The Bull Hunters Guide

Today, we’re going to wrap up our series on stock picking strategies. Over the course of this series, we’ve looked at the stock picking strategies that are most commonly employed to great success by those who’ve been in the investment game for a while. While we recognize that no one strategy is going to produce a winner every time, we thought it was worthwhile to look at these notorious techniques to see what each one had to offer in comparison to the others.

As is fitting for a series like this, the last stock picking strategy we’re going to look at is one that is completely different in every possible way from everything that came before. While up until now, the underlying basis of every strategy we’ve covered has been the principle of fundamental analysis, today we’re going to turn that on its head by looking at technical analysis.

Technical Analysis

Technical analysis is focused almost entirely on the view of the market as a whole, with an eye towards its predictable trends and future prices, rather than the makeup and foundation of any one company. As a result, it’s the most predictive of stock picking methods, and in some ways the most radical. It is not without those who swear by it, though.

Technical analysis asserts that just by looking at the prices on the market, we can learn a lot about where that market is moving, because prices tend to move in trends. Working from the maxim that history tends to repeat itself, technical analysts often invest in those companies that show good trends based on market charts, rather than the intrinsic value of the company behind a stock.

Lookout For Market Movements

For that reason, many decry technical analysis as a stock picking strategy with no long term usage. And indeed it isn’t. That said, it never claimed to be. Because a technical analyst is constantly on the lookout for market movements, he or she tends to spend little time sitting on any one stock for very long. They prefer to soak up the profits (or losses) from rapid movements, and then move on, rather than worry about the long term gains to be had from any one stock.

That wraps up our series on the most popular and arguably effective stock picking strategies. Hopefully by now you’ve learned enough to start developing your own strategies, and that they’ll pay off for you in the long run. Join us next time as we embark on an all new avenue of exploration in the exciting world of stock market investment.

Thank you for hanging around for Bullhunter’s second investment series: Part 1 – 10 of Stock Picking Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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Hey there. Welcome once again to our series of posts covering some of the most popular and effective methods for selecting stocks. These methods have been documented and compiled over the years, and while they differ dramatically in terms of execution and philosophy, they all share the common element that, depending on who you ask, they work!

While every stock selection is something of a gamble, it’s our hope that by looking at these time-tested strategies, you’ll begin to gleam some idea from them of how winning stocks are usually chosen, and begin to develop your own strategy that will be effective for you.

Beating The Dow

Today, we’re going to look at what is probably one of the simplest methods in all of investing. This method was first presented in a book by Michael Higgins called “Beating the Dow”, and is commonly known as the “Dogs of the Dow” method. Selecting stocks by this method couldn’t be easier. You simply take a look at the top 30 companies with the highest dividend yields, according to the Dow Jones Industrial Average, and then spread your portfolio among the top ten.

That’s really all there is to it. You just check back every so often, perhaps every quarter, and make changes based on what you see, so that your portfolio always accurately reflects the top ten dividend yield stocks at any given time.

Depending On The Dividends

Clearly, this strategy is depending highly on the dividends that you’ll receive from the stocks in question, but it always takes into consideration the future potential of those stocks. The idea is basically that, if a stock is in the Dow top 30, it will typically be a strong stock with enough of a foundation to weather passing storms and eventually return to a position of prominence, whereupon you can sell it for an amazing profit. In the meantime, you just enjoy those dividend yields.

Well, that’s it for now. Told you it was a simple method. Next time, we’re going to wrap this series up by taking a look at the last method on our list: technical analysis. Stay tuned!

See you next week for part 10 of Stock Picking Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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Last time in this blog, we began to discuss the CANSLIM method of choosing stocks. Something of a complex system for choosing, CANSLIM involves the study of 7 different criteria in an attempt to pick stocks that are most likely to generate profits for the investors. It differs from other systems in that it doesn’t depend very much on forecasting an uncertain future, but rather on the objective analysis of the current status of a stock. That’s why it has to cover so many variables, and consequently, why we needed to split it up over two entries!

Last time, we mentioned that CANSLIM has to take into consideration the current and annual earnings of a stock, as well as how the company is adapting and making changes in the marketplace, whether it be in terms of new management, new products, or just new policies on how they will conduct business. That covers the CAN part.

Supply, Demand and Leader

The S in CANSLIM stands for “Supply and Demand”. This is a very basic rule of economics that applies to all economic markets and should be very well understood by all investors, even beginning ones. How supply and demand relates to CANSLIM is that CANSLIM strategies hold that, overall, it’s easier for smaller companies to show greater profits. This is because larger companies require a greater demand in order to push the kind of supply that should show huge profits.

The L in CANSLIM stands for “Leader or Laggard”. This refers to the fact that a CANSLIM strategist asserts that one should look at the difference between those companies that lead the market and those that lag behind. Investors are always looking for the next big thing, which is just another way of saying that they’re looking for those companies that lead the market. In order to determine this, one should look for stocks that perform better than 75% of their competitors in the same industry.

Institutional Sponsorship and Market direction

The I in CANSLIM stands for “Institutional Sponsorship”. This means that a CANSLIM strategist looks for companies that demonstrate some kind of sponsorship from important and well-backed institutions. This is generally a sign that an industry has faith in a company, and that it’s going to be around, generating profits for the long haul.

The M stands for “Market Direction”. This means that a CANSLIM strategist must look not only at the stock in question, but at the entirety of the market in question. Whether or not the market as a whole is moving up or down has a big effect on the profitability of a stock. Even if all the other six factors seem sound, the company will probably not succeed and generate profits in a failing market.

Phew. That’s it for CANSLIM. Next time, we’ll continue our look at the most popular stock picking strategies out there. We’re nearly at the end, folks! Until then, happy trading!

See you next week for part 9 of Stock Picking Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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This continues our series of in-depth looks at the different strategies that are commonly employed by big name investors when they go to choose the stocks that they’re going to invest their hard earned money into. In fact, though it’s the case that everyone out there seems to have their own system for doing things, there are a fairly set number of strategies that seem to pop up over and over again. It’s these that we’ve been examining, as we feel they’re the most noteworthy.

CANSLIM

Having discussed all the basic and secondary strategies already, we’re going to move on to a stock picking strategy that represents something of a modern hybrid of picking techniques. It’s known as CANSLIM, and the whole idea is that it allows one to pay attention to a lot of different objective factors at the same time (seven to be exact) in an attempt to pick a stock without relying on subjective forecasts of future values that might not end up holding water.

Because it’s such a complex strategy, we’re going to cover it in two separate blog entries. Three of the aspects will be covered this time, and four next time, finishing it up.

What Does CANSLIM Stand For?

First off, the C in CANSLIM stands for “Current Earnings”. This is meant to indicate that you need to look at whether or not a stock’s earnings per share have risen on a consistent yearly basis. Generally speaking, if a stock’s earnings per share are continuing to increase over a period of a year, it’s said to be in good condition as far as this criteria is concerned.

The A stands for “Annual Earnings”. This indicates that one should look at whether or not a company has shown a good consistent growth over a period of years. Clearly, this implies that companies with a history of at least a few years tend to be in better standing in the CANSLIM method. However, there’s something of an exception…

The N stands for “New”. This means that CANSLIM strategists tend to look for companies that are offering something new. Because they also look for consistent growth over a long history, this means that they usually seek out old companies that are undergoing changes that alter the way that they do business. This could be anything from new management, to a new product line.

Next time, we’ll cover the other four aspects of CANSLIM.

See you next week for part 8 of Stock Picking Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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Recently, we’ve been discussing a host of stock picking strategies and looking at the applications of each. We’ve dealt with underlying fundamentals such as fundamental analysis, and qualitative analysis, as well as the two immediate offshoots from those: growth investing and value investing. We’ve even looked at a more modern methodology that comprises a fusion of both growth and value investing: GARP investing.

Income Investing

This week, however, we’re going to look at an investment strategy that is arguably the most straightforward of them all. In that the end goal of investing is to ultimately turn a profit and generate income, the stated goal of income investing is right in line with that: to pick the stocks that will provide the most steady income.

This runs counter to what many investors think about income. Typically, they view investments like stocks as being a risk with little to no guarantees outside of certain option spreads. For steady, secure income they look to more traditional alternatives like savings bonds. However, when we’re looking at stocks that pay out dividends, it’s certainly possible to draw a good steady income, just from one’s stocks.

Income investors usually tend to invest in those stocks that are tied to older, established businesses, rather than trying to find the next big thing. The reason for this strategy is that these companies have a very solid foundation in the marketplace and “aren’t going anywhere”. They have no real need to reinvest their earnings into themselves, so very often they tend to pay them out to their shareholders in the form of annual dividends.

The Highest Dividends

However, it isn’t just about picking those companies that pay out the highest yearly dividends. Good income investors will also look at a figure called the dividend yield, which is calculated by dividing the annual dividend paid per share by the price of the share itself. This will give one a percentage figure that determines the dividend yield. Typically, income investors look for a high dividend yield no matter what the actual numbers are – a figure somewhere around 5-8% seems to be the sweet spot that most are looking for.

In the end, income investing can be boiled down to the following summary: finding companies with good, high dividend yields that will allow the investors to receive a steady income in dividends over time without much concern for growth or undervaluing or any of the other principles that make up the other popular strategies.

See you next week for part 7 of Stock Picking Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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