Conference nyoss1::market_investing

602.0. "How to use Inv. Daily tables?" by NECSC::BIELSKI (Stan) Thu Oct 28 1993 12:55

    I'd like to better understand how to use the "Intelligent" stock
    tables from Investor's Business Daily to make investment decisions.

    I'm clear on EPS rank, but not sure how to use the Price Relative 
    Strength and Accum-Distbn ratings.  

    =EPS rank is described as a measure of EPS growth in the last 5 years, 
    against all other stocks in the table (80 or better = superior).=
    Fair enough, I want a high number.

    =Price Relative Strength is the daily stock relative price change over
    the last 12 months, compared to all other stocks in the table.
    (below 70 = weaker or more laggard price performance).=   OK, do I want
    a weaker rated stock (with a high EPS rank) that has a lot of room
    to appreciate, or do I want a stronger price rating as a indication that 
    the market is rewarding the high EPS?

    =Accum-Distbn is derived by multiplying daily volume by change and 
    direction of stock price. A is strongest, E is weakest.  Use with other 
    factors to determine investing decisions.=   
    I'm most confused by how to use this one.  I suppose I should want a 
    neutral C, and avoid the D's and E's which are still on the way down 
    in price.  An A or B is ok, but the stock is already appreciating strongly?

    As an example, from a recent issue:

         EPS   Rel   Acc-
         rank Price   Dis

         91    84      A   Chrysler
         79    35      C   Disney
         91    67      A   Ford
         91    50      C   General Motors

    So, assuming all other factors are equal, my guess is that Disney 
    and GM are better buys due to the lower Relative price strength, and
    Ford is a better buy than Chrysler for the same reason.

    Clarifications/corrections would be appriciated.

    Read O'Neils book and the explanation of his CAN SLIM System. He is the
    publisher of Investors Daily and the proponent of these "statistics". 
    
    Most of his followers will ditch a stock that is less than 80 80 B. On
    friday the paper lists stock in order of RS and EPS on the last page.
    
    EPS means that the stock is making money consistently. RS indicates its
    strength relative to the market. Auto manufacturers rarely do well in
    RS. A company can make money, do well but still fail to rise in RS
    because the market does not see them as a good long term value and
    hence will not buy the stock. Look at the P/E on the auto stocks and
    you can be fooled by the low P/E. 
    
    Accumulation and Distribution is the indicator of Market interest in
    the stock. If no one is interested and no one buys...how can the stock
    appreciate in value?
    
    People who have little time and are looking for a fast decision tool,
    use these indicators as a guideline. They have value. However there are
    other factors to examine. 
    
    Cordially,
    
    Moish 

    
    fwiw, I created a screen last year at this time using a CANSLIM
    approach, or at least as close to a CANSLIM screen as I could get.
    
    the results, on paper at least, appeared to be disasterous.  note that
    many of the CANSLIM candidates were health- or drug- related, and I
    made no effort to properly diversify this paper portfolio as I would if
    I were trading real dollars.  Nevertheless, I'm very glad I was trading
    on non-negotiable paper only!
    
    /jim