Wednesday, May 18, 2011

How To Build Your Own List Of Stocks To Buy Today Using Investors.comAnd Their eTables Service

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I wanted to spend some time talking about how to build your very own list of potential stocks to buy using the tools at investors.com. I started from scratch building a watch list on Monday to document the exact steps I take to build my list. The idea behind building a list of stocks you might consider buying is to reduce the number of stocks that you need to focus on at any given time. There are thousands of stocks to choose from and it's impossible to look at all of them every day. To achieve this purpose, you use stock screens to whittle down the number to something that is more manageable. The first screen I use is by index. I only look at stocks on the NYSE and the NASDAQ. I recommend that you do the same.

From there, here's what you'll need:

  • A subscription to Investor's Business Daily. I personally subscribe to the eIBD which is the electronic version of the paper. This is awesome because you have the paper available each night and don't have to wait until the next morning.

  • A subscription to the eTables premium service on investors.com. I recommend a subscription to eTables because you can download the IBD 50 Index, the IBD New America Index, the IBD 85-85 Index, the IBD Big Cap 20 and the Main Tables to a spreadsheet.The first thing that I did was log into investors.com and go into my eTables. Inside, there's a section that is called Main Tables. I downloaded that list of stocks to a spreadsheet so I could cut and paste the stock symbols and put them into my stock lists at investors.com. You can only put in 50 at a time, so since there are about 300 stocks in the main tables, you have to do these steps a handful of times to get through them all.

In case you don't know, the main tables are the list of the top 300 or so stocks based on the Smart Select Composite rating that IBD uses. It is basically like the IBD 200 only with more stocks.

With the My Stock List tool, you have the ability to sort your stocks and see information on:

  • Price & Volume

  • Fundamentals

  • Smart Select

I took the first 50 stock symbols and put them in a my stock list that I named "research". I start my search by reviewing the price and volume. I sort the stocks by price and I eliminate all stocks that are below $15 and the I sort it by volume and eliminate all stocks that have under 100,000 shares in trading volume.

Then I move onto the Smart Select ratings and review the Composite rating, EPS rating, RS rating and only keep those that are 80 or better. After that, I only keep stocks that are B- or better in the SMR rating, Acc/Dist rating and in Group Relative strength.

Once I have done that, I then move onto the fundamentals section and only keep stocks that are over 25% in EPS % Change (Latest Quarter), EPS % Change (Prior Quarter), Sales % change (latest quarter), EPS estimated % change (current quarter) and EPS estimated % change (current year).

I then repeat this process until I have looked at all of the stocks. As I go through each set of stocks, I put the stocks that made the cut into another my stock lists that I named Watch List.

The next step for me after I do that is to identify those stocks with less than 100 million in float. I find this information by clicking the chart icon and it's on the top of the chart.

The stocks that are left are the stocks that I might potentially buy but only if they are at proper buy points and the market is in a confirmed uptrend. It's important to remember that if a stock appears on my list it doesn't mean that I should rush out and buy it. It just reduces the number of stocks I need to keep an eye on. The next step in the process is to look at a chart of each of those stocks to identify a proper buy point. I'll talk more about that in my next post on Stock Market Investing Today.

Creating a list of stocks for the first time is just the first step in maintaining an inventory of great stocks. Your list of stocks is only as good as you make it. That's why you'll want to also make sure to:

  • Commit to reviewing your list every day. Stocks are dynamic and they change daily. An out of date list will not serve you well.

  • Add new stocks to the list. My main source of new stocks for my list on a daily basis will be from the Stocks on the Move section and on a weekly basis from the Main Tables.

  • Prune stocks from the list on a daily basis that fail to meet the initial threshold it took to get on the list.

  • If the list gets two big, either tighten the criteria of set a limit of 20 stocks depending on time available.

So that's how I find potential stocks to buy down the road. I think you'll find that managing a watch list will be very important to your investment success and by using the tools at investors.com, you'll be way ahead of the game.

Monday, May 16, 2011

How To Use The Big Picture Column In The Investors Business Daily

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Well, I've taken a few months off from writing and figured that I would start things back up by talking about how to use "The Big Picture" column in the Investor's Business Daily. Your first step each day should be to check the general market direction and you can do that by reviewing The Big Picture column and it's main feature - the "Market Pulse". The thing you really want to know is what the editors of the paper think the current outlook is based on the CANSLIM investment strategy.

There are three outlooks in the Market Pulse section. They are:

  1. Market in correction

  2. Uptrend under pressure

  3. Market in confirmed uptrend

Investor's Business Daily suggest that you use this as a stoplight system with regard to whether you should be invested in the market. The green light is market in confirmed uptrend. Yellow is uptrend under pressure. Finally, the red light would be market in correction. Just like when you are driving, pay attention to the traffic signals. Three out of four stocks follow the market trend. Why fight the market? Just go on green, be cautious on yellow and stop on red.

When the market is in a confirmed uptrend, you want to keep an eye on distribution days. Distribution days are when the market closes down in price on higher volume. As these days add up, the market pulse keeps tabs of the number of days each index has tallied in the confirmed uptrend. During this time period, the CANSLIM strategy recommends that you be actively investing.

When the market uptrend is under pressure, you want to keep an eye on whether the indexes erase the distribution days that have piled up and be ready to sell your current holdings.

When the market is in correction, you want to watch for an attempted rally and a follow through day a few days later. When the market is in a correction, it's a good idea to liquidate your holdings if your stock shows signs of weakness.

While the Market Pulse gives you a snapshot of the current outlook, it also gives you a summary of the days action and leaders up or down in volume. The rest of the column provides a summary of what happened to the indexes for the day.

For me personally, I typically review the major indexes each day to see what I thought happened and formulate my own summary of what happened. Then, after the paper comes out, I confirm what I thought with what the editors say.

I also watch the IBD TV Market Wrap to get a feel for what the market is doing.

Start everyday by reading "The Big Picture" column. Even if you only look at the current outlook, you will be way ahead of most investors by knowing what the overall trend of the market is and that's the biggest part of the battle.