Transcript:
Steve McDonald: Our guest this week is the Matthew Carr of Prime System Trader and the single most successful analyst at The Oxford Club.
Matthew, you hold the all-time record for high returns at The Oxford Club?
Matthew Carr: I do, 2,733%.
SM: My God. OK, 2,700%. Matthew’s here to talk about something called visual cue stock analysis, and I’m going to let him explain to you what it is.
Matthew, what are visual cues in stock analysis? How do you use them?
MC: Well, the first place I would start looking is at the share price of a company.
Right off the bat, that gives you a lot of information because if you see the share price moving up from the left side of the screen to the right, you have a company that has a lot of momentum in its shares. Everything is driving it higher.
If it’s the opposite – if shares are falling – then you potentially have a value stock. You try not to catch a falling knife, but you also have a stock that’s suffering.
For me, one of the most important things I look at – that I think all investors should look at – is quarterly revenue for a company.
That will tell you 90% of what you need to know about a company and its business – whether revenue is inclining so that you’re seeing it go up quarter after quarter, whether it’s on a decline, which means the company is in a lot of trouble, or whether you have what I call a sawtooth pattern, where there’s an uneven nature to it.
A lot of my systems focus on that sawtooth pattern because that’s where we can find a lot of lower-priced stocks that are about to see their revenue spike. And we’ve done it in the past by looking at the company L Brands (NYSE: LB).
L Brands is the maker of Victoria’s Secret as well as Bath & Body Works. What you’ll see is that throughout the year, during the first, second and third quarters, there’s not much going on. But you see this huge, massive spike in the fourth quarter. That’s where a lot of its revenue for the year is going to come from.
What happens is share price follows revenue. So during those middle parts of the year where revenue is sort of flat or not doing much, shares of L Brands have a tendency to tumble.
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SM: Interesting.
MC: If you know revenue is about to spike – that investors are going to be rewarded with this big, huge fourth-quarter report…
We bought in right before that, held it all the way through that fourth-quarter report, shares spiked and we ended up closing a 1,034% gain on L Brands calls a couple of years ago, just following this pattern.
Like I said, 90% of what you need to know about a company comes from its quarterly revenue. The other 10% is just whether it’s overvalued or undervalued.
SM: OK, let’s put a chart up on the screen now so that …read more
Source:: Investment You
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