Reported by: Ed Sharman
Chapter President Bob Welge
brought the meeting to order at .
This was the first time for AAII in the new, larger, air-conditioned meeting room – greatly improved ambiance! Beginning
with preliminary announcements, Bob drew members’ attention to the availability
of Chapter contact information and handouts for today’s talk on the back table,
and of coffee at the
break. Bob noted that Chapter elections
are coming up on
Bob next announced the schedule of future chapter meetings. On
Bob then introduced today’s speaker, Bud Leedom, publisher of the California Stock Report, and his presentation Spotting the Undisclosed Trends of Institutional Investors to Uncover California’s Future Growth Stocks. He began by presenting a number of keys to successful investing:
· Was your trade profitable?
· Using both fundamental and technical tools, create a universe of stocks for potential investment.
· Contact companies to create a Focus List (‘backyard investing’)
· Select stocks for investment based on detecting institutional investor activity (‘institutional bias’)
· Okay to add other ‘personal interest’ stocks
Bud discussed a five-step fundamental analysis formula (asserted to be available at marketguide.com) for individual stock selection:
· 3-5 year revenue history
· 3-5 year earnings per share
· history of meeting or beating earnings-per-share estimates
· history of raising earnings estimates
· current quarter performance
· compute a 0-5 total score of the above by assigning 0=good and 1=poor
Bud believes institutional trading activity may be predictive of future price movements because 1) Institutions have superior access to information, 2) Institutions typically act in unison, and therefore 3) Institutions move stocks. Bud introduced a proprietary indicator of institutional investing activity for individual stocks. Using his indicator, he presented examples of stock accumulation and subsequent price appreciation on the one hand – and examples of stock distribution and subsequent price declines on the other. His indicator uses two trends of trading volume – a short term ‘green’ line that responds more quickly to volume changes, and a longer term ‘blue’ line that is better at defining more persistent trends in volume. Bud’s indicator lines reminded me of moving averages of on-balance-volume. But, as was pointed out by at least one member of the audience, they could move in mysterious ways: at times, the ‘green’ line would appear to lag, while the ‘blue’ line would ‘forge ahead’ to more quickly respond to changes in volume. This behavior could not be expected from simple moving averages.
Bud wound up by presenting ten stock ‘picks,’ not all California-based companies, despite the name of his advisory service.
In summary, Bud has developed a proprietary volume-based indicator of institutional trading activity which he uses to predict future price movements of individual stocks (no guarantees, of course). He makes this indicator available to subscribers of his californiastocks.com advisory service.
As valued perks, Bud invited members of the audience to see
him after the meeting for complementary tickets to the 2006 Southern California
Investors Conference, to be held
Following the conclusion of Bud’s talk, Bob invited a limited number of 7-10 members to join Bud Leedom for lunch at Cocos, and then adjourned the meeting at .