Increasing revenue , increasing profits and positive cash flow,

Research
1

Please, provide me p123 factor/formula for
Increasing revenue
Increasing profit and
Positive cash flow.

Thanks
Kumar

2

Increasing revenue for the last year, year over year: SalesTTM/SalesPTM > 1
Increasing revenue for the last quarter, year over year: SalesQ/SalesPYQ > 1

And so on depending on exactly what you mean by “increasing revenue”.

3

I would use these rules:

Sales%ChgTTM>0
NI%ChgPYQ>0
100*(CashFlPSTTM*SharesQ)/abs(CashFlPSPTM*SharesPYQ)>0

For the first two, I’m just going to say that I prefer when P123 calculates it because we’ve already considered things like negative sales. Yes, that happens.

Which is why the last line looks so ugly. As it turns out, we don’t have a straight “cash flow” line, with cash flow here defined as Income After Taxes minus Preferred Dividends and Depreciation and Amortization. So I’m just multiplying by the share count snapshots at the time of the trailing 12-month readings. The abs is to take into consideration that cash flow can be negative. The 100* is to get it into percentage points, and is optional.

4

Mgerstein/Steve,

Please, share your experience and fundamental factors on

  1. Increasing Sales
  2. Increasing Profits
  3. and Positive Clash Flow

One of the AAII presenter explained CANSLIM method of investing and has told in the final slide of the presentation;

if stock has these 3 criterias; it will be a good buy and hold candidate for a year on any market conditions;

he gave V Symbol-VISA as example in the past year.
the presenter only gave description not factors and formulas.
I not able to grasp the appropriate factors for these 3 criteria in CANSLIM/Growth investment context;

Thanks
Kumar

5

Have you considered starting with the P123 built in CANSLIM screen? https://www.portfolio123.com/app/screen/summary/37?st=1&mt=1

Or maybe the O’Neil screen? https://www.portfolio123.com/app/screen/summary/30545?st=1&mt=1

6

Kumar, you have a bet on growth or earnings momentum, sometimes it works, sometimes does not.

There is no alpha, this is beta (growth investing). Everybody can do it.

7

Kumar - increasing sales/profits only works for non-cyclical stocks. You will get slaughtered with energy stocks for example if you buy in at high profit growth.

Steve

8

Sorry it took so long for me to notice this:

The presenter is write; with increasing sales and profits and positive cash flow, it’s hard to miss (unless you overpay – which, by the way O’Neil is happy to do as he tries to buy high and sell higher).

The problem is that all the growth data we have comes from the past and whether your trade succeeds or fails will depend on what happens in the future—and the two may not be the same (and often aren’t). This is why many who create and use factors based on growth often wind up disappointed – they bet on the past and got smacked in the face by the future.

And this is why I go through the whole fundamental mumbo jumbo about which I write in all the PDFs I posted for the strategy design class. You can’t write any factors for the kind of growth you need (the future), so instead, I look for clues that are more likely than not to push me in the direction of companies that stand a good chance of doing well in the future; sentiment, quality, etc.

For better or worse, CANSLIM is primarily a momentum-based approach. At times when the world trends 9when it turns out that the future does follow the past, CASLIM does great. But at other times, they get walloped pretty badly. Also for what it’s worth, O’Neil knows this. His IBD stock checkups include ratings that produce results very similar to what you’d get by looking at the P123 Basic: Quality rank (we all do the same basic things in this regard; differences are in minor details).

9

Mgerstein/Steve/caley89 and all experts,

Thank you for sharing first hand investment experience with CANSLIM and growth stocks.

Here, I run

  1. ONeil Rank - ONeil screen and
    2, Basic Quality Rank - ONeil screen

both the screen with following additional filters

Close(0) > 1
MktCap > 30M
AvgVol(20) > 50K
Max Number of positions : 15

It is a tradable universe for private account.

both returns 30 pct annual in screen. both has valid theme on its own.

Currently, only 8 stocks are qualified. i have placed in a watchlist.

Thanks
Kumar

2.AllStar ONeil Screen - 15 tradable stocks 30 pct return.png
2.AllStar ONeil Screen - 15 tradable stocks 30 pct return.png990×469 41.7 KB

1.Basic Quality Screen - 15 tradable stocks 30 pct return.png
1.Basic Quality Screen - 15 tradable stocks 30 pct return.png990×496 44.4 KB

Growth Stocks Watch List 2016-12-16.png
Growth Stocks Watch List 2016-12-16.png1308×253 33.3 KB

10

Kumar - I have doubts about how tradeable this universe is, unless you plan on babysitting each trade and then it is still questionable. What is the average profit per trade? What happens if you increase the minimum closing price to $3, MktCap to $100M, and change AvgVol rule to AvgDailyTot(60) > 200000? These would be more practical, at least in my opinion.

Steve

11

How to get in P123.

  1. revenue per employee - qualitative data.
  2. Instuitional net transaction (buy and sell) in positive in last quarters and last month reporting.

Thanks,
Kumar

12

Sales per employee:

SalesTTM/Empl

For institutional transactions, we don’t really give them, but we do give initiations and exits of institutional positions. Also, one month can’t be done because the time series that we’re using is in three-month increments. That means that for the most recent period the term would be:

(InstitutionalNewBuyers(0)-InstitutionalClosed(0))

And for the prior period, it would be:

(InstitutionalNewBuyers(1)-InstitutionalClosed(1))