Wiser Trader Stocks and Options Newsletter

Issue No. 9 – January 17, 2005

http://www.WiserTrader.com

Systems@WiserTrader.com

James A. Andrews

 

1.0 Recommended Advisories

 

      My experience as a trader has led me through three stages.  The first stage involved unlimited enthusiasm and confidence fed by the large run up leading to the 2000 market peak.  At that time I felt that anyone can make money in stocks and all I needed was a few good stock picks.  Of course, that stage ended with the 2000 crash.  The second stage began with the realization that one needs to take a broader view of markets and consider interrelationships.  Since I had little experience, I sought the help of investment advisors because they had the experience and I was willing to spend money to make money.  It seemed like a reasonable investment.  If you feel that you must spend money to get good information or if you just budget a certain amount for information, the following are recommended fee based investment advisories that I subscribe to and have found to be reasonably priced. 

 

      The first one is the American Association of Individual Investors (AAII).  It is a non-profit organization, with no question of conflicts of interest, which puts it at the top of the list. The annual fees are very inexpensive, making it a great bargain for the breath of information provided. 

 

      Next is the Oxford Club that is highlighted by Alexander Green, the current investment director. The Oxford Club surrounds itself with a very broad collection of investors who believe in sharing investment ideas and methods.  This concept produces startling results.  As someone put it, “If you and I each have a dollar and we exchange them, we both still have a dollar.  But if you and I each have an investment idea and we exchange them, now we both have two ideas.”  They explain concepts of a balanced portfolio and money management and maintain several profitable portfolios. 

 

      Next on the list is Dr. Steve Sjuggerud’s True Wealth Advisory.  Steve is a former investment director of the Oxford Club and is a conservative contrarian stock picker.  He is connected with Stansberry & Associates that is launching a number of new newsletter products this month.

 

      Brian Hunt who is also a member of Stansberry & Associates writes Micro Cap Moon Shots, a great source of micro cap stock picks whenever the Russell 2000 outpaces the S&P500.  But that is not the case right now.

 

 

 

      For income stocks, the Personal Finance newsletter is highlighted by Roger Conrad’s Utilities and Income weekly email.  Although I am not an income investor, the shear clarity with which these people write is incredibly delightful, informative and worth the price alone.  The clarity of their writing makes it obvious that they know what’s going on in energy, telecom and other utility industries. 

 

      It may seem odd that I recommend these good people who are eventually going to be competitors when the new advisory service eventually begins.  I recommend them now in the spirit of providing the best information currently available, based on personal experience.  Each advisory has its own particular method for trading which they have described a number of times and which, for the most part, I think I have learned.  The new WiserTrader.com service, when launched, will attempt to address areas that none of my favorite advisors does.  It will most likely be an option alert service that does not over-analyze its trades.  Updates will be issued as frequently as needed compared to the weekly emails now used. You needn’t worry because the free services we currently provide will remain intact. 

 

      I must confess that I have spent about $15,000 over the last 5 years on investment advice.  Much of it was not money well spent because I did not have the patience, experience and trust needed to follow the advice these good people gave me.  With the exception of AAII, I did not have the benefit of recommendations from someone who had nothing to gain.  Also in my defense, some of my ability to trust good advice was ruined by a few poor advisors, who will remain nameless.  The ones I consider poor are those who felt the need to express their political agendas in their newsletters.  You may know one or two of these.  One fellow who, I’m ashamed to say operated out of Phoenix, Arizona, was an anti-environmentalists who just happened to have written a book on the subject, which incidentally was provided free as a bonus for signing up for his newsletter.   After two or three issues, nothing!  Another one was so disturbed by certain regulations intended to protect the small investor that his complaints finally frightened me to the point of wondering why I had spent so many years and dollars reading his newsletter.  Others, who seem to be good at picking value stocks, did not believe in trailing stops, or any kind of money management.  They were buy-and-hold investors.  I somehow knew this couldn’t be right.  Still others provided so many picks, many of which were good, that one had a difficult time sorting through them to make trades that fit within a typical small investor’s capital budget.  Their once in a while bad picks stood out all the more, in spite of their lack of conciseness.  If you want my opinion on an advisor that I have had experience with, I will be glad to share my experiences with you by email.  But I will not be able to give you personal advice.

 

      This brings me to the third stage of my trading development.  The one thing I had not tried was trading systems.  Maybe it was because of the amazing claims made.  I was sensitive about, and wary of, anyone who made promises of profits.  Some of the sales pages of our current products are truly spectacular in that regard.  Unfortunately, I am unable to change their carnival barker tone. But when you come right down to it,  adapting a trading system to my personality is really the only way I know to achieve independence. Advisory stock picks are to buying fish as trading systems are to learning how to fish.

 

      It is truly amazing the number of potential trading methods there are for the beginning trader.  My advice is to continue using money management and survive to trade another day while casting your net for understanding as widely as you can.  It will ultimately gather you a fine catch.

 

2.0 Analysis

 

      The industry leaders list contains the top 10 industries for four periods consisting of 1 week, 1 month, 2 months and 3 months.  Results are ranked highest to lowest based on the average percentage gain per week within any period times the number of appearances of an industry in the four top 10 lists. 

 

 Market Summary

 Week ending 01/15/05:

 Indices for the Week:

 Dow Jones     -0.4%

 NASDAQ         0.0%

 S&P500 Index  -0.1%

 Russell 2000   0.7%

 Industry Leaders:

 Tires

 Home Construction

 Real Estate Holding

 Tobacco

 General Mining

 Healthcare Providers

 Coal

 Hotels

 Toys

 Steel

 Pipelines

 Oil Equipt. & Serv.

 Oil Equipt., Serv. & Distr.

 Nonferrous Metals

 Marine Transportation

 Consumer Electronics

 Exploration & Production

 Footwear

 Mobil Telecom.

 Apparel Retailers

 Gold for past 30 days:

 USD    -3.26%

 CAD    -5.47%

 CHF    -1.76%

 GBP    -1.18%

 EUR    -2.62%

 JPY    -5.27%

 

      The five day and five week RSI for the major indices are neutral.  From the sentiment indicators in Table 1, traders remain optimistic and complacent.

 

Table 1

Sentiment Indicators 01/15/05

3.0 Procedure

 

      The following stock screens were generated with tools from AAII.  The short term trading screen used for Table 2a looks for optionable stocks whose percentage relative strength over the past 6 months is greater than 90%, EPS Growth over the past 12 months is greater than 80% and are within 5% of their 52 week high with a minimum price of $50.  Autodesk (NASDAQ:ADSK) and Commercial Metals Company (NYSE:CMC) were eliminated from the watch list because their prices are below $50.  It is believed that the mixed signal of listing both puts and calls for the same stock might be confusing.  CLF, MON and MGG were the only stocks that filtered through the screen this week.  However, MGM Mirage (NYSE:MGG) has no Williams %R trigger consistent with its uptrend so no options are listed.  All the others have the trend, trigger and the confirmation of price moving above the 7 day SMA (TTC criteria).

 

Table 2a

Short Term Options Screen as of   01/15/05

 

 

      The stock screen in Table 2b was added for the potential to write covered call options.  The

 

Table 2b

Short Term Covered Call Writing Screen as of   01/15/05

 

only difference between screens for Tables 2a and 2b are that in 2b the maximum stock price is $20.  Creative Technology (NASDAQ:CREAF) was the only new stock to filter through the screen this week..  The rest are from previous weeks with February option expirations.  MXT and PNK 30 day SMA’s were flat so no options are listed for them.  The rest met TTC criteria.

 

      For the screen in Table 2c, the number of selections is reduced by eliminating stocks having P/E’s greater than 30.  No new stocks filtered through the screen this week.  Those highlighted in green are repeats from previous weeks.

 

 

Table 2c

Growth Momentum (Intermediate Term) Screen as of   01/15/05

 

 

 

      For the Peter Lynch screen in Table 2d, Air T, Inc. (NASDAQ: AIRT) filtered through the screen this week for the first time, as did those highlighted in green from previous weeks.  Again, the number of selections for this screen is reduced by eliminating stocks having P/E’s greater than 30.  .

 

Table 2d

Peter Lynch Value  (Intermediate Term) Screen as of   01/15/05

 

 

     A screen for Warren Buffet style stock picking was added for the intermediate to long term.  Two requirements were added to include only optionable stocks in order to find LEAPS opportunities.  The other requirement was to include only those stocks having a PE of 17 or less.   No new candidates resulted from this week’s screening while most of those from previous weeks did.

 

Table 2e

Warren Buffett Value  (Long Term) Screen as of   01/15/05

 

 

      A screen was added for Benjamin Graham’s style of utility investing in Table 2f.  A summary of his very conservative screening method can be found at the site in the watch list section.  While no new picks filtered through the screen this week, all of those from the provious week filtered through.  Good to see.

 

Table 2f

Benjamin Graham Value (Long Term) Screen as of   01/15/05