John V.'s  Instablog

This weeks results from my Super Stock Screener.  Screening is an excellent starting point for finding winning stocks.

My thoughts:  A quick post here with the latest Super Stock Screener results after a two-week hiatus.  Lots of changes in the screening results as many names have fallen off for a variety of reasons.  I expected a fair amount of the list to be gone but some of the ones that disappeared are surprising to say the least.

Before I left for vacation there were 48 stocks.  Now that I am back two weeks later there are only 37 stocks.  However, I would expect these surviving 37 to show some pretty good characteristics as they are the survivors of all the recent turmoil regarding the debt ceiling debate.  Definitely a good list to be working from.  We'll see what happens.

As always this is not a buy list but rather a starting point for doing more research.  Stocks that are new are underlined and have an Asterisk (*) next to their company name.

Stock that fell off the Super Stock Screener results from July 16th are below:

Note: This screen is fairly wide (EPS>=45%, Sales>=25%, ROE>=10, RS>=90, Price within 20% of High) and I do have tighter screens as well.  To keep the screen results manageable I removed Industry Groups that I either do not believe in (Financial) or are so Commodity that I have no edge in how to pick one from another (Oil&Gas).

This weeks results from my Super Stock Screener.  Screening is an excellent starting point for finding winning stocks.

My thoughts:  This week the market pulled-back as it it could not maintain the steep upwards angle of increasing stock prices.  That is always the problem with V-shaped chart patterns in that prices go up so fast that they outrun the number of available buyers in the market, so when people decide to sell some they find that the buyers have gone missing, so prices end up falling more than expected.  However, to anyone familiar with V-shaped patterns this pull-back was more or less expected.

The real test will be going forward as the number of buyers and sellers becomes more balanced.  I expect the market to rise but much more slowly, and since earnings season is now upon us one has to expect a fair amount of volatility to occur. 

The latest Super Screener results have held steady as there are now 48 stocks compared to the July 10th screen which had 49 stocks.  A drop of only one name is nothing to be concerned about and shows how the underlying strength in stocks enabled them to ride out what seemed to be a bad week.

One notable thing I see is that many of the former leaders that came back to the screen like Acme Packet (NASDAQ: APKT) and Aruba Networks (NASDAQ: ARUN) demonstrated how they really are not leaders anymore.  They had just enough gas in the tank to get noticed but did not have enough strength to stick around.  Another reason to avoid former leaders until they can put in better performances overall.

Otherwise, I don't look at this past week as significant at all.  It was simply one of those weeks that is constructive because nothing important happened.  The good news is that weeks like these help lay the groundwork for future moves so we'll see what happens.

As always this is not a buy list but rather a starting point for doing more research.  Stocks that are new are underlined and have an Asterisk (*) next to their company name.

Stock that fell off the Super Stock Screener results from July 5th are below:

Note: This screen is fairly wide (EPS>=45%, Sales>=25%, ROE>=10, RS>=90, Price within 20% of High) and I do have tighter screens as well.  To keep the screen results manageable I removed Industry Groups that I either do not believe in (Financial) or are so Commodity that I have no edge in how to pick one from another (Oil&Gas).

"Never get excited about stock" - Gordon Gekko

Easy for him to say.  I always get excited about stocks though I try hard not too, and I do what I can to downplay everything when things are going well.  One way to handle this excitement about stocks is to figure out exactly what you want from them.

Most people don't know what they want out of each trade (besides money), so let me tell you that the first objective for every stock I buy is to make 20%.  Yes, my goal is to make at least a 20% return on every trade, and even though many do not make that amount, that is still the target I have set.

Why 20%?  20% returns is a level recommended by Bill O'Neil, the founder of Investors Business Daily, because his historical research showed that average stocks go up an average of 20% when they make their moves during an uptrend.

Note that I said "average stocks".  The big winning stocks that I look for tend to go a lot further than 20%, but you never really now how things are going to play out so to me the 20% is the first "hurdle" that a stock has to clear while on its way to even bigger gains.  It does not mean you automatically sell the moment the stock hits to 20%, rather the 20% is a level that helps you determine whether you have an average stock or a potential big winner.

One great thing is that if you can handle five of these trades successfully during a year then you'll double your money, so this is another reason to view 20% as a good solid number to use.

When a stock I own gets to the 20% return level then this is where I decide what kind of stock it may be (average or big-winner) and then I'll determine whether to take profits, or to let things continue as maybe the stock will go even higher.

I'm 100% in favor of giving stocks as much leeway as possible to try and run higher, and if the market is strong then I say let them, just don't forget that 20% number.

If the stock does run past the 20% objective by a decent amount then what I will is place a stop-loss trade-trigger, so that if anything negative happens then those gains are protected by that amount.

The last thing you want to do is have a stock go up a lot and then give it all back if the price comes down again.  Thus setting an objective helps you monitor a stocks progress as well as making sure that you benefit when you have profits in your brokerage account.

A good example of all this is from a recent trade I did in GT Solar (NASDAQ: SOLR).  I bought SOLR stock on June 17th at exactly $13, and had a great start as the stock gave me a profit by the end of that day and never looked back.  My 20% objective was $15.60, and I was sold out by trade-trigger yesterday on July 12th at $15.55 at the open.

A good trade and one that felt even better as the price took quite a dip lower after being sold out, see the below chart.  Time will tell if I should have stayed in or not, but a 20% profit goes a long way in feeling good about how I handled the trade.  And yes, I was excited about it too.

Think about how you handle your trades and what your profit objectives are.  Hopefully this helps you develop techniques that ensures that you keep some of the money you are making.  Cheers!