Tuesday, April 5, 2011

!!! WE HAVE A WINNER !!!

Mark Ritchie II has won Mark Minervini’s Triple-Digit Challenge.

At the conclusion of the 2010 Master Trader Program, Mark Minervini threw down the gauntlet and challenged his attendees. He said: “Every one of you in this room here today now has the tools to produce a 100% return in your trading accounts within 12-months. The first one of you that reaches this goal can be a guest in my home and come and trade side-by-side with me for a day. All expenses for the trip will be paid by me.”

Mark Ritchie II from the Chicago area conquered the challenge. Utilizing the SEPA® techniques he learned during the 2-day Master Trader Program last October, Mark turned his $25,000 trading account into more than $50,000 in just 5-months.

Mark Ritchie II with Mark Minervini


Wait, there’s more!!!

Two days after we confirmed Mark Ritchie’s results, a second Master Trader Program alumnus reached the 100% mark; Matt G of Connecticut traded his $850,000 account to a triple-digit gain.

Matt G with Mark Minervini

CONGRATULATIONS TO THE BOTH OF YOU…

GREAT JOB!

WINNER MARK RITCHIE'S STATS AND COMMENTS

Name: Mark Ritchie II
Account Size: $25,000
Period: October 20, 2010 – April 4, 2011
Use of leverage: Yes, as much as standard Reg-T margin would allow for, roughly 2:1
# stocks traded: 139
Position Sizing: Aprox. 25%
Net reward/risk ratio: 2.42:1
% Trades Profitable: 43%
Quotes: Interactive Brokers, TradeStation
News: Interactive Brokers, Marketwatch.com, Yahoo Finance

Click to enlarge image

How trading ideas were generated:

Used basic screens which I derived from information learned from Mark Minervini's Master Trader Program, at Minervini Private Access, and Mark’s blog; earnings, RS, Mark's Trend Template and things he has discussed at length.

Technical entry criteria:

Only entered if I had a visual stop on the chart I was comfortable with, the smaller the better, usually in the mid single digits, would look for charts with tightness on the right side with accompanying patterns discussed at Master Trader Program and in his workbook, i.e. cup w/ handles, power plays, 3C's and the like. Once I had determined tradable pivots I would enter upon subsequent breakouts.

Fundamental criteria:

Tried to look for stocks with best earnings, although good technicals would sometimes override fundamental criteria, but basically companies with accelerating earnings and sales, usually 25% or higher

Criteria for taking profits:

This was the toughest part but usually looked at current gain to average gain and where the chart looked at a given period, i.e. if the stock was above my average gain and looked extended I would look to take profits, I would often take profits into weakness when stocks would take out previous significant lows on their respective charts. I also used some of the moving average rules discussed for selling in the Master Trader Program workbook.

Criteria for loss protection:

Get out quickly whenever the stock hit my predetermined loss point, usually the point at which the chart started to break down. When the stock hit my pre-determined loss point I would get out ASAP!

Additional comments:

In short I can say that all the performance is a function of what I learned at the Master Trader Program with the exception of the money management portion, as I have always traded strictly based on the #'s of my own trading, avg. W/L, win rate, etc. So once I became more & more comfortable that I could maintain an edge that was mathematically deserving of a 25% position size I started trading larger and more aggressive. That said on the money management side all of the stock specific criteria as far as fundamental and technical selection I would say came purely from Mark's teaching. I should also add that in no way do I feel that this period was some of my best trading as I made many mistakes and I believe that I am capable of much better overall trading the more I continue to put into practice what I've learned. There's not much else to add other than the guy is as good a teacher as he is a trader!
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10 comments:

  1. Mark,

    For the readers, can you please expand on 3C's?
    What are 3C's?

    Thanks

    ReplyDelete

  3. PhoenixTrader,
    The "3C" is one of our major price set-ups. We will be covering all the set-ups and the SEPA system from A-Z at the 2011 Master Trader Program in October. I hope to see you there and finally meet you in person. It's time to take your trading to the next level!
    -MM

    ReplyDelete

  4. bigboss,
    It sure is! Get off your butt and get to Myrtle Beach in October so you can do the same. I love to here these success stories; it keeps me motivated to help other achieve.
    Best wishes.
    -MM

    ReplyDelete

  5. Great to see those success stories Mark.Do we have any stats and comments for Matt Glascoff's
    trades during the same period?

    ReplyDelete

  6. Awesome work guys.
    It would be interesting to see some stats for Matt's trades. In particular I am interested in difference in style due to account size.
    Mark, when does account size become a problem for your style and strategy of trading? I can envisige with an account of several million it would be more difficult to enter small capitalisation stocks, and entry and exits may experience more slippage. Do you have apply particular methods for a larger account?
    Do you focus on larger cap stocks, longer time frames, scaling into more positions, scaling in over more time?
    Cheers,
    RW

    ReplyDelete

  7. RW,
    I get this question allot. Many of you think that managing several million is like running a mutual fund. IT’S NOT! I don’t know who is convincing everyone they should own highly liquid names. The big opportunities are in the smaller, underfollowed and undiscovered companies. To dramatically outperform, you need to fin inefficiently price securities; by definition, this means relatively smaller names. In addition, history supports this. 95% of the biggest stock market winners in history had relatively small floats. The answer to your question is: No adjustment is made, except if a stock trades very thin, then you take a smaller position size. I buy up to an amount I feel I can get out of fairly easily.

    We are working on breaking down Matt’s specific numbers.

    Hope to see you at the 2011 Master Trader Program so I can add your name to the Triple-Digit club.

    Best Wishes.

    -MM

    ReplyDelete

  8. For a couple reasons, including a medical issue, live seminars don't work well for me as a learning format. Will your Minervini Private Access teach me the same information and skills as your Master Trader Program? MPA sounds like something that would allow me to learn at my own pace.

    ReplyDelete

  9. cloudsandskye,
    Yes, Minervini Private Access will teach you the same SEPA strategy as well as provide actionable SEPA ideas each day. I'm in a live trading room each week for Q&A and tutorials. The Master Trader Program is a crash course; you get everything from A-Z in two days. If you can't make the trip, I hope to see you in the MPA trading room.

    Best wishes and happy trading!
    -MM

    ReplyDelete

  10. Mark,
    Thanks for your reply re account size. I didnt imply that we should trade like mutual funds (ie trade blue chips). I however imagine that there must be a difference between buying 100, 1000, 10000 or 100000 shares of a smaller company. Logically there must either be slippage or you will have to not trade the stock because the liquidity is too low.

    Reading between the lines Mark, I take it you are saying that even with multi million dollar accounts, you can apply your SEPA methods and find sufficient smaller cap stocks with decent liquidity to play?

    Thanks
    RW

    ReplyDelete

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MARK MINERVINI'S STOCK SELECTION STRATEGY

Specific Entry Point Analysis® -SEPA®

Specific Entry Point Analysis® - SEPA® was developed by Mark Minervini. The methodology’s foundation is built upon historical precedent analysis of past stock market “SUPER PERFORMERS.” To determine what characteristics make a stock likely to advance significantly, historical models of top price performers and industry leaders are archived in the Minervini confidential database. These models are based upon sets of characteristics prevalent in exceptional winning stocks.

PATTERNS OF EXCELLENCE
On-going efforts are focused on identifying in detail the characteristics of the most successful performers of the past to determine what makes a stock likely to outperform its peers in the future. Based on these attributes, current investment candidates can be compared and scrutinized for criteria in-line with our proprietary Leadership Profile®. This success blueprint is the fundamental basis for our stock selection. The database and profile is continually updated to account for market dynamics and new available data. The SEPA® model takes into account thousands of historic company profiles going back over many market cycles spanning numerous decades. In order to find rapidly growing companies with the ability to sustain above average appreciation, a unique combination of quantitative screening, fundamental research and qualitative analysis serve as core selection criteria for the SEPA® investment process.

Additionally, the SEPA® ranking process scores each company based on earnings surprises, estimate revisions and company issued guidance in order to determine the probability for future price performance catalysts. A unique component of the SEPA® process is a focus on “where” a stock is within its earnings maturation cycle. Each day, computers systematically analyze thousands of stocks for specific data items using a proprietary series of absolute, relative and time dimension calculations. The extensive fundamental research ranks each investment candidate for probable earnings surprise.

Specific Entry Point Analysis® focuses on identifying, company-by-company, the precursors of inefficient pricing in order to distinguish appropriate entry points. Utilizing SEPA® Technology, stocks displaying the potential for significant price appreciation are identified and pinpointed. While nothing is perfect, the proven SEPA® Technology consistently highlights many of the best investment ideas and stock market leaders before they’re widely recognized by Wall Street.
The SEPA® screening process can be summarized as follows:

1. Stocks are screened through a series of "filters" based on earnings, sales, profit margins, relative price performance and price trend characteristics. Approximately 95% of all stocks in the market are eliminated in this first screen leaving roughly 1,000 initial contenders.

2. These remaining stocks are scrutinized and ranked for similarity to a proprietary Leadership Profile® in-line with specific fundamental and technical factors exhibited by historic models. This second stage of qualifiers removes most of the remaining companies, leaving a narrowed list of investment ideas for further review and evaluation.

3. The final stage is a comprehensive manual review. The narrowed list of candidates are examined individually and scored according to a “relative prioritizing” ranking process which considers the following characteristics:

- Reported earnings and sales
- Earnings surprise history
- EPS and sales acceleration
- Company issued guidance
- Earnings estimate revisions
- Profit margins (historic & projected)
- Industry and market position
- Potential "catalysts" (new products, services or industry changes)
- Performance compared to other stocks in same sector
- Price momentum, price trend and trading volume analysis
- Liquidity

The SEPA® ranking process is focused on identifying three key elements:

1. The potential for future earnings and sales surprises
2. The potential for institutional volume support
3. The potential for rapid price appreciation based on a supply/demand imbalance

Profiting from the Earnings Cycle

Individual stocks can go through extended periods of underperformance, in some instances for decades – Eastman Kodak’s stock price took twenty-four years (1973-1997) to just break even while the S&P 500 Index advanced 500%. While some stocks languish, companies with superior improving fundamentals can perform exceptionally well.

Large institutional buyers (mutual funds, pension plans, hedge funds, etc.) have the greatest buying power to influence a stock’s share price. So, what do they look for? Earnings and sales surprise and estimate revisions contribute to valuation model changes and thus impact buying and selling pressure. The subsequent buying pressure that comes from an earnings surprise or a company materially raising guidance generally leads to a higher stock price, which in turn attracts momentum buyers.

An understanding of how Wall Street works and identifying what specific characteristic will attract institutional buyers into a stock is our daily focus. The graph below illustrates a typical earnings maturation cycle and where we focus our efforts on buying and selling within the cycle
Summary of the SEPA® Process

HISTORICAL PRECEDENT ANALYSIS
-Study of the best performing stocks over each market cycle
-Characteristics defined and archived in our database
-Blueprint is constructed based on attributes of winners

COMPUTER SURVEILLANCE
-Computers screen 8,000+ stocks daily
-Narrows down the top 1%
-Companies displaying specific characteristics are identified

LEADERSHIP PROFILING
-Data is compared to all stocks
-Results are compared to a Leadership Profile®
-Profile is continually updated to reflect new information

RANKING AND SELECTION
-Candidates are monitored for specific criteria convergence
-Catalyst such as earnings surprise, company issued guidance
-Entry point defined based on risk/reward

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