Stock Guide - MarketSmith · past are doomed to repeat it.” The old saying about knowing your...

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177 195.72 189.79 174.10 147.95 1.56 08 38.6M EPS +41% Post-Analysis: Taking Stock of 2019 Interview: Ed Carson Good Trade/ Bad Trade Ask a Portfolio Manager 2020 Q1 Post-Analysis: Taking Stock of 2019 Stock Guide

Transcript of Stock Guide - MarketSmith · past are doomed to repeat it.” The old saying about knowing your...

Page 1: Stock Guide - MarketSmith · past are doomed to repeat it.” The old saying about knowing your history also applies to investing, which is why this issue is devoted to an important

177

195.72

189.79

174.10

147.95

1.56

08

38.6M

EPS+41%

Post-Analysis:Taking Stock

of 2019Interview:Ed Carson

Good Trade/ Bad Trade

Ask a Portfolio Manager

2020 Q1

Post-Analysis:Taking Stock of 2019

Stock Guide

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MarketSmith.com 2020 Q1 Stock Guide 3

Stock Guide // 2020 Q1“Those who do not remember the past are doomed to repeat it.” The old saying about knowing your history also applies to investing, which is why this issue is devoted to an important rou-tine that every investor should master: post-analysis. The beginning of 2020 is a perfect time to review your trades from 2019 and break down how you bought, held and sold all your stocks. You’ll notice patterns emerging: why your best trades succeeded, why your losing trades failed, and where you had room to improve your returns. In our feature article, we’ll share some tips for analyzing your past trades and improv-ing your process going forward.

For this quarter’s Q&A, we interviewed Ed Carson, a writer and News Editor at Investor’s Business Daily®. Ed talked about the trends and events that could affect the stock markets in 2020, plus exciting new investing opportunities like 5G, semiconductors and biotechnology. He also discussed the valuable lessons he learned about his trading style from

post-analysis. Last but not least, Ed explained his theory of how investing is a lot like Star Wars (no, seriously).

In Good Trade / Bad Trade, MarketSmith Senior Product Coach Irusha Peiris opens the books on two of his recent trades. He found success with a leading e-commerce stock that he believes is a “game-changer.” However, he mishandled a cloud software stock that ended up going on a big run after he sold it. Irusha breaks down his buy and sell points plus what he learned from each trade.

As always, if you have any questions or comments about your investing research or any MarketSmith features, please call one of our product coaches at (800) 831-2525 or email us at [email protected]. We’re here to help you make more money in the market.

Best Returns, The MarketSmith Team

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Table of ContentsMarket Chart .......................................................................4

Post-Analysis: Taking Stock of 2019 .......................6

Q&A: Ed Carson ...........................................................12

Stock Screen: Fundamentals + Sales* ..............................................16

K L A Corp (KLAC) .......................................................17

Regeneron Pharmaceutical (REGN) ........................18

Vertex Pharmaceuticals (VRTX) ...............................19

Good Trade/Bad Trade: Irusha Peiris .......................20

Stock Screen: Accelerating Margins* ...............................................24

Dexcom Inc (DXCM) ...................................................25

Generac Hldgs Inc (GNRC) ........................................26

A S M L Holding N.V. NY (ASML) ..............................27

Ask a Portfolio Manager: Charles Harris ..................28

Connect With Us.................................................................29

*All screen results are computer-generated and were run on January 2, 2020.

page 6

CONNECT WITH US

Post-Analysis:Taking Stock of 2019

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Feature Article Post-Analysis: Taking Stock of 2019

Post-Analysis:Taking Stock of 2019

Most professional traders will tell you that a post-analysis of your trades is one of the best things you can do to improve your investing skills.

Investor’s Business Daily founder William O’Neil is famous for his rigorous post-analysis of all his trades; in fact, many of the trading rules and

strategies he developed over the years began as post-analysis insights.

FINALLY, A NEW YEAR’S RESOLUTION THAT’S EASIER THAN GOING TO THE GYM.

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Post-Analysis: Taking Stock of 2019 Feature Article

As 2020 kicks off, it’s a perfect time to revisit your 2019 trades and see what you can learn from each one. When you review your trades, focus on your biggest gains and your biggest losses. Perhaps there is a common attribute your losers share that you can identify and mitigate. If you can eliminate a few of your big-gest losers, then your performance will be greatly improved going forward. In-vesting isn’t a sprint—it’s a marathon. By continually improving, you can achieve long-term investing success.

Here’s a tip: in addition to reviewing your own trades, look at charts of the year’s best performing stocks; this can show you which characteristics the biggest winning stocks have in common. With that knowledge, you can better rec-ognize when you’re holding a true “best of the best” stock capable of a 50%, 75% or 100% run. Those stocks can single-handedly transform a good year into a great one, provided you recognize and hold them correctly.

Post-Analysis of Your Trades1. To begin your post-analysis, review

the charts of the stocks you owned and mark up the technical action like chart patterns, pivot points, moving averages, volume clues, etc. • Remember, hindsight is 20/20. It

should be easier this time around to pick out buy points and sell signals.

• If you have MarketSmith’s Pattern Recognition enabled, check to see if the algorithm identifies the chart patterns the same way you did.

2. Next, mark the points on the chart where you bought and sold shares.

3. Ask yourself, first and foremost: what was the market trend at the time? Always try to buy during a confirmed uptrend. If you were buying during a correction, you were racing against strong headwinds from the start. Remember: 3 out of 4 stocks follow the overall market trend.

4. Review any improper entry points. These can be either fundamental in nature—you bought a stock that wasn’t showing strong fundamental strength in areas like Composite Rating, EPS Rating or Sponsorship Rating—or due to mistakes in techni-cal analysis. These include:

• Improperly formed bases (MarketSmith’s Pattern Recognition can help)

• Buying on a weak breakout (low-to-average volume, little power from the pivot point)

• A psychological mistake / failure to follow your buy rules

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Feature Article Post-Analysis: Taking Stock of 2019

5. Finally, take note of anywhere you sold improperly including those listed below.

• Not cutting losses short

• Selling too soon (based on fear or impatience rather than sell rules)

• Not taking profits at upside profit targets

• Ignoring defensive sell signals after the stock has already run up

If you are noticing the same mistakes on several of your stocks, then adjust your buy, sell and portfolio management rules accordingly. This process is much easier if you maintain notes on your transactions throughout the year.

One way to do this is to record your thoughts and observations at the time of the trade using MarketSmith’s chart markup tools and the “Notes” feature. You can find these features by pressing the “Notes” button in the expandable “Screens, Alerts & Notes” panel found to the left of MarketSmith charts in the desktop view.

A Note on Selling For many investors, even the seasoned experts at MarketSmith headquarters, buying stocks is the easy part. It’s sell-ing them correctly that can be difficult.

When you analyze the best points to sell, look for offensive and defensive sell signals. Offensive selling is selling on the way up and locking in your gains, whereas defensive selling is selling on the way down to minimize further losses.

Offensive sell signals are probable indicators that a stock has reached a momentary peak and is due for con-solidation or regression. These signals include climax tops, upper channel line breaks and sharp pullbacks followed by fast recoveries to new highs. You can avoid giving back your hard-won gains by using these signs to take partial or full profits.

In contrast, defensive sell signals usually tell you that a stock is experi-encing a break of a positive trend and is heading for further losses (unless you bought the stock on a downtrend—but you never do that, right?). The biggest defensive sell signal from a technical standpoint is breaking the 50-day moving average line (the red horizontal line on a MarketSmith daily chart) on big volume.

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Post-Analysis: Taking Stock of 2019 Feature Article

When you review the top stocks of the year, you’ll want to mark up their charts with potential buy and sell signals. On the buy side, look for classic breakouts, add-on opportunities and bullish signals like new highs in the relative strength line.

Over time, you’ll train yourself to recog-nize the signals of a true market leader starting a big run, like Qualcomm (QCOM) in 1999 or Apple (AAPL) in 2003. In fact, it’s a good idea to pull up those charts and use the date change function (found above MarketSmith charts) to see what the technical action looked like at the time. If current stocks display action like these stocks, that can be a big convic-tion-booster for your future trades.

Let’s look at some big market-wide trends and examine some of the top stocks of the year.

The market recovery is led by cloud computing. The market downturn of November- December 2018 hurt many investors at the tail end of the year. If you were wary of jumping back into the market in January of 2019, you missed out on a very strong rally led by the tech-heavy

Nasdaq (+22% from January to the end of April).

Top Stocks: SHOP, NOW, TEAM, TWLO, ZS, OKTA

Tech and growth stocks take a hit, but homebuilders and retail come to the rescue. A sector rotation away from software, semiconductors and other tech stocks hurt many of the leading stocks from Q1 and Q2. Investors flocked to more tradi-tional defensive plays like homebuilding and retail stocks that showed classic fundamental strength.

Top Stocks: TGT, RH, BURL, BLD, SHW, PLMR

Biotech and medical stocks surge, while techs rally to finish strong. Tech stocks came back in a big way, joining still-strong retail stocks and a resurgent medical/biotech group in the winner’s circle.

Top Stocks: ARWR, THC, AMD, NVDA, TSLA, AAPL, QRVO

Post-Analysis of the Top Stocks of 2019

1st & 2nd Quarters

3rd Quarter

4th Quarter

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Feature Article Post-Analysis: Taking Stock of 2019

s Pictured: Okta (OKTA), a cybersecurity stock, enjoyed a huge Q2 in spite of the selloff that rocked the markets in May.

Q2 Champion: Okta (OKTA)

s Pictured: Zscaler (ZS), which gained nearly 100% from the beginning of Q1 to the end of Q2. Cloud computing stocks like ZS fared well early in the year.

Q1 Champion: Zscaler (ZS)

Take a look at 4 of the MarketSmith Coaches' picks for the top stocks of the year.

*All screen results are computer-generated and were run between December 30-31, 2019.

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Post-Analysis: Taking Stock of 2019 Feature Article

s Pictured: RH (RH), formerly Restoration Hardware, gained over 40% in Q3 as retail stocks led during a sideways market.

s Pictured: Arrowhead Pharmaceuticals (ARWR), a biotech stock, was one of the biggest winners of 2019. It increased over 400% in a single year.

Q3 Champion: RH (RH)

Q4 Champion: Arrowhead Pharmaceuticals (ARWR)

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A CONVERSATION WITH

Q & A A Conversation with Ed Carson

Ed Carson is a News Editor for Investor’s Business Daily®, where he oversees busi-ness, economics and political coverage. He is adept at stock analysis and market trends, including the impact of economic and geopolitical events on Wall Street. He is also a frequent host of IBD Live, the new interactive broadcast where IBD’s market experts break down the first hour of market action every weekday.

MarketSmith recently sat down with Ed to talk about the state of the market, the year ahead and how his trading style has evolved as a result of post-analysis.

Which larger trends do you see shaping the market in 2020? Ed Carson: With Fed policy stable and an initial China trade deal finalized, the big X-factor for the stock market likely will be the 2020 Election. Who will win the Democratic nomination, who will win in November, and what will that mean for the economy, regulation and taxes? Within the stock market, chips and 5G plays look set to be leaders, but which other groups will join them? Medicals? Software?

When you’re looking for, say, a 5G play, are you trying to pinpoint who the future leading stocks will be, or are you looking

to hedge by betting on a number of them, or even buy group-wide ETFs?

For 5G, I’m paying attention to a number of 5G names – AMD (AMD), Qualcomm (QCOM), Marvell (MRVL), Qorvo (QRVO), Inphi (IPHI), 5G testing firm Keysight Technologies (KEYS) and of course Apple (AAPL). Many of those are current market winners.

Chip ETFs such as SMH, SOXX or triple leveraged SOXL are a good way to get exposure to semiconductors, if not 5G specifically.

With biotechs, I’m usually too nervous to play individual stocks, even though the group looks great right now and a number of names have been red hot. I

Ed Carson

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A Conversation with Ed Carson Q & A

tend to look at ETFs such as IBB or triple leveraged LABU.

With software, the IGV ETF is good to watch. Keep in mind that Microsoft (MSFT) is heavily weighted in IGV. MSFT is a big leader, but with its cloud-comput-ing growth, investors don’t seem to be treating it like a software name anymore.

When you’re preparing for the next trading day, how closely do you follow futures action? Do you feel they are useful, misleading or somewhere in between? Well, I write about stock market futures and other overnight action every market day, so I follow them closely. Futures and overnight action in stocks may give you an idea of how the market and specific stocks will open, but won’t necessarily tell you what will happen five minutes after the open, an hour and especially the close.

Here’s a recent example of unpredictabil-ity: On December 13th, the stock market opened slightly lower, as futures predict-ed. But then five minutes after the open, President Trump tweeted that we were “VERY CLOSE” to a trade deal with China. Shares immediately spiked, with the ma-jor indexes hitting all-time highs. Over the

past year, Trump tweets or other China trade news have abruptly sent fu-tures moving sharply lower. So you might go to bed with the futures moving mod-estly, only to wake up with S&P futures moving sharply in the other direction.

This issue’s theme is trading post- analysis. Which do you learn more from, your winning trades or your losers? Post-analysis is important with winning and losing trades, but I definitely learn more from losers. Like many investors, buying stocks is the easy part. The prob-lem is with selling.

I’ve had a tendency to wait “just a little longer” to get a better price or try to hold on when I know I should sell, only to watch the stock continue to fall and all of a sudden I’m a “long-term investor” in a loser.

I bought CyberArk Software (CYBR) in late July after it broke out. The initial buy was fine, and for a few days CYBR moved modestly higher. But then the cybersecurity stock began selling off. I should have gotten out right away, and had no excuse after it gapped down below the 50-day/10-week moving average line. But I didn’t want to believe that the software rally was over. So I kept

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Q & A A Conversation with Ed Carson

waiting for a recovery. I finally had to sell in September as CYBR broke through its 200-day/40-week line in September, around the time that growth stocks in general were hammered. That’s the kind of trade that really makes me focus on following sell rules.

Name a few keys to effective post-analysis. In a broad sense, I seek to recognize my poor decisions and what drove them—and how to prevent them in the future.

I look for patterns in my investing—the good and the bad. What kind of stocks did I buy (slow and steady winners, hot and wild IPOs, etc.)? When did I buy them? When did I sell, in whole or part?

Did I take losses on stocks that quickly failed—or did I see stocks rise 10% and

then fizzle and I couldn’t pull the trigger?

How has post-analysis changed your trading style in the years since you started? I try to take partial profits—either at 20%, or when the stock or broader market starts to weaken, or heading into earnings season. That can give me the confidence to hold a winner and not feel bad about selling a stock if it falls.

I bought Shopify (SHOP) in early February right as it was breaking out. The stock ran up nicely for several weeks, then consolidated in late March/early April. One day, shares retreated on news of possible competition. The stock never even hit its 50-day line. I probably should have held my entire position. Perhaps to calm my nerves I could have sold one-third of my holdings.

s Pictured: CyberArk Software (CYBR).

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A Conversation with Ed Carson Q & A

Instead, I sold my whole position—and Shopify doubled from there.

Confirm or deny this rumor: in a recent podcast, you talked for over 30 minutes about how investing is like Star Wars. Heh. Well, there are a lot of simple truths in Star Wars, especially the first two movies, that carry over for investing.

Whether it’s the “piece of junk” Millenni-um Falcon, little Yoda (not Baby Yoda), or a not-so-sexy stock like salvage car auctioneer Copart (CPRT), don’t judge based on your preconceptions.

It takes time to be a Jedi—as the orig-inal trilogy knows, “You have learned much young Skywalker, but you are not a Jedi yet”—even if you have talent. That’s something the new trilogy doesn’t get at all. It takes time to be

a great investor, especially mastering one’s emotions.

Ultimately, despite an ever-growing number of Star Wars films, there are only two great ones. So why worry about the rest. In the stock market, there are thousands of stocks, but only several dozen are really good at one time and only a handful are truly great winners. Focus on the winners, not your “Phan-tom Menace” stocks.

Who is your favorite Star Wars character, and why is it Jar-Jar Binks? That’s almost worse than asking, “When did you stop kicking your dog?” My favorite character is Han Solo. He’s just a great character. He’s funny, cool, brave. And he shot first. n

s Pictured: Shopify (SHOP).

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Stock Screen: Fundamentals + Sales

This relatively loose screen looks for fundamentally strong stocks (75+ Composite Rating) with promising sales growth. Without a strict criterion for EPS, it can find IPOs and Biotechs that might be moving toward profitability.

Fundamentals + Sales

Visit Investors.com/MSStockGuide to load the criteria for this and other Stock Guide screens directly in to your MarketSmith screener.

*All screen results are computer-generated and were run on January 2, 2020. This screen can also be found on marketsmith.com in shared screens.

Screen created by Ed Carson, IBD News Editor

COMPANY (SYMBOL) INDUSTRY GROUP COMP RATING

K L A Corp (KLAC) Elec-Semiconductor Equip 99

Regeneron Pharmaceutical (REGN) Medical-Biomed/Biotech 99

Vertex Pharmaceuticals (VRTX) Medical-Biomed/Biotech 99

Adobe Inc (ADBE) Computer Sftwr-Desktop 99

Edwards Lifesciences (EW) Medical-Products 99

Intuitive Surgical Inc (ISRG) Medical-Systems/Equip 99

Synnex Corp (SNX) Wholesale-Electronics 99

Cigna Corp (CI) Medical-Managed Care 99

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Fundamentals + Sales Stock Screen

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Stock Screen: Fundamentals + Sales

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Fundamentals + Sales Stock Screen

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Good Trade/Bad Trade Irusha Peiris

In this edition of Good Trade / Bad Trade, MarketSmith Senior Product Coach (and host of the Investing with IBD podcast) Irusha Peiris shared a couple of his re-cent trades—one winner and one loser—and told us what he learned from each. Pull up the charts for SHOP and PAYC and follow along to see how you would have handled these trades!

GOOD TRADE: SHOPIFY (SHOP)

The Timeframe: February 2019 – May 2019

Stock Background: Shopify came onto my radar in 2017, when it broke out early in the year and went on a great, great run. So I did a lot of research on Shopify during that time while waiting for a proper entry point. During 2018 the stock didn’t fare as well, but I don’t like to forget about former leading stocks that might have another big run in them.

Shopify provides e-commerce services

for small and medium-sized businesses: inventory management, supply chains, marketing and logistics support. One of the things that impressed me most was that Amazon (AMZN) tried to compete with Shopify, but eventually stopped because they couldn’t beat them at their own game. Later on, Amazon announced a partnership with Shopify instead.

Technical Picture: When the market took a big hit in December 2018, Shopify was still in a long consolidation. It was, frankly, a really ugly base, so I stayed away at that time. When the market got going in January 2019, SHOP started to really take off. The relative strength line was nearing new highs; when a stock is showing big outperformance in a very hot market, it always gets my interest. While it wasn’t coming out of a very constructive base, the story and the sec-ondary confirming factors behind SHOP gave me conviction in this trade.

My Buy Point: February 25, 2019 at 187. SHOP hit a new high and reached a pivot point of 176.60 on February 5, but it quickly retreated and lived mostly below the pivot for the next six trading sessions. It wasn’t a powerful breakout with big volume like I like to see, so I was

THE TRADER

Irusha PeirisMarketSmith Senior Product Coach

Good Trade/Bad Trade

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Irusha Peiris Good Trade/Bad Trade

hesitant to jump in until February 25, when it was finally powering out of the 5% chase zone above the pivot.

How I Held It: This one was a pretty easy one to hold. It never fell below the 10-week/50-day moving average lines, which I would normally use as a signal to sell some or all of my position. I had a nice profit cushion of about 20% ahead of the earnings report on April 30, so I held my whole position. Which was fortunate, since it popped almost 8% on the earnings announcement.

My Sell Point: May 6, 2019 at 265. At this point, I was up over 40% on the position and wanted to lock in my gains. At the time, some of my other trades weren’t working; I was starting to see warning signs that the broader market was weakening. Less than a month later, the Nasdaq was down about 10%, so it made sense to sell into strength when I

did. Still, I should have held on to some of it, since SHOP defied the market trend and marched higher, all the way up to 407 in late August. It never even serious-ly tested the 50-day line.

My 3 Takeaways:

• After doing my research, I put SHOP in the category of game-changing stocks. I had a lot of conviction in this trade, which helped dispel some technical doubts I had about the base it emerged from.

• If you have a profit cushion of over 10% and you are a strong believer in the stock, it can be worth your while to hold going into earnings.

• Based on the story and my conviction, I should have held on to some shares until the stock broke the 10-week line. That would have resulted in an 80% gain, as opposed to my 40%.

Six-month Base

Sell point: 265

Buy point:187

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BAD TRADE: PAYCOM (PAYC)

The Time Frame: February 2019 – March 2019

Stock Background: I was really into cloud software stocks around the time of this trade, so PAYC was on my radar just by virtue of being in the group. Cloud stocks were a big winner in the early 2019 market rally, so I was feeling bullish and looking for a new play.

Paycom provides cloud-based pay-roll and human resource services to businesses. The company does really well on sales and earnings, but it didn’t seem like the most exciting trade idea to me. Was it a game-changing “best of the best” stock? Maybe not, but I liked the solid fundamentals and the fact that they were in the cloud space. It was a medium-conviction play.

Technical Picture: One thing that made me nervous about PAYC was that it was building a later-stage base (a 4th-stage Cup with a buy point at 164.18), which increases the likelihood of a failed breakout.

My Buy Point: February 6, 2019 at 174. PAYC reported strong earnings after the close on February 5, which let me know it could gap up into a buy zone. The next day it did just that, so I bought it on the breakaway gap. The gap up gave me conviction in the stock that was lacking from the 4th-stage base and the “ho-hum” story.

How I Held It: From the beginning, this stock didn’t show a lot of power from the initial gap up. It was a modest climber, and it never really tested my stop-loss after the second day (which for me was the low of the gap up day, 166.41). While PAYC was going sideways, many of my other stocks were taking off. It was underperforming versus the rest of my portfolio, so I started getting impatient.

My Sell Point: March 4, 2019 at 177. As the old saying goes, “Sometimes stocks wear you out, and sometimes they scare you out.” This one bored me out. I want-ed to allocate that money to a stock with better performance, which was basically every other stock in my portfolio at the time. PAYC took a couple of months to really get going, but by the time it started retrenching into another base, it had

Good Trade/Bad Trade Irusha Peiris

"You’ll never buy a big winner without looking at a chart, but you’re never going to hold it correctly if you look at the chart too much."

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climbed over 40% from where I bought it. Instead I ended up with a whopping 1.7% gain. Oops.

My 3 Takeaways:

• Boring stocks give me the most trouble. But investing should be boring. You’re not looking for big, volatile swings and high emotions. You want steady, constructive growth.

• You’ll never buy a big winner without looking at a chart, but you’re never going to hold it correctly if you

look at the chart too much. Buy it right, have your stop-loss and exit strategy in place, then be patient let it work. Look at the price at the end of the day, or even the end of the week. Don’t over-trade.

• From Jesse Livermore, words for me to live by: “It never was my thinking that made the big money for me. It always was my sitting.” n

Irusha Peiris Good Trade/Bad Trade

Missed this 40% run

Buy point: 174

Sell point:177

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Visit Investors.com/MSStockGuide to load the criteria for this and other Stock Guide screens directly in to your MarketSmith screener.

*All screen results are computer-generated and were run on January 2, 2020. This screen can also be found on marketsmith.com in shared screens.

This screen selects high-priced stocks over $100 with good liquidity and after-tax profit margins accelerating for 3 quarters.

Accelerating Margins

Stock Screen Accelerating Margins

Screen created by Irusha Peiris, MarketSmith Senior Product Coach

COMPANY (SYMBOL) INDUSTRY GROUP RS RATING

Dexcom Inc (DXCM) Medical-Systems/Equip 97

Generac Hldgs Inc (GNRC) Electrical-Power/Equipmt 96

A S M L Holding N.V. NY (ASML) Elec-Semiconductor Equip 94

Coupa Software Inc (COUP) Computer Sftwr-Enterprse 94

Universal Display Corp (OLED) Elec-Misc Products 94

United Rentals Inc (URI) Comml Svcs-Leasing 94

Nvidia Corp (NVDA) Elec-Semicondctor Fablss 94

Murphy USA Inc (MUSA) Retail-Super/Mini Mkts 94

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Accelerating Margins Stock ScreenDe

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26 2020 Q1 Stock Guide MarketSmith.com26

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28 2020 Q1 Stock Guide MarketSmith.com

Ask a Portfolio Manager Charles Harris

Charles Harris is a Senior Vice President and Portfolio Manager at O’Neil Capital Management. In addition to his duties as a portfolio manager, Charles has partic-ipated in numerous model book studies and has been a featured speaker at the CAN SLIM® Masters Program.

Keeping with this issue’s theme, we asked Charles about post-analysis.

Stock Guide: After analyzing your trades from last year, what’s one lesson you feel like you’re still learning?

Charles Harris: One lesson that I’m still learning is to never get emotionally at-tached to a stock or to a thesis, regardless of how well researched it is or how sound the analysis.

As a trader or an investor, it’s critical to al-ways allow the market itself to be the final arbiter of whether your trade is right or wrong. Your ego will devise the most elab-orate justifications and rationalizations to keep you in a losing trade because the ego does not want to be proved wrong.

The market makes it very easy to know if you’re right or wrong: simply put, if you’re down on the trade then you’re wrong, at least temporarily.

Rather than focus on being right or wrong, focus on making money. As a trader, you will likely lose money on at least 35% to 40% of your trades over the long term. With those kinds of odds, it is imperative to cut losses quickly and without hes-itation. As Bill O’Neil said, you must be flexible and “bend like a tree in the wind.”

It’s helpful to think in terms of probabili-ties. Don’t focus on the results of any sin-gle trade, but rather the process of trading. If you get the process right, then you will be a net winner over many trades. n

Ask a Portfolio Manager

Have a question for a professional portfolio manager? Email us at [email protected] and we might include your question in a future issue!

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MarketSmith.com 2020 Q1 Stock Guide 29

Connect With Us

Follow us for exclusive offers, giveaways and stock investing tips.

CONNECT WITH US

Get actionable investing content, unique financial stories and live videos with market updates on our Facebook page. ________________________________________________________________

Get real-time updates on the stock market throughout the day on Twitter. Tweet us @MarketSmith with your thoughts on the market. ________________________________________________________________

IBD’s StockTwits allows you to connect with other stock traders to get tips on growing your portfolio. ________________________________________________________________

Reach out and network with the IBD® and MarketSmith® teams on LinkedIn to get in-depth investing knowledge. ________________________________________________________________

Check out Friday’s video market update for our take on the market action in the week that was. Plus, you’ll find timely tips for your stock research routine. ________________________________________________________________

Our Instagram gives you a behind-the-scenes look at how the IBD® and MarketSmith® teams work to help you succeed in the market.

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Copyright © 2020 Investor’s Business Daily, Inc., Investor’s Business Daily, IBD, CAN SLIM, and corresponding logos are registered trademarks owned by Investor’s Business Daily, Inc. MarketSmith is a registered trademark of MarketSmith, Incorporated.

The material contained herein is not to be reproduced, redistributed, published, stored in a retrieval system, or transmitted in any form or by any means, electronic mechanical, photocopying, recording, or otherwise, without prior written permission of Investor’s Business Daily, Inc. and MarketSmith Incorporated.

Data provided under license agreement by William O’Neil + Co. Incorporated. All material presented here has been obtained or derived from sources believed to be accurate, but Investor’s Business Daily, Inc., MarketSmith Inc., and William O’Neil + Company, Inc. do not guarantee its accuracy and it may possibly be incomplete and/or condensed. The contents are based on the study and interpretation of available data as it relates to our historical models of the best performing stocks. This is not a prospectus; no effort on our part with respect to sale or purchase of any securities is intended or implied. Any chart appearing in this material is for educational purposes and is not, and should not be construed as a recommendation or rating to buy or sell any security. It is possible that at this date or some subsequent date the officers, directors and/or shareholders of William O’Neil + Company, Inc., MarketSmith Inc. and Investor’s Business Daily, Inc. and their affiliates own securities or buy or sell securities listed in the following pages or those not mentioned.

Standard & Poor’s US Index Data

Copyright © 2020, Standard & Poor’s Financial Services LLC (“S&P”). Reproduction of S&P US Index Data in any form is prohibited except with the prior written permission of S&P. Because of the possibility of human or mechanical error by S&P’s sources, S&P or others, S&P does not guarantee the accuracy, adequacy, completeness, timeliness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. S&P GIVES NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall S&P or its affiliates be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of S&P US Index Data. (2012)

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LISTEN ON

Stitcher

Google Podcasts

presents

For more info, go to: investors.com/podcast

Sharpen your trading skills, improve your returns and stay on top of the market action.

Listen to a new episode every Thursday!

© 2020 Investor’s Business Daily, Inc. Investor’s Business Daily, IBD and CAN SLIM and corresponding logos are registered trademarks owned by Investor’s Business Daily, Inc.

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