- My investment experience has been focused on growth stocks.
- Both fundamental and technical analysis are important in making buy and sell decisions.
- I have studied the stock selection methods developed by Investor’s Business Daily in detail.
- I have years of experience with quantitative stock selection models which rank stocks on a scale of 1 – 100, based on metrics such as earnings growth and P/E ratios. However, there are a number of problems with relying on such composite scores to make investment decisions.
- My research shows that in order to zero in on ideal stocks to buy, we need to look at multiple factors, including:
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- the stock’s fundamentals
- the stock’s technical position
- the industry group
- the sector
- the status of the overall market
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- Note: an example of bringing all these elements together is shown in the article “Managing Data Effectively” in the “Why Unique and Valuable” section of this blog.
- The technical component is also very valuable for selling. William O’Neil states that in many cases, stocks will still have good fundamentals when they are peaking and should be sold.
- A good example was provided by the technology stocks of the late 1990’s, such as Cisco Systems (CSCO), which made dramatic upward moves until they finally peaked in March 2000. When these stocks were near their highs, their fundamentals still looked good and all the analysts gave them “buy” ratings, but the technical developments indicated that they were peaking and should be sold. From March 2000 until 2003, most of these stocks dropped sharply and the Nasdaq plunged by almost 80%.
- My technical analysis approach is based on extensive study of a large variety of professional material, including the “Chart School” program from Investor’s Business Daily, which provides detailed case studies of both buying and selling.
- This is extremely valuable information which is not taught in the CFA program.