Potential Alternative CANSLIM Indicators

Transcription

1 Potential Alternative CANSLIM Indicators AFTA DFW At Baylor Dental College March 20, 2013 Jim Gunn Etal, James Pujals

2 Disclaimer No Representations are made that the investment strategies presented herein or discussed by the presenter are complete, without error, or will produce desired investment results. This presentation is made for information sharing purposes only. Nor are any representations made that the investment strategies discussed have been employed to achieve successful investment results. Many of the results are based on back testing with historical data and simulated investing. Future investing results may significantly differ. You should perform your own independent research and Due Diligence prior to making any investment decisions, and invest accordingly. 4/20/2013 2

3 Presentation Topics Overview of the CANSLIM methodology and indicators Potential Alternative CANSLIM indicators Focus: Alternative Relative Strength (RS) indicator(s), 4/20/2013 3

4 Investors Business Daily(IBD), Investor s Corner Article, 3/22/2013 Some Stocks May Have A Flaw, Yet Still Produce Terrific Runs Extracts: The more characteristics of high quality a stock has, the better its chance of being a market winner. Of course, the more you demand from a stock, the fewer that maybe suitable for purchase. We recently ran a screen of stocks that match IBD s 20 Rules For Your Investment Success. The results were more than limited: Not one stock met the grade. That doesn t mean you should forget about stock investing and seek returns elsewhere. The truth is, stocks can fall short in one or two areas but still become successful investments. They must be purchased and sold properly and when the market is strong. The key point: It s the degree of drawbacks that come up in a stock s analysis that has to be weighed. While there may be no such thing as a perfect stock, investors are always better off going with the stocks with the fewest blemishes. As the research process goes deeper, more imperfections come up. Ultimately, an investor must decide which flaws are acceptable. Don t expect a computer screen to make all those decisions for you. Critical thinking, knowledge and experience are key. 4/20/2013 4

5 CANSLIM Overview* C Current Big or Accelerating Quarterly Earning and Sales per Share A Annual Earnings Increases: Look for Big Growth N New Companies, New Products, New Management, New Highs Off Properly Formed Bases S Supply and Demand: Big Volume Demand at Key Points. L Leader or Laggard: Which is Your Stock? I Institutional Sponsorship M Market Direction: How Can You Determine it * How to Make Money in Stocks: Complete Investing System, William J. O Neal, McGraw Hill, 2011, Chapters 3-9 4/20/2013 5

6 AAII, Computerized Investing, 2 nd Qtr, 2013 Article A CANSLIM Screen with No Float, but Plenty of Lift Discusses 3 Variations on CANSLIM The Original CANSLIM (2 nd edition of O Neil s Book, 1991,5) The Revised CANSLIM (3 rd edition of O Neil s Book, 2002) A No Float Strategy (Proposed AAII variation) Indicates CANSLIM can overly restrict investment opportunities (few passing stocks) Variation Overview (see article for details) Earning and Annual Sales Growth over 3 years (3 rd ed) versus 5 years (2 nd ed) Lower available Shares, recognizing that stocks with or reasonable number of shares will, all else being equal, usually outperform older large-cap stocks AAII decided to test the revised CANSLIM without the float requirement (e.g., Maximum shares outstanding/float criteria ) Results: the No Float strategy outperformed the Revised CANSLIM, but not the Original CANSLIM. See next slide 4/20/2013 6

7 AAII Performance of CANSLIM Approaches vs. Benchmark* (Through 2/28/2013) Price Gain (%) Ann'l Risk Adj*** % YTD** Value of 1K Invest.*** CANSLIM* 79.0 (3.8) (10.5) 97.3 (9.6) (10.2) $30, CANSLIM No Float* (49.7) (3.9) $ 9, CANSLIM Rev. 3rd Ed.* 74.7 (2.6) (1.0) (5.4) 31.4 (26.3) (30.1) $ 8, S&P (38.5) $ 1, All Exchange-Listed Stocks (4.5) (46.3) (12.3) $ 4, * Price performance of hypothetical porfolio rescreened and rebalance Monthly using month-end prices and no transaction costs. ** Data as of February 28,2013. *** From December 31, 1997, through February 28, 2013 Avg. No. Passin g Stocks Recreated Table from: AAII Computerized Investing, Second Quarter 2013 A CANSLIM Screen with No Float but plenty of Lift By Wayne Thorp 4/20/2013 7

8 IBD s 20 Rules To Finding Winning Stocks Source: IBD Daily, 4/19/2013 4/20/2013 9

9 Alternative CANSLIM Indicators CANSLIM Indicator Relative Strength Market Direction (Distribution, Accumulation Days) Fundamental Indicators Quarterly, Yearly Earnings; Sales, ROE, etc Stock Chart Reading Potential Alternative Indicator ROC, RelSt per this presentation Weekly MAs, MACDs VZO, PZO Indicators 1 (volume based like IBD s methods) AAII Stock Investor Pro ~$200 per year Read IBD Daily explanations Many technical Indicators: MAs, MACDs, RSI, ADX, etc Stocks & Commodities Magazine 2 1. Volume Zone Oscillator (VZO) and companion Price Zone Oscillator (PZO) are discussed in Stocks & Commodities Magazine, by Walid Khalil and David Steckler, May, June Stocks & Commodities Magazine has monthly articles on many technical indicators and software/firmware sources for many charting tools. 4/20/

10 AAII s Stock Investor Pro Tool Windows-based (including Windows 7, 32- & 64-bit) Powerful fundamental screening system providing 60+ preinstalled screening strategies Ability to create your own screens NYSE (2,658), Amex (363), NASDAQ Capital, Global and Global Select markets (2,613) and NASDAQ Bulletin Board stocks (4,403) ADRs (503), REITs (257) and closed-end funds (830) Industry data: 12 broad sectors and 102 industries (Reuters) Fundamental data supplied by Thomson Reuters and earnings estimates supplied by I/B/E/S Covers over 10,000 companies (as of 9/30/2011) Depth of company data 2,200+ Fields per company Company financials latest 7 years & 8 quarters of detailed income & cash flow statements and balance sheets Earnings estimates quarterly & annual EPS estimates and long-term grow estimates along with recent surprise data Pricing Date: 10 years of monthly h/l/c/v Source: AAII web site, 4/18/2013 4/20/

11 Excel Block Diagram: Data, Storage, and Calculation ADO to Access Data Excel/2010/VBA Charting Indicator Calculations (MA, MACD) RelSt indicators calculated in Excel on Price/Volume Download SQL used to sort as required VBA Statement to download QQQ Workbooks.Open (" table.csv?s=qqq") Access/2010 ~1000 Symbols: Price: Open, High, Low, Close, Volume, Relative St. Data Storage Yahoo Web Stock Prices & Volume download 4/20/2013 Relative Strength Ranking & Percentile Calculated after Price Data Download 12

12 Stock Price/Volume Data Yahoo Data Source End of Day (EOD) Data EOD data typically fully available by ~9 10 pm on trading days Data Downloaded: Date, open, High, Low, Close, Volume, and Adjusted Close Only Adjusted Close accounts for splits and dividends Initial download of all historical data for a Symbol requires a special setup in automation ROC by Symbol & Date efficiently calculated on Download Rank and Percentile by date and ROC must be calculated later Subsequent daily updates via automation Mutual Funds, indices, sectors, etc. ~1200 Symbols in current data base(s) Symbols can be accommodated in Access, but download time would be long Stock Symbols in following Relative Strength Studies (~970 Symbols) as of March 2013 S&P 500 NASDAQ with Market Cap greater than $1.1B IBD50 4/20/

13 References Charles K. Kirkpatrick & Julie R. Dahlquist, Technical Analysis, 2007, FT Press Charles K. Kirkpatrick, Invest by Knowing What Stocks to Buy and What to Sell, 2008, FT Press How to Make Money in Stocks, William J. O Neil, 2011, McGray Hill Gil Morales & Dr. Chris Kacher, Trade Like and O Neil Disciple, 2010, Wiley Investors Business Daily (IBD) various issues in recent years American Association of Individual Investors (AAII): AAII Journal, Computerized Investing Quarterly, Web Site, etc. 4/20/

14 Relative Strength Indicator Goals Known Current RS Ind. ROCi Unknown Future RS Ind. ROCi Time Previous Date - i Current Date Future Date + j Claimed by Many: Relative Strength Percentile Rank in top 10% Decile (or some upper percentage) will often identify stocks in upper 10% Decile at later dates. This will be demonstrated. Relative Strength Requires: 1. Relative Strength Indicator, ROC i or Alternative; Sorted by Symbol and Date 2. Relative Strength Rank and Rank Percentile: Sorted by Date and Relative Strength 3. 2 proved more difficult than 1 4/20/

15 Relative Strength Indicators Used Herein ROC or Rate of Change = = 1= +/ Percent of Close change, itime later It has been reported that above is IBD s Relative Strength Indicator IBD considers their RS Indictor to be Proprietary, so it may or may not be We will use the following RS Indictors: ROC 63, ROC 125, ROC 250, RelSt Note: 3m = 63 trading days, 6m = 125 trading days, 12m = 250 trading days 4/20/

16 Comparison Study RS Indicators with IBD RS Indicator Count = Number of (Study_RS IBD_RS) in Histogram ROC-3Month with IBD RS Ind. ROC-6Month with IBD RS Ind. ROC-12Month with IBD RS Ind. ROC-RelSt with IBD RS Ind. Source: James Pujals, based on IBD_RS indicators from IBD Daily, 2007 Present and our calculated Study_RS 4/20/2013 Indicators 17

17 Relative Strength Histogram (26,26) Histogram: Decile RelSt Current, Decile RelSt Future 63.95% Percentage in Decile Bins 70% 60% 50% 40% 70% 80% 100% 30% 20% 10% 50% 0% 40% 10% 30% 20% 30% 40% 20% 50% 60% 70% 10% 80% 90% Current ROC26 100% Future ROC26 Current RelSt Decile Time: Future Relst Decile 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 10% 41.67% 11.98% 8.20% 6.79% 5.76% 5.32% 5.01% 5.06% 5.37% 4.84% 20% 10.98% 19.19% 16.54% 13.24% 10.87% 8.79% 7.07% 6.33% 5.11% 1.90% 30% 7.27% 15.92% 17.25% 15.27% 13.46% 10.96% 8.23% 6.15% 4.13% 1.36% 40% 5.17% 13.20% 15.27% 16.04% 15.10% 13.31% 9.98% 6.79% 4.01% 1.12% 50% 4.42% 10.70% 12.73% 15.14% 16.39% 15.42% 11.81% 7.87% 4.42% 1.08% 60% 4.02% 8.61% 9.99% 12.31% 14.75% 16.93% 15.62% 10.79% 5.62% 1.35% 70% 3.66% 7.64% 7.91% 9.10% 10.64% 14.31% 18.83% 16.53% 9.25% 2.13% 80% 3.59% 6.73% 6.48% 6.62% 7.26% 8.94% 14.12% 22.66% 19.07% 4.53% 90% 4.09% 5.23% 4.96% 4.96% 5.01% 5.45% 8.03% 14.02% 29.28% 18.97% 4/20/ % 2.18% 2.18% 2.17% 1.98% 1.97% 2.24% 2.82% 5.24% 15.28% 63.95% 18 Current Relst Decile Future RelSt Decile

18 Relative Strength Histogram (RelSt,26) Histogram: Decile RelSt Current, Decile RelSt Future 65.08% Percentage in Decile Bins Current Relst Decile 70% 60% 50% 40% 30% 20% 10% 0% 10% 20% 30% 40% 50% 60% 50% 60% 70% 80% 90% 100% 40% 30% 20% 10% Current RelSt 70% 80% 90% Future ROC26 100% Time: Current RelSt Decile Future Relst Decile 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 10% 41.80% 12.13% 8.19% 6.86% 5.75% 5.34% 4.98% 4.99% 5.41% 4.56% 20% 10.82% 18.86% 16.66% 13.67% 11.23% 9.05% 7.05% 6.17% 4.73% 1.77% 30% 7.01% 15.88% 17.16% 15.41% 13.63% 11.10% 8.24% 6.28% 4.07% 1.22% 40% 5.16% 13.20% 15.49% 16.57% 15.46% 12.96% 9.83% 6.41% 3.87% 1.06% 50% 4.29% 10.24% 12.86% 15.06% 16.61% 16.08% 11.95% 7.68% 4.21% 1.02% 60% 4.02% 8.77% 9.97% 12.12% 14.73% 17.18% 15.98% 10.69% 5.30% 1.24% 70% 3.69% 7.64% 7.77% 8.56% 10.23% 14.03% 19.14% 17.65% 9.34% 1.94% 80% 3.87% 7.00% 6.39% 6.61% 6.93% 8.44% 14.02% 22.89% 19.52% 4.33% 90% 4.16% 5.58% 5.04% 4.74% 4.80% 5.39% 7.46% 13.60% 30.19% 19.02% 4/20/ % 2.23% 2.10% 1.96% 1.85% 1.84% 2.11% 2.87% 5.08% 14.88% 65.08% 19 Future RelSt Decile

19 Historical Relative Strength Performance Percentage Current ROC between % Percentile and Future ROC between % Percentile Current ROC Future ROC 3 Month 6 Months 12 Months 3 Month 73.61% 67.75% 58.88% 6 Months 69.32% 63.95% 55.82% 12 Months 62.41% 57.74% 50.94% RelST 70.51% 65.08% 56.98% Percentage Current ROC between 0 10% Percentile and Future ROC between 0 10% Percentile Current ROC Future ROC 3 Month 6 Months 12 Months 3 Month 50.05% 42.35% 27.68% 6 Months 49.22% 41.47% 26.78% 12 Months 48.03% 40.14% 25.44% RelST 49.54% 41.80% 27.04% Charts can be produced for all above results 4/20/

20 Relative Strength in Stock Charts 4/20/

21 Conclusions CANSLIM Methods can be utilized with alternative indicators Relative Strength does provide ability to screen for probable winning stocks Relative Strength is very useful in charts to detect uptrends or downtrends Best Successes are undoubtedly achieved by: Studying Indicators and understanding strengths and weaknesses Devoting time to develop chart pattern recognition skills Effective use of Money Management to minimize losses when strategies are unreliable and run with winners when reliable 4/20/