Welcome to the West Linn & Surrounding Area’s IBD Meet-Up

1. Welcome to the West Linn & Surrounding Area’sIBD Meet-Up Thursday, April 24th, 2014

2. Agenda – April, 2014 • Market Condition • Scott O’Neil Webinar Wednesday 4/16 (0:00 – 17:41): http://www.marketsmith.com/Learn/Webinars.aspx • How I Build a Watch List – Method 1 • Team Based Stock Portfolio Contest • Q&A: Specific Stock Review

3. How I Build a Watch List – Method 1 • Definition/Key Points: • A list(s) of stocks that pass a set of specific criteria that represents an initial high likelihood of buying (taking a position) and will be used as the primary source when considering opening new positions at the right time • Stocks will be prioritized and buy points pre-planned. In some cases, triggered auto-buy orders will be established within my brokerage platform • Once a position is opened, the stock will be moved off of the Watchlist to the “Open Positions” list where it will be subject to further buy (secondary buy points), sell, and portfolio “rules” depending on market conditions • My watchlist is not a list of all stocks I find “interesting” or stocks where I wonder what might happen next “with this one” • My watchlist does not represent every stock in the various IBD lists that are building a base or approaching or are in a proper buy zone. My watchlist is used for buyable stocks, according to my investment personality, that pass an initial set of criteria that I have defined

4. Market Condition - Correction • Key Points: • Typically will be mostly in cash (low percent invested) • Watchlist will only include stocks with early base patterns (either building right side of base or pulling back) • Watch list will not include any “alternate” entry points (3 weeks tight, pull back to 50 DMA) • Will buy on follow through day or other signs of obvious institutional buying in the overall market and in leading stocks

5. Confirmed Uptrend (< = 4 dist. days) • Key Points: • Typically will be mostly invested • Watchlist will include stocks with early base patterns and include stocks developing alternate entries such as low volume pull backs and 3 week tight patterns • I will be watching stocks I have a position in for add on buy points and will add to my positions as opportunities emerge • Will take new positions as opportunities emerge (will now also consider buyable gap-ups)

6. Confirmed Uptrend (> = 5 dist. days) and/or Uptrend Under Pressure • Key Points: • Typically will be mostly invested, however, at times will be less invested due to stocks reaching profit goals and new base patterns being more difficult to find • I will be watching stocks I have a position in for alternate add on buy points but will be much more cautious on adding to my positions (smaller) • Watchlist will include stocks with a strong emphasis on proper buying range from early base patterns (either building or pulling back). • Watchlist will still include stocks that are exhibiting secondary buy points if no traditional base pattern buy points emerge, but will enter small and cautious • Will buy as opportunities emerge (more cautious of buyable gap-ups), however, increase level of defensive selling, take profits sooner than 20-25%

7. Watchlist Sources IBD Lists: IBD 50 (Monday & Wednesday: Research Tables) Sector Leaders (Daily: Research Tables) Big Cap 20 (Tuesday) IPO Leaders (Tuesday’s & Thursday’s) International Leaders (Daily: Research Tables) Friday Review (Friday or MarketSmith 250 85/85) Note: Other areas for sources of stocks: Multiple Features in Paper Note: Stocks on the watchlist can become ineligible on a daily bases by becoming extended from proper buy zones. I move these stocks off of the watchlist and set an alert to see if they pull back to their buy zones as 60% of leading stocks will do this

8. Watchlist Criteria - Initial Stocks my only enter the watchlist by passing the meeting the following criteria: Stock Base: 1st or 2nd Stage; exception for Stock Base 3: 3 Digit EPS Current Quarter, 2 or 3 Digit Sales Current Quarter Industry Group: IG<=40; exception for >40: 3 Digit EPS Current Quarter, 2 or 3 Digit Sales Current Quarter (avoid single digit sales, want 20% for double digit). Cannot have both Base and IG exceptions Stock Rank in Industry Group (MarketSmith) for EPS, SMR, COMP: EPS or SMR or COMP = 1,2,3 in group - can adjust to top 10% for large # of stocks in industry group or 1, 2 for smaller # of stocks in industry group Stock Select Ratings: Mostly all “Pass”: EPS>=80, RS>=80, A/D=AB or C, EPS Last Qtr.>=20, Sales Last Qtr. >=20, Price > $10, % of High < -15%, Funds > 5, any no pass ratings must have rationale Earning Announcement: Not within the next 5 days, maybe if within 10 days, want at least 15 days away

9. Watchlist Criteria - Next • Chart Review & Other Ratings & Company Story • Volume & Price Action – Base Pattern Characteristics are good • Price trend Above 50 DMA (10 Week Line): Exception for slightly less than 50 DMA where pull back was on lower volume • Up / Down Volume (looks at last 50 days) >= 1.0 • Fund Ownership increasing from last report with no sign of heavy +++ selling or if no change in fund ownership seeing signs of obvious heavy +++ buying since last report. At least 5 funds. Check if at least some "Best A+ funds" • ROE > 17% (exception if entire industry group is lower then look for group leadership) • ROE + PTM >50 (under review) • Liquidity : 50 DAV > 250k • Company has strong value proposition / potential

10. Questions

11. Team Based Stock Contest Goal: Foster group member communication between monthly sessions, shared learning, allow all in group to see “top” picks from different teams for investment ideas Teams: Would like 3-4 teams with at least 3 people per team. Need team leader volunteers to facilitate discussions and help generate and follow contest rules Timing: Identify team leads. Eric will send note to all group members and ask group members to contact leaders to be on their team. 1 week Eric / Leaders formulate rules for contest and method of communication (google docs) with tab for each team – everyone has access. 3 weeks Official Kick-Off about 4 weeks with teams formed, stocks selected and posted by next meet-up

12. Team Based Stock Contest • Rules (page 1 of 2): • Pick stocks from the IBD investing concept. For example – stocks coming out of bases 1 and 2 stage preferably not late stages, how is volume and stock trading personality behavior reacting, good growing companies – good earnings, revenue growth, return on equity • Use the different search tales that IBD offers to locate and pick your stocks – IBD 50, Big Cap 20, Sector Leaders, New America, Stock Spotlight, Your Weekly Review, Leaderboard (IBD premium subscription service), various IBD videos that mention stocks • Every participant is allotted $100,000 to invest in their choice of stocks. With these basic rules: • Cannot invest in ETFs, Mutual Funds, or any other investment instrument that is not a stock. The idea is to gain knowledge and learn from this process, and since the idea is to gain knowledge about stocks. • Commissions will be ignored since we should not be day trading. • Capped stocks selection at 10 maximum – if you pick too many stocks it is harder to manage.

13. Team Based Stock Contest Rules (page 1 of 2): When submitting a stock purchase selection - a small explanation, preferable about a paragraph, of the reason for choosing the stock, also a reason why you want to sell when that time frame happens. Most likely the chart is going to be your reason for selling. When submitting the purchase of a stock should include a sell target that you are looking at. All teams use standard template. Should include key points for the purchase and sell of the equity. Team Leader Volunteer Sign-up Sheet

14. Q&A: Specific Stock Review?