Mark Minervini Interview - A guide to superperformance from a stock market wizard
When you’re trying to interview a man with a deadline to write a book, finding a convenient time isn’t easy. When that man is Mark Minervini, whose hectic days are split between trading and finishing his eagerly-awaited new investing guide – Think and Trade Like a Champion – the pressure’s even worse. When I finally managed to catch him - one evening after the market close in New York - he was generous with both his time and his views.
For more than three decades, books have played a crucial part in cementing Mark’s reputation as one of America’s most closely-watched traders. This year sees the follow up to his popular 2013 guide, Trade Like a Stock Market Wizard: How to Achieve Super Performance in Stocks in Any Market. That was written 10 years after he was profiled in Jack Schwager’s Stock Market Wizards. In his new book, Mark’s promising to cover everything that couldn’t be fitted in first time around.
So what’s his appeal? Mark started trading with very little capital in the early 1980s. After several years of losses, he took his strategy back to basics and got scientific with what was working, and what wasn’t. It was a turning point that transformed his results.
In 1997 he was named U.S. Investing Champion after smashing the contest with a gain of 155%. It served to prove the effectiveness of his strategy even under the most competitive conditions. Since then, he’s won a huge following and built an education business on the back of it.
In essence, Mark is a growth investor. He made his name shooting for big gains in fast moving stocks with a strategy that blends fundamentals, technicals and strict risk management. The process is carefully laid out in his first book, with a particular focus on getting the timing of trades absolutely right.
But what comes across when speaking to him is that the precise strategy is very much a personal decision. What’s more important is the belief and mindset to stick with it, and an unswerving discipline to avoid big losses.
Mark, tell me about how you’ve evolved and developed your strategy over time?
My strategy developed very simply because I had a small amount of money and I wanted to turn it into a large amount of money. So I had to find a way to trade the markets and be able to very rapidly compound my capital.
In the beginning I couldn’t do short-term trading or swing trading like you can nowadays. Back then, commissions were more than $175 per trade. With a small account back in the early 1980s, with a few thousand dollars, I couldn’t pay that much commission trading in and out. You had to pick up the phone and call your broker, and he called someone that called someone else on the floor, and it was a much lengthier process to make a trade.
Back then we would look for big moves in stocks. But now you can trade for pennies and have instant liquidity so there is a lot more in-and-out trading, swing trading and day trading. Over the years I’ve refined it more and more to the point where I’ve got down to pretty much a science. It’s still an art, but the science takes out as much guesswork as possible.
Your strategy is very much focused on growth companies. In terms of fundamentals, what sort of profile are you looking for in a stock?
My books spell everything out much better than I can explain in a brief interview, but from the fundamentals side, if you’re investing in growth companies you’re obviously looking for signs of growth. It doesn’t necessarily mean that just because a company is showing decent earnings, say earnings are up 30% over the past few quarters, it’s attractive. It’s really a matter of asking whether it’s doing better than it was previously.
For instance, if you have a company that’s growing at 30% annually, but prior to that it was growing at 80% or 90%, that’s not very good because the growth has slowed. That’s what you saw at Dell Computer in the 1990s. Dell was growing at a rapid rate but it decelerated towards the end of the decade and the stock topped.
But if you take a stock that was previously losing money but is now growing at 10% or 15%, that’s a big improvement from where it was. That could actually do better than a stock with a higher growth rate that’s actually slowing down.
Sometimes that confuses people, but it’s really the change in growth rate that you’re looking for. Wall Street likes it when things are going better than expected, and when a company suddenly shows that its growth is accelerating faster than anticipated.
So I’m looking for big quarterly earnings growth. But sometimes you’ll get big fundamental changes that aren’t apparent in the earnings. Maybe you’ll have a company that has got approval for a new drug and you might not see it in the earnings. So it depends on the situation and the category a company falls in.
I treat various industries and different types of companies differently. That’s why I break it down into four or five basic categories. You have Market Leaders, Top Competitors, Institutional Favorites and Turnaround situations. Those are the four that I usually concentrate mostly on. Then you have Cyclical stocks, which I tend to avoid, and anything involving mergers I tend to avoid most of the time as well.
What advice do you have for investors when it comes to honing a strategy and developing a trading style?
One of the problems for the average investor, particularly for those that are new to trading, is that there is so much information out there; information overload is common. There is more than one way to skin a cat, and my way isn’t the only way. It just happens to be the way that I know really well, and I’ve focused on for so many years that I’m good at it.
You can have a value player buying stocks that I wouldn’t touch, and they do very well. Whereas I’m buying growth stocks with P/E ratios that are higher than a value investor would ever think of buying, but we can both do well. The key is to really know your strategy.
But you have to narrow it down and come up with something that makes sense to you and then commit to it. You’re not going to be good at a lot of different strategies. You have to make a commitment to one area and spend time learning it so you become really good at it, rather than just dabbling with different styles. You want to be a specialist, not a jack-of-all-trades.
If you’re going to day trade, that’s a lot different from being a long-term investor. There are going to be different rules to follow - but it’s important to have a set of rules and a process.
It took me a lot of years of course, being successful didn’t happen overnight. I didn’t do very well for almost six years but over time it started to click for me. Nowadays you have access to information that can help shorten the learning curve. When I first started trading, I had to go to the library. I was reading books that were old and outdated, and it wasn’t as easy to get access to good information like it is today.
On that subject, the investment environment has changed a lot since you started trading. Do you still believe that the individual still has an edge despite new developments like algorithm-driven, high-speed trading?
Absolutely! If you’d asked the average investor in 1930 if it was too complicated and whether the big, rich investors and institutions had the edge, they’d have said yes. If you’d asked them in 1950, 1980, 1990 it would always be the case. It’s always the case that people feel it’s a rigged game and that the big guys have the edge. Actually, it’s quite the opposite; the big guys don’t have the edge. They have a handicap because they have to move big amounts of money and their process is very slow and lethargic.
The individual investor can move very quickly and has a huge advantage. The smaller you are and the smaller your portfolio, the bigger advantage you have. Nowadays, you also have the exact same tools as almost any professional. You have access to the same information, and laws have been changed to level the playing field as far as the information flow. All your tools, your quotes, your execution are as good as anybody else’s. So it’s a great time to be a stock trader and it’s going to just get better and better.
Your approach has some of the hallmarks of other trading legends like Jesse Livermore and Stan Weinstein. Who have been the big inspirations in your trading, and what have you learned from them?
I met Stan Weinstein back in 1990 at a big investment event in New York City. He was a very colourful, fun guy and he really impressed me with his passion for the market. That’s when I began to fold-in the trend work. It really got crystallised for me after I met Stan.
One of my biggest influences early on was Richard Love. He wrote a book called Superperformance Stocks. Richard Love and William Jiler are the two who really are the backbone of the fundamentals side and the technicals side. Jesse Livermore would also be one of my big influences. I would say that I am a modern version of those four traders and I’ve combined and refined the best of each.
Paul Tudor Jones is also someone who I modelled a lot of my trading after, particularly on the risk management side. As commissions came down and I was able to trade quicker and cheaper, I started applying the types of rules that futures traders were using. That meant being much more aggressive with trading stocks, and taking a more mathematical approach and mitigating the risk quickly like if I were a highly-leveraged futures speculator.
Risk management is clearly a major part of your strategy, and particularly cutting losses early. Where do most traders go wrong with this, and why?
Most traders go wrong because they usually don’t have a good strategy to begin with. For most, their egos are more important than making money, and they don’t figure out how to differentiate the two. When a stock goes down, they don’t want to be wrong so they wait until it comes back. The loss gets worse and before you know it, a big chunk of your capital is gone. They hit what we call the ‘uncle point’ where your arm is twisted so far that you can’t take the pain any more.
Do that enough times and you start thinking about throwing in the towel; and when your confidence is damaged, then you’re doomed.
Maybe then they’ll read a book like mine and decide that cutting losses sounds like a good idea. They try it, the stock goes down and they sell it and then it turns around and goes back up and takes off and they think: “my god, I’ll never do that again, that was stupid”.
So you have to realise that you’re not going to be right all the time, in fact you’ll likely be correct only about 50% of the time. You have to manage the risk, that’s the most important thing. There is a lot of risk in trading stocks. All stocks are risky and that has to be managed. The goal of stock trading is to make more money on your winners than you lose on your losers - it’s not to be right all the time.
For some, it takes a while to shift their thinking, but you have to focus on avoiding big losses by embracing smaller losses.
Selling at a small loss is one challenge, but knowing when to sell for a profit is another difficult subject. What’s your advice on how to run winners and how and when to exit a successful trade?
In my new book what I’ve done is to try and cover all the things I didn’t cover in the first book because I ran out of room! It covers all my rules and the types of things that you should look for when it comes to deciding whether you should hold the stock longer for a larger move. But also when you should reduce or sell the stock even before it hits your stop loss. There’s a whole chapter on selling and a chapter on what I call “violations”.
The main thing is that you have to have rules. Without them you’re just going to be operating from your emotions, your hunches and the seat of your pants. It’s never going to turn out good when you do it that way. So those rules should be based on a sound philosophy, which means sacrificing. Let’s say you are going to be a swing trader for instance, and you buy a stock at 20 and it goes to 30 and you sell it. If the stock takes off and triples you can’t be upset that you weren’t in it because you already accomplished your goal.
Take day trading as another example. A day trader goes flat, to cash, every night and is out of the market. They’ll go in there and scalp the stock for sometimes a few pennies, or a nickel or a dime or half a dollar. They’re not getting upset when they sell the stock and take 50 cents profit on it if the next day it gaps up 5 points. It’s not part of their business plan.
It’s the same thing if you’re a long-term investor and you buy a stock at 20 and it goes up to 25. You’re trying to play it for a much bigger move and it comes back down and stops you out at 18 or 19 dollars. Now you’re a Monday morning quarterback and thinking you should have sold it at 25. Again, if you’re playing for a larger move, you’re going to have to sacrifice the shorter move. If you’re going to play for the shorter move, you’re going to sacrifice the larger move.
You must define your trading. You have to learn to sacrifice and focus on a particular style, which is all based on having a framework that you operate in. The whole idea of this scientific approach is to remove as much of the emotion and as much of the luck factor.
There are still going to be intuitive decisions to be made: What to buy? When to buy? How much to buy? When to sell? There are always decisions to be made and you’re never going to be truly scientific, it’s still going to be an art. But that’s the beauty of it. If it was purely scientific then you’d be able to put it into an Excel spreadsheet or computer program and let it run, and humans wouldn’t be needed and the edge would be gone. But that’s the beauty about trading, there’s an art to it. That’s the challenging part but it’s also what makes it so rewarding.
What was your best trading year, and what was your performance?
One standout year was 1995, when I was up 412%, the 1990s were good, of course. I was out in 2000 and came back in 2004 and had some big triple digit years. Since then I’ve done very well and been very consistent. I haven’t had any down years in perhaps 20 years. Early on, I had a lot of volatile periods when I’d do well and then blow myself up in a few months of bad trading. These days I trade more conservatively and without my whole net worth on the line as I did in my initial years when I was trying to build my capital.
When you look back, is there anything the stands out as being a key moment in your trading?
As far as any one trade, not really, because I’ve traded hundreds and hundreds of thousands of stocks and it’s not like I had one big winner that accounted for my success. My returns have really been produced through consistency and a lot of trading year after year.
When I look back in time, back in the 1980s and early 1990s I was more of an investor holding for larger moves out of pure necessity. As a result, I got some really big movers. The names that I was buying back then, if you look at them today you’d say “oh, of course” - Amgen, Dell Computer, Microsoft, Costco, Home Depot, Gap Stores, etc. But at the time few investors had even heard of those companies, they were all small-cap, underfollowed names. After that, it became sort of a blur because it was a lot of trading and the stocks just became symbols that I was trading on a daily or weekly basis.
Over time, how have your ambitions and the focus in your life changed?
I’ve come to realise that my calling hasn’t just been trading but it is also helping others. My editor told me I was a natural born teacher. I didn’t realise it was something I was good at and it wasn’t really something I planned on doing.
Back in the late 1990s I got in the public eye after winning the U.S. Investing Championship and I was on TV a lot. As a result, I was offered a lot of money by publishers to write a book, but I didn’t because I didn’t want to give away the “secret”. I was advising some very big institutions and I never saw myself dealing with individual investors or having a retail product or doing seminars. To me, I was a just a trader and I wanted to avoid all that. The reasons why I started trading in the first place was that I could be in a room by myself and be responsible for my own success.
But that all changed as I started thinking about passing the torch. When I wrote my first book I was not even sure if anyone would even like it. Then I did a seminar and that turned into a big success and I’ve been doing it ever since. So it feels like my ultimate calling is to be an educator; it feels really good when people tell me that I’ve helped them improve their lives.
One of the things that I always tell stock traders is that while you can read about the mechanics behind the big returns from superstars, it’s probably not going to get you the same sort of success unless you feel that you can do it and it’s possible and you believe in your own abilities.
A big part of me writing a book and doing workshops is to empower people to help them understand that not only can they do what I have done, but with the benefit of my knowledge, they can do even bigger and better than what I’ve done. Ultimately, a belief in your own abilities is more important than the strategy.
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253 comments
Hope this helps for those interested in Minervini's style:-
https://youtu.be/W5ljClz4H3g
For those interested:
Free Webinar with Market Wizards Mark Minervini & 3-time U.S. Investing Champion David Ryan
September 6, 2018 (Thu) 16:30 US/Eastern
https://mpa.omnovia.com/register/71001534340598
I have now found within the screening selection a price change rule which is available for 1 week or 1 month. So please ignore my previous request to contact Stocko to add it.
One of the key things Mark looks for in a share before he buys is low recent volatility, it would be great if a new rule could be added to the screeners to be able to search for previous price volatility (%) on a 5 and 10 day basis.
I have asked if this could be added, but if only one subscriber requests it it will probably be a low priority. If anyone else thinks it's a good idea will you please contact Stocko and ask for it as well.
Also does anyone know if a different website offers a screener with this capability? I don't mind if I have to subscribe.
How would you calculate? Presumably based on hourly returns rather than daily returns? Is it meaningful over such short time periods?
I would like to screen for shares that have traded within a certain share price range in percentage terms in the past few days E.G 10% or less
That isn't the only criteria but it's an important one and would help reduce the number of charts I have to manually look at.
An example of what I am looking for is HomeServe (LON:HSV), it has a large cup and what Mark would call a high handle.
Hi
For any Minervini screeners interested in US and European opportunities. My screen has thrown up 20 to 25 possibilities over the past few days/weeks which I have further analysed to draw out the best of the best from all the hits.
(I am using usual £ before the EPIC to identify the stocks but as these are US/European stocks I don't think the full name gets inserted by Stockopedia, my apologies).
Clearly my screen will be different from yours but you might be interested to test these stocks against your own screener - for US - £DECK, £HFC.
For Europe £TETY (Sweden) - I have bought into all three of these.
These are interesting developments for me as this is the first time I'm applying my evolving Minervini screen in anger to Europe and US as well as UK markets.
By way of offering some validation to the options identified (and thus my screen).
Minervini Tweeted the other day that £MOV had presented on his screen. On my screen £MOV passes 24 of 25 tests. Only failing the test of the current EBITDA Mgn > 5yr Ave (giving 11.6% vs 12.8% - so still a potential investment candidate - now on my watch list).
On this same Tweet MInervini also noted £VDSI, this passes 23 of 25 of my screen's tests. Another he listed, £LOPE met my screen a few days ago and is now 22 of 25. Then yet another, £TNET meets 24 of 25 of my tests.
I am encouraged by these comparisons to Minervini cited stocks and by the results my own screening presented, but also make note of these things.
US offers a much richer hunting ground at the moment for QM stocks than UK. Europe has a few options.
When screening US it is useful to increase the rigiour of tests as many more stocks present more attractive metrics than UK stocks, but these may not necessarily lead to better outcomes. Thus, it's good to be more challenging of the US market, I feel.
I am inclined not to be as challenging of European stocks as I get the feeling that those markets are more similar to the UK stocks (I will examine this in more detail).
Anyway, it's been an enlightening new venture for me. I hope some might gain an idea or two from this post. I will be very interested to hear about others experiences about investing in the US/European markets using Stockopedia, Minervini inspired, screens. (I know PhilH has posted often on this theme and demonstrates aspects of this approach through his fantasy fund).
Regards
Howard
Howard,
Really interstesting post, thanks. Any chance of sharing yor 25 tests? His trend template mentions specific criteria from which to create a screen but the levels for his fundamental criteria do not seem so specific.
Thanks
Hi Mechanical Bull
I'm very happy to share my current 25 tests.
Unfortunately I have singularly failed to work out how to do a cut and paste (using Microsoft Snipping tool, or even screen shots) into this Stockopedia postings tool. I have tried the Text Editor, and tried creating a word document but to no avail.
Do you know how I could get my screener into this thread?
I'm sure there is a simple way as HumourMe did it in an earlier post (#228) but I do not know what it is.
Regards
Howard
Hi PhilH
Many thanks, I'll try that.
Regards
Howard
Hi PhilH
Your advice worked. Thank you very much.
(post #237).
Regards
Howard
Hi Mechanical Bull
Thank you for your interest in my post (#232).
This is my screen (in it's current guise, I'm sure it will evolve from this point).
To segment the market I use the following ranks - QR, MR & SR.
I vary these from Rank > 70 to Rank > 95 depending on how harshly I want to narrow down prospective hits. If I'm doing a screen in US only I work with Rank > 90 (or even 95). If I'm screening UK only I use Rank > 70. If I am doing a screen across the three markets - US, Europe & UK I use Rank > 80.
Next, the screen then filters out types of stocks I'm not interested in.
Note on Size Group its an exclude. Therefore if you want just Large Caps, add into the box, Mid Caps and Small Caps. Then do same action for Mid caps and/or Small caps only. With StockRank Styles it is not at all likely a Contrarian will be found because of the rank combination.
Next comes my momentum portion (very Minervini).
I altered 52w Low from Minervini's >30% down to 15% as I am trying to get into stocks going into a Stage 2 rise at an early juncture. Minervini's 30% is probably well suited to the US market, but I feel too ambitious for a UK/European market.
With regard to 50MA & 52W High, I have found that if a current holding and a potential buy has a 50MA <+5% AND a 52w High more negative than about -7% these are warning flags and I would not buy in with these present and often use these as slice/exit criterion. So, in short I might refine this 52 Wk high setting.
With regard Price Change 6m vs Price Change 1y, these are arbitrary values and are likely to be refined as I test the screen further. But, the key point is I prefer the 6m to be greater than the 1yr as this picks out stocks whose price growth has occurred in the recent half-year rather than the first-half of a year.
Next section attempts to build from Minervini's message that share prices are driven by earning growth. Thus I am trying to use tests which identify earnings, sales and margin growths. Also, trying to capture stocks which do not have excessive debt.
Minervini also advocates the importance of trading volumes as a signal to enter or exit a stock. This test (a proprietary Stockopedia one, I believe) attempts to offer some information about that.
Note this will return either a positive or a negative value. It is also only reporting volumes so you need to examine the share chart to see if volumes are buys or sells. And, you need to decide in the context of your buy/sell criteria if a negative or a positive number is a good or bad signal.
Next two tests are Sector and Industry. I don't like Metals & Mining so I exclude these. This is a personal bias so this test could be suppressed or added to for personal biases. I have a Sector includes if I wanted to do a Sector by Sector screening (like SNAPS). Mostly I suppress this.
The next section is a recent evolution. More stringent EPS growth tests (borrowed from the generous offerings from PhilH's postings and fantasy fund screens).
In initial screenings I often suppress these to get a feel for what's out there. But, I use them on cross market screening when I'm trying to get the best of the best from across US, Europe & UK.
Also, they are really useful for the 'Run a checklist' tool as they highlight strengths and weaknesses of stock options.
Finally, a test which can be suppressed depending on what you are looking for, and depending on what the market has done in the very recent past, as if the market has just dipped good stocks can be excluded unnecessarily.
This test is present because if I'm about to buy or add to a holding I really would like to direct monies towards a stock which is exhibiting momentum now.
You will note there are 26 tests presented. The Sector includes test is simply a filtering one not often used. Therefore its the 25 which are the core set of tests.
Finally, the screener is but one step in a multi-step filtering process. It finds options to consider.
After a screening run I put these onto a QM watchlist.
Then at intervals I examine that watchlist to filter out the best of the best from it (usually one to three buys). This I do by pulling out the best say 10 QM, MR, SR, 50MA >+5%, 52wk High > -7% and the best momentum record over past year (SP 1wk, 1m, 3m, 6m & 1yr). From these lists usually one to three stocks emerge which fit all or most of these filters. I then examine each stock and make a buy/add decision.
That's it for now. It's all an experiment still. Recent UK results seem ok. US results very ok. European experiences are not yet tested.
I hope it offers an idea or two for someone, as I have learned a great deal from others who have posted similar things in the past (PhilH, HumourMe and many, many others - my thanks to them all).
What I have found with this Minervini screen development experiment is that creation of the screen really makes you think about how it is that you need to translate your ideas of a good stock , which provides returns you desire, into a set of logical tests.
This has been useful. But, the more useful stage is occurring now that after initial experiments I am building on and refining from a designed base of ideas. This is increasing my confidence and helped me to have confidence to go across markets and not remain anchored to the UK market.
All the best, thank you very much for taking the time to read this post. I am humbled.
Regards
Howard
Hi Howard,
Wow! Thanks for all this. It is interesting that you use looser thresholds for non-U.S. markets. This may explain why I've found it difficiullt to find good Minervini candidates. I've found Europe to be a virtual wasteland using his trend template although I've found a couple of good set-ups in the Australian markets.
Cheers
MB
You've got "% vs 52 w High" < 25 in one of your snapshots. This won't do anything.
Did you mean "% vs 52 w High" > -25 maybe?
Hi Nick
Thank you very much for your correction, and thus an improvement to the screen
Yes, it should be just as you present. For some reason my brain struggles with negative numbers. I will correct it.
Also, the 25% is a MInervini value based on his US market experience. My recent experiences, and also my own risk sentiment suggest this ought to be rather tighter to say> -15% for the screen. But, as I explained in the earlier post in a buy/sell scenario for a particular stock, I in actual fact narrow it further to > -7%.
Thank you.
Regards
Howard
Hi Howard,
Thanks for posting your screen. It includes the following 2 criteria:
%200d MA > 1 * %130d MA
and %130d MA > 1 * %50d MA
These two criteria together require that:
%200d MA > %50d MA
Are you sure you have the inequalities in these criteria the right way around? This is because Stockopedia's help page includes the following:
"What is the definition of % 50dMA / 200dMA?
This measures the security's 50 day Moving Average price divided by the 200 day Moving Average price.
Work by Seung-Chan Park has shown that companies whose 50d MA is far above the 200d MA significantly outperform those companies where the 50d MA is below the 200d MA.
On a stock chart, the golden cross occurs when the 50-day MA rises sharply and crosses over the 200-day MA. This is seen as bullish."
Hi pka
Many thanks for your comment. It really got me thinking.
I believe I have set out the tests I need to obtain the hits I am seeking.
Your observation that my criterion do indeed result in %200d MA > %50d MA is correct.
For example here are five hits from a screen run this morning ....
All the %200d MAs are > %50d MAs.
These results reflect the tests whereby I wanted the current share price (SP) to be >4% above the 50MA which is obtained from the test
The subsequent tests then build from this base of the SP being > 4% above the 50MA by building up from each other, as follows ....
So, yes the screen does seek to obtain the stocks you suggest whereby the 50d MA is (far) greater than the 200d MA.
Because the tests are pulling out the percentage difference of the MAs against the current SP.
Thus, the %200d MA will most certainly be greater than the %50d MA, but the absolute 50d MA will certainly be greater than the absolute 200d MA.
The important distinction is that when Stockopedia refers to % 50d MA it refers to the percentage difference of the absolute 50d MA to the SP, wheres when it refers to 50d MA that is the absolute figure.
I hit this distinction issue when I was designing the tests and it took me a while to figure things out.
I hope that explains why the screen operates as it does.
Clearly these are my interpretations and others will see things differently. But, I really appreciate you taking the time to comment, they really made me reevaluate what I had done.
Regards
Howard
Hi Howard,
Thanks for your reply, in which you wrote:
"Thus, the %200d MA will most certainly be greater than the %50d MA, but the absolute 50d MA will certainly be greater than the absolute 200d MA.
The important distinction is that when Stockopedia refers to % 50d MA it refers to the percentage difference of the absolute 50d MA to the SP, wheres when it refers to 50d MA that is the absolute figure."
I think you're probably right about that. Based on what you wrote, I now think Stockopedia's definition of % 50dMA / 200dMA is the absolute 50dMA divided by the absolute 200dMA, expressed as a percentage. All very confusing!
Hi pka
Ok, thanks for responding.
Yes, I fell into the the Stocko MAs definitions and distinctions trap more than once.
Regards
Howard
It's easy to check what effect each rule has by duplicating the screen and then just changing the rules to see what effect it has. Yes it's sometimes difficult to understand what Stockopedia is doing sometimes.
Hi Herbie
Yes, good idea and a good way to test out impacts as I refine the test parameters of the screen.
Many thanks.
Regards
Howard
This reflects what he wrote, as requiring all fundamental criteria is too restrictive. However, with the quality rank we can be a little fuzzier, by only requiring a certain threshold to be passed. This is a little 'looser' as a screen requirement and is similar to saying 'require 8 of 10 fundamental factors' to be in place.
If you want say approx 8 of 10 and the trend template to be met then you'll be looking at the same candidates whether you apply filters sequentially or in one step. Applying them sequentially would give greater visibility to those that subsequently fail on fundamentals, which might draw your attention to good technical setups (with non-compliant fundamentals) but for me I'm not interested in adding to a shortlist unless most of my ducks are all lined up. Having said that I often use the 'use screen as a checklist' to see where companies fail or fall out of my shortlist (usually sales are the first to go).
Hi HumourMe
Many thanks for posting your Minervini screen (post 228).
I agree with your comments in post 230. A composite (momentum, rises in earnings, sales and margins, trading volumes and debt levels) Minervini screener can work very effectively.
I find the 'Tools/Run a checklist' function invaluable as a tool not only to assess a potential buy but also re-asses an existing holding from time to time.
I also make use of the suppress a test (or two) to increase options returned in a screening, but with specific insights into which rules I have relaxed in order to allow these additional options to surface.
I hope this application of the procedure might help me to spot options which are not quite coming into an exemplary Minervini selection, but might do so in the near future (i.e. rise above a momentum threshold).
Regards
Howard
HumourMe thank you for sharing. But as I understand Minervini's use of the trend template he is quite clear that his initial screen consists of the 8 rules which all have to be met. After this he applies quality criteria and earnings upgrades in separate screens. His reasoning is that if these are added to his original screen it will filter out too many stocks.
I've been refining my Minervini filter and thought I'd share the latest incarnation as it is based on others contribution here and debate can only improve things (or point out errors in my interpretation).
https://www.stockopedia.com/sc...
The first section requires 50day ma > 130 > 200.
Price to be no more than 25% from the high and at least 30% greater than the low.
Price must also be less than 70% above the 200 day MA to avoid being overextended.
Finally relative strength must be in the top half of the market and top half among its peers (be lovely to chart RS - may be in the future).
The next section is Quality. Minervini doesn't require all fundamental criteria to be met so I'm mainly happy to use the quality rank vs industry here with a few personal biases, as extras, required.
I'm debt and pension fund adverse so I've included these as options.
Next is the growth requirements. A token growth in sales, with the measure chosen to remove seasonality. This is to ensure EPS growth is not solely due to cost cutting.
Moving on to EPS growth I've taken a slightly different approach trying to focus on accelerating growth. This isn't completely working as explained below.
EPS growth requires growth on previous years corresponding quarter (more often this is 'half' in the UK) to be greater than 15%. The most recent quarter/half growth must then be greater than the this.
This doesn't quite require EPS Now > EPS (-1) > EPS (-2) as a dip in EPS (-1) means that both criteria can be met - so these need to be manually inspected.
Finally in this section is a check that analysts haven't recently downgraded the future expectations for any reason.
The last section is tradability.
Size group is for convenience. I would usually exclude Micros; its inclusion below has no effect.
Spread is my main liquidity criteria. If liquid I prefer this be below 1% so I can easily get in and out without affecting the price.
Exchanges is set up to only capture Sterling/Euro based exchanges so will probably be need to be turned off.
Any comments welcome especially if you have a superior or alternative approach.
Siltronic WAF is the nearest I can find to a code 33.
Burford Capital (LON:BUR) and BESI seem pretty close also.
I just suck the data out of the Stockopedia interims tab, e.g. https://www.stockopedia.com/share-prices/games-workshop-LON:GAW/financials/?statements=Interim
Games Workshop (LON:GAW) has 6m interims
Looking at Games Workshop (LON:GAW)
The EPS has been 0.17, 0.27, 0.33, 0.60
So it is not accelerating. The 0.17 to 0.27 is an increase of 59%, 0.27 to .33 is only 22% or do I misunderstand?
Hi Herbie,
Sorry I should have been clearer ... As the paragraph "Check The Trend" on page 133 of "Trade like a Stock Market Wizard" Minervini gives an example of 2 quarter averaging to smooth the item being analysed, e.g. EPS, Revenue, etc. So I prefer to use this approach when considering a Code 33 as perfect acceleration across three quarters is very hard to find.
So here's my spreadsheet for Games Workshop (LON:GAW)
The first row of each item is the value from the interims for the last six periods.
The second row is the two period average
The third row is %age change in the two period average
For Games Workshop (LON:GAW) the %age change for the 2 period average for Net Margin is down a whisker
Overall, though it's one of the strongest candidates I've seen in my searching
Hi Guys - I went back to his books to refresh myself about code 33. Having both his recent books as kindle versions, it is easy to do a search for 'code 33'.
What is interesting is that he mentions and defines code 33 in his first book , but no mention of it in his latest book. Possibly a simple oversight.
Anyway, as philh says, he defines code 33 as acceleration of revenues, eps and net profit margins over 3 consecutive periods. In the first tabulated example, a period is a quarter, but in the graphical illustration of a particular share, the period is one year.
In this case, perhaps what might be appropriate and practical is to use the final results and the interim results data . i.e. a 6-month period.
Well i put periods as some companies interims are 3 months whilst others are 6 months
I see so not something you can screen for on here?
On European stocks there is often very little information given on quarterly updates, often just revenue and EBITA.
I did post a reply to HumourMe but it got lost in the ether ...
No you currently can't screen the interim figures at present to identify a code 33. I start with a minervini screen and include some aspects of the code 33. Then i perform a manual exercise using excel looking at the interims for revenue, eps and net income (which i use to derive net margin).
I've been a bit busy in real life of late, but recently turned my attention back on to my stocks and today I've picked up more of Games Workshop (LON:GAW) and Evolution Gaming AB (publ) as both are exhibiting what Minervini calls a Code 33. Code 33 is three consecutive periods of increasing sales, eps and margin.
Both have had breakouts associated with big volume.
Evolution Gaming AB (publ) has formed a lovely cup and handle and broken out on heavy volume to new highs
Games Workshop (LON:GAW) has also hit new highs on strong volume
I was already sitting on a 76% gain on Games Workshop (LON:GAW) and 29% on Evolution Gaming AB (publ) but I'm hopeful that they'll continue to perform.
Anyone else stopped any Code 33 type stocks?
Best of luck
Phil
A clarification ...
In "Trade like a stock market wizard" Minervini describes a Code 33 as three consecutive periods of *acceleration* in sales, EPS and net margin.
Games Workshop (LON:GAW) matches this criteria and Evolution gaming has increasing values but not accelerating values.
I've not really noticed any Code 33 as I've not been specifically screening for them, however, Keywords Studios (LON:KWS) might fit the criteria (I bought 24&25/10). Again this has a 'games' theme.
Are you picking up many candidates from the European subscription? I only have UK at the moment but am thinking expanding my candidate list.
I've just about made up my mind to top up Games Workshop (LON:GAW) (similar gains to you). My chart notes indicate that I was waiting for some confirmatory volume.
I'm not convinced about Keywords Studios (LON:KWS) being a Code 33.
Looking at the interims (https://www.stockopedia.com/share-prices/keywords-studios-LON:KWS/financials/?statements=Interim) it seems ...
EPS reduced last period
Revenue growing but not accelerating
Margin reduced last period
Three factors made this stock fail my initial Minervini Code 33 screen:
1) EPS Q v Q > 0
2) %50 day MA <= 6 (This price is too far away from the 50 day moving average. In other words I've missed the boat)
3) Industry Group Rank (ROE %) > 80%
1. Ah - different periods for a different perspective. I was looking at annual EPS 2015/16/TTM/17E. I'm a bit suspicious of shorter periods due to seasonality.
2. I can understand as it currently doesn't offer a safe entry point, I had a 'buy stop' order in place, just above the previous 'pivot point' high.
3. I use quality rank in industry, rather than ROE as a 'fuzzier' filter.
Sorry i forgot to say that I have a US, UK and EU subscription and that I mostly hold EU stocks.
You can see the stocks I own in my fantasy fund which mirrors my purchases in all but value. Sadly I didn't start with a balance of £1m in my personal investments
https://www.stockopedia.com/fantasy-funds/philhs-fund-4060/
By periods do you mean quarters?
I have not looked, maybe Burford Capital (LON:BUR).
Looks like Minervini is cautiously back in, "toe in the water longs".
Hi maff0 -
Without offering advice, I can only tell you the steps I have taken in the past to reduce my exposure.
1. get rid of stocks with poor fundamentals. That means weak balance sheet, negative or poor cashflows, extended valuation ratios such as P/S > 4, poor eps growth and eps growth forecast., poor operating margins, and so on.
2. if you are sitting on large gains say over 20%, consider taking some or all the money and profits off the table
3. consider getting out of stocks which depend on discretionary consumer spending
4. if you have stocks which are near your stop loss, mine is 10%, then consider liquidating earlier than planned
5. if you truly follow Minervini, you should have no story stocks in your portfolio. These will dive first and fast in a downturn.
6. further tighten your stop losses
I hope this helps.
I consider this linked via abnormal returns to be relevant to some of this discussion. Possibly nothing new to many here, and no actionable signal. Food for thought none the less:
https://www.signalplot.com/the-definitive-guide-to-momentum-investing-and-trading/?utm_source=Daily+AR&utm_campaign=224d001539-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_c08a59015d-224d001539-140327645
"First, momentum trading strategies are trend following by nature, so they participate in most of the upside while avoiding bear markets once they are firmly established. Most of the outperformance of momentum relative to buy-and-hold comes from its ability to avoid bear markets.
Second, while momentum strategies retain most of the upside, they miss out on some gains during the transitions from bear markets to bull markets. For example, due to the lag introduced by using a 12 month lookback period, momentum missed out on some of the recovery immediately after the financial crisis.
Third, when there is no clear trend and prices experience large declines with equally large rebounds, momentum strategies struggle. Under this type of market environment, momentum strategies can participate in all the downside but none of the upside. This can be clearly seen in late 2015 and early 2016 when the S&P 500 experienced high volatility but with no trend upwards or downwards."
hi underscored -
Reasonably good paper on momentum strategies. Thanks for the link.
Generally speaking I wouldn't disagree with his conclusions which are based on a dumb mechanistic buy/sell model.
In the context of Minervini's system, the key differentiator is that Minervini values fundamentals as much as the factors that make up the volume/ price action setup. So forwarding looking metrics such as earnings growth and revenues and moats are important in the decision mix.
I agree with the first two conclusions. The third is debatable. Minervini's contribution in relation to choppy market conditions is to stay out of the market. Hold cash as long as it takes for more favourable conditions to return.
I think we are currently in this situation. In my model, shares which would have been perfect Minervini setups a few months ago are no longer behaving in the expected manner. Minervini's answer to this is to row back and stay out of the market, don't fight it. Markets are always right.
Ramridge,
I'm about 80% invested in 10 stocks none of which are "behaving badly". In such a scenario, how would you scale back your exposure if the market was choppy? Would you sell 50% of everything (or most things) or would you sell some of the stocks? And if so, how would you choose which ones to sell?
Thanks,
M.
Anybody else finding Minervini setups thin on the ground recently? Last month I identified VCP-like breakouts in Thomas Cook (LON:TCG) and McColl's Retail (LON:MCLS) . Slim pickings last few weeks. Last Thursday 24th I noticed Ceres Power Holdings (LON:CWR), though it's loss making so not something I'm going to take a big position in.
How about these: Renishaw (LON:RSW), Bioquell (LON:BQE), Fevertree Drinks (LON:FEVR), Berkeley Group (LON:BKG), Indivior (LON:INDV), TCS Holding (LON:TCS), Globaltrans Investment (LON:GLTR), Keywords Studios (LON:KWS).?
I'd consider Burford Capital (LON:BUR) to be a Minervini type stock - Leader in it's field, less than 10 years on the market, fantastic earnings (growth), margins, sales (growth), and firmly established in a stage 2 uptrend, admittedly with some bases along the way.
Long (one of my largest positions)
Re VCP (Volatility Contraction Pattern) is there anything on Stockopedia you use to check these?
Hi Herbie
If you mean identifying stocks which have broken out from a VCP using Stockopedia - I don't know if it's possible. I'd be grateful if anybody could help here. Would be very useful imo.
P.S Good list of Minervini-like stocks in your previous comment.
Hi Ricky,
Yes that's what I meant.
Thanks, you could add Burford Capital (LON:BUR) and IQE (LON:IQE) also, both down a bit recently. Another I have been considering is SSP (LON:SSPG). I forgot to mention Electrocomponents (LON:ECM).
Agreed, I'd consider all those Minervini stocks. I had Electrocomponents (LON:ECM) on my watchlist late last year, when it was around 400p, the highest the price had been since 2003, unfortunately I was fully invested at the time so it passed me by.
Today I added Cambridge Cognition Holdings (LON:COG) to my speculative portfolio after a breakout to an all time high. Maiden profit last year, hopefully results on 21st Sep will show further progress.
4imprint (LON:FOUR) broke out from a ~1 year VCP today too but the volume wasn't as high as I'd like. Great track record imo.
Two shares shooting up today on what I can see no news, maybe they have been tipped?
Cambridge Cognition Holdings (LON:COG) was covered in an interview some time ago with Edward Roskill.
I used to hold Electrocomponents (LON:ECM) but got stopped out and in those days did not revisit if I had been stopped out.
4imprint (LON:FOUR) was tipped in one of the newspapers yesterday, possibly the Telegraph, that might account for part of the spike up today.
Ok I wasn't aware, thanks for the heads up.
Cambridge Cognition Holdings (LON:COG) showing good "tennis ball" action +9.71%.
McColl's Retail (LON:MCLS) still going strong too!
As the book contains charts, not so sure these sort of books lend themselves to being on the kindle (I like to be able to easily flip between the text and the chart). I went the route of ordering the hardcopy from Amazon US.
Although a great read, I still prefer the charts in O'Neil's book "How to Make Money in Stocks: A Winning System in Good Times and Bad, Fourth Edition".
Martin5760, yes, I see Amazon UK are now advertising the Kindle version. Why has the book never been available in the UK. I know a few people have bought off Amazon US, makes it a bit pricey that way though.
Dennis.
I don't know but I asked Mark Minervini but have not had a reply yet, I see some other people are asking from around the world also. Maybe it will be released later this year?
Minervini also tweeted yesterday that his recent book that was only available in the USA is now available on the kindle
For Minervini followers, here is a tweet posted yesterday.
"
Mark Minervini @markminervini 18h18 hours ago
More
Our work suggest we are not out of the woods yet. I'm still maintaining my market short position initiated on 8/16 with a breakeven stop.
"
I tend to agree. Continue to be 50% in cash.
What short term indicators make you cautious Ramridge?
And are your long term indicators bearish, or bullish?
I look at at stock index charts (mainly US) , consider economic climate and the antics of the lunatic Donald.
US charts have been indecisive lately although the long term trend is still upwards.
UK economy is not exactly rosy with Brexit difficulties, consumer squeeze and rising costs.
Mix that with the Donald's and the North Korean's egos, then you have worrying times ahead in the short to medium term.
My investment horizon is 6 - 9 months. So the long term is to me just a series of short term cycles.
At the moment, I am sitting on my hands and only considering low risk / exceptional opportunities.
The key risk in taking this approach is of course the opportunity cost if I am wrong.
Cheers for that.
What concerns me is the chart for the Russell 2000, which is a better economic barometer than the S&P500 or the NDX. The price line is touching the 200d moving average & is below the Ichimoku cloud, suggesting that the long-term trend may have/may be about to change.
Interesting times.
As a counterpoint, this chart (which comes via Chris Ciovacco writing at seeitmarket.com) shows 23 occasions over the last 9 years where the Russell 2000 dipped below its 200dma, so the signal is not necessarily (indeed is unlikely to be) a harbinger of doom:
Great chart bestace
Price < 200d ma clearly necessary but not sufficient evidence of a break in the long-term trend!
Agreed, many stocks have a history of breaking their 200 day SMAs and continuing on their long term uptrend. National Express (LON:NEX) comes to mind as one.
Thanks Brigra. Thats really helpful.
An interesting point in Minervini's latest book is where he mentions that if a PE of a stock doubles or more from where he bought, he's wary that the stock may be in the latter stages of a move and looks for sell signals. Does anybody know of a charting site which shows the PE change for UK stocks? I haven't been able to find one.
Ricky,
I'm not aware of any chart that plots PE, but you can always use Stockopedia's historical pages to keep an eye on it. You can download / view them by going to "print" button near the top of each StockReport.
M.
Maffs0,
There's a five year history of the stock's PE movements on every stock report.
Check the graphical history section, just above broker forecasts.
Cheers,
B
Ah yes, now thinking about it, I remembered that Paul Scott sometimes displays these historical PE charts on the SCVR.
Thanks
Helps a lot Phil, cheers
Guys,
All my shares are UK based and I wondered if those of you who follow Minervini on Twitter use his US based comments to inform your UK investments.
The UK All Share seems to have some pretty solid support at 4,000 and has been moving sideways for a few months.
M.
if US markets go bad, the rest of the world tends to follow also including the UK.
I tend to keep a eye on stocks that can do well if the markets get choppy, ive identified the following (Miniervini type stocks I say) that have the potential to break out even further in this type of market:
Marshalls
Bioquell
EVRAZ
Thalassa Holdings
Indivior
Ferrexpo
I have small positions in all the above. Central Asia Metals is another one that could break out but I don't hold a position in it.
deleted
this video on you tube with him doing a webinar is brilliant:
https://www.youtube.com/watch?...
he talks about when opening a position he wants to be in it only if its moving upwards fast. he talks about coming out quickly when hes at a 7-8% loss. he also only buys in the direction of a trade. he sells half his gains quickly so hes in win/win situation
Hi vik2001
Thanks for the link. Very informative.
Regards
Howard
Since he mentioned the Russell Index I've been taking a closer look at the index as a proxy for overall sentiment and I was also interested in what signs he might be looking for in that index.
I can't find a ticker for the Russell Index on Stocko so I've been using IWM which is an iShares Russell 2000 ETF.
If I load that ticker up in the Stockopedia charts, choose a weekly rather than daily chart then apply Ichimoku Clouds overlay ...
It seems that a good indicator for overall market sentiment might be the Chikou (blue lagging line) breaking below the cloud to sell and breaking above the cloud to go long.
That strategy has been particularly successful since 2003 keeping you in a long bull market until taking you out in early 2008 (Remember the chikou lags the price) dodging the GFC crash, putting you back into the market in early 2010
Depending on how sensitive you want the signal to be it would have either taken you out of the market in the Autumn of 2015 or early 2016 and back into the market in the Autumn of 2016.
Looking at my own fund/investments I actually had a strong finish to 2015, then a negative first quarter in 2016, flat 2nd quarter then things took off like a rocket from June.
So perhaps a modified strategy might be:
Sell/short on chikou (blue lagging line) making a convincing break below the cloud
Once the market has been sold trying to time the entry back in is trickier.
Option 1: Buy back in once chikou breaks above the cloud
Option 2: Buy back in once the Tenkan Sen (red fast Moving average) cuts up through the Kijun Sen (orange slow Moving Average)
What is clear is that Minervini holds for shorter periods than me. He seems to be quite twitchy whereas I'm prepared to play a longer game.Then again my fund hasn't really been exposed to a dramatic bear market so time will tell no doubt.
At present I'm 77% invested.
Hi Phil -
Thanks for your thoughts on this topic. Personally I am not into the Ichimoku Clouds technique at the moment but have pencilled in some time later in the year to get to grips with it.
You are right in assuming that Minervini's investment horizon is short. I remember reading somewhere that he holds stocks between 6 to 12 months. Over that period either they fly and typically he gets out with 20%+ gains or he gets rid of them at a maximum 10% loss.
Using the Ichikomu overlay in the manner you have suggested, what is your view over the short / medium term?
I read that most of his stocks he holds for much less time, "Historically, we average 200-400 trades during the course of a year – but, that ... Our historical average holding time is about 3-4 weeks for winning trades"
Some he does hold for 6 to 9 months.
I have no idea what is going to happen.
For now I'm bullish as that's what they weekly chart tells me but I'm aware it's consolidating (i.e. the lagging chikou is running into the previous price action) and if that happens in my individual stocks I tend to tighten my stops.
Given the criteria I listed above the following scenarios with the Russell 2000 would make me bearish ...
1) A weekly close below 1100 in the next two months
2) A weekly close below 1160 from late October to the end of the year
3) A weekly close below 1250 for the first few months of 2018
4) A weekly close below 1290 after that
Those are basically the values of the bottom of Ichimoku cloud
Not sure if that helps?
I also know that when I previously attempted to short the FTSE it cost me quite a bit of money, so I'm reluctant to do that at the moment.
If the cloud was broken by the chikou I would be comfortable shorting the index.
Hi Phil -
I am wondering if we are looking at the same chart. On Tuesday when you wrote the note the Russell 2000 index value was 1372.
A weekly close below 1100 in the next two months will make if drop some 20%. So that would take it in market crash territory; more than just being bearish.
What am I missing?
Hi Ramridge,
Here's the image below. I've added some red horizontal lines to highlight the base of the cloud at the levels I posted.
A drop below 1100 in the next month would be dramatic but the reason why the chikou is so far away from the base of the cloud is that there was a huge surge in the Autumn of 2016.
For the chikou to drop below 1100 the price itself would have sunk below the cloud (bearish for many) but for the model I suggested perhaps it's better to use the chikou for market sentiment rather than the price itself?
As I mentioned in another post I think Minervini nips in and out of the market more frequently than me. He takes 20%, I squeeze as much as I can and let my winners run.
So if he was looking at this image the last four red bars of the price action piercing the blue Kijun Sen (slow MA) might have been the warning signs to sell out.
Personally I think his approach would have me trading too much. Then again he's made a lot more money than I ever will.
Hope that helps
Phil
Here's the fully history ...
Thanks, Phil.
I guess I will have to wait and become more familiar with this technique before I can make a meaningful contribution.
In any case, thanks for sharing your views.
My view is this ... the markets lost ~20% from mid 2015 to early 2016 yet I made about 11% in that period.
http://www.stockopedia.com/fantasy-funds/philhs-fund-4060/
I'm not in a hurry to chop in/out of the market especially when I'm paying 1% FX on non-UK transactions
I want a definite indication that we're in a bear market and I'm prepared to pay the price of spotting that a little later than others as I think I recoup it in:
- reduced transaction costs
- maximising returns whilst others are out of the market
Everyone needs to find an approach that they are comfortable with.
Best of luck
Phil
"My view is this ... the markets lost ~20% from mid 2015 to early 2016 yet I made about 11% in that period."
Out of curiosity Phil, as from your posts you like an international spread of stocks, does that performance strip out FX effects?
Hi Graham,
Personally speaking I think it does as I have in the past been unable to find UK stocks that pass my screens. The fantasy fund I linked to earlier in the thread is representative of the stocks I've purchased over the same period and my personal gains %age wise are closely matched. Sadly I didn't start out with £1m.
Best of luck
Phil
That looks like a trend following system with promise, Phil
One problem I see with the Stockopedia charts is that :
Doesnt this invalidate it as a signal, or is a 26 week lag correct?
Hi Howard,
The Chikou or lagging line (which is the closing price) is shifted backward by 26 periods, so on a weekly chart it is 26 weeks.
If the Chikou is overlapping previous price action it indicates consolidation whereas if it is in clear territory either above or below previous price action it indicates that the stock is trending to some extent.
I hope that helps
Phil
Correct Ramridge the Russell is struggling, the index has seen four consecutive weeks of losses.
The expected small-cap rally was part of a larger Trump-inspired equation that also was supposed to see a big year for banks, materials and industrials.
The Russell 2000 dipped below its 200-day moving average earlier this month for the first time in a little more than a year, which is considered a warning sign of market softness.
Going back when the S&P 500 dropped substantially in mid-2015, the Russell 2000 began declining about a month before the rest of the market. That is key to remember if working from previous trends.
I been watching the indexes with a lot of interest. If the S&P 500 breaks below 2,400, that would be a sign more selling is coming, and a correction could take the market down to 2,300. The S&P 500 at 2,300 could be a quick, temporary bottom and opportunity to buy into the market.
I have also been monitoring the indices closely of late.
On a 12-months chart, the S&P 500 has breached through the 50EMA and is pretty close to potentially breaching the 100EMA.
However the more interesting chart is the Russell 2000 (American small caps). This index has breached the 50EMA, 100EMA and 200EMA.
Like Minervini I am sitting on my hands and waiting to see how the market develops from here; only looking at really exceptional opportunities.
For Minervini followers. Tweet on 18/8 :
"
Mark Minervini @markminervini Aug 18
More
Market is ST oversold and put volume has swelled. It could support a bounce, but we are not yet out of the woods; risk remains elevated.
"
Caveat emptor
For Minervini followers, here is what he tweeted on 10/08/2017
"
Mark Minervini @markminervini 9h9 hours ago
Moved to almost 100% cash earlier this week; been winding down positions for a few weeks. Our Risk Model flashed a Sell Alert.
"
Just for your information.
FWIW I am already 50% in cash. Not sure I will be following him further just yet.
Hi Ramridge
I noticed that tweet yesterday and got me thinking overnight about my own positions. Ive just moved to 56% cash myself until this N Korea issue blows over or up! Thought i would take the chance this morning to "Nail down some profits", as Minervini would put it.
Thought I would put my screens to work and out of the whole UK universe the only one I would really be interested in as it seems to pass the Minervini test is EAH Animal Health. I won't be investing as the market fails one of the basic tenants which is don't invest against the market sentiment or perhaps another way to look at that is "gut feeling" I would be interested if anyone else sees a profit in EAH. Obviously I haven't done all the safety checks etc so please DYOR.
Well that answers that, I only play in the UK, but if I was in the market, which I am not I would be holding GAW and watching SPX for a break above 5812.
Anyone who has developed a system a PhilH has done and Sticks to that system is bound to do well.
None of us are called Minervini.
He gave the idea and admits that it is not his but a refinement of O'Neil's with support from Jesse Livermore.
Hi Ram & aflash,
No problem, glad I could help!
I agree that opening a long position could be dangerous at this stage so I will wait for price and volume confirmation first. I think the next week or so will be critical in determining the strength of the VCP. If the share price can consolidate further and go almost flat then I would see this as a very powerful signal.
Another potential VCP that caught my eye is Stadium (LON:SDM) which I am monitoring closely. The stock is very illiquid but volatility is contracting on lower volume so it might be worth a closer look.
Let me know what you think!
BH
Neither Stadium or MoneySupermarket would meet my Minervini criteria even if the technicals match a VCP.
Best of luck though
Phil
Interesting reply, Phil. Would be interested to know which of the Minervini criteria does MONY fail on?
I' m not sure how well the formatting is going to work out but here goes ...
I collect the following data from historical interims and place it in an excel spreadsheet: EPS, Sales and Net Income (which i use to derive Net Margin)
To smooth out the quarterly data I use a 2 month rolling average (that's the 2nd row for each item) and then I compare the change.
Ideally I'm looking for increasing growth in the change percentage across the board (Code 33 as Minervini calls it). What we're seeing with Money Supermarket is flat EPS growth and a reduced margin.
MON MoneySupermarket EPS -6 -5 -4 -3 -2 -1 $0.03 $0.06 $0.06 $0.07 $0.07 $0.07 $0.05 $0.06 $0.06 $0.07 $0.07 23% 4% 11% 0% Sales -6 -5 -4 -3 -2 -1 122.4 125.7 143.9 137.9 157.6 158.8 124.05 134.8 140.9 147.75 158.2 9% 5% 5% 7% Net Margin -6 -5 -4 -3 -2 -1 17% 25% 21% 24% 24% 22% 21% 23% 23% 24% 23% 9% -3% 7% -4% Net Income 21 31.9 30.2 33.3 37.9 35.6As a minimum I'd want increasing EPS growth over a couple of two-periods plus positive growth in sales and at least flat margin growth in the last set of figures.
The thing that stops me even considering MoneySupermarket is that it doesn't pass my screen due to reduced EPS estimates in the last few months.
My understanding is that Minervini is trying to ride the wave of institutional support for growth stocks so why would I want to invest in a stock where the analysts are cutting EPS estimates? It's highly unlikely that they are going to be wading in to buy a growth stock whilst cutting estimates so for me it's a waste of my time to analyse it.
I'm currently watching 10 stocks that I like from a Minervini fundamentals perspective and I'm tracking their technicals. I think it's actually very hard to find the perfect combo of Minervini technical and fundamentals
The ten stocks I'm watching are :
Not sure if that helps
Warm regards
Phil
I believe Minervini has sold PETS now.
Yes agree about MoneySupermarket.
How about Manutan, Vestas, ROCK B, UDG Healthcare (LON:UDG), UPM, G5M all these I'm considering or have bought recently.
Hi Phil -
I think you are working at a much more granular level than I am. Looking at the StockReport data, eps growth is going from 11% to 24.2%(f) ; operating margin from 28.6% to 29.1% . ROCE is an amazing 47%.
True revenue growth is reducing from 12.3% to 8.7%(f).
Yes, broker forecast for eps has come down slightly in the last month.
My understanding of his method is that he looks at the technical picture first, and if it passes, then he looks at the fundamentals. Personally I doubt if he is as binary in his fundamental analysis as you are. But could be wrong.
But as I said in previous posts, my investment method is based on his and not an exact adoption of his rules.
Best. Ram
Yes, Minverini looks for the VCP setup or technical breakouts first, then he analyses the fundamentals. However, he doesn't always focus on the EPS growth etc and eludes to this in the interview comments...
"But sometimes you’ll get big fundamental changes that aren’t apparent in the earnings. Maybe you’ll have a company that has got approval for a new drug and you might not see it in the earnings. So it depends on the situation and the category a company falls in. "
I'm not disagreeing with a strict fundamental approach and I know this doesn't directly apply to £MONY but he does appear to be flexible.
I'd suggest that it's very much harder for us mere mortals to spot a VCP using a rules system than it is to screen the fundies first and the scan the charts.
Cheers
Phil
Of course the individual thumbs downing my post has a screen that can identify the VCP or they could just be on a childish and petty campaign to thumbs down my every post.
Bless 'em
Yes I get a similar treatment from time to time. Very childish.
Phil
I agree with you regarding Mony, but then I would as most of my analysis is based around your original research, for which I thank you. I agree with SPX, GAW, on your list so will have a look at the rest and let you know if it also works for me. As for Mony it looks as if it is running out of momentum which would confirm my reply to BH1991. As always time will tell.
regards
Ken
Hi Ken,
Thanks for your kind words.
I just checked my notes and I was looking for a break over 1250 for Games Workshop (LON:GAW) and a break over 5800 for Spirax-Sarco Engineering (LON:SPX).
I've been quite busy today so might well be tucking into Games Workshop (LON:GAW) next week.
Best of luck
Phil
Games Workshop (LON:GAW) is an interesting one. I've been thinking of adding to my position on Games Workshop (LON:GAW), but if you have Mark Minervini's book "Trade Like A Stock Market Wizard", doesn't the Games Workshop (LON:GAW) drop below SMA 50, around the 30 May look like what Mark talks about on page 90, where its a warning if the stock experiences its largest daily and/or weekly price decline since the beginning of the stage 2 advance, this is a sell signal in most cases, even if it comes on the heels of a seemingly great earnings report. Interested to hear others thoughts on this.
It then went on to new heights.
I'm only on page 90 of the book. Very much enjoying it. Looking forward to when the follow up book is available in the UK
On second look, the Games Workshop (LON:GAW) drop around 30 May looks to be one of the bases in Stage 2 advance. As although it was drop, it perhaps isn't a sharp enough fall.
SDM has been going sideways since May with support at 123p and resistance at 137p.
I want it in my Hi-Tec portfolio. It still has some Value, more than say SCH.
To all Minervini followers, I would like to have your opinion on a potential Volatility Contraction Pattern (VCP) setup within a Stage 2 uptrend (otherwise known as an ascending triangle to technical traders).
The stock in question is Moneysupermarket.Com (LON:MONY) and has been consolidating since early June 2017 (link below).
http://stockopedia.com/charts/shared/85b3bfef11a7e22546d4f471512d470795e82e941499356668
The share price has been bouncing between a narrowing support and resistance line on what appears to be decreasing volume with each contraction. Minervini waits for the breakout above the resistance line, on large volume, before making his trade but I wanted to gauge from other traders/investors whether they believe this is a valid setup?
Your opinion is much appreciated!
BH1991 -
Great find. It definitely shows a VCP pattern.
There are other positives too. EMA 50 is greater than EMA100 and greater than EMA200, all 3 on a rising trend.
Forecast eps growth 24%.
MONY's fundamentals are also really strong. Debt free and good cash flow.
So do you take a long position or not? Personally I would wait until the next trading statement which is due soon. Last year there was one on 14 July. Minervini advocates this course of action. This is a risk averse step and if you lose say a 10% rise by delaying, then it is a small price to pay if the stock subsequently superperforms and rises 40%. Of course it may go the other way and SP drops following the update. In which case delaying was a wise move.
All down to risk analysis and your risk appetite.
It's going on my watch list. Thanks.
Yes indeed great find.
If you go from 18 May there are Four touch points on the Ascending base.
By going back further to 6 April or even 28 Feb you get more touch points but it puts the 18 May Lo in 'crack and snap' territory i.e. breaks below but is back over the line in four sessions.
Either way at 97 Quality and an ex-div date in August to be announced at H2 Earnings release 20 July lots of support going forward.
Hi BH Based upon the theory that the flatter the angle the greater the resistance I would suggest a breakout to the downside.
For Minervini followers, he twitted this earlier today.
"
Mark Minervini? @markminervini 49m49 minutes ago
More
Our risk model moved to sell alert on 6/9 - not yet a full blown sell signal, but warrants holding some cash - NASDAQ remains under pressure
""
Posted here for information only.
Hi Ram,
Must admit most of my sensible FT250 stuff seems to be rolling over to Minevini's phase three stage not sure if its do to the low volume summer effect or maybe the start of the overdue correction.
Currently 50% cash so reasonably relaxed.
Hmmm . I am still 90% cash and will only venture for clear low risk set-ups. Otherwise market signals are still mixed and the UK outlook has only worsened over the last month.
on 9 June, Mark M tweeted
" Our risk model turned bullish on June 1, I've been ramping up my exposure since. Small & mid caps are looking good.
"
So he feels confident enough about the short to medium term stock market prospects to buy long again.
Posted as pure information for Minervini followers. DYOR .
Just in time for NASDAQ's sell off last Friday!
Gus.
Down again today, tech stocks taking a hit.
I have been selling.
I've been a big Minervini fan for several years - although that doesn't mean I've always practised what he preaches! I have definitely benefited from his books.
Many thanks for the stock screens posted - could I ask if you guys are confident that the Relative Strength Ranking he talks about from IBD, is as short term as used in some of the screens I've seen posted here?
When I googled IBD, I wonder if it's a 12 month one used by IBD? http://bit.ly/2rYjg7e
Thanks again.
Two Minervini tweets from today to shed some light
"The indexes are the least of my focus; I'm mainly interested in how many stocks meet my buy criteria vs. how many are a risky proposition."
"The indexes are the least of my focus; I'm mainly interested in how many stocks meet my buy criteria vs. how many are a risky proposition."
I've just been looking at the Russell 200 index using a weekly Ichimoku chart (see the link if you're interested) and I've added some commentary to it.
Russell 2000 Index weekly Ichimoku Chart
I'm guessing Minervirni is cautious before entering the market and then aggressive when he does (in terms of focused investment)
Be interested in the thoughts of others
Phil
PhilH - To be more accurate Minervini is very cautious before entering into a **trade** . But once he initiates a buy, then he tends to build a large position gradually. Or if it doesn't work out, then makes a swift exit. So for example even during the last market selloff, he was going long with a few shares that passed his strict criteria.
In terms of the market though, he'll dip his toe with one stock and if it seems to be going well he'll entertain another and another.
Conversely if some of his selections are closing he'll be tentative about opening new ones.
In terms of aggression I was referring to the fact that he seems to have a small portfolio
Also do we know historic periods where he was no longer long?
Hi PhilH
- I use a charting software from barchart.com But if you go to Google Finance, use the ticker RUT
- Afraid can't help you with your second question
Thanks I've just used an ETF as a proxy on Stockopedia using the ticker PCQ:IWM
He mentions them in the first book and in youtube seminars and interviews. One period lasted years around the Tech bubble. Take some time to collate all the info.
Is there a ticker for the Russell 2000 index on Stocko?
Interesting couple of tweets from Mark Minervini, yesterday.
" Our risk model flashed a recent sell signal. I'm heavy in cash for the time being until conditions improve."
and then
" Until the Russell 2000 turns up from its base and stock participation broadens, I am unwilling to get aggressive long. Cautious here!"
Well, the Russell 2000 index looks like this this morning:
This suggests that the index has been forming a base since the start of the year. The crucial question is, will the break-out be north or south?
Minervini's decision appears to be to play it safe and stay in cash. This is consistent with his general approach; he is actually very risk averse.
I am also 80%+ in cash as explained in my previous posts.
I would recommend the second book in addition to the first (I ordered it from Amazon.com); in the middle it is mentioned that it is a companion volume. Certainly reading them in order would be easier.
Examples of some of the exercises you are encouraged to do: After analyzing my trades over 7 years (the data I had easy access to), I have a win/loss ratio of 50:50. Overall my averages gains were ~23% and losses ~12%, so approx 2:1. Recently (last few months), while transitioning to a momentum strategy, the win:loss ratio remains the same, average gains are now ~12% and losses ~6% (gains/losses include open positions) but turnover and realizing gains has accelerated, which will benefit from compounding.
For me, the second book emphasized risk, position sizing and pyramiding. There is also the usual insight into psychology which personally means that I should only look for confirmation by price action. It doesn't matter what the bulletin boards say.
I still feel that I can take away more from this book as I essentially speed read it. At the moment I feel there are a few contradictions (e.g. potential long period and size gains after a setup, and in a separate statement not to hold over results) so I definitely need to revisit.
I am always reminded of comment Minervini made in one of his webanars about how to make a 100% gain - you can either wait for a share to appreciate 100% or you can compound 7 shares that make 10% each. His route is the 10% route (although he hopes to make more) mine is the 100% as I cannot sit around watching the market.
Minervini's route is a trader, to get in and out of the market fast. If he thinks the market is against him he will watch from the sidelines. My guess is that currently he is seeing his market leaders decline. The second rate stocks are still climbing so that is why the overall market is still increasing. Are we now in a bear market? Minervini's answer would be yes if the market leaders are decreasing. Personally, I will carry on holding as I work to a much longer timescale.
The market will correct at some point, but I'm waiting for signs of weakness first. If you apply Minverini's stage analysis to indices, it can help gauge market sentiment. Remember, Minervini says you should buy and hold in stage 2 uptrends, but sell when the stock reaches stage 3.
http://www.stockopedia.com/ind...
If you look at the FTSE 250, FTSE SmallCap and the FTSE AIM All Share indices, you will see no such weakness, especially AIM. Stocks in this part of the market are in a clear stage 2 uptrend, hence why I'm still invested.
Peter Lynch said a famous quote: "The key to making money in stocks is not to get scared out of them". Basing your investment decisions on emotion (i.e. fear of a bear market) means you will miss the best bull years. If you're scared out of bear markets and scared out of bull markets, then you will never be invested for long enough to make a meaningful return, IMO.
The key is to devise an exit strategy, trust it and most of all, stick to it!
Peter Lynch said a famous quote: "The key to making money in stocks is not to get scared out of them".
But Peter Lynch was a fund manager. Perhaps what he should have said was "The key to earning fat commissions and management fees is to persuade customers to remain fully invested in our funds at all times."
Hi Blissgull & BH1991,
I write not to criticise market timing - those who do it well appear to achieve the highest performance - but to make a couple of clarifying observations on Lynch and his famous quotation (one of many, since he is so quotable). Lynch's quote was made in the context of noting that we all make mistakes, especially when we are learning. In order to become a successful share investor - and, as you know, Lynch was very successful - one must persevere and not be deterred from share investing (in favour of other assets, such as bonds) by those setbacks. He did not say it in the context of criticising market timing (though he would point out that the majority of investors are poor at market timing). Secondly, its low fees contributed to the impressive performance of Lynch's Fidelity Magellan Fund.
Regards,
Ed Miller
*Disclosure: I don't work for Fidelity, but I am a fan of Peter Lynch!
Minervini states that you should believe what you see, at this stage I would show you a graph of the FTSE but I cant make it work so perhaps if you follow this you can trace it all out on your own graph. From the top of the market in 1999 the FTSE moved sideways until the double low of 2009. That move could be said to correct the whole of the bull market which started in 1975. If that is the case we are now in a new bull market which started in 2009 and will last for perhaps another 25 years. So from 2009 FTSE 4000 to the present time you will notice five distinct waves starting 5/03/09 to 18/01/11 FTSE 6081 down to 18/8/11 FTSE 4760, which is a 62% correction of the rise, lets call that wave 1 and 2. The market rises to 7135 in April '15 and corrects again to 5527, which is a fall of 60% of the previous rise, lets call that wave 3 and 4. ending with Brexit. It appears that the fifth and final wave is now in progress and towards the top of the trend. So lets say it ends sometime soon, perhaps FTSE 8000. The correction ( Bear Market ) now has to correct the whole of the rise from 2009 which was 4000 pts and as we have seen it could be another 60%, which is 2400 points or FTSE 5600
Once this is over we will have completed the much larger waves one and two and be entering the larger wave three, which as I have already mentioned is the biggest and best wave, that is the time to fill your boots but only if you don't get wiped out in the high risk area of the game. Obviously this may be rubbish as Technical Analysis often is, but the confirmation for me is that wave three is the longest wave and it is the longest wave..
If I am right it means anytime now this very mature market will correct after an eight year run and that would not be out of the ordinary, so the real question is can you offload quickly enough or short the market at the right time. Or will we have the same discussion as we had prior to Brexit. Whatever the answer ask yourself how did you feel when Brexit hit, not the days following, and that was a correction that had been telling everyone that it was in force for almost eighteen months. The next stage is not a correction but a full blown bear market, we just don't know when it will begin other than to say it always starts at the top. Funny that!!! We have just analysed the FTSE now have a look at how much individual shares fell during the same period and a 75% fall in the value of lots of portfolios is not unusual. Please remember I am a lifelong self confessed Bear so it could be rubbish, I have only one thing in common with Minervini, we play poker in the exact same way, only when we know we have the best winning odds do we go for the gold.
I'm looking at top slicing some holdings (mainly small and micro caps) as like many i've seen some major gains the last 3 -5 years. Main approach are those shares whose trends and newsflow is softening but rather than dropping it all into cash i'm looking at dropping 50% into fundsmith as a cash proxy. This means i could still benefit with any upside in a more measured way ... think that they have a good defensive base of companies, dividends and its easy / cheap to get money in / out.
Will then wait and see what happens in H2 2017 knowing I've got some dry powder should i need it but can let the rest of the portfolio run the winners.
Dealing with the Bear
Towards the end of a Bear Market
Run a 52 week high and find the industry groups making the running check the relative strength against the market as a whole.
The bear will pull even the best stocks down but stocks that fall twice as much as the market should be avoided in the recovery stages.
The past has gone the only thing that matters is what will happen tomorrow each stock must earn its place in the portfolio cut and run quickly and don’t fall in love with winners.
Earnings surprise could be tomorrow winners and if one company sees improved trading so might others in the same sector.
Turnaround and Bear Mkt end page 127
It will be quality that lead each sector out of a bear market look for active Institutional buying pushing individual shares higher.
Look for strong results in both earnings and sales. Low debt is important check carefully how well the actual business has been performing and why things are improving. Look for strength over the last 2 qtrs and compared with the same qtr last year. Look out for a slow down with qtr reduction or not as good as last year.
Check High Flyer List to find emerging Superstocks or Sectors. If one particular sector is rising faster than the others pay attention to the stocks within the sector.
Don’t buy laggards in the hope of an improvement it could be months always wait for the trend to be well established, MA’s are both pointing North East preferably NNE.
Quality Stock Do not play games with the accounts they go from a history of steady earnings and growth to a sustained improvement check that both turnover is growing and the profit margin is better each time. Look out for the false rally based upon a reaction to a one time event.
Guys -
Following on my post no. 88, I thought long and hard over the week-end and decided to go cash. My portfolio now has 3 shares only and 83% cash.
From now on I will only buy shares that satisfy all or nearly all of the strict Minervini criteria, with the view to selling them within a shorter time frame, weeks and not months.
Taking everything into consideration, I think a market correction ( 10% - 15% fall) is highly likely before the year-end, and a major fall (20% +) unlikely but possible.
Protecting my capital including the gains made over the past year takes first priority.
Interesting, is that simply following Minervini into cash or is it based on your own fundamental analysis of the markets?
I'm looking at all the major indices and seeing nothing that would push me into liquidating my investments just yet - most of the indices are at or near all time highs, the moving averages are trending higher with no signs of rolling over and investor sentiment is not particularly extreme. A recent quote from the AAII sentiment survey:
Even macro factors like the China downgrade yesterday and Trump's political woes seem to have been shrugged off by the markets.
I see Minervini tweeted yesterday:
If he thinks the fair value of SPX is 2350, that implies we are only 2% overvalued and his 20-50% range implies we could get to 2820 - 3525. I'm struggling to reconcile that tweet with his being 75% in cash.
If you're happy to share your thinking, I'd be interested to hear what specific factors have led you to going so far into cash at this point?
bestace -
To say the obvious, there is no science to this. It is a judgement call based on facts , opinions and my investment approach.
The following S&P500 chart is pretty scary. I don't know about you but this tells me that a correction is long overdue. Yes, I could have said the same last year or the year before.
My investment approach has changed in a big way. From being invested in some 40 shares a few years ago, I now aim to keep 5 - 10 shares but have a much larger exposure. The Minervini approach allows me to minimise the downside so the ratio of upside to downside is much higher. I want to concentrate on a smaller number of shares which I can follow very closely and hence react to in a better way.
Frothy markets, dangerous political events, brexit implications for the UK economy, all add up to a judgement call to go cash for now. I appreciate this may not be the conclusion that many would reach. But it works with the investment approach I have chosen, and my risk appetite.
Thanks for the reply. I suspect my typical holding period is a bit longer than yours and although I'm a Minervini admirer, I don't try and closely replicate his approach. So we may be talking at cross-purposes somewhat in our macro views of the markets.
For what it's worth my view is that I need a bit more evidence than a chart which looks a bit extended before I'd want to start selling up wholesale. I'm mindful of another Peter Lynch quote:
I'm also mindful that just because a chart looks extended doesn't mean it can't continue to look extended for a long time to come, in other words markets which look frothy can turn out in hindsight to be anything but.
History never repeats precisely, but this might be an instructive example:
It's a chart of the NYSE composite (NYA) from 1967 to 1980. It bears some similarities to the more recent SPX chart in your post, including as it does a couple of bull peaks, a couple of bear troughs and looking a bit extended at the right hand side.
Project further forwards and this is what happened next:
This is where differing investment horizons come into play. Shorter term investors will look at that sell off in 1981/2 and cite that as evidence that selling in 1980 when the markets looked extended was the right move.
Longer term investors will look at what happened after 1982 and say the 1981/2 sell off was but a short term retrace within a much stronger, secular bull market which started in 1975.
To take advantage of that retrace you would have to be able to time both the exit point and the re-entry back into the markets. Maybe I could get one of those calls right but I don't think I am skilled (or lucky) enough to time both calls right. So I generally prefer to try and focus on capturing as much of the full extent of the bull market as I can, holding through short term retraces.
Before moving wholesale into cash I would therefore want to see some or all of the following, none of which are currently in place:
Waiting until more of those things are in place will mean losing out on some of the last bits of the bull market upside, but with reference to that Peter Lynch quote, at least by staying in the market I don't lose out from corrections which may not materialise and which I will probably mis-time anyway when they do come around.
bestace -
Your comments are reasonable and you take a somewhat more of a scientific approach than me.
I recollect the case of a well know US Fund Manager who about 2 years went cash trumpeting to all that the bull market is over. Well, a year later he was still waiting for Armageddon but with egg on his face, and very irate fund holders.
The key element behind my decision is the radical change in my investment style. I am now looking to invest in a small number of shares (less than 10) but with much higher exposure per holding, as much as 20%, if they pass all criteria. The core of my strategy is based on the Minervini method with additional criteria that I have defined. I have been testing this in a small way (with live deals) for over 6 months, refining it all the time. I feel ready now to up the ante substantially.
At the end of 1980 nominal interest rates were well over 15%.
There was a powerful reason for moving into cash even if inflation was high.
I had spare cash in those days and very little in shares.
Even if in early 1987, 2008 and last year I moved substantially into cash I still felt a fool for holding some shares that dropped significantly in price.
You may believe in your judgement more than I do. Certainly your post indicates an ability to maintain perspective.
Noteworthy that yesterday (23rd) Minervini mentioned on Twitter that he's short the market via Index ETFs.
Guys
I got tired of waiting for the UK publication of "Think & Trade Like a Champion" so I bought it from the US site of Amazon. It took around 3 weeks to deliver and cost $37. Was it worth it?
Like all such books you need to read it a few times from cover to cover to fully take in the concepts and the details. However after the first pass, my view is
- there is no new concept or method or technique that has not already been covered in his previous opus "Trade Like a Stock Market Wizard". Maybe it was too much to expect it would.
- this book adds more detail and clarifies a lot of concepts introduced in the previous one. For example, the section on pivot points, VCP and buy points is a lot clearer. A whole chapter has been devoted to "when to sell".
- sadly still nothing explicit about his approach and trading pattern during a bear market
So in conclusion, if you are a practitioner of his approach, it is well worth buying for the additional clarity it provides. However if you are not and just need to understand his approach and techniques, then his previous book is good enough for that.
Just my initial take.
I thought he did not trade in bear markets?
Hi Herbie.
My take on Minervini is that his approach is stock specific rather than market general. As a consequence, he will buy in a general bear market but only if the target stocks meet his extensive criteria. Given many of these criteria are momentum related, I agree it's likely there will be less opportunities for a Minerviniist to invest in a bear market but as and when they present themselves he will invest. Given the importance of preserving capital, I agree he is likely to be far more cautious in a general downturn.
Gus.
Gus - I think you are spot on. I also remember reading elsewhere that he starts to short stocks, but his main approach is to have a healthy war chest and wait for the upturn.
Not sure about that Gus his strategy is based upon the following and I think the first point is a major priority.
Requirements are ( in order of importance )
Good Healthy Market or Sector
Good Price Action
Good Fundamentals
Wait for an entry point to Phase Two and exit at Phase Three
Concentrate on the best in the group in terms of earnings/ sales/ margins and price strength
Find which sector is moving up or companies that are taking over from older established companies.
Ken
Guys,
remember that Minervini is based in the US. It may or may not be the same here. I'm still finding some stocks making "easy dollar" moves in my portfolio (BOO, CVSG, NMC), but I'm not buying anything new.
I have some watchlists set up for the US market, both are down, one about 4% in the last month, compared to my UK smaller companies which is up about 7%. With the uncertainties around Trump I'm not surprised Minervini is mostly in cash, remember Minervini wants everything going his way. We have our own uncertainties also with the election and then Brexit. I'm tempted to sell some more.
When is his new book out in UK?
Does anybody know how Minervini came to the conclusion that he should be 75% in cash? (See post 88)
My understanding is that he let's his positions take care of themselves as stops are triggered.
From reading his book he seems quite cautious and if the market is closing or lots of positions he's hesitant to open new ones.
Just my take ...
I'm holding my long positions with tighter stops close to the nearest support levels on each.
The MA's are not down trending yet to suggest a sell off though.
Guys -
Minervini tweeted on 18 May that his portfolio is 75% cash and he has only two long positions left
I am considering my position. Already 50% cash, but maybe will follow suit and liquidate to 80%. Will mull over today/ tomorrow,
I have tried to distil most of what Minervini says in his book to paragraphs of Rules you might find the following helpful
Phase Three the Topping Phase.
It is the momentum that counts at the top- trust what you see not what you hear.
If a stock fails to rise, or falls on good results, take it as a warning
Major price break with the biggest one week negative spread.
Volatility increases with wider swings in daily price action.
EPS is slowing down against previous year and quarters
More pundits are bullish on the stock.
Forecasts are becoming unrealistic
Price falls below200DMA.
Break below 52week high
200DMA starts to flatten and fall.
On the subject of his method in bear markets, he hasn't yet replied to my tweet, but his recent comment (on 20/4) :
" Since our risk model flashed a sell alert in Mar. been holding 75% cash - a few names that i still hold include: $OLLI, $BABA, $MDSO, $CHTR
"
suggests that I am right. He basically holds cash until the market turns bullish again.
Which would fit with him being a reader of Bill O'Neill.
Hi Ramridge
You might be interested in my latest offering "Think and grow rich"
I watched it Damian. I think his overall strategy, especially the risk management piece, is exceptional. I'm curious though as to how well timing the execution of a trade (i.e. pin-pointing the precise moment to buy) translates to the UK markets which, naturally, are less liquid and deep than those of our US cousins.
Did anyone else watch the webinar last night? I missed the first set of slides but after that Mark & David made some excellent points about risk/loss management and how important it is to restrict the size of your losses.
A point which has really got me thinking is that you should analyse where you've made losses in the past so that you can avoid making them again - a trading autopsy if you like. With this you can put together a running scorecard of your winners and losers so that you know whether your style is actually working.
All in all a very good webinar and I guess that I'll buy Mark's book now - a bit cheaper than doing the Master Trader course!
Hi Damian The book, the old one is worth every penny- not sure I want to read the new one it might be like the sequel to a great film.
He is holding a webinar tomorrow - Tuesday 18th April which may be interesting - and its free !
Super Trader Tactics with Market Wizards & US Investing Champions Mark Minervini & David Ryan
goo.gl/x1Dexq
Hi,
Just wondering if anyone has been to one of Minervini's seminars. It would be good to get their thoughts as to whether it was worth the time and money over and on top of reading his book.
Yes it because of the Industry Group Rank ( ROE % ) > 80%, so Europe is lower than the UK.
Well screens for me are just a starting point to further research companies. I don't think some of the data is that accurate, take EPS for even 1 month never mind 1-2 years time. I did find something weird, I ran the screen for just UK and it came up with 5 shares, I then ran it for Europe and it has brought up 3 more UK companies, Boohoo.Com (LON:BOO), Treatt (LON:TET) and Robert Walters (LON:RWA). Some companies are excluded because of missing data, whether you should exclude them is upto you. Of the 5 companies I already hold 2, Taptica International (LON:TAP) would be excluded as Israeli, Hays (LON:HAS), I would not buy, Games Workshop (LON:GAW) I have considered but don't really understand it and feel I'm too late now.
So why is the UK screen selecting 5 shares and the European screen selecting 8 UK shares?
Because some elements of the screens are ranks within the selected universe.
Also just because a screen doesn't throw up options doesn't mean it's a bad screen. Herbie you seem to be in a hurry to be fully invested.
On reading Minervini's I was struck by his caution and patience. It appears from the book that he went for extended periods where he had no cash in the market.
Best of luck
Phil
I was not implying a screen was bad but it's often a case of tweaking screens to get you you want. No hurry to be fully invested in fact I'm going the other way at the moment. Certainly UK shares have a smaller proportion of my portfolio and I'm buying more for income now.
Several things all the criteria probably would not have been met if the shares have been dropping back, there are quite a few things such as EPS forecasts upgrades etc. Minervini system was designed for a US bull market, I'm not too sure how it will fare with UK small caps. I have done various other screen versions, which pick up shares such as JD Sports Fashion (LON:JD.), Treatt (LON:TET), RDW, Boohoo.Com (LON:BOO) but you are right when would they have first appeared is something that I can't tell. It's probably a case of setting up your own scenes and watching for new shares to be added when you run it. You can also check other shares out that don't meet the criteria by the check at the bottom, I have found quite a few that fail because there is no 1 month EPS update. JD Sports Fashion (LON:JD.) fails Phil's screen because the QR is only 78.6
Minervini fans may be interested to hear that he is running another webinar with David Ryan on 18 April.
Sign up here:
https://mpa.omnovia.com/registration/pid=32531490884595
second Paul and bestace, have signed up for his webinar. He has some simple phrases that really strike out previous prejudices and make you review your previous assumptions such as PER rating.
This man (Minervini) is a genius.
He has totally opened my eyes to the mistake of fixating on PER.
As Mark says in his book, statistically the best multibaggers start off at a PER of 30. So if we screen for low PER, we exclude all the best ones. That was a revelation to me.
Fantastic stuff, I've learned so much from this guy - he's fantastic!
Regards, Paul.
although, I would add, that I prefer to do things my own way.
So whilst I enjoyed reading the Minervini book, it more got me thinking about ways I could blend it with my own approach, and improve the way I do things, particularly in bull markets.
So far, so good, anyway.
Personally, I put far more emphasis on fundamentals. So I tend to buy a lot earlier than Minervini, and I don;t use stop losses. So am more prepared to just ride out downturns. But each to their own. My performance has certainly improved from reading his book, and drawing in his influences though. So a superb approach, to add to the tool kit.
Regards, Paul.
Thanks everyone for all this help. I am half way through the book at the moment. One thing springs to mind is that Mark suggests a multi-approach to selection. He says that if you put too many criteria into a screen, you can filter out some very promising possibilities. Mark gives a Trend Template on page 79 which he suggests is the first selection stage. These are the minimum criteria. Then run various screens on the results.
My initial thoughts on a selling target (maybe that is further into the book) is that you sell when the share fails to pass your selection criteria. Or is that just being naive time will tell.
What would be the the holding times of shares traded according to his method? Are there any statistics available?
theres no defined time, read momentum master and probably his latest book for more info. If the stock keeps on trend and doesnt violate sell rule then he just keeps on holding.
From memory i think most are few weeks to few months, but could be year + if stocks acts well
Here's my 1st take on a Miniverni screen using the rules posted earlier.
I've had a look at a few of the screens produced by others and there appear to be mistakes around the relationships between the moving averages. Note I'm having to use the 130 day MA as Stocko doesn't have a 150 day MA.
My understanding is that the price should be above the 50 day MA, the 50 day MA above the 130 day MA and the 130 day MA above the 200 day MA and the 200 day MA should be increasing over the prev months.
We can't currently screen for the last one (increasing 200 day MA) but typically if price is above the all three MA's and they are in position relative to each other and relative strength has been good over the month then it seems that the 200 day MA is increasing.
I think a sure fire way to tell if your screen is correct is to switch to chart view when viewing the results and you'll see nicely rising trends. Also with the new Stocko charts you can add all three MA's to check the relationship in your screen parameters are correct.
I haven't read his original texts yet so there may be other checks to add, e.g. my understanding is that quality management is important therefore I added a QualityRank > 80.
My hope is that this screen will generate a list of stocks that I can stuff through some software that will attempt to identify the Miniverni's Volatility Contraction (VCP) Pattern although it seems that it will be hard to analyse this and it might be easier to track them by eye.
I'd be interested in any comments.
Warm regards
Phil
It helps if you include a link to the screen ...http://www.stockopedia.com/screens/phils-minervini-screen-193073/
The RS 1m requirement may knock out shares that are consolidating in a VCP pattern - just depends on the pattern length. Interestingly according to Stocko +ve 1m RS may be negative "relative strength is a negative signal in the very near-term (less than 1 month)" - See more at: http://help.stockopedia.com/product-guide/stockran... Once Point and Figure charts are fixed (currently they don't always work) these may be very useful to see these easily.
BTW I'm increasingly impressed with the stockopedia rank factor approach with Momentum as it allows for 'most' of the criteria to be met, whereas specifying that all criteria be met may be onerous. Using the rank factor supplemented by the absolute criteria makes sense to me. Minervini provides a guideline for entry (essentially buy higher highs associated with lower lows with institutional (volume) backing while 'big' moving averages are upwards) . While shares remain on trend it is a hold. Exit is less clear to me. There are exits for entry (tight) and when the trend is broken ... a break below a consolidation phase (lower low) or when you see a lower high and a lower low or potentially when you see a moving average broken; I need to re-read the book to get these rules clarrified
Domino's Pizza (LON:DOM) was coming up on some screens I did and that is down 14% today, I guess that's a warning as most of these are quite highly rated, anything that disappoints the market could move sharply downwards, so I think a trailing stop loss is probably a good idea. There are a few I'm considering at the moment, I think these screens are great for finding new shares to invest in a few of these companies I have not come across before. There are also a few surprises such as G4S (LON:GFS).
Hi HM,
Thanks for the observation around the RS 1m.
I've changes the RS 1m to RS 3m.
I'm currently working my way through his old book so I'll update the screen as I go.
Interesting to see a few of my existing holdings pop out of this screen.
Cheers
Phil
Hi Phil, have you amended your screen, it is only selecting 4 shares today, I'm sure there were many more yesterday when I checked it?
Hi Herbie,
I've been tinkering with it as I go.
I added a PEG check and then reversed back out after reading his old book.
I've also added mkt cap limits, debt profile checks, spread and earnings upgrade checks (though these might need to change).
It might be worth forking it if you want it to stay fixed.
Cheers
Phil
Just so people are aware there is a Stockopedia software defect that is effecting my Minervini screen.
The problem is the quarterly growth figures for EPS and Sales. This will also effect the EPS and Sales Growth % on PYQ.
For the UK stocks it seems that the Stockopedia interim data is consistent in terms of period length but for some of the European stocks this can be inconsistent. One example is Finnish company Detection Technology and you can see the Stockopedia interims here .. http://www.stockopedia.com/share-prices/detection-technology-oyj-HEL:DETEC/profit_loss/?statements=Interim
The last period is 12m whilst the 3 preceding interims are 3m's. The impact is the latest EPS and Sales growth figures are considerably flattered and when the next quarter is posted they will be considerably diminished.
This is further complicated when considering Sales & EPS growth against the PYQ as it appears that the stockopedia code is not considering the period length and as a result is comparing against the wrong interims.
This issue is not confined to Detection Technology as there are other European stocks that exhibit this interims inconsistency.
So any screen that uses:
- EPS/Sales growth % QTR v QTR
- EPS/Sales growth % QTR v PYQ
is broken.
I'll report the issue to the Stocko team and hopefully they can clarify the scope of the issue and hopefully fix it.
I hope that helps
Phil
Thanks for flagging up that issue, I will take that into account with Euro shares. It does support my point about data not always being correct. I have found this on several shares when screening, hence check why some companies are excluded. I think the EPS figures are often out or way out, take Burford Capital (LON:BUR) eps forecast just before results was +15%, actual was +73.8%, the Burford Capital (LON:BUR) stockranking fell which surprised some people and it was discovered that the QR was based on the wrong ROCE and ROE figures, since has been corrected.
Re Minervini I think he only invests in bull markets, he wants everything to be going his way. That's why I'm not getting too carried away with momentum investing as I can see it going the other way fairly soon.
Hi herbie -
You are making a good point about his method in a bear market. I have scanned his book again and other blogs and find only sketchy reference to bear markets. He of course claims that he has made money in both bear and bull markets.
Strict application of his approach means that in a bear market you will be almost wholly in cash. Opportunities that satisfy his strict growth criteria and VCP setups will simply dry up.
I have sent him a tweet on this particular point, and will copy any response here..
BTW his new book has been released in the US, but not yet available in the UK. Another week or two?
Hi Herbie
You might be interested in my latest offering Think and grow rich.
Regards
Ken
Hi Phil
You might be interested in my latest offering Think and grow rich and yes I have NOW read the book thanks for all of your help and the blogs that have kept this link live.
Smile and be wealthy
Ken
As you will see Phil I posted for help earlier and was directed to your post. I have tried back testing the results by using your screen Code 33 I started with Hay which was not a great exercise and then looked at the rest which were all good, but it would be with that history and it depends when the signal was given and acted upon. The first question is when would the stock appear in the screen? I assume that would be when all the criteria was met and --and this is the important bit-- when all the MA's were in place 50 above,100 above 200. This could be some time into the move. If it is as stated, then the Hay back test using a 20% trailing stop loss is illuminating, anything less than 20% or a MA will probably bring the trade to an early halt and then you have to get back in etc. The Hay exercise resulted as follows-- Assuming all criteria was met after the rise beginning 13/01/12 phase one the SP low was 60p entry was at 84p £10000 invested costs ignored stopped out @74 loss 12%
Phase Two when all MA's were in line and SP over the 50day bought @ 82 £8800 invested price gapped down sold @ 70p 14% loss
Phase Three Entry £7568 invested same criteria @ 82p stopped out @ 122 profit 56% £11800 total
Phase 4 28/11/14 Invested £11800 @ 134 stopped out at 134 no loss.
Phase 5 move back in on 24/8/16 still invested.
Obviously I am assuming that all criteria were met at the beginning of the reversal ion 13/01/12 and at each entry point..
The contradiction here is Minervini clearly states keeping losses low but this is not possible if you want to be in for most or all of the rise, hence the 20% or alternatively pull out when satisfied with the gain accrued but that also means you are not in play. Minervini mentions in one interview about being in a stock and making zillions %-- can't be he would either be stopped out or break his own rule.
That having been said if your screen gives an early entry point it is still beneficial providing the early stop is say 10% and then widened. As with all these theories some work some don't and Minervini suggests that 60% are losing trades hence having to keep a tight stop. Personally if your screen gets me in early I will be satisfied, just need to wait until that happens. Remembering that this is really a short term momentum play I think the minimum of fundamental criteria should be applied otherwise we could be screening out lots of winners. Again Minervini has said simplicity is best. It would be great if all the contributors so far could continue this thread we might just discover the Holly Grail!!
Hi Ken,
Some comments ...
1) Have you read his book? For me he looks to avoid losses, closing out losing positions quickly. If a position moves up, he'll move his stop to break even and might well leave it there. This would give a stock some breathing space as it appreciated. This might explain why he is able to multi-bag so frequently.
Personally since switching to a QM approach four years ago I've regularly multi-bagged 200+, 300+, etc. For me my breating space is created by using Ichimoku charts to locate stops but (and this might be a weakness of my approach) if the whole market turns south I'll let the positions run for a while before reviewing my whole portfolio.
2) There is no Holy Grail! If there was one it would quickly become defunct. I'd suggest that you find a system that works for you.
3) I groan every time I hear someone say "But what about this other one that didn't get picked up by a screen"
4) Miniverni definitely isn't looking to get in early! He's looking for a stock appreciating over several step ups with increased volume (indicating institutional support)
5) For me just because the screen spits out a stock doesn't mean I buy it. The one thing the screen currently can't do is spot a one day volume spike and for me 9 day volume vs 3m volume isn't quite what I'm looking for. I've asked the Stocko team to add the following features:
a) screen for last quarter eps > quater - 1 eps &
quarter - 1 eps > quarter - 2 eps, etc.
in order to identify strong growth in eps through screening
b) daily volume as a screenable item (or as an alert possibility)
Best of luck
Phil
Thanks Phil
Hi Ken - very useful suggestions, thank you.
On the subject of selling to protect your gains, I was really bad at it and left a lot on the table, until I found something that works for me. As you say, you have to find a way to take the emotion out of the decision making. Here is what I do now
Assuming that your stock is really motoring ahead and you are sitting on at least 20% gain, then I watch the SP line against the 200EMA, 100EMA and 50EMA. the 50EMA will be higher than the 100EMA and the 100EMA higher than 200EMA, and the SP will be sitting higher than all 3. Now if the SP starts to dip and crosses below the 50EMA then that this the time I worry and top slice. If it further drops and is close to crossing the 100EMA then I just sell. No ifs or buts. And at any time I will never allow a 20% or more profit to dip below 10%. These are black and white rules which have no room for emotion.
Now as a example, have a look at the one year chart for BOO, with the 3 overlays I mentioned above. In August last year the SP shot up around 60p - 80p. A lot of people including a few in this forum saw the rise as exponential and sold their shares to lock the gains. The reality is that the SP never crossed the 50EMA line throughout, even to date. If people had followed the above rule then they would still be sitting owning the shares with a 200 / 400% gain.
As I said it works for me and has saved me from making untimely sales..
Declaration: I have been in and out of BOO as a trade but never had or have a long term hold.
Thanks for sharing the concept, I know how much time is invested. As I mentioned I have been working on a trailing stop loss concept, not successfully may I add, so this morning I bought and placed a 5% stop loss, then changed it to 10% and then got rid of it altogether. I am comfortable with it once the share starts to motor but the thought of being stopped out fills me with horror. I know I am wrong but this way at least I am in control, so now I have to bury the ego and sell before I watch it go all the way down to dungeon. I will come back to you, thanks again.
OK got it-- problem is the rise needs to be strong otherwise the 50day " I take it you are using days" starts to cross and you can lose quite a lot of previous growth. I used a 10% trailing stop loss on boo and achieved a similar result as yourself but obviously I limited my downside to 10% off the top. With the MA's I found that it could stop you out 30% off the top in some positions-- have a look and try it with existing holdings. If you tick the stop loss flip box it makes it easier to analyse. The downside is the occasional intraday activity can stop you out even though the end of day activity is positive, that happened with Boo on two occasions. Obviously it means a manual stop with action the day after the signal and then of course I am back to dithering again. The key to all of these systems is strong momentum and that means predicting the future. The overall trend must be positive otherwise it will stop you out and the losses can accumulate. Minervini states -positive trend, good volume, small stop loss-- well why didn't I think of that-- but to be fair he also says less than 50% success rate with large gains, 20% plus and small losses 5%-- but the 5% can mount up in the wrong market. So I guess we should add if the Sector is moving fast like mining or oils last year that should be a precursor to stock selection and action. Then of course because the sector was in a bear market the fundamentals will suffer. Hey Ho no one said it would be easy.
Regards Ken.
If you have sold out at 100MA do you look to buy back again or do you leave them?
Just wondering with shares such as Fevertree Drinks (LON:FEVR) which has multi-bagged in the last 2 years but has dipped down to the 100MA line or below it.
Also with events such as Brexit do you sell everything and then wait until they go back up above the 50MA line?
Hi herbie -
First question: I tend to look at all purchases as if I was buying for the first time, irrespective of past dealings. So the question I ask myself is, "would I buy this stock based on the information I have in hand today?" The rest is just noise.
Re. Fevertree, My charting software shows the price to be well over the 50 EMA and 100EMA lines, and for some months now. Can you check again?
Hi Ram,
Sorry I meant with Fevertree Drinks (LON:FEVR) it was over the last 2 years, when I checked it had touched or gone below the 50MA 8 times.
Do or did you hold £G4M, I see that fell 20% in the last day?
See my reply Herbie and thanks
See my reply and thanks
Interesting discussion.
I'm looking forward to reading the new book. I've read the previous one last week and here is my interpretation of the screen.Minervini also pays attention to the quality of earnings so this adds a token quality rank >70. It makes sense (to me) to also add Stockos momentum rank. Finally Minervini also requires institutional interest (evidenced via volume) so this fork contains a few volume criteria. I also add a small spread requirement as evidence of liquidity.http://www.stockopedia.com/screens/minervini-stage...That looks better I will have to tweak mine some more. One thing I have noticed is many shares fail because there is no % 1m EPS Upgrade information available, for instance Purplebricks (LON:PURP) and Sopheon (LON:SPE) fail on only those 2 rules.
Looks fairly similar to the trending screen that I use:
http://www.stockopedia.com/screens/trending-191657/
I like to use multiple moving averages (simllar to Guppy MAs) as part of my trading / investing routine, combined with fundamental analysis. This screen picks up stocks in a strong trend and has an option to select the market of interest (setup as FTSE 100 as the default).
Reading Minvernini's book I am struck by how similar it is to my own trading system. I also have a book coming out this year, which makes use of Stockopedia extensively as the main source of information - so it may be of interest to some subscribers if the Minvernini or Naked Trader approach appeals to you. More of a how to manual on implementation than outlining high level ideas though.
Mark
sorry to be extremely cheeky what stocks are you currently in tht fit in best with mark minervini style investing thanks
Gus, Herbie, wrt to the Minervini screen (post 13) from what can see the screen does look to be an accurate reflection of the "Trend Template" listed on page 79 of "Trade like a stock market wizard". I'm too surprised at the absence of BOO, G4M, FEVR on it.
From page 79 of the book the criteria are
a) share price above 150 day MA and 200dMA
b) 150dMA above 200dMA
c) 200dMA trending upwards for at least 1 month (pref 4-5 months)
d )share price above 50 dMA
e) 50dMA above 150 dMA and 200dMA
f) share price at least 30% above 52 week low
g) share price within at least 25% of its 52 week high (the closer the better)
h) relative strength ranking at least 70 (pref. 80s or 90s)
I'm not at all good at setting up screens on here so it would be good if someone could double check.
There might be other criteria sprinkled throughout the book, I will post them should I stumble upon them whist revisiting the book.
Thanks but I disagree about that screen, at the moment it is selecting 6 UK companies. If we look at DFS Furniture (LON:DFS) you can see the 200MA has been downward for the last 8 months or so, also the 50MA is below the 200MA.
Aberdeen Asset Management (LON:ADN) the 50MA is well below the 200MA.
DCC (LON:DCC) 50MA is still below 200MA.
So are Howden Joinery (LON:HWDN), Huntsworth (LON:HNT) and Bunzl (LON:BNZL).
Purplebricks (LON:PURP), Burford Capital (LON:BUR) and Fevertree Drinks (LON:FEVR) all fail that screen due to the MAs which does not seem correct to me.
I think the problem it is using % 50MA, %130MA and % 200MA when it should be just 50MA, 130MA, 200MA. However 130MA does not seem available.
I have tweaked it and it's closer to what I think it should be: http://www.stockopedia.com/screens/duplicate-of-du...
Now 87 shares, some look interesting, I will have to do some more research on GKN (LON:GKN), Science (LON:SAG), Vitec (LON:VTC).
Hi herbie47 -
I haven't had a chance to look at your screen but can I make a small suggestion. Minervini makes a strong case for picking shares that have strong earnings growth. He doesn't say exactly what he considers as high earnings growth. The work I have done so far suggest something around 18%+ in earnings growth as a minimum.
So my suggestion is that you add in your stocko screen either EPS Forecast growth 1 year >18 or PEG < 1 or maybe even PEG<0.7.
You may find that it will reduce the number of stocks to look at considerably.
Hi Ram, yes a good point and sometime that I did notice, will try to add that as well.
I did take the trouble to read Minervini book last night from Amazon, "Think and Trade like a Champion".You are able to look inside for free.
What immediately came over is his passion to succeed, having put in hours and hours of practice. Read over a thousand books on the subject and worked out a system that works for him.
With experience like that behind him, he has to be not just good, but the best he can be, winning championships in investing. It is not surprising he is able to do it .
He has gone through the pain to get the gain.
Not to sure who said "It is the people you meet and the books you read that makes you successful" . It might have been Napolian Hill from the book Think and grow rich. The other quote that did come from that book was,
"2% of people think, 3% of people think they think, and 95% of people don't think at all".
Now with the new charts in Stockopedia, I think we will all make more successful actions.
Thanks Ed for making this happen.
Just for the record, I did have a punt at SNAP and came out with a profit, not a long term hold for me. There is lots of other fish in the sea.
Hi Lightning.
Intrigued by your post about obtaining and reading Mark's latest book, "Think and trade ....". According to his Twitter account it's not due out until second week of April.
https://mobile.twitter.com/markminervini/status/836273112719163392
Early advance copy, or were you referring to his earlier "Trade like a stock market wizard"?
Best,
Gus.
Some sites say it was published in August 2016. It was on Amazon yesterday but seems to have disappeared today.
I haven't read the Minervini book yet but from reading the overview of his approach I'm struck by the similarities with The Naked Trader approach. The combination of technical breakouts allied with something meaningful driving the news, e.g. new product or sales growth.
I'll pick up the book when I can and I'll be particularly interested in his strategy for timing the purchases and as always when/how he decides to reduce/sell which is always a tricky issue.
Sorry if I've missed the info somewhere above, but does anyone know when the new book is out? I had a quick google search but can't find the answer...
(Off on hols Saturday week and had hoped to take with me - guess I'm going to have to wait!)
Does anyone know?
2nd week of April according to his Twitter feed.
Ok, thanks Bestace
Think I've found the thread to the original discussion on the derivation of this screen.
http://www.stockopedia.com/content/on-the-doubling-of-high-momentum-shares-in-3-years-146607/?comment=82#82
Gus.
Hi Gus
Nothing to do with this thread but I haven't seen you comment lately hoping you are well
Ken
Thanks Ben,
Thank you for this interview. I learnt so much from Mark Minervini's first book, I am relieved that he has recognised the need for a second volume as my fear of flying precludes me from taking up his course!
SNAP 178M shares traded to date up over over 50% time 20:11,so loads of interest in this one.
Seems as though we have all got some improvements to make.
Great interview, well done Ben. I have not read any of his books yet but will be soon.
A screen based on his on strategy would be an excellent idea.
While we're waiting for an "official" Stockopedia Minervini screen, I found the attached in my file of user screens that I think I must have taken from a previous discussion thread.
http://www.stockopedia.com/screens/duplicate-of-minervini-aug-2016-141441/
It's not my creation so I can't confirm how closely it tracks the Minervini investment style. I've had a quick look through the discussion threads from about this time (Augst 2016) but haven't found the original link. If I do, I will post it.
Best,
Gus.
Gus, many thanks for that link to the screen, had a quick look and it has 8 selections at the moment, it's not what I expected, I was expecting more high flyers, more quality and momentum, this looks more like a Naked Trader screen which picks shares that change to positive momentum. Yes they have all gone up but most it's only in the last 2 months. Maybe I have misunderstood Minervini's strategy. I was expecting shares such as Carnival (LON:CCL), Ashtead (LON:AHT) and £JD or more growth companies such as Fevertree Drinks (LON:FEVR), Boohoo.Com (LON:BOO) and £G4M.
Hi Herbie.
I must confess to not (yet) being that au fait with Minervini's strategy, but my understanding is that it is an evolution of some of the seminal ideas of Stan Weinstein in the 1980's on what we now broadly think of as Momentum trading. Worth reading the attached brief summary of Four Stage theory which explains the cycle of share price movements (and more importantly how to spot where best to buy and sell).
http://www.nextbigtrade.com/stage-analysis/
It's a little bit of a Goldilocks approach (moving upwards but not gone too far just yet) in that you're trying to spot shares to buy that have been running flat for a while (Stage 1) and about to take off (Stage 2) while avoiding shares that are either about to peak (Stage 3) or worse still on a down trend (Stage 4). Buying Stage 3's (like Boohoo.Com (LON:BOO) etc.) is OK, but there's a sense that the horse has left the barn and is half way to the next county so it's better to get in early before much of the rise has taken place.
My understanding is that Minervini takes a fair bit of this basic TA on board and then refines and improves by adding more fundamental information (which Weinstein tends to ignore) to the mix. (Apologies to Minervini if I've misrepresented him).
Best,
Gus.
Yes I agree that the likes of Boohoo.Com (LON:BOO) and Fevertree Drinks (LON:FEVR) have gone up considerably already but I suspect he would have picked them at an earlier stage. Purplebricks (LON:PURP) maybe one he would have added a few months ago. I don't consider Unilever (LON:ULVR) to be a growth share not sure about DFS Furniture (LON:DFS) either. To me growth shares are ASOS (LON:ASC), Boohoo.Com (LON:BOO), Burford Capital (LON:BUR), Fevertree Drinks (LON:FEVR), £G4M. Purplebricks (LON:PURP) etc. Guess I will have to wait for the new book.
Wonder what his opinion of Snap Inc's IPO would be.
Hi Is2g08 -
Simple answer. Minervini doesn'r do IPO's until the respected companies have acquired some history. Besides his method doesn't lend itself to IPOs.
I have read all his books and I am really impressed. Looking forward to his new book. As Isobel2018 said a Guru Screen based on his methods would be a great idea.
I support Ramridge !!!!!! he changed my investment style !!!!
Thank you, Ben. An excellent interview.
I've just bought his first book following a recommendation from Paul in one of his recent SCVR's.
It's an excellent book, very readable, and with recommendations and guidance that will improve my technique.
Michael
Great interview, I'm a big fan of this guy and also really looking forward to his next book.
Thanks Ben.
Will you be building a Mark Minervini stock screen? Stephen
Great catch Ben.
I'd strongly both Minnervini and Weinstein books. Will be buying Mark's next
BTW question in the middle is missing the bold.
Hi Ben -
Your long promised interview with Mark Minervini has been worth the wait.
I became his follower roughly 12 months ago. It wasn't exactly a Road to Damascus moment but close to it.
It led me to bin all my systems & programs which were based on pure fundamental thinking and I started developing systems based on his principles and thinking.
This process is by no means complete. However the difference in the performance of my portfolio has been remarkable. And the difference in my mental attitude and approach to investing has been more remarkable still.
Thanks & Best wishes, Ram
Hi Ram,
Interesting have followed you on here for a while and had the impression you were fairly competent trader. Out of interest what changes have you made to your trading style since following Mark
Regards
Andy
Hi Andy -
I guess it all comes down to adopting an investment approach that fits your style and temperament… and is profitable.
Minervini's approach resonated with my personal view and showed me a path that I was more comfortable with.
- Minervini is possibly the only momentum trader who also requires that any stock he buys should also pass stringent fundamental criteria. So net debt should be < 3*operating profits ; strong earnings and earnings growth, strong cash flows, competent management and so on.
- I used to have around 40 - 50 stocks in my portfolio. No longer. I now have 15-20 stocks which I watch more carefully.
- Before, my investment horizon was measured in years. Now a stock needs to have a potential to grow at least 20% over a period of 6 - 9 months. If I cannot see this as a possibility at outset, then I pass. I think about selling when a gain passes 25% but will hold as long as it continues to grow.
- I now have a strict rule to sell if a loss exceeds 10%. No nursing of a stock in the hope that one day it will be profitable.
- I have stopped being ensnared by story stocks and going for falling knives. It just doesn’t fit in with the Minervini approach.
To summarise, as long as I follow his methods (and for that you need to read his book) and remain disciplined, I feel far more focused and in control. So far, all this is translating into a significant boost in the performance of my portfolio.
Regards, Ram
looks like im a year or two behind you on the curve ramridge. Read Minervini last July and spent last 5 months reading oneil, weinstein, morales and major note taking to change my approach. Momentum masters is also a very good book with minervini, zanger and ryan.
These sort of books really do require at least 2 or 3 reads to fully understand/ absorb, a single read will not get the message through and you will miss so many important messages that you skim over on the first read.
check out minervini webinar in david ryan, ridiculous amount if info in under 2 hrs:
https://www.youtube.com/watch?v=SwxR6wcB12o
Thanks for the reply Ram I do always think a concentrated portfolio (not 4-5) stocks of decent mid caps is the way to go out of interest how much higher percentage wise have your returns been since changing tact ?
No issues if you prefer not to disclose.
Hi clarea -
Not at all. I am experiencing near double returns on average.
So far, notable Minervini picks have been G4M bought early September @ 186p. Added during the month of October. Top sliced a few times recently, with the final 50% lot sold last week @ 660p.
And SPE in August last @246p. I am still holding. Yesterday's SP was 488p.
However my system is throwing up a number of false positives and this is where the 10% stop-loss rule kicks in.
I am spending a lot of my time these days in refining the programs to improve the noise to signal ratio, to use an engineering expression.
Regards, Ram
Hi Ram,
I've been reading some of Minervini's materials and the video NoodleHat linked to was interesting too.
How much success are you having at identifying the VCP breakouts?
Have you found a way to screen for them?
Although from listening to Minervini he suggests that the human eye is more sophisticated than any screener and that it's best to just keep looking at lots of charts.
Thanks in advance
Phil
Hi Phil -
The VCP pattern is very difficult to detect programmatically, and M is right in saying that the naked eye is a far better tool in this respect.
However I am not giving up the ghost. The tools I am currently using are Excel VBA and VB.Net. Both subroutines and APIs. There are lots of very sophisticated mathematical, statistical and financial modules and functions that are available either free or for a small price.
But I haven't yet come across anything here that can help me identify the VCP pattern. It may well be that I need to turn to pattern recognition software for this. I am going to take this problem to an acquaintance who is a computer scientist.
Best. Ram
Hi Ram, how strictly are you sticking to the rules, have been reading the rules and there are quite a lot of them, such as 200-day MA is trending up for at least 1 month (preferably 4-5 months minimum in most cases).
Stock price is at least 30% above its 52-week low.
I think Burford Capital (LON:BUR) is one that would have been selected back in 2015 around 170p.
Hi herbie47
Generally, I am sticking very closely to the parameters given by Minervini. Taking your example I can filter for a rising 200-day MA for any value from 1 day to 1 year. I simply set the parameter values to whatever range I like.
Basically if it can be programmed then I have done it. It is the non-quantitative elements that then need further desk analysis, such as quality of earnings, competent management, institutional buying, etc.
Regards, Ram
Hi Ramridge
Assuming the fundamentals are a given and it is a stock that we would buy, what we want to achieve is to get out at a good time but ride the momentum for as long as possible. Although I found a number of contradictions in the Minervini's YouTube seminar on these points it did give me a few ideas to test. The objective is to enter the trade and have a trailing stop loss so that the emotion is taken out of the selling. I am getting somewhere but couldn't do it without my charting software as I am back testing over twenty years and in areas where the market behaviour was the most confused. My reason for mentioning this is to suggest that you might find it useful to test your system and ideas in this fashion, it is cheaper than the real thing and if you move the graph along on a daily basis almost real time. I have used Sharescope Gold for years ( not the SharePad version although that is great to run along with Stockopedia) and the charts are brilliant for back testing.