The Kirk Report

Lucky Charms Portfolio

Almost a year ago I asked members to submit the ticker of a stock they think would bring investors the most luck over the coming year. I remember at the time receiving more than a few emails suggesting I was being ridiculous for asking such a stupid question with the market and economy doomed.

Remember those wonderful days?

Nevertheless, the Lucky Charms Portfolio we put together last year was indeed very lucky. Here's the performance as of this morning:

The member who submitted the best performer overall will receive a nice gift next week!

From time to time we put together portfolios of this nature so that we can share our best ideas with each other. In fact, we'll be updating this lucky charms portfolio this coming Thursday. If you'd like to participate, please consider joining us. In addition to having access to portfolios like this throughout the year, I provide a lot of good stuff that will be helpful to you.

Member Mail

One of these days I'm going to set aside an entire week and just respond to every question I can! But until then, I'll be talking about the following today:

• Mark Minervini's Trading Philosophy

• Market Opinions As Contrarian Indicators

• Using Weekly ATR Analysis

• Screening For Deep Sector Values

• Other Indicators That Work With ATR

• Economic Indicators And Trading

• Adopting Short-Term Methods

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Mailbag

I missed doing these mailbag posts probably more than you missed reading them, which is saying something. For today, here are the topics covered:

• Obesity & Trading

• Developing A Trading Plan

• Focus On Weekly Versus Daily Trends

• Quality Stocks vs Junk Stocks

• A Whale Indicator

• Playing Defense

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Q&A with Jason Kelly

It is my pleasure to present this Q&A. We've had the privilege of learning from a number of wonderful people over the past few years and we will start our series in 2010 with Jason Kelly.

Known for his Neatest Little Guide To Stock Market Investing and for his investment newsletter, Jason offers a different approach than we've seen from others in this Q&A series. In addition to long-term value-focused investing, Jason also uses what he calls "permanent portfolio" strategies that you'll find of great interest. We'll talk about these approaches, his background and perspectives and more importantly, what he thinks all of us need to do in 2010 to outperform the market.

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Member Mailbag

In today's member mailbag, I covered questions on the following:

• Mission Accomplished Syndrome

• Using ATRs As A Last Resort

• Adjusting To High Frequency Trading

• Odd Lots vs Round Lots

• Winners Watch List

• To Do Widget

• Learning About Market Sentiment

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Q&A With Sylvain Vervoort

I have had the distinct privilege of interviewing a number of top traders who utilize technical analysis to produce significant outperformance in the market. Continuing that tradition, this month I am honored to share this extensive Q&A with Sylvain Vervoort who has over 35 years of trading experience.

When I read Vervoort's new book Capturing Profit with Technical Analysis, I was so impressed with its straightforward, no nonsense educational format that I felt compelled to invite him in for a Q&A. Mr. Vervoort's book is the best trading book I've read this year.

Mr. Vervoort has earned high respect among the traders who develop their trading strategies on rigorous backtesting and technical analysis. His claim to fame more recently has been an excellent series of articles that have appeared in Technical Analysis of Stocks & Commodities Magazine. Many of you are already quite familiar with his work as you've seen at least one of his indicators, the Modified ATR Stop, at use in many of the stock charts I share. Though I've used a variation of ATR analysis for many years, his variation and other indicators Vervoort has developed have been useful. I have also linked to his website Stocata on many occasions and will continue to do so as it offers a treasure trove of information.

In this interview we will talk about Mr. Vervoort's background, his trading strategy, the indicators he uses and much more. While this interview will be no replacement for his extensive book or website, I think you will enjoy it at least as an introduction to his type of trading and analysis. In addition we hope you'll find something of value here in your own journey toward more success in the markets next year. As fair warning, in this Q&A we dive into a number of complex ideas and methods. By no means will a novice trader be able to grasp every concept discussed without additional research. This Q&A is geared more toward the advanced technical trader and those of you who wish to improve your technical analysis skills even though I think some concepts in the Q&A will be helpful for all long-term investors.

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Member Mailbag

Sad to say, it is time for the last member mailbag of 2009. If you are a new member or only read the website occasionally, I highly recommend you take time to read past mailbag posts as they offer more in-depth information about a variety of topics that I'm sure will be helpful to you.

In today's mailbag, the following topics will be discussed:

• Spotting Trend Changes

• Three Reasons Why Most Trading Strategies Fail

• Trading Outside Of My Stock Screen Machine

• An Update For The Kirk's Passive Aggressive Lazy Portfolio

• Real-Time Indicator Scans

• Tracking Cost Basis In Trading Positions

• Setting Reasonable Goals

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Member Mailbag

Time to open up the old member mailbag. Topics for today include:

• How To Detect Breakouts

• Adapting To Market Conditions

• Three Wishes

• Technical Review Of ASIA

• Weakness Among The Market's Generals

• A Perspective On Market Sentiment

• The Lowest Form Of Technical Analysis

• Using AAII's Stock Screens

• Performance Drag With Cash Positions

• Stocks Trading 70% Above Their 50 Day MA

• My Thoughts On Ending The Fed

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Member Mailbag

It is always a pleasure to read what is on your mind and have the opportunity to reply to questions you send in.

In this mailbag, I will discuss the following:

• Learning About Proper Position Sizing

• Screening For Low Debt/Equity Ratios

• Charting Fundamentals

• BRIC Certificate Of Deposit

• Transition Into An Income Retirement Portfolio

• New Margin Requirements On Leveraged ETFs

• The Crowded Holiday Retail Trade

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Q&A With John Reese

It is no secret that I think stock screening can be an asset to both investors and traders who seek to outperform the market. For well over the past decade, Mr. Reese has dedicated his career to the extensive use, research and development of stock screens based on the strategies of legendary investors like Ben Graham & Warren Buffett.

For those unfamiliar with John's work, he is best known for being the founder of stock-screening website Validea.com. John is also the author of "The Guru Investor: How to Beat the Market Using History's Best Investment Strategies" and a regular columnist for RealMoney.com, Forbes.com and MSN's Strategy Lab. John also maintains the investing blog The Guru Investor which you will find among the blogs I read.

We will cover a wide variety of topics in this Q&A and we hope you find it as helpful and enjoyable as we have in preparing it for you!

Q&A With John Reese

Kirk:  Hi John. Welcome to the Q&A! We are excited to have you here so we can learn more about you and your perspectives and approach.

John Reese:  Thank you Charles. I'm also very excited to be speaking with you and I appreciate you putting this together. I hope I can offer up some valuable thoughts and insights from my investing experiences and research that your readers can learn a little bit from.

Kirk:  Let's start at the beginning. When and how did your interest in the market begin early on?

John Reese:  I first became interested in the stock market at the age of thirteen when I became curious, then fascinated, by reading each weekly issue of Value Line that my father subscribed to and then trying to figure out which combination of Value Line's ratings and screens would help pick the best stocks. Around that time, I also began playing the 3M bookshelf same "Stocks and Bonds" and became quite good at it, reinforcing my interest in stocks and investing.

Kirk:  How did those early experiences transition into a lifetime career?

John Reese:  When I went to MIT, my main interest was learning everything I could about technology and computers. As part of this interest, I joined the MIT Artificial Intelligence Laboratory, where I learned how to extract wisdom from books and incorporate that knowledge into smart computer programs. With the encouragement of one of my professors, J. Licklider, I began to think about how I might make a smart computer program to pick stocks. However, that was perhaps one of ten diverse projects that I was seriously spending time on (the others ranging from non-drug treatment of migraine headaches, to the first microprocessor-controlled system for office building HVAC systems to save energy and money, to electronic speech recognition, to a computer controlled windrower that could automatically harvest rows of grains without being ridden by a human.) I actually brought several of these projects to fruition, but the program for picking stocks ended up on my incubation list, where it was to lay dormant for many years.

After graduation, I went on to a career in engineering and business, getting my MBA at the Harvard Business School and working in the telecommunications and personal computer industries. I eventually founded a business focused on computer networking. It was the sale of this company many years later that retriggered my interest in the stock market - trying to figure out how to invest the cash that I received from the sale of my company. I had read many investing books, but it wasn't until I read Peter Lynch's One Up on Wall Street that I had an "aha!" moment. Here was someone with 1) a proven track record, who 2) in his book had publicly disclosed the stock-picking strategy that made him successful, and who 3) had a strategy with a substantial, clearly described quantitative portion. I thought that I could extract the wisdom from his book, and create a computer program to analyze any stock of my choice and tell me whether Peter Lynch would have a strong interest in it -- and why or why not.

This approach proved to be extremely successful and time efficient. I went on to identify more than a dozen investing legends (after reading hundreds of investing books and research papers) whose works met the three criteria I just mentioned. Then I implemented Artificial Intelligence "knowledge bases" for each one -- that is, I created computer models that evaluated stocks using each approach. So, by entering just the ticker symbol of a stock that caught my attention, I could almost instantly get the opinion of twelve investing legends on the stock.

This development happened near the beginning of the Internet era, and, with my handpicked team, I went on to offer access to these models on the Internet at Validea.com.

The extensive investing research that I had done, plus the excellent track records of stock portfolios picked by each of my AI gurus, resulted in quite a few individuals asking me to manage their money. I thus created Validea Capital Management, which, along with Validea.com, became my full-time passion and my new career.

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