|Corona Home||Investment Style||Growth||Aggressive||Conservative||Portfolio Strategy||Management||Get Started|
The following report is a summary of the trading strategy used by Corona Investment Management to achieve excellent returns from stock investing. We use a disciplined approach that has been back tested and show to achieve very good returns.
Our basic strategy is to buy stocks of companies showing very strong earnings growth and with a great earnings outlook. We time our buying of the stock when it is emerging from a base and at a time when the general market is in a rally phase.
Corona has a sophisticated computer software program tracking some 7,000 stocks. We have very elaborate screens running during trading hours that pick up breakouts, stock's under big accumulation, and conversely breaking down or showing big distribution. This gives us an eye on both the "longside and shortside" of the market. Our price data comes in via our satellite setup with S&P comstock.
We look at stock and the market from several vantage points. We want to focus on:
(1) The general market (trend of the market)
(2) Leading stocks (leaders)
(3) Stocks breaking out of bases (technicals)
(4) Stocks under big accumulation (tape action)
(5)Earnings and business of Leading stocks (fundamentals)
The directon of the general market often determines the success of many stocks. In bull markets, or rally phases, we have found that going long with stocks often results in a higher probability of success. So, we often time our initial buys during market upswings.
Conversely, in market downtrends, we are less inclined to be going long. Instead, we will be closely monitoring protective stops and even looking at potential shorts. When a bear market phase sets in many times we will be stopped out of stocks and have very few new candidates to buy. Thus, most portfolios under Corona's management will tend to build up cash - and rightly so.
When buying stocks, Corona tends to go with leaders. They are stocks that are already in good up trends. We have found that truly the strong get stronger - especially in market up trends. We draw our list of leaders from several market screens.
They include those companies that will show accelerating earnings growth on a quarterly basis. We have found that these companies going through big earnings times will perform exceedingly well. They are one of the best groups that Corona finds for big winners.
Another area to pick up big winners is those with high relative strength ratings from Investor's Business Daily. We follow closely all stocks with a relative strength rating of 97 or higher. The 97 means the stock's price has outperformed 97% of all issues the past 12 months. These 97 RS stocks may have strong earnings, or they may not. Instead, it may be a new products or new development driving them. In any case, they can do very well.
Perhaps our best screen for leaders is those with both a relative strength over 90 and an earnings per share rating from IBD over 90. They are stocks acting strong and supported by good earnings. The 90 eps rating means the company's earnings growth is better than 90% of all companies.
These three groupings give Corona Investment Management a birdseye view of the best stocks.
We time the buying of stocks in three ways. Our ideal is to buy a stock when it is breaking out of a basing pattern (sideways price action for several weeks). The second is to take a partial position in the base and top it off on a breakout. In that case we have generally spotted big accumulation in the base that makes us become aggressive prior to the breakout. The third method used only in special situations is to buy on a mini-pullback within a powerful up trend. In that case, we have in the past nailed some big hard-to-buy winners.
Corona watches the tape action of many stocks during the day. We use a proprietery indicator called "tick volume. It tracks the big block buying in every stock. It allows us to get an inside look of the tape on each stock. What we are looking for is "unusual big block buying." That has been found in the past to be a very good precursor of a stock acting better in the future.
The business of investing in stocks is generally simple. If a company is making a lot of money the stock will move higher. Of course, stocks move higher "in anticipation" of a company making money. This may happen or it may not. However, research has shown that companies which have already reported a pattern of strong earnings usually get good performance out of their stock.
Corona does a lot of research work studing corporate earnings and earnings projections. Our favorite situation which turns in great stock price performance is when a company reports earnings that are better than all Wall Street estimates. The stock generally heads higher for sometime.
We also looking at other key factors impacting a company's opeations. They include industry developments, change in management and new products, just to name a few. The key to all these is to find "something new" that will drive a stock higher. We are looking for that key catalyst. When we find it and the stock's technicals and tape action are bullish, it can lead us to a big winner.