by Dr. Bart DiLiddo
Friday, 05/01/2009
Five weeks ago, when we got a Confirmed Up signal, I wrote an essay called, "Time to Transition." It was meant to show how stocks with weak fundamentals fly upward in Price when the market rallies from a bottom, but stocks with good fundamentals do not perform as well. The Price performance of the weak stocks, however, tends to peter-out in a relatively short time while the Price performance of the strong stocks tends to get better as time goes by. Therefore, I was suggesting that it was time to transition from picking weak, beaten down stocks with "S" ratings to solid stocks with "B" ratings.
To my amazement, our Bottom-Fishing strategies continued to work well and even outperform high VST stocks, so I have stayed with Bottom-Fishing strategies to the current time. Furthermore, I was quite impressed by last week's "Strategy of the Week" presentation, "Digging for Gold Using Stock Viewer," given by Glenn Tompkins. You may recall that the best result he showed was obtained by sorting by RV, Relative Value, Desc. It was up 87% from 03/10 to 04/23. This result is logical since RV goes up when a stock's Price goes down and the stocks Glenn found certainly had gone down as shown by their low RT, Relative Timing, values.
Hmm, I wondered, what would I find if I looked at the stocks with the lowest RT's? So I sorted Stock Viewer by RT Asc. I really expected to get a lot of crazy, low-priced stocks from this sort, and I did get some. But the percent gain was 230%. Wow! The percent gain from 03/10 to yesterday's close was 274%. Wow! Wow!
OK, the results are astonishing, but how can I get a selection of stocks with better fundamentals? Sort by VST/RT, of course! So I clicked on the Edit button, selected VST/RT from the list of Custom Sorts and clicked on the radio button to the left of Desc. This sorted Stock Viewer by VST/RT Desc. Uh Oh. I got a gain of only 167%. Somehow, I had to start with a list of better stocks. This meant that I had to use UniSearch, which I didn't want to do because the beauty of Glenn's presentation was its simplicity, or I had to use WatchLists.
The first WatchList I tried was Blue Chip Bargains. Sorting by RT ascending worked like a dream. Would it work with the S&P 500? You betcha! Does it work with the Russell 2000? Oh my goodness! The results were incredible. Well, doing this was simple enough. I just open the WatchList of my choice, set the date and sort by RT ascending. Fantastic. So I did this over and over again, testing different combinations of low points to high points as identified on the Market Timing Graph, going all the way back to 1997. The results were fantastic just about every time.
Now I want to use this bottom-fishing technique in managing portfolios. The easiest way is to create Strategies in the UniSearch Tool. These Strategies are named as follows: Blue Chip Bargains/RT, S&P 500/RT, Russell 2000/RT and they're all located in UniSearch in the Strategies - Bottom-Fishing Group. To make things really convenient, we took our other favorite bottom-fishing strategies, such as Jail Break - No Contra ETFs, Blyar's Bottom Feeders/BMB and so on and also put them in The New Strategies - Bottom-Fishing Group.
