific stock, but to identify names with potentially sound fundamentals that are being oversold based upon institutional buying & selling pressure patterns.

Now, it’s up to you or other readers to do your homework and determine if the fundamental reasons you own or want to buy these stocks remain intact. Personally, I use this list to stalk stocks and watch them for hints of fresh institutional rotation/support. This requires some patience, but it can be rewarding. Besides, it’s much easier to hunt and learn the habits of a smaller group than follow a larger universe. Think of yourself as an assassin waiting to pull the trigger when the odds are more in your favor. When you get that final capitulation, chance favors you the most.

If you don’t own this stock and it has fallen another 10%, you should be as happy as a pig in shit. On the other hand, if you do own it, then it’s a risk management issue and only you can determine what’s acceptable for a loss.

Now let’s be realistic. The stock has made a 57% run from Oct-23-2008 through Jan-06-2009. During the same period, the SP-500 eked out only a 2.93% return. This is a relatively strong stock and I suspect there are good fundamental reasons for its superior performance, but it is undergoing a price correction. Trees don’t grow to the sky, unless you believe in "Jack and the Beanstalk". Incidentally, the company is in the right space/sector too, i.e. healthcare info technology. If you read the details on the last employment report, the healthcare sector is the only group that continues to increase new jobs in our economy while all the others contracted.

Hey man, I’m just trying to help people focus on potential opportunities and I don’t even get paid for this stuff, i.e. blogging. I do give specific investment advice, but only when people pay for it as a premium service at my website.

Good luck with your investing and trading. If you are looking for the Holy Grail, you will find it within yourself and nowhere else. Believe it or not, it (the Holy Grail) actually does exist. Trust me on this one….

Sincerely,

J Clinton Hill"

The point I would like to make is the importance of being earnest in all undertakings. Responsibility is the privilege of free men and should not be taken for granted. Those who would transfer or absolve themselves of such responsibility may involuntarily be assigned to the role of victim. Unfortunately, this is exactly what more or less happened in the tragic case with some of Bernie Madoff’s clients and middlemen. There is nothing wrong with exposure to outside ideas and insights. Human progress owes a debt to inspiration, collaboration, and imitation. However, the bottom line, especially in investment research, is that if you know something, know it because you know (based upon your own understanding and research) and not because someone else told you so.

Disclosures: Hillbent.com, Inc. or its affiliates may own positions in the equities mentioned in our reports. We do not receive any compensation from any of the companies covered in our reports.