Today is strategy day

[nullzero]

I was playing around with the filters and losened up the 200dma and 50dma and came up with SBSA. Which looks great fundementally and is actually working on breaking through the 50dma today.

[WallStreetnBio]

nica is a woman??? thats hot i want you 

[MrChina]

Hi DAVID what di you think about CMBX???

Good trading idea or SCAM?

[nica33]

My preferred sites/tools for trade:

1. 3stocksonfire.org  
2. moneycentral.msn.com (stock screener and fundamental view)
3. Nasdaq.com (to check pre and after hours movers)
4. Medved quotetracker  (portfolio, charts and a lot of links to get info at a glance. Download at quotetracker.com)
5. My broker

[kpusan]

www.alphatrade.com has that great "Fundamentals" service that you see me using in my videos. It costs just $5 a month. The problem is it comes as an add on to the general service which costs about $40 a month.

I would just love a service that, instead of showing those tables, it showed historical fundamental graphs on an annual and quarterly basis. To quickly grasp the fundamental trends, you see?

I should make a company to develop a service like that ... but I have other things to do

Try MSN money  

Nica, how do you get the bar graphs to appear? Thanks

Click on financial results ont the left menu.  That's all

Thanks .. I had to download lastest software changes.  Now I see it

[nica33]

It looks like CPNE is recovering WOW 

[David Randolph]

David, I am wondering if you could suggest your "Top 5" things that you would recommend checking on a stocks fundamentals in order to quickly weed out possible losers from a given stock scan.

For example, these days I first check the daily and weekly chart to ensure bullishness in terms of volume, etc. then I cehck the balance sheet first and scan the balance and current ratio, and if these look really bad I might just move to the next stock.  If they look OK I will go on to look at the income statement, and so on.

Ok, here are the Top 5 Fundamental Tests to do before buying a stock, by David Randolph (me ):

1) Check the share count on an historical basis. If it has been growing a lot, it doesn't matter how great the news are, probably the company will dilute shareholders value and the stock will fall back after the rally. A constantly rising share count means the company is not working on the shareholder's behalf, but on its own behalf (those are two different things). nica33 already showed us the historical share count numbers can be found at MSN Money. The exceptions to this is if the share count rose due to acquisitions. In that case there's no dilution. One needs to compare the share count evolution with revenues. Rising number of shares outstanding without correspondent rising revenues means dilution. What I like to see is declining share count (when the company is buying back its own shares), stable or growing just a bit year after year.

2) The balance sheet study. You need to compare the total current assets with the total current liabilities. The ratio between those two numbers should be higher than 2 and not below 1 (if it is below 1 it means working capital is negative, and that means the company has short term liquidity needs and will have to dilute shareholder's value to survive). As for the total current assets, you don't want it to be composed of just receivables and inventories, there should also be some cash.

3) The revenue and gross margin study. The market pays more for a company with growing revenues than for one with declining or erratic revenues. A strong and positive revenue trend is a good fundamental background for a stock to keep rising. But also check the gross margin. It should be high and stable. If sales are rising but the gross margin is declining (gross margin is the operating profit/sales ratio) the market will attach a lower multiple to the company, it is being less efficient. This can be useful when, for example, there's news out, revenue growth was 50%, the stock is up 20%, but you see gross margin declined five percentage points ... probably that's the short term high for the stock. Revenue growth make good headlines but many times the underlying gross margin is hidden.

4) EPS and net profit margin. Everybody knows how to make a quick earnings multiple test. You just multiply that quarter's EPS by four and see what's the full year earnings multiple (but don't forget to see if there's seasonality). The market average is about 16, so if it is below that it looks undervalued, above that it looks overvalued. But multiples also need to be considered in connection with growth rates, so it's not that simple. The best of both worlds is a low multiple and a high growth rate combined, that will probably make the stock run a lot further, as it looks undervalued in a double way, if you know what I mean. The market pays a high price for stocks with a high net profit margin (net profit margin is the ratio between net income and sales). These stocks have the highest potential. For example Google and CPNE.OB have very fat net profit margins. On the other side of the coin, if EPS grows, say, from $0.20 to $0.30, but revenue growth was 100% ... well, net profit margin is deteriorating, and that's not good.

5) Comparison with the company's industry. Of course, all these ratios should be considered in comparison to the company's competitors, but this leads to a very, very hard work. My hope is that by studying many, many stocks, someday I'll know their ratios more or less by memory and I'll be a fast machine at recognizing opportunities. Yahoo has some industry numbers at its "competitor's" link, but I'm afraid many times those numbers are not accurate. I also like to read just a bit about what is the company's business model and market potential. This can be important because, for example, if the company is a niche player, a lot of growth might even depress its valuation, because the market will think: "there's no more room for growth in this niche".

How to do all this in just 3 minutes? Tough job, but it sure increases the chance of picking the best of those 10 stocks you got in your technical filter ...

[nica33]

David, I am wondering if you could suggest your "Top 5" things that you would recommend checking on a stocks fundamentals in order to quickly weed out possible losers from a given stock scan.

For example, these days I first check the daily and weekly chart to ensure bullishness in terms of volume, etc. then I cehck the balance sheet first and scan the balance and current ratio, and if these look really bad I might just move to the next stock.  If they look OK I will go on to look at the income statement, and so on.

Ok, here are the Top 5 Fundamental Tests to do before buying a stock, by David Randolph (me ):

David nice very nice!!!!!! I'll print it. I need to have it always on hand

[TraderStar]

David is building so much great karma in this lifetime .. next time he can probably be anything he wants 
Seriously, the first person I have met online who seems genuinely focused on helping others succeed as well without underlying agendas...

[David Randolph]

David nice very nice!!!!!! I'll print it. I need to have it always on hand

Thanks nica33. Watch out because I edited the post, there were some things missing and some grammatical errors (I'm sure there are plenty, still). 

[TraderStar]

The MSN scanner is remarkably similar to the one in VectorVest however VV charges $60 a month (after the trial).  VV does have some proprietary indicators and may have others more sophisticated .. but I was amazed to see how similar they are...  great information today, another sterling idea David!!

[TraderStar]

XDSL  is definitely breaking out but its fundies look bad so must be just news driven.

[David Randolph]

Seriously, the first person I have met online who seems genuinely focused on helping others succeed as well without underlying agendas...

Sorry to disappoint you Traderstar, but you need to keep looking for that first encounter, I have an agenda

I'm interested in building another valuable service to the 3 Stocks on Fire Premium service. That is disclosed in the 3 SOF Portfolio FAQ.

I hope to increase the number of premium subscribers to 3 Stocks with this free access message board. It has been working well and I'll keep doing it everyday, as I work 14 hours a day.

But my conscious is clean because I know that the 3 Stocks Premium service is probably the best of its kind out there, since I've tried several others. It allows people to sit back, just follow sound recommendations and make an above average return on their investments. I never turn my back to a losing position as I update the analysis on all holdings everyday.

And I have another hidden agenda. My plan is to launch an hedge fund in the future (although I'll keep working at 3 stocks) and I need to learn as much as I can before I turn 35 (the launching date). Therefore I need to talk to as many people and get as many knowledge that I can get before jumping into managing millions.

Well, enough of me, let's move on ...

[David Randolph]

Hi DAVID what di you think about CMBX???

Good trading idea or SCAM?

That's not a valid ticker symbol MrChina. Anyway, today is different, we're discussing strategies and tools. Have a nice day

[David Randolph]

Thanks .. I had to download lastest software changes.  Now I see it

I also don't see those graphs. Isn't MSN Money a website? Why is software needed? Where to download the latest version? I want to see the fundamental graphs too.

Thanks