Not a day passes that I don’t scour the market for opportunities in stocks and equity options;...
06/25/2004 12:00 am EST
Momentum expert, Kevin Kennedy, has introduced a new service focused on exchange traded funds. Here’s a look at the latest stocks picks from his "old" portfolio and a fascinating glimpse into the development of his "new" ETF portfolio.
"For our Coolcat Report portfolios, we conduct various volume, price, and momentum screens to isolate stocks, which show the characteristics present in top winning stocks. We look for high relative strength and new highs in strong growth industries. We also look for breakouts from bases on big volume and pullbacks on lighter volume. Here are some of the stocks that have recently passed our basic screens:
"All American Semiconductor (SEMI NASDAQ) has risen from a 52-week low of 2.21 to
a recent high of 11.25. The company is recognized as the nation's fourth
largest distributor of semiconductors and the ninth largest electronic
components distributor. The company has offices in 36 strategic locations
throughout North America, as well as operations in both Asia and Europe.
Astea International (ATEA NASDAQ) has risen from a 52-week low of 2.10 to a
high of 13.75. Astea is a global provider of service management software that
addresses the unique needs of companies which manage capital equipment, mission
critical assets, and human capital. Since its inception in 1979, Astea has
licensed applications to companies in a wide range of sectors, including
information technology, telecommunications, and medical devices. EVCI Career
Colleges (EVCI NASDAQ) has risen from a 52-week low of 1.61 to a
high of 14.77. The company is in the business of acquiring, developing, owning,
and operating career colleges. It provides on-campus post-secondary college
education through its four college sites in the Manhattan area. Shiloh
Industries (SHLO NASDAQ) has risen from a 52-week low of 2.91 to a
high of 13.63. Shiloh is a manufacturer of first operation blanks, engineered
welded blanks, complex stampings, and modular assemblies for the automotive and
heavy truck industries."
Meanwhile, in introducing his new Coolcat Total Market Report , Kennedy explains the strategy behind his new exchange traded fund portfolio and the reasoning behind its initial eight positions. "ETFs are obviously much different territory than our usual small- and micro-cap stock focus. But investors crave choice and they're finding that through ETFs, there's an increasing array of tools to use in managing their financial futures. That's why I've introduced a new report focusing exclusively on both ETFs and sector funds. Similar to my approach with the small-cap report, I also use market timing, a selection criteria that focuses on the best performers and a money management approach, which aims to cut losses short and let profits run.
"This service will maintain a ten-fund portfolio. The NASDAQ-100 Trust (QQQ ASE) and the iShares Russell 2000 (IWM ASE) will be permanent components of the portfolio. The positions are either long or short depending on the monthly close of those two ETFs vs. their close six months ago. A close above the six-month-ago mark will keep us long, while a close below will shift us to short. The decision to add long or short stakes to fill out the rest of the ten-position model portfolio will be dependent upon the moving average of the NASDAQ Composite, my proxy for the overall market. The timing approach is simple: I will add a long ETF position if the NASDAQ's 50-day moving average is above its 200-day moving average and I will add a short ETF position if the NASDAQ's 50-day moving average is below its 200-day moving average.
"The actual selection of the ETFs to fill portfolio allocations is also simple: I will select the top-performing ETF over the past six months. (If there are no ETFs that meet these requirements, I will keep the position in cash.) I will sell any long ETF position if its performance in the past six months turns negative. And I essentially use a similar approach to add and manage short positions: I will select the worst-performing ETF over the past six months and I will cover any short ETF position if its performance in the past six months turns positive and use the criteria above to add a new position.
"In addition to the QQQ and Russell 'permanent positions' described above, I am beginning the portfolio with five additional positions: S&P 500 Energy Sector (XLE ASE), Merrill Lynch Broadband HOLDR (BDH ASE), iShares Mexico (EWW ASE), iShares Japan (EWJ ASE), and iShares NASDAQ Biotech (IBB ASE). Taken together with QQQ and IWM, this is a pretty diverse group that comprises energy, tech, biotech, and emerging markets and should get us started on the right foot."
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