Vital Stocks

Another financial blog that I liked is Vital Stocks

They have other services too but I linked just the blog.

Not sure if they add any of their own views or just report Zacks analysis, maybe they are just an arm of Zacks. But some good ideas and analysis and focuses mainly on earnings growth and positive surprises.

I have included a link under the blogs I follow.

Cheers!
Lazy

UVE - Universal Insurance Holdings Inc

Another little company popped up on my scan, its called Universal Insurance Holdings Inc - UVE

I will have to start running my scans during the week too. If I had found UVE on Wednesday, I could have earned myself some dividends. It seems record date for next dividend was the 27th/Thursday.

Anyway I plan to keep an eye on this one. Though its a home insurance underwriter, it is based in Fort Lauderdale, Florida, so I am guessing business is good, the numbers look very promising, has been increasing revenues and earnings at a terrific rate. Hordes of cash, and pays out dividends. But these smaller companies are always a bit speculative.

(Click on the image to show larger image)

On other stories, LPHI had a good day, after the split, price volume action looks very promising.

Cheers!

Lazy

ICFI - ICF International Inc.

I had put a limit order at 27.75 for ICFI (ICF International Inc.), got filled today. This is only a partial buy, I will add more based on strength. Though the volume on this one tends to keep low, the price action has interested me. It is a management services company and the numbers look good to me. New orders have been flowing in quite frequently, so hopefully they will keep up the massive growth rate. Only area of concern is they are very low on cash, on top of that the cash flow was negative in the most recent quarter.

Today finally mustered enough courage to let go of my remaining shares of AKAM, with a huge percentage loss! With explosive growth of online streaming videos, I still believe in the company, but the market always has the last word!

Still keeping an eye on PRCP, CRNT and CHNR

Cheers!

Lazy

LPHI CRNT UA

Couple of days back I was planning to sell LPHI and wait for good news before buying again, as I like the company a lot. I am sure it has lot of upside potential if it can maintain the growth rate, which I believe it will. Neither did I get a chance to sell, nor did we have to wait long for news. Hope it keeps on with the upside momentum.

Another stock that was on my list but never got a chance to buy is CRNT (Ceragon Networks Ltd.), hope there is a pullback and I get a decent price.

Not sure if UA (Under Armour, Inc.) would be a good buy. If it falls further, I might be tempted!

Cheers!
Lazy

Stock Doctor

Found a blog, liked what I saw, so I have included it in my list of blogs on the right. Its called Stock Doctor

The picks are good and most are based on earnings momentum. I plan to follow it regularly.

I had 2 Chinese companies on my EPS Momo watchlist: CHNR and JRJC. Both went bonkers and I missed both! Oh well, that's what I am missing I guess, nimbleness. We were seeing all Chinese stocks go up. JRJC was one of the first, based on that I should have atleast bought CHNR before today. Today, whole day I was busy in meetings. Even never got a chance to sell LPHI before it fell, knew it would. Forgetful day! Oh, on the bright side, SNCR, VMW and CROX made good and predictable moves.

Forgot to mention earlier, based on my regrettable experience with GOOG, I have got into VMW. Might not be as explosive as google, but this company has got potential, believe me, I work in IT!

Cheers!
Lazy

Earnings Momentum

I dug out this old article, which reiterates the importance of Earnings Momentum. It says:

In a December 1997 issue of Barron's, a Merrill Lynch poll found that the top strategy among 122 institutions surveyed was to buy stocks of companies that exceed earnings expectations and sell the companies that fall short. Quarterly earnings reports are among the most powerful of the underlying fundamental factors that drive stock prices. In many cases, the magnitude of a stock's quarterly earnings surprise can be a short-term catalyst for the equity's performance.

Rest of it at this link....

http://www.schaeffersresearch.com/schaeffersu/options/expectational/fundamental/earnings.aspx

The Little Book that Beats the Market - Joel Greenblatt

I was reading this book - The Little Book that Beats the Market by Joel Greenblatt on the metro and could not help wonder how nice it would have been if I could have read the first few chapters when I was a teenager. These chapters give a very lay man's view of the basis of the stock market and theoretically why a company's stock goes up or down. I recommend the initial chapters to all middle school kids! These days schools might have good exposure to the stock market but in our days, especially in India, where I grew up, nothing!

Rest of the book is fine, just that it is not my cup of tea.

Cheers!
Lazy.

LPHI - Life Partners Holdings Inc.

Some of the numbers of PRCP in my earlier post might not look accurate, that's true. I do not go for exact calculations, I just use simple rough calculations, as I am more interested in comparing numbers between various potential candidates. That's why I am providing numbers for LPHI here to give an idea.

I like LPHI, the numbers are staggering. Did not own it until recently. When it fell to 36-37 after some predictions for next qtr which did not live up to analysts expectations, I bought some as it seemed momentum value to me, and it promptly fell to 33, oh well! It has come up, but the price/volume action is totally messed up. Maybe I will sell and wait for some favourable news when it starts moving up again. Any insights are welcome!

Cheers!

Lazy

PRCP - Perceptron Inc Continued....

Here are some numbers on PRCP. No Debt, thats good. Big jump in EPS and Revenue this mrq. Revenue has been growing steadily. Looking at the other numbers you can tell it is a potential turn around candidate, so lets see how things develop.

PRCP - Perceptron Inc

PRCP - Perceptron Inc appeared on my scan, looks promising, broke out of its neckline two days ago and has moved up quite strongly on big relative volume. Hopefully will pullback and provide better entry.

I am too tired to post the numbers from excel right now, will do that tomorrow.

Cheers!
Lazy

Missing out on certain opportunities/strategies

After a few years in the market I have found this strategy has worked very well for me, considering how little time I am able to devote to the markets, (literally, 15-20 minutes during market hours, and 1/2 hr every night). The weekends I am at home, I spend maybe couple of hours. I am not sure if I will be able to handle more time consuming strategies which promise to give better edge in the market.


I am Stockbee's big fan. I feel I can learn a lot from him as I think my strategy is one of the strategies he has discarded to move to more profitable strategies. But not sure if I will have the time to prepare and trade those strategies. But maybe I should atleast learn the good strategies and hope I can make use of them later.

And I miss his market monitor! He has moved to a donation based service for some of his products! Though I stay away from paid advice, his I hope is different and there will be chance to learn and not be spoon fed!

Cheers!
Lazy.

My Strategy - Part IV - Selling

Now that I have bought a bunch of stocks when do I sell them? Lets review the strategies I follow:

1. Too extended - Sometimes these fast movers get too extended, even by their standards, a pullback is eminent. I sell some on strength and then if it pulls back enough, buy back some. Sometimes they never pullback and keep going much higher, tough luck, but that's okay, you made decent money on the part you have sold and you still have some which is making money. Its part of the game. Recent Example: CROX quickly moving from 45 to 60 and SNCR galloping from 30s to 45. I took some off the plate!
2. Hitting Stop - Some of these fast movers reverse and hit my stop. Sometimes I put very strict stops for half my positions and a bit relaxed for my other half. I usually put my stop below the recent low, unless it is very far down. Then I look for support areas on the charts and put my stop below that. Recent Example: SIGM - Initially stop would be below 39.04 (most recent low) lets say 38.75, but as there is no other recent low and the stock is now over 50, stop has to be raised. Look at the chart. 45.50 was resistance area, so now that should act as support, so stop goes around 45.40. Maybe half at 45.40 and half even higher.
3. Technical Sell - If the stock goes down and I have not sold yet or has not hit my stop, I might decide to wait. And it starts creating a bearish flag, then I sell right away. Recent Example: LPHI (Life Partners Holdings Inc.) From its high of 52, it fell to around 40-39. Suppose I am still holding it. Then for 2 days it created a bear flag, and I should have exited like a horse out of the gate! After that it fell like a knife!
4. Better Opportunities - I think all of us are familiar with this strategy, I spot a better opportunity, I will move money from one of my laggards and put into it. Current Hypothetical Example: I should have moved out of SILC and put my money into JRJC. I wish!

I think that's all on selling, I can keep going on and on on stops, raising stops, and also about trailing stops, but maybe I will hold for later or if someone has any questions. I do not use trailing stops with my EPS momo trades.

Cheers!

Lazy

My Strategy - Part III - Buying

Ok, now I have a list of great EPS momo stocks I like, what now! Here comes the real part, the actual buying and selling. Lets focus on the buying in this post. I have various buying strategies, mostly based on fundamental and technical indicators, while sometime it is a more personal indicator, like my time and availability factor. Here are the buying strategies I apply depending on the situation:

1. Earning Day Join the Herd - Good stock, good uptrend, good EPS growth, and the most recent qtr gives big EPS jump or a substantial earnings surprise, I try to buy it pre-open or during the market hours on pull backs. Usually works well for higher float stocks as they take time to move up. Recent Example: GME (GameStop Corp.) after beating analysts expectations by 4 cents, I got in at 46.
2. Post Earnings Technical or Pullback Buy - Similar stock as in first case, only difference is that it has low float. Low float stocks do not give a good entry, they just zoom up on earnings day (or maybe I am not able to follow the markets most of that day)! Then I wait for it to pull back over the next couple of days before buying, sometimes it even fills up the earnings day gap before moving up, or it forms a bull flag then I use technical rules to buy. Recent Example: SIGM (Sigma Design Inc.) after beating by 14 cents, shot up to 45, over the next couple of days it pulled back to around 40 when I bought it.
3. General Technical Buy - A stock from my list, makes a big move, many times without any news as such. I am sitting there amazed, wondering what has hit me, cursing myself for not taking a position sooner. Anyway if after the initial move, the stock forms a nice looking bull flag, I use technical rules to start a position, buying if the stock moves above the neckline, putting a stop below the low of the flag. Recent and very bad Example: SILC (Silicom Ltd) recently shot up from 22 to 26. Then it created a bull flag and I put a stop buy order just over 25. It then moved up to 28. Should have sold, anyway it has crashed down, stopping half my position (as the other half I put lower stop as I still believe its a strong growth stock, and it will go up. Emotions kill me!) and I am still in the red with the rest.
4. Dip Buy: Very risky, but has worked quite well for me usually during corrections. I will put a conditional limit buy order a bit below the recent lows and a stop sell order. I usually take smaller positions under this method, so can afford to have a more relaxed stop. I have missed quite some big movers as they never fell to my price, but the ones I catch have been profitable. Recent Example: CROX (Crocs. Inc.) during the rollercoaster ride over the last couple of months, market dipped big time twice, first time CROX went down to 47.01, so I put an order for 47, next whipsaw I got filled but it actually went all the way down to 44.10, oh well! Good that never hit my stop. But then it went all the way to 60 quite quickly, sold some at 60, still have some left. But the "hole in the sole" escalator story does not bode well, though it is holding above 50DMA and I personally feel, CROX is headed for bigger things a bit longer term, lets see.
5. Momentum Value Buy - I have coined this term (at least I believe so). A strong growth stock suddenly falls 20-30% due to some rumour or seemingly bad news and the market reacts too strongly, illogically! Not from classical valuation point of view but from growth potential point of view, the current price is a actually a bargain - its a momentum value. Recent Example: SNCR (Syncronoss Technologies, Inc.) Steve Jobs lowered iphone price and SNCR got hammered, from 40 it fell to around 30, I bought quite a few around 32, come on, lowering of iphone prices is good for SNCR right! That's what I call momentum value, and it got reflected right away as the stock raced to 45. It is again getting hammered, presumably because a director sold at 38-39, I hope it is something more serious than that! For all you know, that Director's daughter might be getting married this weekend!

I hope I have covered most of it, next post I will cover selling, and some more posts to talk a bit more on specific stocks.

Note: Most of the buys mentioned above were during the market correction, so I was picking smaller positions.

Trivia! Significance of today, 70 years ago

"The Hobbit"--English writer and scholar J. R. R. Tolkien's coming-of-age fantasy about a comfort-loving "hobbit" (a smaller relative of Man) who joins a quest for a dragon's treasure--was first published on September 21, 1937. Originally begun about 1930 as a story to entertain his four children, "The Hobbit" included pictures drawn by the author (an accomplished amateur artist), and was so popular that its publisher asked for a sequel. The result, 17 years later, was Tolkien's masterpiece, "The Lord of the Rings".

Prosper.com

Anyone familiar with Prosper.com a borrowing and lending site, the returns are pretty good, but risks are high too, and key word is to diversify, sounds very similar to the stock market! Anyone up for a study on which one is better?

Cheers!
Lazy

SILC JRJC

Today, before I had time to check my account, SILC was already butchered by a downgrade, anyway I will leave it to either hit my stop or go up, lets see! I still feel its a solid growth company.

On the contrary JRJC rocketed up, wish I could say I own some shares :( It is on my list of eps momo, but never got to actually buying it!

Cheers!
Lazy

Feds make the day!

No cut or a quarter point cut would have hit most of my stops, so Feds made my day, lets see how is the followup.

What's up with SNCR, it went bonkers even before the announcement?? Anyway I am not complaining.

SIGM also had a good day, while CROX and SILC were mostly quiet.

Ok, I know, I am giving away some of my holdings!

But most happy with the action in AKAM, finally it moved a bit after all that shoving and pushing. I know! What am I doing with AKAM, its one of those old stocks that I still have some shares left.

Another embarrassment is LPHI, thankfully that also moved up a bit, but more details on each trade in later posts.

Feds saved the big guys and even small fish (investors) like us, Govt has some plans for the struggling homeowners, but I feel all this is too late, I really feel bad for all those thousands of folks who already had to foreclose :( what happens to them???

Explosive Stocks

From the links on Stockbee blog, I came across another blog which I liked a lot, it is called Explosive Stocks. Very interesting and some really explosive picks. Last post was in August, must be on vacation!

Cheers
Lazy

My Stategy - Part II

As I have mentioned, I like to keep things simple. That's why I like blogs like Stockbee, Alpha Trends and Stockcoach as I have mentioned here. They all keep things simple but achieve excellent results.

Now back to my strategy,

I can screen for a bunch of stocks that are going up, say 20-30% in a quarter, 100-200-300% in a year, making 52 week highs, all time highs. These are mostly small or mid-cap low float stocks. These are the momentum stocks, trending upwards, I would like to buy them in the hope that they will keep going further up, that there are even greater fools than me who are ready to pay more than me! But how do I know tomorrow these stocks will not reverse and nose dive maybe 20-50%. I don't! I have no idea! Maybe I was the greatest fool who bought right at the peak and is left holding the bag.

But what if someone told me a subset of these stocks have historically proven record that they have a higher probability of keeping on going up than the rest, they share an unique characteristics - exploding earnings growth (and also for the ones that are followed by analysts, their ability to show earnings surprises quarter after quarter).

That brings us to the title of this blog - earnings/eps growth + momentum

So, I have reduced the number of candidates that I have to deal with and in the process also ensured that my candidates have much higher probability to keep on going up. Most of the past huge winners had these characteristics - NTRI, TASR, HANS, FRPT, CROX etc

Two issues:
1. Am I choosing such great stocks that they can never reverse and go down 50% as soon as I buy them, on the contrary they can,these are low float, high beta volatile stocks, any bad news, negative earnings surprise will butcher them, downward momentum will be much greater. So, what to do? Use strict stops, be very disciplined in that area of trading. Not all will go up, some will hit the stops - but on the long run those losses are minimal compared to the winners. As William O'Neil says, it is like insurance.
2. Won't I miss some huge winners that are not in my subset of stocks. You bet! Biotech companies getting FDA approvals, stocks moving on hope, anticipation, big news etc. I will miss them, and lose some great opportunities but tell me, who is able to catch all the great opportunities anyway. I might actually trade some, but they will be outside my core trading strategy. (Another way of looking at it is, if it is such a great news, that should lead to earnings momentum in the future, then they will become part of my universe of potential candidates :) )

As I am a great fan of Stockbee, maybe I should use his analogy - my strategy is a cross of his earnings momentum + double trouble strategies. Even if I get in a bit late, (as I am waiting for trend to be fully established) I am happy if I can catch the major earnings momentum related price appreciation.

In another post, I will give more sources and books that have helped me derive my strategy over the years.

Details on when to buy and when to sell in later posts.

Cheers!
Lazy

My Strategy - Part I

I try to keep things simple! Thats my motto in life as well as in trading/investing.

If you show me two strategies, one requires an MBA and 3 hours/day of my time and returns 30% annually. The other requires 30 mintues/day of my time and is so easy a 15 yr kid can do it, but returns 20% annually, guess which method I will choose. Thats right, the second one - reasons being 1) I do not have an MBA 2) each day I have only 30 minutes for the markets 3) I am very lazy :)

So I will choose the second strategy and then try to squeeze 30% from it :)

Okay, so what would be a good strategy which does not require too much thinking/efforts, does not require too much of my time and if executed effectively gives steller returns! Options are-
1) Value Investing: Would have been the best strategy for me, buy and forget. But needs quite some time and efforts to analyse and also I am very fidgetty kind of person, I need results right away, I cannot wait for years for the street to acknowledge the true value.
2) Techincal or Event based Swing Trading: Neither very difficult nor time consuming, I have tried it in the past with great results but to be really successful you need to monitor the markets quite frequently during trading hours, which I do not have the luxury currently (day job too demanding!).
3) Momentum/Growth: Identify what is going up and join the crowd, easy to identify, only difficulty is to know when to buy and when to sell, that mostly dictates your returns.

So, as might be obvious I went with the third method but added some icing to fit it in my groove!

Details in Part II. Dinner time!

Cheers!
Lazy

Parting Ways...

I started blogging to share my technical based daily lists, which I post in the Lazy Investor blog.

But I realized, I felt like discussing my earnings growth momentum based trading strategies, its successes and failures and in the process teach and learn.

But including these posts under the technical blog would have been confusing so instead decided to part ways and start a parallel blog!

Cheers!
Lazy.