The Kirk Report

Insider Stock Picks

Looking through the SEC filings this fine morning, I noticed some interesting trades, that have caused me to do additional research in some selective stocks. In general, I always try to follow the smart money, especially on long-term positions. As with many indicators, insider buying and selling should only be step one of your research. Nevertheless, here are some notable insider trading moves:

Some of the notable insider buying activity can be found in the following stocks now: FTI Consulting (FCN), Shaw Group (SGR), Key Energy (KEG), ASB Financial (ASBP), Idine Rewards Network (IRN), Eden Bioscience (EDEN), and Southtrust (SOTR).

Key insider selling can be found in the following stocks: Bed, Bath, and Beyond (BBBY), Nu Skin (NUS), Select Medical (SEM), Eresearch Tech (ERES), Broadcom (BRCM), Lam Research (LRCX), Apollo (APOL), Harman International (HAR), Intel (INTC), Schnitzer Steel (SCHN), Maxtor (MXO), and Countrywide Financial (CFC).

IBD - Screen For Quality

What is working now? IBD's stock screen today shows the stocks with the top overall fundamental and technical rankings. You can easily see that almost all of the hot sectors are represented here, including the homebuilders, the retailers, Internet stocks, and technology. What is interesting about this list is that very few at the beginning of 2003 would have predicted these would be the stocks to lead the market higher this year. Which also leads me to ask, as we think about 2004, what groups are so out of favor now that will lead in 2004? Any thoughts?

Stock Strength During Market Weakness

Whenever there is a selloff, one of my favorite things to do is to figure out which stocks are staying strong, if not getting stronger, even though the market is falling back. The reason? This strength usually shows that the path of least resistance is higher, which is necessary for any short-term trade.

Some of the stocks that are now moving higher, even though the market is weak today and yesterday include the following: August Tech (AUGT), BlueFly (BFLY), Border (BGP), Belo (BLC), C-Cor.net (CCBL), Countrywide (CFC), Dow Chemical (DOW), Eresearch Tech (ERES), Gottschalks (GOT), Manor Care (HCR), K-Swiss (KSWS), Lucent (LU), New Century Financial (NCEN), Quest Software (QSFT), Select Comfort (SCSS), Steel Dynamics (STLD), Taser (TASRW), Tumbleweed (TMWD), Vixel (VIXL), and Zimmer (ZMH). A quality list of short-term trading candidates, in my view.

IBD - Making The Grade

I use Investor's Business Daily for a lot of my fundamental research. If I'm lazy and don't have the time or motivation to run the numbers, I'll often use their stock grade to ascertain a quick opinion about the stock I'm researching. On IBD's website, they also have a daily stock screen, which is also a valuable resource.

Their stock screen today is one of my favorites - called "making the grade." The screen searches for stocks which have strong ratings in fundamentals, technicals, attractiveness, sector fundamentals and technicals. All good qualities for short-term trades. To help narrow the results a bit, I've done some additional research and selected the cream of the crop by putting a green dot by my favorites.

Stock Screen: Insider Buying & Selling

Looking over the recent insider transactions, there are a few notable transactions. On the buy side, I see some insider accumulation in the following stocks: Copart (CPRT), Shuffle Master (SHFL), York Water (YORW), Net Bank (NTBK), Carriage Services (CSV), and Intrabiotics Pharmaceuticals (IBPI).

On the sell side, here are the companies in which I've noticed fairly heavy insider selling: Apollo (APOL), Comverse Tech (CMVT), American Express (AXP), Marvell Tech (MRVL), Qualcomm (QCOM), Schnitzer Steel (SCHN), Starbucks (SBUX), and Fedex (FDX).

Stock Screen Friday

One of my favorite tasks every Friday afternoon is to spend a few hours just running stock screens. I don't like to trade stocks headed into the weeked, so I've developed a routine that I use this time for screening stocks.

On the Investor's Business Daily website, they offer a feature (if you're a subscriber to their newspaper) a daily screen. Some of their screens aren't particularly noteworthy, but I found today's of interest. Today their screen is one called "Glowing Fundamentals." In it they searched for stocks with have three-year earnings and sales growth rates of at least 25% — a common trait of many market winners before they went on to big gains. To narrow the selection, the screen excludes Canadian-listed stocks, those under $15 and those with an average daily volume of fewer than 100,000 shares.

A lot of the stock's I've been bullish on in the past year are found on this screen. But a few, that I wouldn't touch with a 10 foot pole and which I think are ripe short sells, are also here. So, to help you know the difference, I've marked the stocks I like with the green dot, and the stocks I don't like with the red dot. The stocks without any dot - I have no opinion on.

High-Beta Stock Screen

With all of the hedge fund managers trying to play catch-up by the end of the year, they will likely reach for those stocks with the highest beta. That's why I decided to run a stock screen searching for those stocks that have exactly that - high beta ratios. Based on some numbers crunching this morning, here are the names of my top 10 favorite high-beta stocks for the rest of 2003:

1. Avaya (AV)
2. Embarcadero Technologies (EMBT)
3. Foundry Networks (FDRY)
4. Genesis Health (GHVI)
5. Kindred Healthcare (KIND)
6. Komag (KOMG)
7. Lexar Media (LEXR)*
8. Marvell Technology (MRVL)
9. Packeteer (PKTR)*
10. SCO Group (SCOX)*

* my top three favorites

Investor's Business Daily 100

Investor's Business Daily is a key resource for anyone who invests in the market. Whether or not you agree with the CANSLIM strategy in which the paper is based upon, too many investors (including mutual fund and hedge fund portfolio managers) read IBD every day so it makes sense to read it as well. At a minimum, it will provide you a glimpse of why certain stocks are moving and why.

However, that being said, IBD is really focusing its top 100 stocks called the IBD 100. These are stocks which meet the paper's criteria of good investment opportunities. The problem is that while the list is a good one, unless you are playing with someone else's money like a portfolio manager, the list is hard to use as an individual investor.

So, as a basis, I decided to use the IBD 100 as a starting point for today's stock screen. What I basically did is screen each of the companies below for criteria that narrows the selections down to 30 stocks, instead of 100. The thirty stocks below (each tagged with a green dot) are stocks that my own research indicates are good opportunities based on criteria I like - a combination of fundamental and technical research. In particular, I'm looking at whether the stocks trade above or below their fair value. All of the stocks with the green dot by their names are undervalued right now.

Relative Strength

Do you want to see which stocks are leading this latest rally? Today's stock screen shows the stocks with the most mojo right now. All of these stocks are helping to pull the major averages higher and with a few exceptions, most of these stocks are not very commonly held.

Keeping An Eye On Performance

It is always important to keep a close eye on sectors which are performing well, over the long and very long periods of time. The reason? Often these sectors are places you have to have your investment dollar, especially within the companies that lead those particular sectors. Stocks move up in herding patterns and if you can keep a close eye on those groups which continue to be consistent outperformers and own stocks in those groups, you'll do far better than if you didn't. Here are some of the key figures based on 3Q data:

Impressive Sales Growth

Sales growth, in my view, is much more important that earnings growth. Why? An improvement in sales simply shows that the business fundamentals are actually improving. While earnings are still very important, companies have millions of ways to improve the bottom line earnings results without an improvement in the company's actual business. Here are the results of a stock screen showing the market's top growers in terms of sales improvements:

Top Stocks In Top Industries

As a matter of routine, I'm always aware of the stocks being promoted by Investor's Business Daily. Today they published a screen of leading stocks in leading industries. I found the results interesting and this afternoon I'm focused on researching each of these stocks to determine if they are worth a buy on any significant pullback. Below is a copy of IBD's screen:

Dorfman's 15-15 Screen

John Dorfman at Bloomberg has just released his "15-15 screen" which looks for stocks that sell for less than 15 times the past four quarters' earnings and that have achieved five-year compound earnings growth of 15 percent or better. Here are the stocks that made it to the list: NVR Inc. (NVR), Eastman Kodak (EK), Sanderson Farms (SAFM), InVision Tech (INVN) and Jack in the Box (JBX). READ

Why Screens Are Important

Running stock screens is integral to picking stocks, especially for short-term trades. Last week I provided a stock screen which highlighted growth stocks at a reasonable price. One of those stocks was Bio-Reference Labs (BRLI) which has gone on to set new highs and has already produce a sizeable return in a short period of time. That's why using stock screens is so important.

Growth At A Reasonable Price

One of my favorite stock screens is one based on GARP or growth at a reasonable price as it often highlights good opportunities in smaller cap stocks. Here are the stocks my screen uncovered this morning:

Several of these stocks have been of interest to me in the past - including TENT, FCFS, SGR, and ZQK. Time to do more research into these stocks...

Technology Bargains?

Believe me, the buy-the-dip crowd is focused on the technology sector. So, in their honor, I ran a stock screen that searched for the following:

1) The Price/Earnings-to-Growth (PEG) ratio must be less than or equal to 2.00. (value-based) 2) Share purchases by corporate insiders, net of sales, must be greater than or equal to zero. 3) The company must have achieved a positive rate of year-to-year EPS growth in the latest quarter and in the trailing 12 month period.

So, what tech stocks were screened out? Here is a list: Canon (CAJ), CGI Group (GIB), Cognos (COGN), Cubic (CUB), Excel Technology (XLTC), KT Corp. (KTC), Mobile TeleSystems (MBT), Nam Tai (NTE), Quality Systems (QSII), and Taiwan Semiconductor (TSM). Not a group of stocks that are very closely watched by investors. Time to do some work on these stocks to see if there is really any value behind them.

New 5 Year Highs

I always like to run this stock screen to see which stocks are moving even higher than the last bull market. A few of these names are very interesting, including three stocks I've owned in the past few years, including Gildan Activewear (GIL), Flamel (FLML), and Mylan Labs (MYL).