Margaret Hennel honored by Worden Brothers.
T he Worden Report (Friday, November 12, 2004)
Dame Learner Drops In
Dame Learner is a recipient of our Golden Wisdom Award. She was knighted on June 15, 2001 and contributed again on November 9, 2001. Our paths have crossed from time to time on TCNet Chat, where she uses the handle, Ayrlass. However, I never realized I was conversing with Dame Learner. Rather than preview her current submission, I think it may be more appropriate to reprint my original introduction back in June, 2001, which follows:
June 15, 2001 : Our newest member of The Roundtable of Knights Who Think for Themselves offers more questions than solutions, and therein lays the basis of the Golden Wisdom Award. Because when the right questions are asked, the answers take care of themselves. Here is a person who has tasted investment success. Recently, I published an email from her in which she said:
I have been investing in the market all my life and have done very well, making at times as much and more money per annum than I earned in my professional position. It gave me the ability to offer each of my children the college of their choice and once that was behind me I turned my attention to my own retirement.
She was planning to change from what sounded like a fundamentally oriented approach to a technical approach. My answer to her was, "If it ain't broke, don't fix it." She responded with a submission for this report [see WR of June 15, 2004], which, in my opinion, exemplifies how an orderly mind attacks a problem: (1) by recognizing it (2) by facing up to it (3) by asking the right questions and (4) by finding and accepting the solution.
Lady Learner, who holds a Ph.D. in physics and math, and I repeat, who has had great success as an investor, is gifted with one of the two or three most important assets an investor can have: humility. I believe she serves well as a role model for the many Users who are relative newcomers to the challenges of Wall Street. If, at this stage of her life, she is willing to devote her energy and organizational talent to learning something new, isn't there a lesson there for novices? If she is forthright in detailing both her past successes and failures, isn't there a lesson there? If she tells you the questions she is asking now and the paths she will take in search of answers, isn't there a lesson there? I think so.
And so we welcome Lady Learner to the Roundtable, and we are scraping the bottom of the moat for yet one more exquisite bottle of Veuve Clicquot Ponsardin.
And once again, we are dragging the moat . -DW
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[Note: The following is the letter of submission that won Margaret the award.]
November, 2004
Dear Don,
Those of us who have gained experience in using TC2000/TCNet know that most, if not all, strategies work for a time and then dry up with changes in the market.
I started using the software as a long term serious investor but knowing nothing about technical analysis. You named me Lady Learner because I was so interested in learning what this was all about in order to adjust at that time to the crazy late 1999, first quarter 2000 market.
I cannot say I learned quickly but over time I digested the contributions posted in the Daily Worden report, read your notes and Peter's, and strived for understanding. Last Fall I was intrigued by Sir Silent Knight's methods, adopted them and used them successfully for months. In June of this year the results dried up. Trying it one evening last week yielded one and only one stock. It does not yet fit this market but its day will come around again.
So in June I put my thinking cap on, deciding what I liked to see in a stock and set up one or two simple EasyScans. One looks for stocks with EPS increasing over each of the last four quarters by more than perhaps 2.5 %, and P/E less than 15 which means the Rank is less than perhaps 24. None of these numbers are set in stone, I juggle them so that the EPS gain in each quarter is approximately the same, and they can jump substantially from one Rank value to the next. My goal is to end up with fewer than 200 stocks in the end with good fundamentals. The count after each step in the EasyScan shows on the right enabling one to decide which attributes are most wanted and at what value. Once set I usually leave them as is.
In the next step I use the Custom sort feature on Money stream, Right click on MS and then click Sort By in the dialog box, followed by Visual value which appears as the default, click OK . This is the reason I want less than 200 results. I use TCNet which Custom sorts only the top 200 stocks.
The results of the Easy Scan are now displayed in order of descending Money stream. Those with MS values of 100 have it at its high for the time period displayed in the chart. There may be four or five there and I look a bit further down the list to see how those charts compare with their predecessors.
I use the watch List columns too with other fundamental features like Latest Net Profit Margin, Operating Cash flow, Earnings as % of Sales, PE value, Price % change today. They can be used to determine which stock to choose over another. Clicking on any WL column sorts the list in order of that attribute. One column has the volume - 5 days value and I discard any that have a volume lower than is comfortable for a decent chance of selling when the time comes. I could sort out those with low volume but for some reason I am not anxious to commit to a hard number for this, preferring to look at the chart and the volume bars.
My favorite indicators are TSV periods 18 and 8, BOP and Money Stream. Money stream is already optimized. These three happen to be the Worden proprietary indicators which is not the reason I choose them. They were the first indicators I realized I could read well and have a fair idea what the price was likely to do next. I have other favorite indicators that I can use well but that is another story for another day.
My second EasyScan is very similar. In this one instead of all 4 of the last Quarters, I only use the EPS change for the latest Quarter, then add Revenue Growth (for the last four quarters) in the top 50 percentile, Rank 50 to max, and PE Rank 1 to 43 which makes the PE value less than about 19. Again the values do not need to be fixed in stone but varied to give a desired not too large set of results. I use two versions of this scan, one for stock prices below 20 and the other for prices above 20. Each run typically yields around 150 to 200 results and only the ones with top MS values and good looking price charts and indicators make it the results watchlist.
There are no Pcf's here, all the items are canned and easily added to the EasyScans directly from the drop down lists. My results over the summer have been very good. Several stocks have jumped magnificently a few trading days after purchase. One month this summer was my best ever for profits, quite spectacular. While I have learned to be a trader I am still a long term investor at heart and will let a stock run if it continues to show good potential. But with the surfeit of good looking charts that turn up each night I can be a trader and not an investor until the chaos of the market subsides, if it ever will.
A big Thank You to all those who share their ideas and expertise! Investing has been a great hobby for me. Before TC2000 it was a lonely one but now I have friends made through this program - a Users Group where I live which I lead, we meet twice a month, and on-line friends around the world. We have never met but we work together regularly, sharing our ideas, knowledge, and information. Our common bond is that we use TC2000 and TCNet. There is no end to learning and trying out new ideas but the goal is to Win the Game! Succeed as an investor or trader.
Margaret (aka Ayrlass and Lady Learner)
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[Congratulations, Margaret Hennel. Margaret is one of our Finance class instructors. Watch for her classes January, February and March.]