Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (86) | Ignore Thread Prev | Next
Author: BruceBrown Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 23022  
Subject: FORE! Date: 3/1/2001 11:45 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 120
I feel like a beginning golfer who has just watched some videos of the golf swing, read a few books, thought about a few things, hit a bucket or two of slices and hooks and now am standing on the first tee in front of a crowd who knows the game as well as golf swing all too well. It's pretty difficult to swing the club and hit the ball in those circumstances - so bear with me. Perhaps I should simply yell 'FORE' before we go on with this post. In other words - duck low and protect your respective body parts...

I certainly don't - at this time - pretend to have any confidence and skill built up about CANSLIM and the rest of the reading materials from the Burrow. That's not why I am making this post. However, I have most of the books and have been reading them for the past two months. I am still in the early stages of study process which is allowing me to look back and see where I went wrong. As painful as that is, I feel it is an important step for me to move forward. I sure could have used an earlier injection of Weinstein and O'Neil about 12 months ago when my friggin' ego and confidence was a dangerous element. However, what remains in the past is finished. Believe me, I don't mean for that previous sentence to be taken as being flippant. It's not. I just don't know how to find the proper words at the moment to describe it. The point is to move forward and improve for the future. Failing to do that would be admitting no lessons were learned and no wrongs committed. Allow me to be the first to admit that although I've been able to uncover emerging things in the early going in technology over the past few years - outside of that I knew very little about what to do with that information in terms of making and or protecting the money. Of that, I am deeply humbled. Not only for my personal capital, but for anyone who has had the misfortune of observing my thoughts.

I had a very disturbing exchange with dbphoenix on the gorilla game board in early 2000 due to my ego and 'lemming' belief based on some type of group think about gorillas. Those of you that read this board will recall my venture over to this board to equally shove my foot in my mouth. I made an immature comment about the Burrow's graphics in my frustration and was way off base. Way off base. For all of that, I deeply apologize. I can't even bring myself to offer any type of an excuse.

When I found the Fool a few years ago - no doubt the LTB&H philosophy fit right into my longer term goals as many of my investments were in the middle of a nice run. At this point, I refuse to simply 'accept' the overall Fool mantra and have the desire to broaden my horizons. Boy, was I tainted by the Gardners (as well as Malkiel's) comments in regards to TA. That belief hurt me as well as others. I was delighted to be presented with the information in the list of reading material that db has assembled. It's all very eye opening information. I haven't even cracked the Bulkowski or Schabacker books yet because they look like I need flourescent lighting and a number two lead pencil with a notebook and professor in front of the class to get me through them. Yet, they will be cracked in due time. I've only encountered the rest of the (minus the out of print Mamis book) material on an initial basis (first readings) and have much more study to complete. I'm still learning about the 7 iron before I spread that knowledge throughout the bag to hit the driver, wedge and 3 iron.

I've had plenty of dandies get away from me using the shorter term time reference even though they were all purchased for the longer term. I believe I will be attempting to implement additional strategies to help in building that longer term process from now on to avoid certain elements of greed and fear contained within the overall process of investing and the stock market. I realize it will take time, discipline and effort on my part. If it leads to better longer term success and realization, then it will all have been worth it. Not that I would wish a market environment such as 1973-74 or 2000 to ? in all of our futures again, but what a learning experience to recover from for all investors and the markets.

The above being said, my first request is for a little guidance concerning a current holding I have had since earlier last year and my parents have had for many years. Cardinal Health. It's not designed as a presentation of “here is a CANSLIM' candidate” by any means, but more designed as an exercise process or learning experience to see how I should apply the criteria to a current holding to help make decisions about why I still hold it, what the market is telling me about it and what process I should go through to avoid holding yet another stage 4 disaster while being unable to move, set stops and evaluate overall strategy. I can't really narrow down why I bought this particular company outside of my knowledge of the company and the desire to broaden my portfolio into more 'non technology' areas at the end of 1999 and early 2000. At the time, I didn't even set a time frame for holding the investment. I had no idea that the stock was going to perform as well up until now, so I thought it would benefit me to try and take a look at it to make some determinations. As has been mentioned on this board, I don't think we are in classic 'CANSLIM' times by means of a new bull market at present by any means. Certainly not with the broader markets. So perhaps it would be best to apply some Weinstein criteria as to what stage the stock is currently located rather than view anything by means of CANSLIM.

Regardless, I will just run a brief initial CANSLIM look at the stock itself which comes from the Health Care Distributors/Health Services and Products Provider industry segment. As I said, I'm not trying to make the conclusion that it fits the criteria - especially in this environment. But as an exercise for future use, I thought I would at least begin to take a look at running things through the initial criteria to get a handle on future application once times roll around to moving in the uptrend direction. I remain open to what such a discovery would reveal. This is only a rough draft of what would be best served by guidance to lead me to a direction of nailing down a second, third and final draft for proper study/presentation. No need to mention, it's a work in progress. I only chose it as a learning exercise. I welcome all suggestions and comments as how I can dive deeper into each element to make determinations and weed out non important information. Obvious steps to take would be to determine the entire health care segment and judge how the aggregate is performing in addition to the leaders and the laggards in the current market environment. That study has not been completed on my part and remains the obvious 'next'. Without even looking at that sector, I don't know how we would view some of the defensive issues in terms of this point in the cycle. If the aggregate health care service and product group has not been too shabby over the past few months to year, I imagine it is due to the cyclical rotation. Yet, that is unfounded speculation on my part without looking. I would imagine that's not proper use of CANSLIM by any stretch of the imagination, but simply a process of where the money has been flowing. I can't run an IBD stock check up on CAH since it appears foreign subscription and sign up is not available. If any of you subscribers could run a check up on CAH and post it, I would appreciate it. I assume it lists the industry segment ratings to see how the aggregate is doing.

C = Current quarterly earnings per share. They must be up at least 18% or 20%

Recent quarter was 21.4% better than the y/y period. Operating revenues improved 24% from the year ago period. Management's guidance was for 20% EPS growth going forward. Previously announced $750 Million share buy back program was withdrawn due to the $1.67 Billion acquisition of Bindley Western Industries.

A = Annual earnings per share. They should show meaningful growth for the last five years.

Five year actual EPS growth has been an annualized 20.7%. Consensus analyst 5 year forward EPS growth is an estimated 21.5%. Five year actual annualized revenue growth has been 29.1%.

Estimates and analyst ratings:

http://quicken.com/investments/estimates/?symbol=CAH

N = New. Buy companies with new products, new management, or significant new changes in their industry conditions. And most important, buy stocks as they initially make new highs in price.

http://www.thestreet.com/stocks/biotech/1197316.html

Here's where I need some determination and guidance. I'm not sure if this qualifies, but Cardinal Health just completed a recent acquisition of Bindley Western Industries. I'm not trying to stretch the implications of the word 'new', but does an acquisition figure into the parameters of 'new changes' in their industry condidtion? The stock was about $3 away from it's recently set all time high of $104.94 in the past few months as of last night's close. I would need help in determining what the chart shows. The visual I get shows that interesting spike as almost being in the middle of some sort of either a basing period or a topping period. As I said, I'm just beginning to study all of this so I'm in the dark here. Then I realized that the spike in volume after the recent high was set was partially due to the announcement of the acquisition which caused a profit taking or sell off which one often sees when such an announcement is made. I'm not sure if that is a valid observance on my part, but I just mention it.

For lack of a better chart without an html that is six miles wide, here's a long term chart:

http://tscquote.thestreet.com/Charts.jhtml?symb=CAH&time=20&freq=1&type=64

S = Supply and Demand. There should be a small or reasonable number of shares outstanding, not large capitalization, older companies. And look for volume increases when a stock begins to move up.

Well, this company has been around for a long time. Shares outstanding equal 280 Million. Market cap is around $29 Billion. A recent 3 for 2 stock split was announced. As I mentioned, the $750 Million share buy back (or roughly 7.5 Million shares using current price) was scrapped due to the acquisition of $1.67 B for Bindley. Most of these elements certainly don't seem to be qualifications for a CANSLIM candidate. Yet, I would appreciate guidance on how best to apply the age issue, number of shares and market cap to see if I should just skip trying to view this stock as a candidate or move to other elements to determine that it once was and now needs to be viewed in terms of a selling strategy.

http://quicken.com/investments/snapshot/?symbol=CAH

L = Leaders. Buy market leaders, avoid laggards.

Analysts have pegged Cardinal Health to be considered as the 'gold standard' in this particular industry. Whatever that means? In terms of EPS growth and strength within its niche, Cardinal Health has built itself up over the past decade to be quite a leader in the segment. I start to get fearful these days when sell side analysts suggest stocks. I'm afraid to say that I've heard Cardinal Health mentioned in the past two months...

I = Instituttional sponsorship. Buy stocks with at least a few institutional sponsors with better than average recent performance records.

Cardinal Health is certainly well owned with a high percentage of institutional sponsorship. Most likely a negative using the 'heart of the watermelon already being eaten' comment that O'Neil talks about in the book. Once again, I would look to guidance as to what one can determine 'overwned' means in determining a CANSLIM candidate.

Institutions: http://biz.yahoo.com/hd/c/cah.html

Mutual Funds: http://biz.yahoo.com/hd/mf/c/cah.html

1,253 Institutional holders for a total of 81.5% of the shares.

http://quicken.com/investments/snapshot/?symbol=CAH


M = The general market. It will determine whether you win or lose, so learn to interpret the daily general market indexes (price and volume changes) and action of the individual market leaders to determine the overall market's current direction.

Boom! I think we could determine that the market direction has not signaled we are in any kind of a bull market at least in the overal Dow index (which is down around 13% from it's all time high). Pretty much some sort of a trading range has been lasting for quite some time within the Dow. Who knows where we are going from here? This determination is out of my league in my current learning process. I do know that CAH is in the S&P 500 and that index has just hit the 21% decline area from it's high which I guess tradition qualifies as a 'bear market'. The Nasdaq hit an intraday low of being down 59% from its high this morning. In combination, those particular benchmark measures are certainly not pointing to any sort of a bull market at the moment with readings of -13%, -21% and -59%. When compared to the 1929 - 1933 and the 1973-74 eras, I can see why the bears are enjoying 'being right' this time around since the opportunity provides plenty of fodder. O'Neil mentions that the 1929 - 1933 period saw the average stock lose 90% of its value and the average stock lost 70% of its value in the 1973-1974 era. The 1973-74 period saw the Dow lose 50% with the underlying issues giving back 70%. We have certainly seen plenty of technology stocks lose 65% - 95% of their value from the highs to date which illustrates that the index average might end up not having as large a loss as the average issue once it's all said and done. However, we will have to wait and see what that information is once we arrive at a point to look back and provide that data. Not that I feel any prouder as being part of 'history', but I fear that I am in this unfortunate circumstance. I would venture to guess that there are more people who have particpated in this historical moment than would have desired. So, it appears the "M" portion certainly fails the desired trend at the moment.

As indicated, I'm more interested in determining the current situation for Cardinal Health since it is already a holding. So, it's a real money decision. How I look at all of the elements I need to look at to use as viewing 'what the market is saying' will be instructive for me - regardless if I make a determination to take any action. The defensive issues, taken as a separate 'index' so to speak might qualify more as an area that has been experiencing a 'bullish' direction over the past 10 to 14 months or at least the recipient of rotational money as we work through the economic cycle 'wheel'. I'm not sure that qualifies as the appropriate type of rotation at this time to be conducting this exercise, but perhaps an ideal time to make a determination to avoid stage 4 action.

If I think of the Weinstein stages and simply look at the chart, I can see a few things. Whether they are right or wrong is up for grabs. So once again, I welcome any comments. I don't even know what the hell kind of a chart I shold be looking at. Bar chart? Linear chart? Candlestick chart? OHLC chart? I'm going with the bar chart as presented by Weinstein on page 22 of his book. I've looked at both the daily and the weekly. The stock has been trading in a range since late September to current more or less between $90 and $100. During that time it has never dipped below the 200 DMA, but has flirted with the 50 DMA, including dipping below it a few times. On a weekly basis, the stock has only dipped below the 20 DMA at one brief point since my purchase. On a daily basis, there have been more dips below the 20 DMA as opposed to the weekly. The RSI has not exactly made the type of directional move that I would like since the middle of 2000 to the current date as the price has increased when I look at the weekly. Therein lies the question. If I look at the monthly chart in terms of the 'longer view', the RSI shows the highest reading with upward momentum. If I change that to weekly the RSI is headed in the wrong direction. If I look at a daily, the RSI doesn't look bad. What the heck am I supposed to determine with those three views. I know they apply to different time frames, but any guidance would be appreciated.

April of 2000 to September was an obvious uptrend that seems to qualify as a stage 2 move. It's certainly not the first stage 2 move that the stock has had in the past. From a larger picture, the stock has had quite an advance over the past decade.

http://finance.yahoo.com/q?s=CAH&d=mym

1994 to 1998 was a pretty major move. The April 2000 to September 2000 move was a shorter stage 2 move before the stock entered whatever the 9/00 to 3/01 period is. Here's a quick look at the past 2 years:

http://finance.yahoo.com/q?s=CAH&d=2ym

I'm curious if the past few months would qualify as having been in a stage 3 or a possible considation/basing period. That's why I'm watching it to see what happens with volume and direction - regardless of whether or not it is a CANSLIM candidate or not. Anyway, I'm still in the discovery process as is evident and simply used CAH as an example to take a look. I would appreciate any comments and direction on some of the above to see how I can progress to the next step or two to make some determinations.

BB
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (86) | Ignore Thread Prev | Next

Announcements

2013 Feste Award Voting Begins!
Who will win the 2013 Feste Award? Vote now for the Fool that most exemplifies the Fool Community mission of Learning Together!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Berkshire Hathaway

Reestablishing the Middle Class
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement