| ICLUB Insider |
April 8, 2005 |
THE LATEST NEWS ON
NAIC SOFTWARE BUILT BY ICLUBCENTRAL INC.
Summary
Have you ever seen a headline like this on the cover of a popular
financial magazine? "THE BEST STOCKS TO BUY FOR 2005!"
If you've done any study whatsoever on NAIC's methods for
analyzing stocks and investing, you've probably learned that it's
pretty near impossible to predict how stocks will perform in the
short-term. However, if you have a five-year or longer horizon,
the impossible becomes the possible, and individual investors can
identify and buy stocks that will provide generous rewards over
these long-term periods.
You might wonder just how the editors of these magazines come up
with their lists each year, but you'd be missing the point. After
all, the magazine business is about selling magazines -- not
stocks -- and juicy headlines with lots of juicy promises about
juicy profits pander to individuals with a get-rich-quick mindset
who surely will never achieve their financial goals. And who ever
thinks to check up on the success of those magazine's picks a
year later?
This issue of the ICLUB Insider pays tribute to the manic "just
buy it" headline tradition of the popular press -- but with a
twist. We're not going to tell you which stocks to buy that will
make you rich by next New Year's Eve; instead, we're going to
introduce you to the time-tested tools and resources that
ICLUBcentral provides that you put to work today to find ideas
for stocks that just might help make you rich over the next five-
to-ten years. If you've ever asked: "Where can I find ideas for
stocks for my portfolio?", then this issue is for you.
"The proof is in the pudding," as the old saying goes, and we've
been eating some pretty tasty dessert around the ICLUBcentral
offices ever since we received word of the Investor Advisory Service's 2004 performance.
As tracked by the Hulbert Financial Digest, IAS turned in a fifth
consecutive year of market-beating performance, besting the
Wilshire 5000's 12.6% return with our own 14.1% performance. And
while we're pleased that IAS has continued its consistent
performance, we're even more pleased with the long-term results
of the IAS's picks. An investor following the newsletter's picks
for the five years ending since January 31, 2005 could have
earned a return of 79.8% on his or her investment (a 12.4% annual
return), compared to a loss of 5.5% of the Wilshire 5000 Index (a
-1.1% annual return) during the same period.
The IAS's longer-term performance has also been exemplary. In the
nine years ending January 31, 2005, the IAS gained 14.1% a year,
compared to 9.1% for the Wilshire 5000.
What's the secret to this incredible performance record? Nothing
more than a solid adherence to NAIC's long-term growth stock
selection manifesto. No matter what's going on in the overall
market, the independent Chartered Financial Analysts of Seger-Elvekrog come up with three stocks each month that offer solid
appreciation potential over the next five years.
These talented professionals bring to bear a wealth of knowledge,
experience and understanding of companies and industries, and
then distill this information into a two-page write-up for each
stock. Each recommended company is presented with an analysis
that examines the company's past and provides explanations of the
reasons for each judgment item. What's more, IAS includes a
completed Stock Selection Guide for each featured company. Not
only do subscribers get three great ideas each month, they also
get to learn much more about NAIC's stock selection methods.
After a company is recommended, IAS tracks it each month on an
ongoing basis. If conditions warrant, IAS also issues sell
recommendations for companies that fall off track.
But enough about the Investor Advisory Service for now. We've got
to get back to work on those three great ideas we have up our
sleeves for the May 2005 issue -- but you'll have to subscribe
now in order to benefit from the IAS's great advice.
To subscribe to the Investor Advisory Service, download a free
sample issue, or get more information, please visit http://www.iclub.com/ias/.
Many NAIC investors think of growth as the single most important
attribute when investing in stocks. But ask any investor who
bought a fast-growing company that later crashed and burned, and
you'll learn that it's never a good idea to ignore the quality of
a company when considering it for your portfolio.
On the Stock Selection Guide, you can consider the quality of a
company by examining two areas.
First, take a look at the graph of sales and earnings in Section
1 of the SSG. It's not enough to find companies that have
demonstrate growth of sales and earnings. You should consider the
consistency of sales and earnings growth over the past ten years.
If you can tell the difference between a straight line and a
jagged line, you can determine how stable the company's growth
has been in the past. The straighter the earnings line, the more
predictable the company's growth, and the better the job that
management has been doing in running the company. You will have
far greater success forecasting the future growth for a company
whose historical growth has been consistent.
The second place on the SSG where you can gain insight into the
quality of a company is Section 2. It is vital that management
can demonstrate its ability to control costs and maintain profit
margins, so look closely at Section 2(a), the % Pre-Tax Profit on
on Sales (also known as the pre-tax profit margins). These should
be stable at the least, and it can be a good sign if the margins
are increasing -- these are good indications that management
should be able to sustain good growth into the future. If profit
margins decline, on the other hand, you should be concerned --
this company probably does not have the level of quality that you
should look for in any investment.
So where can you find companies that show these desirable quality
attributes? One great source is "The Complete Roster of Quality
Companies." Each month, ICLUBcentral scours 9,000 publicly-traded
companies and identifies those few companies that meet our
demanding standards of quality and includes them in "The Complete
Roster of Quality Companies." Each one of these companies will
show good levels of consistency in their growth of earnings and
sales, and stable or increasing pre-tax profit margins.
In addition, "The Complete Roster" includes the Quality Rating of
each company on a scale of 1 to 10, with 10 being those companies
that will appear most attractive on the SSG. (This is the same
Quality Rating used by NAIC Take Stock, by the way.) This helps
you pare down the list to those few stocks that are most
deserving of full-blown SSG analysis using NAIC Investor's
Toolkit, NAIC Classic Plus or NAIC Stock Analyst.
Of course, even companies of the highest quality are never a good
investment if the price isn't right, which brings us to the third
criteria -- value. "The Complete Roster" won't tell you if a
stock is right for purchase at the present price, but it does
help you overcome the hurdle of knowing if a stock meets your
minimum quality criteria. When you find a stock with a high
Quality Rating in "The Complete Roster" that appears to be
overvalued, the best thing to do is complete an SSG and then add
that stocks to a watchlist in your SSG software program. Then,
when the price reaches your Buy zone, you'll be ready to pounce.
If you subscribe to NAIC Take Stock, then you already receive
"The Complete Roster" each month by e-mail. If not, you can still
subscribe to it for $33 a year through the NAIC Investing
Software Support and Maintenance Program. This subscription
provides premium support and updates for any of your NAIC
investing software programs along with the monthly "Complete
Roster."
For more information on "The Complete Roster of Quality
Companies," including a sample issue, and NAIC Investing Software
Support, please visit http://www.iclub.com/isupport.
When it comes to finding "good stocks," one of the best tools at
your disposal is NAIC Stock Prospector. NAIC's official software
for screening can help you search through the universe of
publicly-traded stocks and identify those companies with the best
chance of meeting your portfolio objectives. (Or, to put it
another way, NAIC Stock Prospector can help you find stocks that
look good on the Stock Selection Guide.)
The software supports both beginners with an easy-to-use Wizard
interface, and experienced users with completely customizable
search and report features. But no matter whether you use the
screening wizard or construct your own screens, it's easy to
begin your SSG analysis of the companies that meet your criteria
with Stock Prospector's built-in export function.
Stock Prospector's often-overlooked export feature allows you to
automatically import SSG data files into NAIC Investor's
Toolkit, NAIC Classic Plus or NAIC Stock Analyst for further study.
After you have executed a screen and displayed the results in
Stock Prospector's report area, select the the "File > Export
records to Analysis Program" menu option (or click the Identify
button on the toolbar). This will open a window where you can
select some or all of the companies in the screen that you wish
to analyze further, and allow you to designate the directory
where the file will be saved. Click OK, and Stock Prospector will
create a file called "SSGC.FLS" on your computer (which is a list
of the companies and ticker symbols for the companies that you
selected for export).
Note: You must be online when you select this option, since
Prospector also uses NAIC's Online Premium Services (OPS) feature
to download and save the SSG files on the list from OPS to your
computer.
Once you have created the SSGC.FLS file, open NAIC Stock Analyst
and select "File > Open > Prospector Stock List," and select the
*.FLS file that was exported from Prospector. NSA will
automatically import the SSGs to your database and/or to your
screen. TIP: Don't try this with too many SSG files all at once,
particularly if you choose to view all the SSGs on your screen.
Keep the list small, to a dozen or so the first time you try this
function.
If you use Investor's Toolkit, you can also import the SSGs by
selecting File > Import Company > Import Several at Once > Other
Data Files. Then navigate to the directory where Stock Prospector
was installed (which should be C:\Program Files\NAIC
Software\Stock Prospector\ by default), and select the NAICDATA
folder. Select any or all of the Available SSG files, click the
">> Add >>" button to add them to the selection list, and click
OK when you're done. Toolkit will ask into which portfolio you'd
like to add the stocks (or if you'd like to create a new
portfolio). It can be useful to create a separate portfolio each
time you import screening results and name it accordingly, such
as "Prospector Screen 2005-04-05." This will help you identify
these companies when you start reviewing their SSGs. Note: If you
already have any of these stocks in any Toolkit portfolio, the
program will pause the import process and ask if you'd like to
overwrite the existing SSG file. This is another good reason why
it's better not to try to import dozens of stocks at one time,
since you can't halt the import process once it's begun.
With NAIC Classic Plus, select File > Open > Stock Selection
Guide from the menu, then click the "NAIC and NAIC Classic
Datafiles" tab. Navigate to the C:\Program Files\NAIC
Software\Stock Prospector\NAICDATA\ directory, and then select an
SSG file to open. With NAIC Classic Plus, you'll have to import
the files individually instead of all at once.
Once you've gotten a handle on how the export function works in
NAIC Stock Prospector, you'll find yet another reason to make
screening a regular part of your investment research process.
For more information on NAIC Stock Prospector, please visit http://www.iclub.com/prospector/.
Read past newsletters, subscribe, or unsubscribe at:
http://www.iclub.com/newsletters/
© Copyright 2005 ICLUBcentral Inc. All rights reserved.
ICLUBcentral is licensed to use the investing methodologies
and trademarked forms of the National Association of
Investors Corp. (NAIC), a national nonprofit organization
dedicated to investor education. NAIC assumes no liability
or obligations with respect to the investment education
information or other content presented in the ICLUB Insider.
For more information on NAIC, please visit http://www.better-investing.org.
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