Tuesday, April 6, 2010

A Stock Picker’s Market

We are now into the 13th month of our Rebound Bull and so we shift strategies from just getting invested to a sector selection strategy. We could go further and engage in stock picking which while more difficult can generate above market returns with lower risk. Now in order to limit the downside and still have some surprise upside potential we need to employ the following tests.

The candidate should be a real business – a company that generates revenue by providing a service or a product to unrelated third parties. This would exclude themes or stories of greatness if this discovery or “new thing” occurs. Our candidate should also be unpopular – sort of a hard sell by an advisor to a retail client – almost like an airline stock. When I was a retail broker I always knew the easy sell (like a gold stock) was a bad idea and a hard sell (like a stripped bomds) was a good idea.

Now one of the most ignored sectors in Canada is the Health Care Sector – with good reason because there is basically no choices in Canada and besides, most retail investors are only interested in gold and copper stocks.

Can you imagine the reception a retail broker would get calling a client and suggesting to acquire some Biovail Corporation (BVF-T) closed today at $16.98 on 363,000 shares.
Did you say Biovail? Isn’t that the company with that fishy accident and that insider trading noise? Well yes but that is all behind the stock but the “smell” lingers on. On the plus side the technical’s suggest someone is buying. Look at the rising money flow numbers and the recent move up and out a bullish ascending triangle. The weekly or intermediate cycle has also turned up. The TSX Health Care sector is also top 3 ranked in the Getting Technical weekly and monthly rotation tables.


Trading Student said...

Hi Bill, how would you assess MDS on the technicals vs BVF and as a turnaround candidate?

Gettingtechnical.com said...

Hello Trading Student

Actually I was considering featuring MDS because it is also a component of an improving TSX Health Care sector – and component MDS is just attempting a long base (32-weeks) breakout. MDS is also in the early stages of a relative out perform vs. the TSX60 and, – MDS is just entering a youthful weekly or intermediate cycle advance. Indeed a good choice for difficult markets

Bill Carrigan