New Column: Nine Stocks for Playing the Long Side Safely

Tuesday, June 12, 2007 | 06:30 AM

Tscm_1 The Real Money column I mentioned Friday has been moved to the (free) The side: Nine Stocks for Playing the Long Side Safely

Before you yell "Capitulation!," understand that this was in response to client requests. I continue to have concerns about a laundry list of economic problems: inflation, slowing growth, slow job creation, rising interest rates, the drag from housing.

What led to this research and stock selection was a repeated request from research clients, managed asset accounts, and institutional traders, who have all asked some variation of this question:

"I am afraid this market is overvalued, over-extended, and overdue for a major correction -- but I want to play from the long side (variation: I cannot afford to fall behind my benchmark). How can I participate in a way that is relatively safe, but still allows me upside?"

The response we crafted was to quantitatively screen stocks for these characteristics:

1) Identify strong sectors with good money flow;
2) Screen for stocks with the best technical and fundamental potential;
3) Look for stocks within those sectors with desirable risk/reward characteristics;
4) Find stocks that are near good entry points;
5) Avoid the "runaway momentum" names;
6) Look for stop-loss protection that is a reasonable percentage downside away.

The column identifies nine firms, with entries, targets, and stop losses.

The stocks and sectors I picked, however, are more likely to outperform on a relative (as well as on an absolute) basis, especially if the economy slows further or slips into a recession. Our goal was to identify those stocks that will participate in the upside, but at much lower levels of risk.


There is a video discussion here:




Nine Stocks for Playing the Long Side Safely
6/8/2007 4:44 PM EDT

Tuesday, June 12, 2007 | 06:30 AM | Permalink | Comments (16) | TrackBack (0) add to | digg digg this! | technorati add to technorati | email email this post



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I like AOC, IO, SCI, and MOS. I have some reservations about XRX.
SGP and ABT are good defensive stocks
I have no opinion about WCRX.

What do you think about aerospace/defense sector and companies supplying them with carbon composites and titanium?

Posted by: V L | Jun 12, 2007 8:01:09 AM

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