(Underlined italicized
text represents the latest additions to this training
guide. Underlined text represents the previous additions
to the training guide)
IT IS IMPORTANT TO REALIZE THAT SINCE 1998 THE
MARKETS HAVE DRAMATICALLY CHANGED AND ANY INFORMATION
THAT YOU COME ACROSS ANYWHERE MUST BE EVALUATED WITH THIS
TIME LINE IN MIND. STRATEGIES AND RULES WHICH APPLIED TO
THE MARKET PRIOR TO 1998 MAY NOT BE APPLICABLE IN THE
CURRENT MARKET, THERE HAVE BEEN TOO MANY CHANGES IN THE
WAY STOCKS ARE TRADED AND ACCESS TO MARKETS HAVE CHANGED.
SO IF YOU ARE RELYING ON INFORMATION PRIOR TO 1998 YOU
WILL RUN A GREAT RISK OF LOSING YOUR MONEY IN THE CURRENT
MARKETS. IT IS ABSOLUTELY IMPORTANT THAT YOU RECOGNIZE
THAT THE MARKETS AND INVESTMENT OPTIONS ARE GOING THROUGH
A MAJOR PERIOD OF FLUX THAT WILL LAST WELL INTO THE NEW
MILLENNIUM AND THEREFORE YOU MUST BE PREPARED TO KEEP UP
WITH THE CHANGES AND NEW STRATEGIES AS THEY
OCCUR.
Remember the key to the Hannaian system of stock research
is Intellectual Property acquisition. your goal is to
acquire bits and pieces, if not the entire piece of
valuable intellectual property. Our trading and
investment strategies are designed specifically to
accomplish this goal either through private or public
investments. The following information deals specifically
with public transactions.
Part 1. General
Research.
When researching public companies & securities
realize there are many ways to reach the same goal.
However your research process should cover two basic
levels of research principles:
A. First you must identify potentially
valuable companies. We refer to this step as "The
Identification or I.D. Phase"
B. Next you must fully research them. We refer
to this as the "Acquisition Phase".
In the I.D. Phase the goal is to initially find issues
that may have merit. There are generally five ways we use
to initially identify such stocks.
1. Review and closely follow the stocks and
criteria listed in the HIPS Research Report.
2. Use stock screens, which can be accessed from the
research Tools Page to enter in specific criteria you
desire to search for. e.g. all stocks under $2, in the
computer software security sector. You can get pretty
specific with stock screens. Several are listed on the
Stock research tools page some do a better job than
others. One of our favorites is the stock screen at
www.wsrn.com
3. There are various sites around the Internet that
provide information on stock picks. We refer to these
as "Tip Sheet" sites. As you find these bookmark your
favorites and visit them regularly. Remember for our
system the ones that cover small priced issues and
technology stocks are the best. We are developing an
organized list of these sites for your use. Many of
them can be accessed form our Stock Research Tools
page. Try to stay away from
sites or services which are paid to hype or advertise
stocks.
4. There are many message boards and chat rooms on the
Internet which discuss stocks. Be extra careful about
the advice you get here. However, many times these
services will provide valuable initial picks in
addition to research information to be used in the
Acquisition phase. Many times these message Boards
will reveal information from individuals who are very
familiar with the management and other aspects of the
company which is not otherwise widely available.
Always remember that these boards are susceptible to
people illegally pumping up stocks, so do not buy into
a stock just because it was recommended here. Our
recommendation is to regularly visit the Yahoo, Raging
Bull, and Quicken message boards.
5. Regularly searching the news in the sectors you are
interested in will many times identify general trends
and sectors which you may want to concentrate your
initial efforts in. Your general knowledge of what is
happening particularly in the technology, software,
telecommunications, wireless, broadband, computer, and
Internet sectors is very important at this time.
Regularly review the hot sectors identified in the
"Sector Updates" area of the H.I.P.S. focus page. You
should consistently search the News sources in these
areas. There are many News sources which cover these
areas as they are related to the stock market. When
researching the news look for companies in industries
which are currently in the news or likely to be
newsworthy in the future. Remember that in our media
driven economy everything moves with media attention,
stocks prices are no different. This is especially
important for short term trades. In particular most
investors come from the "Dumb Money" sector, they
don't research properly and depend heavily on any
broker or other advice they come across. Most
importantly they buy primarily on news. This "Dumb
Money" can have a significant affect on short term
price moves. Remember however if the stock is not
fundamentally sound or if the HIPS criteria do not
indicate that it is a long term buy and hold, you must
be ready to take profits quickly if the stock has no
other basis in strength other than news.
The Acquisition Phase of your research is used to
provide in depth research into a company and to refine
your focus and following of issues you may buy or sell.
The key to this phase is to closely follow the criteria
used in the HIPS Research System. You will evaluate each
identified stock on the basis of these criteria. It may
take some time to adequately complete this phase and in
some respects it is always ongoing, because even if you
purchase the issue, you must continue to research and
follow it to provide the necessary information needed to
maximize your profits in it. A good general research site
to begin with is www.wsrn.com
Part 2. Rules To
Remember.
The following are some research rules used to
effectively find appropriate securities to trade and
invest in when using the HIPS Research System.:
1. Read carefully and keep in mind the information in
the section "Private versus Public Investments".
2. Read carefully and follow the information in the
section "Understanding Value in Intellectual
Properties".
3. Follow closely and keep
updated to the information and stock focus in the
Hannaian Stock Research Center, and the Hannaian Finance
& Investments Website, Newsletters and the "Playing
The Right Ball Game" broadcast.. You will find this
information to be invaluable. Most of the information is
designed specifically for the operation of our
intellectual property acquisition business and in its
context cannot be found anywhere else. Be thoroughly
familiar with the criteria used HIPS Report and
explained in the HIPS glossary and get proficient at
evaluating stocks using these criteria.. Understand
and regularly follow the "Sector Updates"
section.
4. Follow the rules of the "Stock Investment Tool Kit"
to identify companies which are intellectual property
rich and otherwise meet your trading and investment
criteria.
5. Become familiar with and stay abreast of the
"Hannaian Stock Tools Research Listings". This listing is
constantly updated with the latest and best trading &
investment research tools on the Internet.
6. Utilize your computer and Internet connection as
your first line of research.
7. Be prepared to follow up on
your research with non-Internet sources. You may even
need to call the company for direct information, or to
call their competitors. researching the Company directly
is an important part of your research and one which the
Network is designed to assist in. You may also contact
the Hannaian company for contact names of Network members
in the geographical area where a company being researched
is located. These network members who have agreed to
perform on site inspections or research on their local
companies will be happy to assist in giving you valuable
local input on such companies. You want information about
how the company is performing, how it treats its
employees, what is its local reputation, what do the
locals say about its competitors, what about the quality
and character of its products, its management, its
facilities etc. What does the local newspapers,
particularly the business newspapers say about it. The
local better business bureau and chamber of commerce
involvement. The onsite local evaluation of small
emerging companies is particularly important since
information on them may not be widely
available..
8. Run stock screens to discover the companies with
the criteria you are search for. Screens allow you to
search for stocks which meet certain criteria. There are
many screens avaialable on the Internet and in stand
alone programs, they are all different and each have
their strengths and weaknesses. Different screens should
be used for particular purposes. One good general
screening idea is to start with the most inexpensive
stock issues first and work up. You must periodically
revisit these stocks by rescreening preferably on a
biweekly basis. You can find the screening tools we
recommend on our Stock Tools Research Listings.
9. Utilize one of the free stock tracking tools we
list to keep constant track of your portfolio and other
stocks you are following. You may need to use two or
three different tools to access all of the features you
need since each tool may have unique strengths e.g., real
time quotes, standalone ticker bar that's always visible
on your screen, minute by minute tracking of stock
purchases or sales etc. Our recommendation at this time
is MedVed Quote Tracker available for download
free from our Stock Research Tools page. Another good
tracker is Internet Trader, also available from
the Stock research Tools page. One interesting feature of
Internet Trader is its ability to screen stocks, do so
automatically over time and configure the reports as you
perfer the colums to be organized. This makes it an
excellent research tool in additionn to a good stock
tracker. One tip to keep in mind when using its Global
Scan screening feature is that it will not show all of
the stocks it pulls up on a screen if there is a large
amount. however if you print the report it will print out
all of them.
10. Establish several accounts with online discount
brokers if possible. This gives you access to several
sources of proprietary research and research tools and
methods. You can research the various online brokers at
or Stock Research Tools page. If you want to participate
in market making activities and professional short term
trading you should get an account with a brokerage
service like The
Executioner in order to participate at this
level.
11. Make sure that the brokers you select meet as much
of the following criteria as possible;
a. Allow trading without extra costs on
OTC:BBB stocks, International stocks, and penny
stocks
b. Provide check writing privileges to access the cash
in the account
c. Pay a good rate of interest on the cash balance in
the account.
d. Allow phone trades at a reasonable price or at no
difference to Internet placed trades.
e. Allow access to trade Initial Public Offerings
(IPOs).
f. Have adequate Internet and phone access during
times of heavy trading.
g. Provide real time quote access.
h. Provide margin accounts at low rates.
i. Provide the ability to trade options.
j. Provide NASDAQ level II quotes
12. Follow the news and message boards on the stocks
you are researching.
13. Look for stocks with criteria as identified in the
Stock Tool Kit.
14. Always use limit orders to purchase stock rather
than market orders.
15. Try not to buy or trade stock at the open of
trading wait until the middle of the day or at the end of
the day if possible.
16. Follow the stocks in real time rather than delayed
time.
17. Have all account and trading information handy at
all times.
18. Have access to a computer with the stock tracking
software running throughout the trading hours if
possible.
19. Watch sharp spikes in the price of a stock and
attempt to take profits just before the peak or before it
inevitably falls down again.
20. Carefully study the chart patterns of stocks in
general and ones you intend to buy.
21. Don't be greedy. Start to consider taking some
profits after a stock has accumulated more than a 25%
gain, but try and understand why the price is increasing
before doing so. Carefully watch stocks which have moved
from immature status to a mature status. This is
indicated on the HIPS report by highlighting in yellow.
Stocks which make this change may start to behave
differently and can run far up in price quickly. Do not
be too quick to sell these stocks.
22. Be more ready to take some profits in stocks which
rise very quickly or which tend to be very volatile.
23. Don't be too quick to sell because of fluctuations
in price. Remember the many market variables may
transiently affect prices but over the longer run if the
criteria you picked the stock for in the first place is
still intact, holding the stock probably remains
wise.
24. In researching the fundamentals of a company look
at the details of the financial statements, SEC filings,
natrional and local area news to determine the following:
Ability to generate cash flow through total revenue
derived from their basic business operations; licensing
revenue from their intellectual property holdings;
ability to obtain additional funding and credit;
dependence on market acceptance of their products;
dependence on a limited number of customers; lack of
significant sales and distribution channels; ability to
timely develop new products; business conditions and
growth in their industry and the general economy; .
competitive factors, such as rival providers of similar
products, technology or intellectual properties; price
pressures; compatibility of the products with a wide
variety of configurations and other products; reliance on
sole source contract manufacturers and component
suppliers; dependence on a limited number of key
personnel; rapidity of technological changes in the
company and industry.
25. Look at the track record of the company, how long
has it been in business, how many employees does it have,
what is the institutional interest and investment in it,
what was its financial performance in the past year, what
is its market capitalization, and is it actually making
profits. Remember however that solid fundamentals are not
essential to growth in stock price, many other things
influence the price of a stock (e.g. remember the first
Internet stocks).
26. Remember the "Growth Without Earnings"
priniciple and benefits which publicly traded companies
have over private companies. In other words as long as
you are satisfied with reaping your rewards from the sale
of stock when the price of the shares rise, rather than
dependig on dividend payments when a company earns a
profit, your dependence on the fundamentals of the
company does not have to be absolute. In fact most of the
money made in securities trading and investment oriented
businesses come from the growth in stock prices rather
than dividends from profits earned in the operation of
the business. This means that your emphasis should be on
finding companies which primarily provide stock price
growth. Companies which pay dividends usually have slower
growth even though these companies are usually profitable
business operations, since they must be to declare and
pay dividends.
27. Remember you must research the competitors of any
company you intend to buy into.
28. Look for companies that Wall Street and
established analysts have not yet discovered or which
have not yet become fashionable, or which have been
dropped from the popular lists. Remember that the vast
majority of investors do not do their homework and will
generally follow the herd. They blindly follow what's in
the news and what seems to be in fashion with Wall Street
and other people. By the time a stock becomes fashionable
it is generally too late to profit from it because the
herd has already taken it to premium prices. The 5-10% of
investors who truly do their homework and who are truly
successful try to find companies which are just emerging
with good fundamentals, low debt, good management. And
most importantly which Wall Street has not yet
discovered. Remember at one time Microsoft, Dell and all
of the major public companies today were small emerging
companies. The good researchers job s to discover these
companies before they become popular in the market. This
is the reason you must operate your trading and
investments as a business. This is how you distinguish
your operation from the herd of investors simply pouring
their money into the markets without proper research.
Remember the key to your success is research, research,
more research, and close, close, and consistent
following, and watching your money. There really is no
better solution.
29. Look for stocks with small outstanding stock
floats, since these are more likely to move up more
quickly with less trading volume. But remember they can
also move down more quickly. These stocks can also be
good for trading as they tend to be volatile, so they
must be watched closely.
30. A general rule, buy stocks when they are
unpopular, sell stocks when they are popular.
31. Develop a consultant source of experts in new
technologies, software development, computer programming
etc. You may need to contact members of this group from
time to time to analyse technical information and give
insight you need to complete your research. These
individuals may be friends, family or anyone you meet who
be have technical knowledge about the kind of
technologies we generally invest in. They will generally
be happy to help you because of your interest in things
they do for a living. Remember that one of the advantages
of the Network is that there may be affiliates who are
experts in the areas you are researching contact Hannaian
to find these individuals.
32. Forward the names and other
information on any stock you feel is worthy of a full
HIPS evaluation, or which may you need additional help
researching to the Hannaian Company. Use email whenever
possible to HIPS@hannaian.com. The issue will be
evaluated and a report sent back to you as time allows.
If the stock meets the criteria for listing in the
official HIPS Research Report it will be added to
coverage for all members of the Network to view. This is
an important concept in our networking process of sharing
information and research in order to reduce the
duplication of efforts and expand the opportunities for
success.
33. Follow Money Flow Indicators......Following
the charts on money flow into stocks and sectors will
provide an important indicator into the potential for
price accumulation. In addition on a short term trading
basis the following of large block trades will give some
indication of where a stock may be going in the short
run. Such large block trades particularly in small priced
issues and OTC:BB issues are significant indicators of
where the stock price is headed. Obviously an increase in
money flow indicates a rise in price, and a decrease in
money flow indicates a fall in price. There are several
charting sites and programs that provide such money flow
indicators and real time Time & Sales
information.
34. An important research TIP is to visit the
OTCBB.com site daily to review what stocks are being
added to the OTCBB, which ones are being relisted and
delisted. This can easily be done by clicking on the
OTCBB link in QuickTrader on when using WebLine and then
on the item "Today's Changes" on the main menu on the
OTCBB.com site. If you check it on most days for example
you will see that several stocks that moved to the active
listings and ones that got rid of their fifth letter "E"
responded well to the change in their status and
immediately gained some in price. This is a very
important research technique to use to get some quick
profits on the change in status of these stocks. Likewise
you will find stocks that are about to be delisted and
which will drop in price and if you are holding them you
can get out and save some money. In doing this research
if you find HIPS stocks on these change lists please
report them on WebLine as soon as possible. In addition,
by clicking on the menu item "Daily List" you can search
for "Anticipated Additions and Deletions" This is another
important research tool to find moves before they happen
and before most of the market, who may not be as research
savvy as you are.
35. In review, remember this
"Points of Alert Checklist" for initially
identifying your stock picks, look for:
1. Strong Intellectual Property holdings
2. Hot sectors
3. Good news
4. Companies whose stock price has been beaten
down
5. High Competitive Rating
6. Low Market Notice Rating
7. Favourable Technical and Behavioral Analysis of the
graphical charts for potentially high "Trading
Performance".
8. Small float
9. Significant sales and/or licensing revenue
generation
10. Significant amount of cash on hand available
11. Large percentage of instituional investment &
ownership
12. Type and quality of institutional investors
related to core business (e.g. Microsft or Intel as an
investor in a micro chip designer or manufacturer)
13. Important business partners and relationships
14. Low priced stocks with large market
capitalization.
15. Low priced stocks trading on the major markets,
NasdaqNM, NYSE, AMEX.
16. High insider stock ownership
Click here to Download
The HIPS Stock Research Log ...used to
facilitate the researching of stocks