______________________________________________________________________________
Issue No. 22 – April 18, 2005
Prescott, Arizona Systems@WiserTrader.com
______________________________________________________________________________
1.0
Trading
This issue will describe a
dividend filter that can be used with a flexible stock picking tool to
independently create one’s own watch list. Stock picking tools found at the
web site, such as Stock Picker RT and Investor 3000, are essential to a
successful trading system. To further boost your trading profits, low cost
stock and option advisories are available at http://www.wisertrader.com .
1.1 A Dividend Filter
Dividends contribute to
returns in any market situation, while the income appeal of dividend-paying
stocks helps to limit steep losses if the market declines. A dividend-yield
strategy can help you find potentially undervalued stocks with reduced downside
risk, provided the dividend is secure. Because mostly mature firms pay
significant dividends, dividend analysis is geared toward established firms
that are past their explosive growth and cash-consuming stage.
A stock's dividend yield is
computed by taking the expected dividend over the next year-and dividing it by
the share price. For most stocks, the indicated dividend is the most recent
quarterly dividend multiplied by four, although some firms have switched to a
single annual dividend payment. If a stock is paying an indicated dividend of
$1 per share and is trading with a price of $40, its dividend yield is 2.5% ($1
÷ $40 = 0.025, or 2.5%). If a stock's price rises faster than its dividend, the
dividend yield will fall, indicating that the price may have been bid up too
far and may be ready for a decline. Conversely, if the dividend yield rises to
a high level, the stock may be poised for an increase in price if the dividend
can be sustained.
Like all basic
value-oriented techniques, the dividend-yield strategy attempts to identify
investments that are out of favor. Contrarian techniques such as this are based
on the premise that markets tend to overreact to good and bad news and push the
price of a security away from its intrinsic value. Value investors hope to
identify under priced securities through the use of a consistent set of rules
called a valuation model.
© 2005 WiserTrader.com, LLC. Members of wisertrader.com are neither licensed
brokers nor licensed advisors. Trades discussed represent recommendations
made by the editor for the wisertrader.com portfolio. The newsletter and web
site are for information only and should not be considered as personal advice.
While it is believed that the posted information is factual, mistakes can be made
in transcription. Investors should trade stocks only after verifying all
information and consulting with a licensed broker or adviser. WiserTrader.commarkets third party trading systems but has no other affiliation
with trading system companies.
Screening is just the first
stage in this process and it involves scanning a group of securities to find
those that merit further in-depth analysis. Absolute or relative levels may be
used in screening for high-yield stocks. A screen requiring an absolute level
might look, for example, for a minimum dividend yield of 3% before an
investment is considered. Absolute screens can lead to passive market timing as
cash levels tend to build up when investors cannot find suitable investments
that meet the minimum requirements during times of market extremes. Also,
screens that only look at absolute levels can be weak because they may turn up
securities from a single industry that traditionally has higher dividend yields,
such as utilities or REITs.
Screens based on relative
levels compare the yield against a benchmark that may fluctuate, such as the
current dividend yield for the S&P 500. In this case, the investor does not
require that the yield meet some minimum level, but instead that it maintains
its historical relationship with the benchmark figure. Common screens examining
relative yields include comparisons against some overall market level, industry
level, historical average, or even some interest rate benchmark. This AAII screen
is performed using a historical average as the benchmark.
The first filter requires
that a stock trade on the NYSE, AMEX or NASDAQ. This filter helps to establish
minimum levels of liquidity. Next, the filter excludes closed-end mutual funds,
which have unique financial characteristics requiring that they be analyzed
separately. The screen then requires that a company have seven years of price
and dividend records.
The screen should include a
time period that covers both the up and down periods of a market and economic
cycle. Selecting a time period is a balance between using one that is too short
and only captures a segment of the market cycle and one that is too long and
includes a time period that is no longer representative of the current company,
industry, or market. Periods of between five and 10 years are most common for
these types of comparisons. This screen looks for companies that have paid a
dividend for each of the last seven years and have never reduced their
dividend.
Dividend levels are set by
the board of directors based on consideration of the current company, industry,
and economic conditions. Because dividend cuts are tantamount to an
announcement that the firm is financially distressed, dividends are set at
levels that the company should be able to afford throughout the economic cycle.
A lack of dividend growth or a decline in the dividend growth rate can also be
troubling, especially after a period of regular annual dividend increases.
Nearly 10% of the companies paying a dividend over the last seven years had not
increased their dividend payout over that time period. Investors such as
Benjamin Graham required that stock dividends at least keep pace with
inflation. This screen is even more aggressive and demands an annual increase
in the per share dividend payout for each of the last six fiscal years. The
next filter requires that the company's current dividend yield be higher than
its seven-year average dividend yield. This filter seeks out companies whose
dividends have increased faster than increases in share price, or whose current
share price has declined recently.
While it might seem that the screening process
should be over with this last filter, before a company can be considered for
purchase the security of the dividend must be examined. A high dividend yield
may be a signal that the market expects the dividend to be cut shortly and has
pushed down the price accordingly. A high relative dividend yield is a buy
signal only if the dividend level is expected to be sustained and increased
over time. Measures do exist that help to identify the safety of the dividend.
The payout ratio is perhaps the most common of these and is calculated by
dividing the dividend per share by earnings per share. Generally the lower the number,
the more secure the dividend. Any ratio above 50% is considered a warning flag.
However, for some industries, such as utilities, ratios around 80% are common.
A 100% payout ratio indicates that a company is paying out all of its earnings
in the form of dividends. A negative payout ratio indicates that a firm is
paying a dividend even though earnings are negative. Firms cannot afford to pay
out more than they earn in the long term. The screen requires a payout ratio of
between 0% and 85% for utilities and between 0% and 50% for firms in other
sectors.
Dividends are paid in cash,
so it is also important to examine the liquidity of a company. Financial
strength helps to indicate liquidity and to provide a measure of safety for the
dividend payout. One must consider both the short-term obligations of the company
along with long-term liabilities when testing for financial strength. Common
measures of the longer-term obligations of the company include the
debt-to-equity ratio (which compares the level of long-term debt to owner's
equity), debt as a percent of capital structure (long-term debt divided by
capital, which includes long-term sources of financing such as bonds,
capitalized leases, and equity), and total liabilities to total assets.
The screen uses the ratio
of total liabilities to assets because it considers both short-term and
long-term liabilities. Acceptable levels of debt vary from industry to
industry, so the screen looks for companies with total liabilities to assets
below the norm for their industry. Higher ratios indicate greater financial
leverage and risk. The financials and utilities passing have much higher values
than the stocks in 
the
consumer sectors. It is also important to examine the historical record of earnings.
Dividend growth cannot deviate for very long from the level of earnings growth,
so the pattern of earnings growth will help to confirm the stability and
strength of the dividend. Ideally, earnings should move up consistently. The
final screen requires growth in earnings over the last three years greater than
the norm for the industry.
Because I am growth
oriented, a further requirement was added so that the PEG ratio (Price to
earnings ratio divided by the 5 year expected growth rate) be less than or
equal to 1.2.
In summary, screening for relative high dividend
yield is based upon the time-honored rule of buying low and selling high. To
succeed at this strategy, you need to develop a set of tools not only to
identify which stocks have relatively high dividend yields, but also which of
those stocks have the strength to bounce back. As is true for any screen, the
list of passing companies represents only a starting point for further in-depth
analysis.
Stocks passing all of the
above screens are: DHI, DOV, DRL, HD, HDI, ITW, KRB, MSBK, USB and WFC. Remember
that these candidates are for consideration for the long term
2.0 Market Analysis
Industry leadership is given
in Table 1 where leading industries are ranked from highest to lowest.
Table 1
The week brought concerns that not only is
consumer spending slowing, but that the manufacturing sector might be slowing
as well. Corporate news was generally favorable, but a disappointing earnings
report from IBM after the close on Thursday overwhelmed the other news.
General Electric had a good report, as did Apple and Citigroup. In fact,
most of the reports were decent, but it is still too early in earnings season
to draw any conclusions about first quarter profits in the aggregate. Next week
brings a slew of earnings reports. The focus this week was on the macro
issues concerning interest rates and economic growth. On Tuesday, the April PPI
report will be out. On Wednesday, the CPI is due. These inflation
reports could have a major impact, as could the Fed's Beige Book report on
Wednesday on national economic conditions. The report will be dissected
for any comments about inflation trends and whether economic growth slowed as
the first quarter wound to a close.
The 5 day and 5 week RSI
for the DOW, S&P500 and the NASDAQ are oversold to very oversold. Other
sentiment indicators are given in Table 2.
Table 2
VTO Report on Market
Sentiment Indicators
|
Sentiment Indicator
|
Value
|
Last Week
|
2 Weeks Ago
|
Complacent
|
Cautious
|
|
VIX
|
14.53
|
12.62
|
14.09
|
< 20
|
> 50
|
|
VXN
|
18.01
|
16.96
|
17.61
|
< 30
|
> 70
|
|
Put/Call Ratio
|
0.698
|
0.550
|
0.813
|
< 0.6
|
> 0.7
|
|
%Bulls - %Bears
|
17.2%
|
18.7%
|
23.6%
|
> 29
|
< 20
|
3.0 Procedure
The following watch lists contain
stock candidates for consideration. They are not necessarily recommended as
trades. The “Reference” is the date that a stock was added to the list. The “%
Change” is how the price has changed since a stock was added to the list. Stocks
that have declined 10% or fell out of filter specifications (EPS, relative
strength or percent of 52 week high) are flagged in red. The “% of High” is
the last price relative to the maximum price reached after a stock was added to
the list. Stocks that are down 8% from their high are flagged in yellow.
Those that are down 15% from their high are flagged in red.
The usual practice of
removing red flagged declining stocks has been suspended temporarily to provide
market perspective and to identify possible bargains when there is a market
turn around.
Key
Companies that have
experienced net insider buying, within the past 6 months of 5% or more of issued
stock, are listed in Table 3A.
Table 3A
Net Insider Buying
Stock Filter as of 04/16/05
|
Stock
|
Reference
|
% Chg
|
Company
|
Sector
|
Industry
|
% of High
|
|
CTRX
|
04/08/05
|
-5.5%
|
Cotherix,
Inc
|
Health
Care
|
Biotechnology
& Drugs
|
90.9%
|
|
FTD
|
04/08/05
|
-4.7%
|
FTD Group,
Inc.
|
Services
|
Retail
(Catalog & Mail Order)
|
95.2%
|
|
FVRL
|
04/08/05
|
-17.2%
|
Favrille,
Inc.
|
Health
Care
|
Biotechnology
& Drugs
|
82.3%
|
|
INHX
|
04/08/05
|
0.3%
|
Inhibitex,
Inc.
|
Health
Care
|
Biotechnology
& Drugs
|
94.7%
|
|
IPSU
|
04/08/05
|
-5.5%
|
Imperial
Sugar Company
|
Consumer
Non-Cyclical
|
Food
Processing
|
94.5%
|
|
ITMN
|
04/08/05
|
-7.7%
|
InterMune,
Inc.
|
Health
Care
|
Biotechnology
& Drugs
|
92.3%
|
|
MERCS
|
04/08/05
|
-5.2%
|
Mercer
International Inc.
|
Basic
Materials
|
Paper
& Paper Products
|
94.8%
|
|
MWY
|
04/08/05
|
-4.3%
|
Midway
Games Inc.
|
Technology
|
Software
& Programming
|
93.8%
|
|
OSHC
|
04/08/05
|
-2.5%
|
Ocean
Shore Holding Co.
|
Financial
|
S&Ls/Savings
Banks
|
97.3%
|
|
THLD
|
04/08/05
|
-12.8%
|
Threshold
Pharmaceuticals, Inc.
|
Health
Care
|
Biotechnology
& Drugs
|
87.2%
|
|
TRCA
|
04/08/05
|
-0.6%
|
Tercica,
Inc.
|
Health
Care
|
Biotechnology
& Drugs
|
95.8%
|
|
VSTA
|
04/08/05
|
2.9%
|
VistaCare,
Inc.
|
Health
Care
|
Healthcare
Facilities
|
99.4%
|
Companies with net cash
positions that comprise at least 40% of their share price are listed in Table
3B.
Table 3B
Capital Rich
Companies Filter as of 04/16/05
|
Stock
|
Reference
|
% Chg
|
Company
|
Sector
|
Industry
|
% of High
|
|
ACP
|
04/08/05
|
0.1%
|
American
Real Estate Partners, L.P.
|
Services
|
Casinos
& Gaming
|
98.9%
|
|
ADZA
|
04/08/05
|
-6.2%
|
Adeza
Biomedical Corporation
|
Health
Care
|
Biotechnology
& Drugs
|
93.3%
|
|
CDCO
|
04/08/05
|
-1.4%
|
COMDISCO
HLDG CO INC
|
Services
|
Rental
& Leasing
|
98.6%
|
|
INCX
|
04/15/05
|
0.0%
|
Interchange
Corporation
|
Services
|
Advertising
|
100.0%
|
|
NCTY
|
04/08/05
|
2.2%
|
The9
Limited
|
Services
|
Business
Services
|
98.6%
|
|
SWIR
|
04/08/05
|
-6.5%
|
Sierra
Wireless, Inc. (USA)
|
Technology
|
Communications
Equipment
|
93.5%
|
|
VNUS
|
04/08/05
|
-10.8%
|
VNUS
Medical Technologies, Inc.
|
Health
Care
|
Medical
Equipment & Supplies
|
88.8%
|
|
WSC
|
04/08/05
|
-0.8%
|
Wesco
Financial Corp.
|
Conglomerates
|
Conglomerates
|
97.9%
|
|
WZEN
|
04/08/05
|
-7.8%
|
Webzen Inc.
(ADR)
|
Technology
|
Computer
Services
|
92.2%
|
For the screen in
Table 3C, the number of selections is reduced by eliminating stocks having
P/E’s greater than 30.
Table 3C
Growth Momentum Watch List as of 04/16/05
|
Stock
|
Reference
|
% Chg
|
Company
|
Sector
|
Industry
|
% of High
|
|
CRAI
|
03/18/05
|
-7.4%
|
Charles
River Associates
Incorporated
|
Services
|
Business
Services
|
91.1%
|
|
ELK
|
02/24/05
|
-10.5%
|
ElkCorp
|
Capital
Goods
|
Construction
- Supplies and Fixtures
|
83.2%
|
|
FPIC
|
04/08/05
|
-7.7%
|
FPIC
Insurance Group, Inc
|
Financial
|
Insurance
(Property & Casualty)
|
92.3%
|
|
KBH
|
01/10/05
|
8.0%
|
KB Home
|
Capital
Goods
|
Construction
Services
|
88.0%
|
|
OSK
|
03/12/05
|
-3.7%
|
Oshkosh
Truck Corporation
|
Consumer
Cyclical
|
Auto &
Truck Manufacturers
|
91.6%
|
|
SYT
|
04/08/05
|
-2.3%
|
Syngenta
AG (ADR)
|
Basic
Materials
|
Chemical
Manufacturing
|
96.4%
|
|
TDY
|
03/18/05
|
-15.1%
|
Teledyne
Technologies Incorporated
|
Services
|
Business
Services
|
84.1%
|
|
UNH
|
04/15/05
|
0.0%
|
UnitedHealth
Group Inc.
|
Financial
|
Insurance
(Accident & Health)
|
100.0%
|
|
USNA
|
02/21/05
|
8.5%
|
USANA Health
Sciences, Inc.
|
Consumer
Non-Cyclical
|
Personal
& Household Products
|
91.0%
|
|
WFR
|
03/18/05
|
-19.2%
|
MEMC
Electronic Materials
|
Technology
|
Semiconductors
|
80.8%
|
|
WOS
|
04/01/05
|
0.4%
|
Wolseley
plc (ADR)
|
Capital
Goods
|
Misc.
Capital Goods
|
97.3%
|
|
ZNT
|
04/15/05
|
0.0%
|
Zenith
National Insurance Corp.
|
Financial
|
Insurance
(Property & Casualty)
|
100.0%
|
For the Peter Lynch screen
in Table 3D, the number of selections is reduced by eliminating stocks having
P/E’s greater than 30.
Table 3D
Peter Lynch Value Watch
List as of 04/16/05
|
Stock
|
Reference
|
% Chg
|
Company
|
Sector
|
Industry
|
% of High
|
|
BLSC
|
12/13/04
|
3.9%
|
Bio-Logic
Systems Corp.
|
Health
Care
|
Medical
Equipment & Supplies
|
82.2%
|
|
CAJ
|
01/31/05
|
-1.8%
|
Canon Inc.
(ADR)
|
Technology
|
Computer
Peripherals
|
95.1%
|
|
CHL
|
03/18/05
|
-2.4%
|
China Mobile (Hong Kong) Limited (ADR)
|
Services
|
Communications
Services
|
96.7%
|
|
CSLMF
|
12/13/04
|
-1.7%
|
Consolidated
Mercantile (USA)
|
Basic
Materials
|
Containters
& Packaging
|
92.6%
|
|
GMK
|
04/01/05
|
-8.9%
|
Gruma S.A.
de C.V. (ADR)
|
Consumer
Non-Cyclical
|
Food
Processing
|
91.1%
|
|
KEP
|
12/13/04
|
1.3%
|
Korea
Electric Power Corporation (ADR)
|
Utilities
|
Electric
Utilities
|
91.4%
|
|
LFL
|
12/13/04
|
21.9%
|
Lan
Airlines S.A. (ADR)
|
Transportation
|
Airline
|
95.9%
|
|
MBT
|
01/10/05
|
2.8%
|
Mobile
TeleSystems OJSC (ADR)
|
Services
|
Communications
Services
|
86.9%
|
|
MKTAY
|
04/15/05
|
0.0%
|
Makita
Corporation (ADR)
|
Consumer
Cyclical
|
Appliances
& Tools
|
100.0%
|
|
NL
|
04/08/05
|
-12.4%
|
NL
Industries, Inc.
|
Basic
Materials
|
Chemical
Manufacturing
|
87.6%
|
|
NOLD
|
12/13/04
|
63.7%
|
Noland
Company
|
Capital
Goods
|
Misc.
Capital Goods
|
99.9%
|
|
PCU
|
12/13/04
|
15.4%
|
Southern
Peru Copper Corp (USA)
|
Basic
Materials
|
Metal
Mining
|
82.1%
|
|
SHI
|
12/13/04
|
7.8%
|
Sinopec
Shanghai Petrochemical Co. (ADR)
|
Energy
|
Oil &
Gas Operations
|
82.8%
|
|
SKM
|
02/07/05
|
-4.4%
|
SK Telecom
Co., Ltd. (ADR)
|
Services
|
Communications
Services
|
89.2%
|
|
TKS
|
04/15/05
|
0.0%
|
Tomkins
plc (ADR)
|
Conglomerates
|
Conglomerates
|
100.0%
|
|
TM
|
12/13/04
|
-3.1%
|
Toyota
Motor Corporation (ADR)
|
Consumer
Cyclical
|
Auto &
Truck Manufacturers
|
88.8%
|
|
TMIC
|
03/25/05
|
-5.9%
|
Trend
Micro Incorporated (ADR)
|
Technology
|
Software
& Programming
|
93.2%
|
|
VCP
|
03/25/05
|
-16.9%
|
Votorantim
Celulose e Papel S.A (ADR)
|
Basic
Materials
|
Forestry
& Wood Products
|
82.7%
|
|
VLCCF
|
12/13/04
|
11.8%
|
Knightsbridge
Tankers Limited
|
Transportation
|
Water
Transportation
|
97.9%
|
|
YPF
|
04/15/05
|
0.0%
|
YPF Sociedad
Anonima S.A. (ADR)
|
Energy
|
Oil &
Gas Operations
|
100.0%
|
The filter for Warren
Buffet style stock picking in Table 3E is for the intermediate to long term.
Two requirements were added. One was 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.
Table 3E
Warren Buffett
Value Watch List as of 04/16/05
|
Stock
|
Reference
|
% Chg
|
Company
|
Sector
|
Industry
|
% of High
|
|
ABFS
|
04/15/05
|
0.0%
|
Arkansas Best
Corporation
|
Transportation
|
Trucking
|
100.0%
|
|
CACH
|
04/15/05
|
0.0%
|
Cache,
Inc.
|
Services
|
Retail
(Apparel)
|
100.0%
|
|
COLM
|
01/10/05
|
-8.3%
|
Columbia
Sportswear Company
|
Consumer
Cyclical
|
Apparel/Accessories
|
89.4%
|
|
DHI
|
04/15/05
|
0.0%
|
D.R.
Horton Inc.
|
Capital
Goods
|
Construction
Services
|
100.0%
|
|
DSPG
|
02/07/05
|
-4.4%
|
DSP Group,
Inc.
|
Technology
|
Communications
Equipment
|
91.3%
|
|
ELBO
|
01/31/05
|
17.2%
|
Electronics
Boutique Holdings Corp.
|
Services
|
Retail
(Technology)
|
87.5%
|
|
HDI
|
04/15/05
|
0.0%
|
Harley-Davidson,
Inc.
|
Consumer
Cyclical
|
Recreational
Products
|
100.0%
|
|
HELE
|
04/15/05
|
0.0%
|
Helen of
Troy Limited
|
Consumer
Cyclical
|
Appliances
& Tools
|
100.0%
|
|
HOV
|
12/27/04
|
1.5%
|
Hovnanian
Enterprises
|
Capital
Goods
|
Construction
Services
|
81.2%
|
|
LNCR
|
12/27/04
|
5.9%
|
Lincare
Holdings Inc.
|
Health
Care
|
Healthcare
Facilities
|
100.0%
|
|
NUE
|
04/15/05
|
0.0%
|
Nucor
Corporation
|
Basic
Materials
|
Iron &
Steel
|
100.0%
|
|
PGR
|
12/27/04
|
4.1%
|
The
Progressive Corp.
|
Financial
|
Insurance
(Property & Casualty)
|
95.5%
|
|
RS
|
04/15/05
|
0.0%
|
Reliance
Steel & Aluminum
|
Basic
Materials
|
Misc. Fabricated
Products
|
100.0%
|
|
STLD
|
04/15/05
|
0.0%
|
Steel
Dynamics, Inc.
|
Basic
Materials
|
Iron &
Steel
|
100.0%
|
|
THO
|
04/15/05
|
0.0%
|
Thor
Industries, Inc.
|
Capital
Goods
|
Mobile
Homes & RVs
|
100.0%
|
|
VLCCF
|
02/21/05
|
-0.6%
|
Knightsbridge
Tankers Limited
|
Transportation
|
Water
Transportation
|
97.9%
|
The stocks from Benjamin
Graham’s style of utility investing are listed in Table 3G. A requirement was
added to include only those stocks having a PE of 17 or less. PGN was removed
temporarily due to unavailability of data.
Table 3G
Benjamin Graham
Value Watch List as of 04/16/05
|
Stock
|
Reference
|
% Chg
|
Company
|
Sector
|
Industry
|
% of High
|
|
ATO
|
04/01/05
|
-0.3%
|
Atmos
Energy Corporation
|
Utilities
|
Natural
Gas Utilities
|
97.1%
|
|
KEP
|
01/10/05
|
9.3%
|
Korea
Electric Power Corporation (ADR)
|
Utilities
|
Electric
Utilities
|
91.4%
|
|
NFG
|
04/08/05
|
-2.8%
|
National
Fuel Gas Co.
|
Utilities
|
Natural
Gas Utilities
|
97.0%
|
|
OKE
|
04/15/05
|
0.0%
|
ONEOK,
Inc.
|
Utilities
|
Natural
Gas Utilities
|
100.0%
|
|
PGN
|
01/10/05
|
-6.7%
|
Progress
Energy, Inc.
|
Utilities
|
Electric
Utilities
|
91.4%
|
|
PNW
|
01/10/05
|
-1.1%
|
Pinnacle
West Capital
|
Utilities
|
Electric
Utilities
|
96.9%
|
|
SRE
|
01/10/05
|
6.9%
|
Sempra
Energy
|
Utilities
|
Natural
Gas Utilities
|
91.6%
|
|
WPS
|
02/07/05
|
1.4%
|
WPS
Resources Corp
|
Utilities
|
Electric
Utilities
|
95.4%
|
4.0
Results
4.1 Option Trades
Table 4B
History of Closed
Option Trades
|
Stock
|
Buy
Date
|
Buy Price
|
Last
|
Action
|
P/L(%)
|
Option
|
|
URBN
|
11/23
|
11.50
|
$9.00
|
Sold 11/30
|
-21.7%
|
URQ FG JUN
35.00 CALL
|
|
TXU
|
11/23
|
11.30
|
$6.30
|
Sold 12/2
|
-44.2%
|
TXU DK APR
55.00 CALL
|
|
USG
|
11/23
|
8.40
|
$12.80
|
Sold 12/15
|
52.4%
|
MAY 25.00
CALL
|
|
ADSK
|
12/20
|
8.20
|
$9.20
|
Sold 12/23
|
12.2%
|
ADQ GN JUL
70.00 CALL
|
|
MON
|
12/20
|
3.80
|
$4.80
|
Sold 12/23
|
26.3%
|
MON GJ JUL
50.00 CALL
|
|
POT
|
12/20
|
7.00
|
$8.00
|
Sold 12/23
|
14.3%
|
POT FP JUN
80.00 CALL
|
|
TXI
|
12/20
|
5.50
|
$9.00
|
Sold 12/23
|
63.6%
|
TXI GL JUL
60.00 CALL
|
|
AET
|
1/7
|
5.70
|
$7.10
|
Sold 01/19
|
24.6%
|
AET GX JUL
135.00 CALL
|
|
CLF
|
1/7
|
7.30
|
$9.20
|
Sold 01/19
|
26.0%
|
CLF GJ JUL
50.00 CALL
|
|
MTH
|
1/21
|
6.80
|
$9.20
|
Sold 02/01
|
35.3%
|
MTH FZ JUN
62.50 CALL
|
|
BZH
|
1/31
|
13.70
|
$17.30
|
Sold 02/01
|
26.3%
|
BZH HJ AUG
150.00 CALL
|
|
KBH
|
1/31
|
9.20
|
$11.10
|
Sold 02/01
|
20.7%
|
KBH GU JUL
110.00 CALL
|
|
BHP
|
1/28
|
2.25
|
$2.70
|
Sold 02/01
|
20.0%
|
BHP HE AUG
25.00 CALL
|
|
X
|
1/25
|
5.30
|
$4.90
|
Sold 02/02
|
-7.5%
|
X GK JUL
55.00 CALL
|
|
SFI
|
1/24
|
0.75
|
$0.30
|
Sold 02/04
|
-60.0%
|
SFI PH APR
40.00 PUT
|
|
EBAY
|
2/7
|
6.80
|
$5.60
|
Sold 02/08
|
-17.6%
|
XBA SO JUL
75.00 PUT
|
|
CCJ
|
2/4
|
6.60
|
$10.20
|
Sold 02/11
|
54.5%
|
CCJ IG SEP
35.00 CALL
|
|
MON
|
2/4
|
8.00
|
$8.20
|
Sold 02/15
|
2.5%
|
MON GJ JUL
50.00 CALL
|
|
TOL
|
1/2
|
7.10
|
$7.30
|
Sold 02/17
|
2.8%
|
TOL IR SEP
90.00 CALL
|
|
BZH
|
2/9
|
14.60
|
$16.90
|
Sold 02/17
|
15.8%
|
BZH HN AUG
170.00 CALL
|
|
KBH
|
2/7
|
11.10
|
$10.40
|
Sold 02/18
|
-6.3%
|
KBH GC JUL
115.00 CALL
|
|
VLO
|
2/24
|
6.98
|
$8.70
|
Sold 03/02
|
24.6%
|
VLO IN SEP
70.00 CALL
|
|
TXU
|
2/25
|
3.55
|
$4.70
|
Sold 03/04
|
32.4%
|
TXU GP JUL
80.00 CALL
|
|
SWN
|
3/3
|
6.50
|
$5.00
|
Sold 03/11
|
-23.1%
|
SWN IL SEP
60.00 CALL
|
|
GM
|
3/9
|
2.20
|
$5.80
|
Sold 03/17
|
163.6%
|
GM UZ SEP
32.50 PUT
|
|
VLO
|
3/17
|
6.60
|
$7.50
|
Sold 03/18
|
13.6%
|
YGY AP JAN
80.00 CALL
|
|
BHP
|
2/24
|
2.25
|
$2.40
|
Sold 03/22
|
6.7%
|
BHP HF AUG
30.00 CALL
|
|
QQQQ
|
3/29
|
1.05
|
$0.85
|
Sold 03/31
|
-19.0%
|
QQQ RJ JUN
36.00 PUT
|
|
TNX
|
3/14
|
6.80
|
$4.80
|
Sold 04/07
|
-29.4%
|
TNX LI DEC
45.00 CALL
|
|
PCO
|
3/17
|
5.00
|
$6.50
|
Sold 04/12
|
30.0%
|
PCO IL SEP
60.00 CALL
|
|
VLO
|
4/4
|
10.30
|
$11.10
|
Sold 4/11
|
7.8%
|
YGY AP JAN
80.00 CALL
|
|
AAPL
|
4/12
|
4.40
|
$2.25
|
Sold 4/14
|
-48.9%
|
QAA GV JUL
42.50 CALL
|
Average fractional profit
for 32 trades, FP = 12.44% per trade.
Fraction of trades chosen
in the correct direction, FC = 68.80%
Average fractional gain for
22 winning trades, FG = 30.7% per trade.
Average fractional loss for 10 losing trades, FL
= -27.7% per trade.
The dollar profit goal DG
is set equal to the average capital used per trade C such that
N = 1 / FP = 8 becomes
the average number of trades to earn the average traded amount.
The Profit Factor for the
trading system, FG FC / [FL (1 - FC)]
= 2.07
Gross Profits divided by Gross Losses (includes
1% commission)
4.2 Stock Trades
Table 4A
Recently Closed
Stock Trades
|
Stock
|
Ref Date
|
Ref. Price
|
Last
|
Action
|
P/L(%)
|
% of High
|
|
TXU
|
11/22/04
|
63.98
|
$82.75
|
Sold 04/14
|
29.3%
|
96.6%
|
|
SID
|
12/20/04
|
18.49
|
$21.95
|
Sold 04/08
|
18.7%
|
83.5%
|
|
AET
|
01/03/05
|
61.40
|
$71.24
|
Sold 04/14
|
16.0%
|
90.3%
|
|
AAPL
|
01/10/05
|
34.48
|
$37.26
|
Sold 04/14
|
8.1%
|
82.7%
|
|
TS
|
01/10/05
|
46.61
|
$54.89
|
Sold 04/14
|
17.8%
|
81.4%
|
|
MDRX
|
02/07/05
|
11.25
|
$13.50
|
Sold 04/14
|
20.0%
|
90.0%
|
|
VLO
|
02/07/05
|
58.26
|
$72.18
|
Sold 04/14
|
23.9%
|
88.7%
|
|
PCO
|
02/14/05
|
53.51
|
$57.49
|
Sold 04/14
|
7.4%
|
86.4%
|
|
BYD
|
02/18/05
|
49.96
|
$54.38
|
Sold 04/14
|
8.8%
|
92.7%
|
|
RETK
|
03/04/05
|
8.49
|
$11.25
|
Sold 04/12
|
32.5%
|
100.0%
|
|
WDC
|
04/09/05
|
13.78
|
$12.67
|
Sold 04/14
|
-8.1%
|
87.0%
|
Average fractional profit
for 11 trades, FP = 15.87% per trade.
Fraction of trades chosen
in the correct direction, FC = 90.9%
Average fractional gain for
10 winning trades, FG = 18.2% per trade.
Average fractional loss for 1 losing trade, FL
= -8.1% per trade.
The dollar profit goal DG
is set equal to the average capital used per trade C such that
N = 1 / FP = 6.3
becomes the average number of trades to earn the average traded amount.
The Profit Factor for
the trading system, FG FC / [FL (1 - FC)]
= 9.00
Gross Profits divided by Gross Losses (includes
1% commission)
5.0 Conclusion
Based on the performance
of major indices since 11/22/04, our trading is beating the market averages
handily.
NASDAQ: -6.0%
DOW: -2%
S&P500: -0.8%
Appendix
Investment Conference Schedule
Below are links to
conference registration sites where you can sign up.
- 05-02-05 Chicago, IL "2005 Healthcare
M&A & Corporate Development"
- 05-03-05 Acapulco, Mexico "SRI Conference on
Foreign Investment Opportunities in Mexico's New Consumer and Small
Business Lending Industry "
- 05-04-05 Atlanta, GA "Global Debt
Collection Summit"
- 05-11-05 Minneapolis , MN "Medtech Investing
Conference (4th Annual)"
- 05-11-05 New York, NY " IIR's Inaugural
Forum on IP Rights Protection in Financial Services - Strategies for
Building Patent Portfolios and Managing IP Risk "
- 05-17-05 London, United Kingdom "Corporate Venturing
& Spinouts Conference "
- 05-17-05 New York, NY "Hedge Funds
Regulation and Compliance 2005 - Gain Advanced Operational, Legal and
Accounting Strategies to Achieve full Compliance in Today's Regulatory
Environment "
- 05-23-05 New York, NY -Both professional and
sophisticated private investors meet with the world's leaders in gold,
silver, precious metals, copper and oil and gas exploration and production "New York Institutional Gold Conference"
- 06-01-05 San Francisco, CA "Venture Capital
Investing Conference"
- 06-12-05 Vancouver, BC "World Gold, PGM &
Diamond Investment Conference" Resource Investment
Conferences featuring small cap opportunities in gold, diamonds, oil &
gas, industrial and emerging growth situations are being presented in
Canada. Pre-registration is complimentary to: investors who are clients of
sponsoring firms which include discount and full service brokerage houses;
subscribers of participating newsletters, sponsoring media and sponsoring
internet investment services; shareholders of participating exhibitors;
accredited investment advisors and investors who take an interest in
managing their own personal portfolios.
- 09-07-05 Las Vegas, Nevada "Gold and Precious Metals Investment Conference"
The gold and
metal resource market has demonstrated its strength and longevity,
achieving sustained growth and multi-decade highs in the last year.
Explore the shining prospects of gold, silver, copper, uranium and other
fast-rising commodities. Realize your full potential in this sustained
bull market, with Natural Resources the clear profit leaders.
- 09-29-05 Las Vegas, Nevada "Tradestation World
Users Conference" Trade Station World Conference and Expo, the premier
conference for TradeStation users, is coming to the Venetian Hotel in Las
Vegas, September 29 - October 2, 2005. Here's where you learn about how to
design your personal trading strategies, and to test those strategies
against historical data.
- 10-02-05 Toronto, Ontario "Toronto Resource Investment Conference"
- 10-30-05 New Orleans, LA "New Orleans Investment Conference"
- 11-10-05 Millbrae, CA "Biotech Investing
Conference" Continuing advances in genomics, proteomics and enabling
technologies makes the Biotech sector a favorite among private equity
investors and venture capitalists. The Biotech Investing Conference is an
industry gathering of the leading private equity investors, venture
capitalists, biotech companies, pharmaceutical companies, corporate
investors and institutional investors.
- 11-27-05 San Francisco, CA "Gold and Precious Metals Conference"
Both
professional and sophisticated private investors meet with the world's
leaders in gold, silver, precious metals, copper and oil and gas
exploration and production. The Natural Resource industry's newest
opportunities are presented, together with educational seminars, executive
panels and investment workshops led by top finance specialists, economic
analysts and newsletter editors. Admission is complimentary with
pre-registration.
Conference Search