My Current Watch List

There are a number of stocks with great fundamentals setting up in consolidations right now, a great sign. As mentioned in previous postings, not long ago it was tough finding stocks with excellent fundamentals that were going through constructive basing patterns. It is encouraging to see so many more, although no where near what it was like during the height of the previous bull market.


My current watch list includes the following stocks:

ATHR
PCLN
WDC
GMCR
CTRP
HMIN
LULU
AIXG
NTAP
GIL
MELI

This list was developed from scouring all the stocks listed on the NASDAQ, the NYSE and the AMEX. I use a stock screening software provided by the Investor’s Business Daily (IBD) Daily Graphs company. I am still developing my watch list, as I am always looking for new additions to my watch lists. The general criteria for the list above was that they were in the top 20% of all stocks in terms of EPS rating, top 20% in Relative Strength rating and composite rating (a proprietary ranking methodology of IBD’s) and that they had at least 25% EPS and sales growth in the most recent earnings report. I also set a minimum for rate of return, an important component for determining the financial health of a company.

As you may infer, this list is not based on emotional attachment to an industry group or an old favorite, it was developed based on how the stocks are currently behaving. It is based on where the money is flowing. Astute thinkers and observers of economics and business practices, many stock investors forget a basic fundamental of stock investing: supply and demand. How ironic that we all are taught this basic aspect of capitalism, and in microeconomics specifically, yet most forget to apply this to the stock market – a monument to our capitalism itself!

Money flows into and out of stocks necessarily affects the current price of a stock. Therefore, another key aspect of how I develop watch lists, and which stocks I favor on my own watch lists over others, is the number of shares outstanding and whether a stock is being accumulated or being sold off. IBD offers the Accumulation/Distribution rating, a proprietary measurement that suggests whether the big players are buying the stock or not. But you can also see accumulation and distribution by just looking at a stock’s chart. That’s why I don’t like stock chart services that do not indicate this key aspect clearly (can I get a mobile phone app that shows volume!?!).

After I’ve developed a watch list, I create research packets on each stock that includes balance sheets, analyst opinions, projections, news stories, profiles of the company and other such pertinent information.

Once I’ve decided on which stocks I like best (I usually prefer the stock that shows most earnings growth), I wait until the stock breaks out when the market is in a confirmed uptrend.

Keep an eye out, the market is showing some positive action. Don’t try to predict where it goes, simply react to it once it tells you where it goes.