Minutes
Monthly Meeting,
President Bob Welge brought the meeting to order at
Bob next announced the
schedule of future chapter meetings. The
next meeting will be on March 14, 2009, when Herb Farrington will discuss New
Tax Strategies for Investors and Retirees just in time for tax season. Then on April 11th, Wade Slome will present his prescription for Beating the
Market – Investing in Volatile Times.
Finally Paul Rabbitt will discuss A Hybrid
Approach: ETF Hedging and Stocks at the Chapter’s May 9, 2009 meeting. These meetings will be held as usual on
Saturdays at 8:45am at
Bob then introduced today’s
speaker, Joe Burns, President of the Burns Investment Group, and his
presentation Finding the Next Great Stock
Market Winner. Joe’s background is
with Investors’ Business Daily (IBD), so his approach is an outgrowth of IBD
founder William O’Neill’s CANSLIM method. Joe didn’t mention it, but interested
AAII members can learn more about CANSLIM and how its AAII stock screen has
performed by visiting the AAII website http://www.aaii.com. Joe began by
pointing out that three widely-followed strategies – Buy and Hold,
Diversification, and Staying Fully Invested – haven’t worked recently, and are
actually myths in his view. His strategy is to invest in one or a very small
number of stocks – the very ‘best’ companies, just when large institutions
start purchasing. He mentioned just one winning stock that he traded last year
– Potash Corp. – and alluded to perhaps another four small losers that partly
offset his gain in POT.
While he did not detail how in
the case of POT, he does stock selection using his ‘EDGE’ method: Earnings,
Demand, Growth, and Educate, empower and enjoy. His term Earnings
encapsulates sales, return on equity (ROE) and profit margins, all of which he
wants to see Grow by >30% for the last three quarters. Under Demand,
he includes technically-significant changes in volume (showing that
institutions are accumulating the stock), and that the number of institutions
with significant investments in the stock have increased in each of the last
three quarters. Companies with these attributes must also be imbued with
superior capabilities for Invention, Innovation, Development and Discovery (“If
a company is doing the same old thing, its stock will do likewise”). Companies
are further identified by employing a ‘top-down’ approach, first identifying a
favorable overall market environment, and then identifying attractive sectors,
groups within sectors, and finally stocks within groups. But Joe never did
explain what he meant by ‘Educate, empower and enjoy.’
Technical methods utilizing
stock price charts are important in timing Joe’s stock trading, presumably once
he has selected a stock with EDGE. He utilizes moving averages, and
especially notes the price of a stock relative to its 50-day moving average. He
has a method of drawing a box around a stock’s consolidation period, and then
makes a purchase when the stock price breaks out of the box to the upside. He
hopes to do this multiple times over a period of 3 months to a year.
Joe was asked if he ever
back-tested his system. He replied he thought that unnecessary because the
CANSLIM system upon which it is based had already been thoroughly backtested. Nor did he present any definitive real time
results, or real time forecasts.
In summary, Joe is a very
dynamic speaker and his presentation was highly entertaining, if somewhat light
on the specific details that would allow an individual investor to use his
method going forward.
Following the conclusion of Joe’s
talk, Bob adjourned the meeting at 11am.
Recorded by Ed Sharman