Ask Colin

STOCK SELECTION

Select another keyword

  1. In your talk the other night, you said that it is now time to buy more defensive stocks because they are likely to fall less in a bear market. I can’t find a reference to defensive stocks in your books or elsewhere. What do you mean?
  2. How do you come up with choosing a quality stock because there are so many stocks to monitor?
  3. Why does Telstra not appear on the 52-week scan (18 November 2011) on the members' website?
  4. Do you look at rate of return and projected rate of return in choosing stocks?
  5. Why is it that the leaders in one bull market rarely do as well in the next?
  6. Do you only produce one fundamental list a year for PE ratio scans and then visually select stocks from that list for the entire year, or do you update the list several times a year?
  7. Just what is your regimen for controlling the purchase of stock, including timing, for your portfolio?
  8. If you are fully invested do you continue to scan for stocks or do you only scan when you need stocks for your portfolio?
  9. Do you select a list of stocks once a year and populate your portfolio from this list?
  10. You recommended five industrial stocks in February 2004 Shares. To what extent is the success of these recommendations dependent on the market being strong and they being in strong sectors?
  11. I did very well with gold stocks in 2003. To what extent was this due to the strength of that sector versus my following a value approach to stock selection?
  12. I thought I had trading sown up. From May 03 up to November 03, I couldn't help but make money. Then it all dried up from November 03 onwards. My dilemma is whether I somehow changed my trading style and am not aware of it, or is the change in market conditions my difficulty?
  13. Is there a way to identify rising stocks that have not yet reached a 52 week high?
  14. I want to get in early on stocks you mention in articles. When does Shares magazine go on sale?
  15. Your portfolio does not seem to have any blue chip stocks. Why not?
  16. You teach how to find value stocks. However, this only applies to industrials. How do you find resource value stocks?
  17. You seem to scan the charts first and then look at the fundamentals. Isn't it easier to scan the fundamentals first?
  18. You look for Price to NAB multiples of 1.0 or less for value stocks. Would it worry you if the multiple was negative?
  19. Would it worry you if a PE ratio was negative?
  20. You look for a PE multiple less than 10 for a value stock. Would it worry you if the multiple was as low as 1.5?
  21. The mini Course on stock selection on your subscription web site suggests that your version of Benjamin Graham's Margin of Safety has replaced the value stock scan. Is that right?
  22. For your fundamental scan do you still use PE Ratio, Dividend Yield and Price/NTA filters?
  23. You seem to scan the charts first and then look at the fundamentals. Isn't it easier to scan the fundamentals first?
  24. If Warren Buffett's approach is so successful, why worry about looking for uptrends?
  25. In BRW 26 July 2003 you discussed ABC Learning Centres (ABS), but it has a PE ratio of 21.9 versus the industry ratio of 13. Am I missing something?
  26. If you have several growth stock investment opportunities, how do you decide between them?
  27. Why don't you use a scan based on PE ratio, Dividend Yield and Price/NTA to find value stocks among resources and trusts?
  28. Can William O'Neil's CANSLIM method be used in Australian stocks?
  29. Have you ever used a "RelStrenComp" for stock selection? Are there any benefits? Why do you prefer a hybrid approach?
  30. Finding interesting companies using the AFR Rolling Year Records is OK, but how do I know if today's list is better than any other day's list?
  31. Many of the stocks you recommended in Shares Weekly or BRW do not seem to come from your value or growth searches. How have you chosen them?
  32. Where can I find the bond rate you use in your PE ratio scan?
  33. You use weekly and monthly bar charts when teaching your stock selection methods. Why not daily bar charts?
  34. Should I avoid thinly traded stocks and what daily volume would you regard as a minimum?
  35. Are your value and growth models applicable to all market conditions and if not, when are they best used?
  36. Is the 52-week new high scan the only way you find stocks of interest?
  37. In Shares Charting Guide 2002, you demonstrate the margin of safety analysis. Is this carried out after your usual scan of PE ratio, dividend yield and price to NTA?
  38. I have found a company that meets all the "margin of safety" tests, except that it has a debt to equity ratio of 220%. How should I deal with it?
  39. How can I find the stocks in the ASX top 100 that have wide channels for Dr Elder's swing trading in Come Into My Trading Room?
  40. Is it better to invest in companies that are followed by institutions?
  41. You mention in Shares Charting that about 10 years of earnings is needed to analyse it, otherwise it may be best left alone. This would knock out a lot of growth stocks like CSL, wouldn't it?
  42. In Shares Charting Guide you look for companies with a margin of safety. Can these rules be relaxed sometimes?
  43. You discussed XXX (code disguised) in a column. It has a high dividend Yield, but no PE ratio. How did you identify it?
  44. Is the value model best used after a market correction?
  45. You filter stocks in consolidation with PE ratios below 10. But won't all stocks that have fallen have low PE ratios?
  46. If profit comes from price movement, should a technical analyst look for volatile shares?
  47. There are too many stocks to look at all the time, how do I narrow them down to the key stocks?
  48. Is it necessary to do the same level of analysis as a stock broker's analyst might do to follow the value method?
  49. Do the stocks you write about in your Trendlines columns always conform to the value stock selection method in your article in April 2002 Shares page 72?
  50. When you make the original purchase of a stock after the breakout has occurred and then you are waiting for the correction ... do you continue to wait for a correction if the stock is trending strongly or do you abandon the stock?
  51. I have read one of your articles regarding choosing value shares by their PE and yield, but I am unsure as to your approach on growth shares. I also note that you will be happy to trade a trend in the face of recently poor financials, etc. So, my question is how do I go about narrowing down my choices of shares to watch and perhaps trade?
  52. With respect to the 3 fundamental filters of your Fundamental Value Scan: P/E ratio of 10 or less: For good or ill, there are less and less companies that pass that first filter at the present time (Late December 2001). This means that there are less and less companies that one can choose from to trade in. I wonder if perhaps your notes may have been written at an earlier time, when companies exhibiting this filter were more numerous. Or do you still stick with this filter? Dividend yield 5% or more: Much the same comments apply to this filter as well. You are happy to continue with this value?
  53. From my archives of about 30 years ago, I came across the following published once as the golden rule of trading. What do you think? Calculate the result of Price/Net Assets ratio multiplied by Price/Earnings ratio. If result is less than or equal to 10, BUY. If result is greater than or equal to 25, sell. I like rules that minimise the thinking effort.
  54. While the concepts of diversification and efficient frontier appear to make modern portfolio theory (MPT) the "obvious choice" for investing, it appears to me that one would need an unlimited time horizon in order to assure its superior outcome. MPT seems to suggest that no one can consistently pick "winners". Do you feel that this is true, or do you think that "stock picking" can beat this system?
  55. I have just finished reading your Research Report No 1 on combing FA and TA, which I found very informative. I find it difficult to understand how one can rely on dividend yields and PE's, which are based on earnings calculated up to 6 months or more previous for the filters. The dividend yield is obtained by dividing the DPS by the present market price of the share. Hence, if the share has dropped in price, the yield would be increased and in a similar manner the PE would be decreased. This would give a false positive aspect to the stock. The situation would soon be obvious when the chart is observed, so does this indicate that only shares with a positive trend should be considered in the filter list?
  56. Would you please give me information on how to select a share (not necessarily blue chip) out of the several hundred listed on the ASX, without having to purchase a software package that everyone is trying to tell me is essential.
  57. Do you consider Risk/Reward ratio important for choosing stocks to invest in?
  58. No doubt you have noticed the continuing rise of Toll Holdings. In the past in your articles you have indicated holding onto stocks in rising trends and selling once that trend breaks down. Would you apply this logic to stocks like Toll, Cochlear, CSL, Perpetual Trustees, which have all been in long term up trends?
  59. You have recently emphasized towards more defensive stocks in view of the market conditions. You have mentioned P/E's and dividend yield as specific criteria to use. Do you use historical or prospective numbers?
  60. Your stock picking is concentrated on two models i.e. value and growth. Do you have a particular bias in the current market conditions? In selecting a stock under the growth model, do you apply reward/risk ratio in deciding on whether to take the trade? In the growth model, I have problem calculating the potential reward unlike a value model where I can apply Fibonacci retracement or previous support/resistance lines.
  61. Thanks for teaching me that it is short-sighted to view stocks as having gone too high and therefore shy away from them.
  62. In your article Trend Trader in Shares, July 2001, you mentioned in one of your points in your stance in the Australian market that you "focus this exposure on defensive situations. Defensive means they have lower than average p/e ratios and higher than average dividend yields." Is the comparison with the overall market, within the sector or historically for the stock itself, or a combination of all 3 with equal or different weights of importance ?
  63. How do you finds stocks entering an up trend, rather then go through say 500 charts every week.
  64. How do you feel about setting very tight initial stops?
  65. How do I find stocks to trade by using a system tester where at the moment I am using Insight Trader Software?
  66. I find that I watch too many stocks at once. How can I focus on the best ones?
  67. What would be a good strategy to eliminate the undesirable stocks?
  68. Concerning your Research Report No 1 Combining Fundamental and Technical Analysis (No longer published, but now incorporated in my Seminar Notes under Stock Selection - Colin): Most disconcerting of all are the stocks filtered out of your list that have experienced substantial price growth during the last 12 months.
  69. Concerning your Research Report No 1 Combining Fundamental and Technical Analysis (No longer published, but now incorporated in my Seminar Notes under Stock Selection - Colin): What was of concern, as much as other factors, was the prevalence of illiquid stock in you accept list.
  70. Is there any readily available system similar to William O'Neill's CANSLIM method of finding good stocks?
  71. I have come across you and other experienced traders saying that the strong stocks at the beginning of a bull market tend to stay the winners. How do I recognise these stocks at the beginning of a bull market?
  72. In your value method you make it clear that the model is for Industrials only. Is there a model for mining stocks?
  73. I want to use the "Dogs of the Dow" 10 high yeilding leaders method of stock selection. Should I apply technical analysis at least for the selection process and for selling a stock if the chart looks drastically wrong?