I started doing my research in the Microsoft Network using the Custom Search feature in the Stock Screener. Since I was looking for a conservative stock to start with, the first restriction I put was that the stock be a member of the Dow Jones Industrial Average. I also wanted a Large-Cap company so I put the Market Cap to be above 5 billion dollars. Another restriction I added was that its P/E ratio be the lowest possible and that the EPS Year to Year be above 13%. After running the search I got 20 matches. The top three were Exxon, SBC Communications and American Express. After researching them a bit more I decided that Exxon would be a good option because it was a solid company that had a pretty stable history. After analyzing its fundamentals and taking into account the rising prices of gasoline, I decided Exxon would be a good long-term investment. I bought 115 shares of Exxon at $43.36!
The second stock I am looking for is a value stock. I want to get a good solid company and buy it for a bargain. The research I did in the Stock Screener was based on the value strategy we learned in class. In the Stock Screener I entered the following restrictions:
2)Return on Equity * Industry Average Return on Equity
3)Return on Assets * ROA 5 year Average
5)P/E current * P/E current (Industry)
7)Previous Day Closing Price near 52 week low
I got 10 results and researched each individual company using the research wizard. The company that I liked the most was Loews because it seemed like a good company with strong fundamentals. The company primarily deals with insurance through publicly traded subsidiaries. Other holdings include tobacco, hotels(US and Canada) and watchmaker Boluva. Even though it has the characteristics of a value company its growth potential and estimates are very impressive. I bought 120 shares of Loews at $53.01.
Now that I had value in my portfolio I decided to look for a good growth stock that had a positive momentum recently outperforming the market. I still am not sure I want to invest in a technology stock because of their volatility and risk. I used a similar screen to the O’Shaughnessy Growth screen. The screen was almost identical but with a couple of minor alterations. I decided to make the minimum market cap half a billion dollars and added the following restriction: P/E current / EPS growth next Yr. * 1. Most of the companies that came up were technology based and are currently going through difficult trends. But I did find a company that I liked a lot called AmeriCredit Corp. The company basically seeks to attract consumers who have credit limitations or past credit trouble and to shoppers buying late-model and new automobiles. Even though it does not sound so exciting, their numbers are outstanding. What especially caught my eye was the positive trend in EPS and the fact that the estimated price at the end of the year was higher than the current price. Multiplying the current P/E * estimated earnings = estimated future price. Another factor that finally convinced me to buy the stock was the fact that it had a Stockscouter rating of 9. I bought 170 shares of ACF at $60.87.
The fourth transaction I made was based on the Righteous Rockets stock screen. I made a few modifications to the screen but basically left it the same; I changed the market cap to at least half a billion dollars instead of 50 million and I also added a new restriction (StockScouter Rating * 9). I only got one result off my screen and that was Downey Financial Corp. (DSL). After running it through the research wizard, the stock seemed to be wonderful. The estimated earnings were about 20% higher for FY 01 than the previous year and the price was estimated to be higher than it currently is. The only negative characteristic I found in the stock was when I analyzed its chart at StockCharts.com; there I basically saw that the stock price was at the top of the Stochastic chart (around 80) and the MACD and RSI (Relative strength Index) were around their highs. Even though I know the stock price of DSL will most probably go down in the immediate future, I am buying DSL long and I believe that it will outperform the market in the long run. I bought 176 shares of DSL at $57.00.
The next transaction I realized was based on the GARP stock screen. I analyzed the first 10 results of the stock screen and the company that I liked the most was Chicos FAS stores. The company basically operates about 260 Chicos and Chicos Outlet stores in 40 states. The Chicos stores sell clothes for woman. The company has had a stunning growth over the last year, increasing its sales 64.50%. The stocks fundamentals where very good; I particularly was impressed with the companys sales growth and with its estimated EPS which were reasonably higher than last years EPS. After having read a little more about technical analysis and what we covered in class I decided to use Clearstation.com to review Chicos and see what the outlook was. The technical analysis of CHS was what convinced me to buy the stock; primarily because the stock was presently in a great buy point with two very strong supports under it (the graph is on the next page). The Stochastic was also showed that the stock was in the oversold area and had an upward trend. Finally another reason I thought the company was going to do well in the future was because of a recent recommendation of the stock by a Goldman Sachs retail analyst. I bought 200 shares of CHS at $32.45.
The next investment I made was based in a totally different research strategy. I started my research in the Market Trends page provided by the StockScouter. Here I was able to see what sector of the stock market was currently in favor (consumer durables) and then see which stock of that sector had the highest ratings. After researching the fundamentals of the top rated stocks I particularly liked three (Harley Davidson, Whirlpool and Centex Corp). I ruled out Harley Davidson because it seemed very expensive and I wouldnt like to own that stock. Whirlpool and Centex on the other hand are both great companies in my opinion and I would like to own their stocks. I researched Centex Corp. fundamentals using the research wizard and I liked the company very much. The company had very high EPS estimates which where 32.24% higher than last years respective quarter and the recent news showed the company was right on track. I also did the technical analysis of the company using the graphic tools at stockcharts.com (I printed out the stock chart with my analysis posted on it). I concluded with my technical analysis that the stock was currently in a good point of entry for buyers and that it was heavily oversold. I bought 200 shares of CTX at $42.75.
The next stock I researched was based on a recommendation I read in Business Week. It was recommended as a good technology stock that dealt with both equipment and medicine. The company is called Strykers Corp. and it basically makes surgical products such as drills, saws, rasps and mixers. Orthopedic implants (including artificial joints, spinal rods, screws, and bone cement) account for nearly 60% of sales. The fundamentals of the stock are very good and the technical analysis indicates it has been heavily oversold. The only negative I found in the stock analysis is that its P/E is higher than the industries and that the PEG is high also. Still I believe the company is going to do well in the near future because it has new products coming out and good numbers are expected. I bought 300 shares of SYK at $55.00.
The next transaction I made was one that was very different from my other transactions. I based my transaction on a clearstation.com e-mail report that was sent to me recommending that I short NVDA. I went directly to the stockcharts.com and analyzed its chart. I decided to short the stock based on the information the chart provided (it was heavily overbought). I short-selled 100 shares of NVDA at $84.64.
Author: Luis Ahumada