Market Talk with Piranha is currently moving to its new home at chrisperruna.com. The new site is up and running but many of the posts need editing as the images and stock charts did not transfer successfully (thanks blogger). I will post all new entries to both blogs – Thank you for your patience while I make this change!

Friday, April 08, 2005

Focus when Investing

...I recently started an interesting conversation on a forum on the web about CANSLIM and my method. I consider my philosophy a modified version of CANSLIM with my foundation coming directly from William O’Neil’s teachings. Over the years I have branched out and used various methods from other authors such as Gerald Loeb, Bernard Baruch, Jesse Livermore and Stan Weinstein. Each of these authors differed in their approaches but they always relied heavily on price and volume.

As you read my recent case study explaining my screening methods and fundamental research breakdowns, you will notice that I do follow and study many of the same statistics that CANSLIM uses. The difference is that I don’t require a stock to meet every standard of a CANSLIM stocks. During a bear market, it is near impossible to find a stock that meets the CANSLIM criteria perfectly. I focus on the most important numbers such as earnings and sales and institutional support.

My latest purchase would never make the CANSLIM criteria based on price alone. I have an article written about stocks that are priced lower than $12, something that O’Neil suggests that we stay away from. I don’t agree and I have made good money on stocks coming out of bases from the $8-$10 area over the past few years. A further study will reveal that most great CANSLIM stocks start their initial runs in the single digits, well before making the newspaper at $15 per share.

I buy with the trend more so than the actual base that CANSLIM suggests. I rather buy a stock that is taking a breather to the 50-d moving average during a solid up-trend than a stock that is acting funny, coming out of a cup with handle base. This is not to say that I don’t buy cup with handle patterns because I do but I prefer the long term trend which is explained deeply in Stan Weinstein’s book. See our recommendations page for books to read, including Weinstein.

I always say, my foundation is deeply rooted with CANSLIM and O'Neil.
It works!

Why would I ever confuse myself with anything else until this stops working and it hasn't stopped in all the years I have been using. Sometimes it doesn't work as well or sometimes I am not as sharp but I don't switch my system. This is something that 99% of all individual investors will do. They become frustrated and quit one system to search for a new one, only to be disappointed when that one fails.

Too many people that I meet switch from book to book to book and system to system to system and never understand why they don’t make consistent money. They are too confused, looking at too many things, complicating the entire process. A great statement: Keep it Simple Stupid. It hangs above my desk in my office and I read it everyday. Why complicate things when simplicity works.

I don’t need stochastics, bollinger bands, MACD, MFI and expensive technology to determine and place my trades or any of that “waste of time” crap.

I need fundamentals, price, volume and a chart and that is it. I can make money any year if I am provided with those 4 things. As Livermore, O’Neil, Darvas, Baruch, Loeb and Weinstein all teach: Price and volume are the most important things one will ever need in the stock market. It will NEVER change, ever!

In the end, it is never the systems that fail. Thousands of different systems work in the stock market; it's the user that ultimately fails because of lack of concentration and motivation to stay the course. It is hard work to play in Wall Street and not many people can hang! I see people come and go every day. They are motivated for weeks, months and sometimes a year but most fizzle away after they fail and can’t figure the market out. Some people try to copy a system from a so-called guru and may find success for a while but if they don’t learn the system themselves and tailor it to their personality and investing style, it will become obsolete and they will fail. Work, work hard and you can be successful in the market. Do the work yourself. Learn how to do the work and then do it yourself or you will never learn to be truly successful.

The mission of MSW is to teach you how to develop a system by showing you what to look for and how to research stocks on both the fundamental and technical side. When you finally create your own system, you will be able to be successful without my help. Heck, you may be better than me at that point, the sky is the limit if you only put your mind and heart into it. Money is not easy on Wall Street although most people think it is; I hope the members that go through my community will be the few that actually get the big picture and become successful!

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