Jim Roppel: Liquidity, Cushion and 30 Years Of Studying Bill O’Neil

okay everybody welcome to investing with ibd podcast sponsored by vantagepoint it's wednesday august 4th 2021 and i'm your host justin nielsen and of course i'm joined by my partner in crime arusha purist o'neill global advisors portfolio manager and our guest today is jim ropel founder of robocapital management uh welcome jim back to the show great to be here it's been a long time how's it okay well you know i mean i feel like we get to talk to you all the time uh we're lucky uh you've been a a long time canceling investor i think we met at one of the masters programs where you came to hear bill speak um and of course you were always kind of sneaking in those special meetings with bill so a lot of uh insight that you got from the founder of course uh william o'neill over your time uh joining those seminars but man you've really become a wealth of knowledge yourself uh you've got the girlstockmentor.com and of course people can follow you at twitter at upticken so there's a lot of places where people can kind of get your information but let's get into a little bit about what we're going to talk about today on our agenda we're going to talk about the current market we're also going to look at two of the things that jim finds to be critical for his stock market success specifically liquidity and cushion and maybe a little bit about how he got off the razor's edge so he could get a little bit higher quality of life and as always we are going to end with some stock ideas from jim so let's go ahead and get started arusha how about the market uh we've got a lot of distribution days on the s p 500 at six we've got maybe four distribution days on the nasdaq but doesn't seem to phase those indexes uh they're you know right right there at new highs we made a closing high yesterday on the s p 500. uh the nasdaq is you know just just moments away from a closing high as well uh it's the russell 2000 that seems to be having the trouble as that gets stuck below its 50-day moving average what are your thoughts you know this this market continues to be resilient it continues to find a floor pretty quickly sometimes we'll have these sell-offs that last a day or two and then all of a sudden everything's back to normal and everything's good it's just been a very quick shakeout so here's the the s p 500 and i'll pull up the nasdaq too and i think the real lesson here is you know you want to give your stocks a little bit of room a little bit of wiggle room if they come in especially in the morning especially earlier in the week right to see if they can recover uh jim let's get your thoughts on this uh on this market and uh how how are you handling it you know billy used to say a lot the market will scare you out or wear you out and in this case it's been wearing up me and a lot of people out it's it's it's such a mixed response to earnings uh you had a big rally about ended about three weeks ago that was really driving a lot of liquid leaders and they've all cooled and they've retraced back to their pivots or undercut so it's been kind of mushy it's it's not a really firm market you've had a few breakaway gaps which have been exceptional right but in general they're kind of languishing so if you're a intermediate term trend follower or a congestion breakout method you're really struggling now if you retired from some company and bought the indexes you know four months ago you're like this is great you're an investor and you're just chill like if if your money management routine is just turn the computer off and go play tennis this has been great but if you have real risk management you've been getting chopped up so you may have got a um fortune and caught a couple really good ones but in general uh it's been tough lately yeah and there's been this kind of rotation that's been going on i mean you know just recently i mean you had energy and materials the steel stocks all of those kind of some of the cyclical names that were showing some power you know doing some breakouts but then it seems like the next day they're out of favor a couple days later they're back in favor and you know meanwhile tech is kind of uh you either have one or the other you either have tech doing well and the the cyclical's not or vice versa um has has that affected you at all jim with that rotation again kind of adding to that mushiness it it really did significantly uh at the beginning of the year i was up pretty pretty strongly and then the cyclicals came into uh favor and they only pseudo meet can slim variables like well i think if bill was here he'd go well the new high list is the greatest list in the world which was jammed with commodity stocks but when you look at the cop rating their earnings are bad or there's there's a lot of fundamental variables that don't fit can slim they're not like crowdstrike or docu which you know fit everything so you have to take a leap of faith to go with the commodity names and then the rally did not have persistence uh i mean lumber's percent off the high uh the oil stocks copper they've all broken down so and then growth came back so you know the bane of a trend follower is whipsaw right so you get a start and then no follow through and like i was discussing all those liquid leaders we had that rallied really hard they then did not follow through they follow through's been tough to gate lately it's and that's a kind of a good thing because the market's really showing you what the big money is really willing to support and not so when the market really does come on we may have a clue but yeah earlier i mean it's like there's not much of a pullback in the indexes you're seeing in the in the individual stocks but meanwhile the s p 500 and nasdaq are maybe correcting you know three percent at most and then coming right back well i would agree a 100 that's a perfect uh example of what's going on but if you look at the percentage of stocks above the 150 day moving average it's around 40 it's down from 80 to around 30 40 percent or something under the hood under you know your mega cap liquid leaders have held this market up and persevered google's right at the high microsoft all of them but under the hood there's a lot of damage a lot lot you know how do you have only 35 to 40 of all the stocks above the 150 day it's been you know tough sledding yeah jim getting back to the the commodities industrial stocks uh one one thing that i found because i was trying some of those when they were come coming about uh first there wasn't a lot of fall through but one one thing that i struggled and i would get shaken out a little bit quicker on those stocks because i didn't have the conviction it's like sure okay some steel stocks are going well and i kind of get the infrastructure and all this all this kind of stuff but it's not like understanding like a classic can slim stock like a docusign or or one of these crowdstrike or one of these stocks you might actually be using their service and so that conviction i found you know has really made it hard for me to hold up those stocks that i i just don't understand i mean does that affect you are you just going more on the price and volume if you're trying to go uh really kind of out of your or your circle of expertise every stock where i've made thunder money i intimately understood the variables just every in i intimately understood those companies the companies that i buy because they have a very nice pattern and a great breakout and i pseudo understand are the ones i'll get shaken out of immediately identical to you if i don't believe intrinsically in the story i'm i'm likely to get whipped out i mean rules will keep you in or maybe sometimes there'll be a breakaway and it'll get so strong so quickly uh i will get familiar with the fundamentals deeply quickly but in general the names that i've killed it in i knew what was going on while it was in the base or i'd seen it in prior cycles where it maybe had a you know in the early days it had a run but it really didn't have the institutional sponsorship yet and then a couple years later it came out and i i already known it from a long broadcom was one of them uh sandisk was one of them uh so the bottom line is if you don't understand the story you are going to be the one causing the shakeout and one thing jim also is you reminded me of a question right here is you have experience talking about broadcom and sandisk so so you have a good reservoir experience to lean back on and there are going to be times right especially for a can slim growth investor where the markets are going up and you're just kind of getting whipped around how have you in the past when you worked yourself kind of out of it because obviously it's very very frustrating how have you in the past kind of kept up the faith and things like that because obviously a lot of people and i've gone through it plenty of times and every single time you know there is in the back of my head like why am i doing this maybe it's like it's getting so frustrating you start to question life okay this is this is really opportune at this moment sometimes people will have a stock and they'll get really lucky and it'll go to mars and they'll think it was luck but if you're using canned slim it's not luck you pick the right stock based on all the critical variables and you did it right and i've done this for 30 years now the first time you might think ah it's a fluke i'm not that smart i'm not taking that smart but i can follow instructions pretty well you do it again and again and again over 30 years and you compound out your money for 30 years like i've seen a million i've seen 15 slow summers out of 30 years but let's go back to why this is all happening it's capitalism it's free markets and it's freedom and it's in america until the golden goose of capitalism is snuffed out by socialism there will be entrepreneurs trying to better their lives level up innovate create a new product in their garage they're going to need capital they're going to go public it's going to form a perfect base it's going to have 100 sales and earnings growth it's going to have a 99 copyrighting it's going to come ripping out and it's never going to end as long as capitalism is what we use to govern our our economy it's not gonna end it's just we've had a perfect record of it it's not stopped since this country was founded and it's it's not going to stop so you can bank when you go to bed tonight you're like oh the market's weak and it's mushy and i missed you know moderna rest assured there's going to be five or six more monsters this year there's going to be 20 true market leaders every year for the rest of your life it's just are you going to use the template to identify them do you have the emotional control and discipline to stay with the plan and that's it if you don't have the emotional control in the discipline all the tmls in the world presented to you on a plate you're going to screw it up anybody could in about 20 minutes you can learn how to screen with market smith to pick all the all the leading stocks it might take you 22 years to 20 years to figure out how to emotionally how to deal with it and make the money so and as you said it's it's not really about luck if you're using those rules you know it's almost like an inevitability that you are going to catch one of those big market leaders but as you said it's learning how to handle them is the is the big issue now if we could just step back a little bit to the overall market um what you know are you looking at the day-to-day that much or is is your market view a little bit different jim in terms of uh how that is influencing your maybe exposure levels or how aggressive you're getting or when you may be raising cash as i've aged i have become more conservative and i don't i do watch the market every day most of the day i try never to watch tick by tick i think that's you know counterproductive but the markets become mushy and i don't want to swing the bat when i'm down i want more confidence that the market is going to support the names and it's it's the dog days of summer the big dogs are out on long island you know playing squash and golf and yachting the grunts are in the shop and the grunts don't make the world don't make the market levitate the big whales do so until they come back i'm patient i don't when you're in a hole stop digging okay uh you want to protect your mental capital in a mushy period and be prepped mental capital might be more important than monetary capital right when and if you're down three four five percent don't sweat it okay you can make that back in in a week five six days and beyond that if you are using can slim it shouldn't shock you when you make money you're following a really proven model that's worked for a long long time so if you get out of sync just redouble your efforts and what variable wasn't there what did i overlook because it works and it's going to continue to work because human psychology is what drives the market and that's not going to change human dna is fear and greed and that's what runs this market it's until you change human dna can slim is going to work so after the break we're going to get into uh some of those variables specifically liquidity and cushion that you look at so that you can kind of uh you know get a little bit better at getting through the mushiness so and increase your odds of success because really that's what we're all looking to do so stay tuned we'll be right back do you feel like you're always late to the best trades you don't have to kick yourself for those missed opportunities any longer today is your day vantage points artificial intelligence has helped traders of all experience levels with its predictive analysis forecasting visit www.freestockcoaching.com and find out how their ai automatically recognizes global market patterns well ahead of the news to help you pick the best trade go to www.freestockcoaching.com to join a free live training session today vantagepoint's patented artificial intelligence can give you a massive edge don't hesitate save your seat now trading involves financial risk and is not suitable for all investors past results not guarantee future performance welcome back to investing with ibd sponsored by vantagepoint i'm your host justin nielsen and arusha is joining me he put on a jacket today jim didn't get the memo unfortunately he's our guest jim ropel uh thanks so much for coming on the show jim you were talking a lot about these overall trends uh with with the market but let's start getting into the variables um that you you use most of all arusha where do you want to start yeah so jim let's go into liquidity because we talk about this a lot in ibd live in in in a number of different formats but this is an incredibly important concept so first let's start off with just the final liquidity just to make sure we're all on the same page and then and then we'll go further there so so what what is liquidity and and what specifically are you looking for in stocks all right the best measure i know is average daily dollar volume so it's share price times average daily volume so if a stock trades a million shares a day and it's three dollar stock it's illiquid it's nothing it's irrelevant but if it trades a million shares a day it's 300 now you're talking about liquidity and a lot of times i'll get the question is jim what's the secret give me one secret you know and there's there's several very important things but one of them like the magic pixie dust the magic elixir is liquidity plus large earnings growth because when you think like a large hedge fund manager when you're running hundreds of millions of dollars and you know most funds are probably running 30 40 stocks you're still looking at putting 20 million dollars in one name now where can you go okay you cannot go buy a stock that trades 30 million dollars a day you just cannot do it even if you bought it every single day and it's probably really hard for it was i i i couldn't grasp the concept until i started to run a lot of money when you're running million two three four five million dollars liquidity you don't think it matters but it does you wanna know where someone's gonna be in there buying every day for 30 days where maybe there's a complex like fidelity where there's four or five funds that are 30 billion or greater and that semiconductor analyst is going to visit all four of those managers and they're going to say what's your favorite semi so they're slowly going to pick it up and all the funds if it's great like nvidia is a perfect example of higher earnings growth and liquidity what's the p e ratio going to be on a on a company that has very high liquidity and earnings growth compared to a company that has super high earnings growth with no liquidity it's going to be double or triple on the bigger liquidity name uh and plus you know we're all in this for the reason i think most people invest is to make their life better your life is not better when your stock is whipping up and down 12 a day huge ship so when you know that there are major institutions in there and somebody wants to let rip with four percent of all the shears there's people there to to absorb that that that supply now when you have a little illiquid name that trades three four hundred thousand a day two hundred thousand and somebody wants to sell that much it's going down and there's nobody there to buy it yeah now does it matter if the stock goes from 40 to 400 if you can't sit in it it doesn't matter at all liquidity is the magic fairy dust it's this it's a secret but people don't understand it because they don't run hundreds of millions now you talked about this dog's day dog days of summer here and we are looking at in a lot of cases much lower volume so you might have something that maybe trades normally a very liquid amount on a daily basis but you know we're looking at our screens and it's like trading negative 50 percent uh versus its average uh is that something where it ever scares you like okay this is normally liquid but today does it have does it have the capability of absorbing my my trade well i love it when the volume goes to zero after a massive gap up but in general when the volume in the whole market goes down i don't like that and i also really find you know when i got started there was 10 000 public companies right we're around 5 000. so the big ones have gotten bigger and then the liquidity just been up it's just gone away uh yeah and disturbs me a lot um it reduces the number of names that people who are running 200 million or more can buy down to maybe a pool of 300 and when you screen out for key variables it really shrinks that list up so actually it even makes the crowded uh the liquid names crowded so i think you know for me i love a name that is 9 to 20 billion you know the lower end of of big cap mid cap i love because if you can catch one of those you know the secret like the recipe is sitting through five six earnings beats in a 10 billion dollar name as it goes to 60 billion right okay that's a life changer you do that six times in your life you can go from private jet or from first class to private jet or from bicycle to car or car or whatever you can level up your life if you do that if you do that five times in your life you're going to be rich yeah and jim i i think there's there's another concept here that you're you're talking about that that i really just want to highlight you're very very specific on on what you're looking for right obviously you can slim you're using the characteristics there making sure has good earnings has a lot of liquidity and not only because this works and there's a lot of institutions that are going to push it up and goes from a 10 10 billion dollar market cap to 60 billion but there is a characteristic there's a behavior in these stocks when they're being accumulated when they're slowly crawling up and then when they're being distributed and the more you study that the more you get experience in it you're truly going to be a master just at that very specific type of stock if you're going to get a name that is going to go from 10 billion market cap to 40 billion or 60 you're going to have to sit through let's just say every single year let's say you have to sit for 18 to 24 months you're gonna you must if you want to study history and all the tmls you're going to have to sit through four three to six pullbacks to the 50 day every year which are going to be 10 to i'm sorry depending on a mushy mark like mushy market a 10 pullback will get you to the 50 right now but under animal spirits market your pullback is going to be 30 percent you need to say how am i going to get through this pullback because it i guarantee you if you're going to be in there for 18 months you're going to have six seven pullbacks to the 50 today and even undercuts so anytime you're in a stock that is historically above the 50-day moving average by a large percentage you have to ask yourself can i take it down to the 50 and if you can't you've got to hedge or lighten your load or you will never make it and again what good is it knowing is if you had forward looking information you knew it was going to quadruple but you couldn't sit through those pullbacks it doesn't matter so you have to be able to sit through those the inevitable pullbacks but if you study the monsters they all do it and they generally if the fundamentals are solid will will get support around or below the 50 and come back and make all-time new highs yeah and it's a hard thing to do because when when it's i mean theoretically when you see a stock that's had this big move and you keep on using the phrase tml which is true market leader so you see one of these true market leaders and you know it seems easy oh yeah i just you know it comes comes down to the 50 and i would just buy it it's just that simple but you know as as the boxing legend said you know everyone has a plan until they get punched in the face and it feels like a punch in the face when you get down to the 50 and you've got a drop of you know 20 30 especially if it's one of your larger positions you know you start doing the math and it's like that's that's a bit of a hit to the portfolio oh and and it's not just one stock too right it's like you have five six stocks all doing that at the same time yeah for sure people go well are you diversified and i'm yeah well i'm diversified in eight growth stocks tesla breaks crowd styx is going to break it doesn't matter that one's an automotive and wants a semiconductor or whatever security stock high growth gets pummeled in the same day um but listen if you have studied history and maybe you've had a few you have confidence and confidence is critical to this game believing that you are worth worth it that you're that you're worth making a lot of money that the system works and you can make a lot of money and then having so much confidence that when it pulls back from 80 to 70 or 65 that you have a disregard for that money that you know you feel confident that you'll make it back uh if you're paranoid like oh if the money's too valuable you will sell and you will sell at the worst time because i've done it a thousand times i've done it listen i've done that every year at least three or four times a year for 30 years okay but don't let that bother you get back on your horse redouble your efforts and get back in there i mean i remember at my dad's i'm gonna take this too far i was at my dad's desk going through all my all my trades all my losses and i was cutting everyone at five six seven percent i go you know one day i'm going to stumble into a monster and sure as the sun came up the next day it happened and then it happened again and then it happened again and then it happened over 30 years so i stretched that all over the place sorry no no that that was good uh now you you touched on this a little bit jim uh but the concept of having a cushion when you have a cushion knowing how to to play that too because and and this is what i've i've fallen trapped too sometimes i'll get this really nice cushion on the stock and that profit is just burning a hole in my pocket right and and i all i want to do is is lock in the gains it's there there's always that kind of universal question on when do you you know lock in your profits versus you have this really great question let's try to go for kind of the the life-changing kind of event that that you were talking about earlier well if as you when you are in the need phase of your life making five ten thousand dollars is could be a is a game it was a game-changer for me i sold the stock called macro media up hundred dollars because i needed a new timing chain on my honda acura and it went up like you know call it fifteen thousand yeah and then another stock i had and you know i sold and made my fifteen hundred dollars and i was i was in the need phase of my life but the more stocks that you capture money in the more you're going to go wow i missed on i i nailed down 1500 but i would have made 10 grand so you make 1500 a couple more times and then you're like i don't care about fifteen hundred dollars anymore right now i've seen that i could have made 10 grand and then you make 10 g's that one goes up 50. and also enough 50 is your your bogey and then you're like well i sold one up 50 but if i would have held it i would have made 100 and then it's going to be a million and that is possible for everybody listening right and you know you keep on coming back to this confidence thing i just want to share real quick that one of the things that you know in my time working for bill o'neil uh you know people would ask you know him to autograph their books all the time and i will say that the number one thing that i would see him write in people's books was you can do it i wrote that in my book justin i mean seriously 2002. uh edition two i still have it yep you guys i'm a bill knockoff i didn't invent anything the japanese had it right why reinvent the wheel bill wrote the book it works just follow the you know i owe this all to bill i followed him around like a little school boy for 30 years you know i didn't i just listened i hung on every word i wrote every word down and i implemented it and a lot of times i screwed it up but i didn't give up and most people do you get into a market like this and you know i have bills stuck in the back of my head stay with it you can do it so when you get a mushy market like this and maybe you're down a little bit you have to have bill on your shoulder telling you chill it out america is the greatest country in the world the entrepreneurs are in their garage right now inventing things that we can't even think about it's true the next tesla is only six months well i don't know about tesla but the next tesla's within the next two or three years a major innovation look at that especially you look you look at the ipo market that we've had this year how many innovative companies have been coming out it's incredible yeah i mean i'm i don't love ipos because they don't have a lot of things i'm looking for like earnings and writing and institutional sponsorship right but if you're just screening for the can slim template if it's a ipo and it fits the template it's going to it's going to show up so i would professor tell people don't look for ipos look for the can slim template it's as much as i dislike ipos i've been in a lot of the monsters not because i was looking for them but because i was looking for the canslim model template right now jim also get giving you know following the cancelling template using a lot of weekly charts giving stocks room to breathe and slowly trend up yeah that kind of goes against what a lot of people will fall will will start doing especially once they learn how to read charts or they have a brokerage platform with all the codes flashing where they start watching it way too closely and they feel like they have to trade all the time you learned a valuable lesson about the quality of life and just you know living a good life in addition to doing well in the markets one day when you when you're taking a shower right well i was building a house and i you know i was kind of you know listen i'm not knocking people who swing trade or day trade but you're living on a razor's edge what's your quality of life and i and i kind of did a lot of heavy leverage super concentrated stuff to build up my war chest it's super high risk and i was i was a lot younger i'm 56 man i've been doing this for 30 years it's amazing but once you make some money you amass some size you know i was building the house and i'm like dad in the shower i'm going to take one of these things out i'm going to have to put a shelf back there so i can put a laptop up there and see see the quotes and my dad's like what are you talking about because you want to live like that and i go well i don't know i do i and i realized i don't uh i want to listen we are do we're all investing to have a better life if you're rich and you're like all the time that's no life that's no that's not i'm not in it for that i'm in it i'm not saying i'm a peaceful tranquil dude but maybe on the inside i'm a lot more tranquil than i am on the outside i'm pretty animated in things but i do meditate almost every day i do really try to live a balanced life now i love this to me it's the world's greatest chess game and people ask me a lot what are you gonna quit and i'm like i don't see that happening i enjoy it too much but i'm not into the volatility i'm not into the big drawdown i'm not trying to win back or swing the bat all the time i'm trying to chill enjoy my life play the game the greatest chess game in the world horse racing's got nothing on the stock market man um yeah i want to have a quality of life so my dad led me he was the first one who made me think about that but that was 20 years ago you know um just i know something about those fat pitches you know that come you know some sometimes people feel like they have to do something all the time and that's just not the case i mean sometimes you just have those times where nothing is working and you don't have to do anything you know you can just wait for the market to turn it's detrimental livermore i'm going to butcher his quote but he said no man has reason to trade every day now if it's good enough for him and it's good enough for bill it's good enough for me yeah you know what um listen you don't have to make it all in a year as a fact you're not going to make it all in a year and there's no reason to try if you i think it's such a great quote someone said if you could only make one trade a month with the stock you're about to hit the key enter on be the one why why swing the bat if it's not right over the plate right in the middle of the box there's just there's only be more pitches coming just wait and it was that's probably one of the harder things you know as as we went online i mean you remember 30 years ago it was it was a phone call you had to make in order to put an order in with a broker but now when it's just you can do a click of a button and it's just all so fast you know getting quotes everything it is tempting but um speaking of stocks and ideas uh when we come back from the break we are going to pick jim's brain a little bit and find out some of the ideas that are on his radar right now so stay tuned do you want to conquer market volatility we can help you protect your hard-earned capital visit www.freestockcoaching.com and find out how vantage points ai technology can forecast stock market trends up to 72 hours in advance with incredible accuracy vantage point's patented technology analyzes huge quantities of global data in seconds so you can finally stop guessing what's going to happen next check out www.freestockcoaching.com and experience vantagepoint for free learn how successful traders generate their wealth trading involves financial risk and is not suitable for all investors past results do not guarantee future performance welcome back to investing with ibd podcast sponsored by vantagepoint i'm justin nielsen your host along with arusha pearis and our special guest jim ropel now jim you were talking a lot about some of these qualities uh and you were also mentioning some of the some of the giants in the field jesse livermore and bill o'neil uh arusha you had another question for him though yeah when you were mentioning these these amazing greats and we've all learned from them it really kind of reminded me of just having examples mentorship right and and it really gets back to the service you've been ha well you've been doing this for like six seven months growth stock mentor talk a little bit about it really the goals of that because you didn't necessarily even need to do that i i remember asking you that when you're starting it but uh talk a little bit about kind of your motivation why why you're doing this girl stock mentor you know i i really really like to teach you know it's fun and i like to see people blow up when they learn and grow like my my partner who passed away matt d'souza was a caddy he was a my caddy for years went to college uh came out got me into crypto the hedge fund crypto hedge fund i have is purely because of matt but over the years of playing golf you you go you play 18 holes of golf for four hours and you get to know your caddy and somebody started asking what do you do how'd you do it and they're like god i'd love to learn how to trade so i would go you know get bill's book read it come see me in my office and every three four chapters we'll spend a half hour with you and we'll answer questions well all of a sudden over the years it's been like 30 people and sometimes they have like five guys who want to come in in one week i can't see i don't i don't have that much time so um i do the podcast teach these kids how to trade and then i met adam sarhan he's like jim let's you know blow this thing up and so every monday i take questions on anything regarding the markets really anything i mean uh psychology of the markets setups variables and i'm just trying to teach people how to trade and you know bill bill taught me and i part of it's giving back and i do get this question like well jim why do you charge and i'll tell you why i didn't say i gave the book to the caddies because i used to give the book out to people and then i'd go to read the book like oh it's in the trunk of my car they don't have any skin in the game they're not really interested so if the kid goes out and buys the book now i know he's a gamer now he'll read it if if you you know just i'm looking for people who want to grow and be and blow up and become huge so if you want to do that and you want to you know i got to i was so lucky that i got to talk to bill lee freestone like one-on-one a lot lot lot and i'm not them but i did get a lot of info from them and i try to answer people's questions with them in mind so every monday it's available i i give the best my positions the markets uh temperament i rate the market i you know i give you everything you want to know it's just like having a bill's monday morning call is what i try to replicate that's what i was right i'm a knockoff artist i am not doing any original thinking here yeah and for people that don't know the monday morning call was a call that bill would do uh with you know institutional sales uh with a lot of clients on the phone and it was basically hey this is you know his thoughts of course as part of his routine he was doing a lot of this research over the weekend and so monday morning that's when he would kind of present it uh about a what was it usually 7 a.m pacific time about a half an hour into the uh the the market so again he would take that time every every week and uh make sure you know he kind of let people know where he was at so speaking of where you're at jim right now let's go ahead and start talking about some of the stocks that you've been looking at uh that are on your radar and we'll go ahead and start with cloudflare uh ticker symbol n-e-t and i should also disclose that i do have a position in this myself all right well you know if you go to the weekly the first thing you're going to notice that i noticed is 12 or 14 weeks in a row up and then if you go up to down volume is 3.0 now wow that's incredible but it reminds me you know if you go back to google when google was lighting up the world 10 15 years ago google's up to downline was 3.2 now that's very it's it's very difficult even for a small cap stock but when you get a big cap stock to do this that is super unique it's like driving uh a hugo at 280 miles an hour it's just it's so rare and you know if you look at it my notes fido is in there uh now i you guys don't have one of it you know but on the right-hand side here in market since we have a we have we have a little window here ibd mutual fund index ownership so yeah you can see fidelity contra funds in it and a couple others so these are these are funds that are part of the ibd mutual fund index and so we'll pick up here in this little window one little tidbit information i love it that fido fidelity contra is in there but of the fidelity funds it's my least favorite because they're so big they have to have everything but listen if the analyst who got that manager to buy it goes down the hall to the other manager's office who hasn't they're going to buy it and also these guys start to gang tackle it like just really quick you want to pull up uh nvidia and see how many well it'll only give you three uh yeah well i i think there's only they have i'm not having a mutual fund so yeah i'm not sure what other is it only is maybe only confronts on the only one okay i'll decide or fidelity funds have it so all four so fidelity balance fidelity otc yes and and i don't know i can't remember the fourth one but again this goes to liquidity if it's one of the rare names that has everything and now if we go back to net net has a lot of those characteristics that i'm really looking for um now they aren't earning money but they are beating and the sales growth is ripping i i generally like if i have to sacrifice earnings i want to see triple digit sales growth it doesn't quite meet it but this stock also has the cubby bear effect he's been beating me up for years that i should have this thing my wife was the smart one who bought it at 20 from cubby i think she likes them better than me a couple years ago but uh you know it really has a lot of the variables something like possibly 20 or 30 of all of the internet traffic is serviced some in one way or another by cloudflare yeah investors business daily uses cloudflare too it's you know what when those analysts you guys have come to see me and they're like not only have we done the research but we use it in the company so why it's more and that's a great bill would always say go to the comp go to the use the product go to the store go how many cars are in the lot if you can use these products it really matters but okay so now i'm looking at the chart relative strength is 96. yep the look at the it's a wall of blue bars on the weekly look at that i mean that is not my dad buying a thousand lot that's fidelity buying 300 000 every day for months and again where are what stocks are going to lead you to believe that that's possible that some complex or multiple comp hedge funds complexes are just going to be on the bid and what does on the bid mean on the bid means when there's a big whale seller it's not going to go down much because they'll take all this stock so um i i really like that and i don't own it i i'm if you could go to the daily i'll kind of give example of why first of all i'm not in a really aggressive buy mode and i didn't get it at say 86 or seven right right there and that digestion really i don't know how viable it was it wasn't pristine and then when it came out again over about 110 uh to the right a little bit over here right there i wasn't in love with the general market it was kind of mushy i had a bunch of stock um i think this stock if the market turns up might be i won't say the leader but aim it's a good candidate to be a major leader if not the leader it's liquid now it looks like they are going to report earnings tomorrow after the close tomorrow yes so so so we'll we'll we'll see how how the reaction is it's already up 25 just from the the top of the consolidation uh so yeah it'll be interesting to see okay let's go ahead and take a look at one that was on our radar for a while and seem to kind of drop off that's dexcom the ticker symbol on this is dxcm okay though what occurred four days ago for me has i would say about half of the names that i made a lot of the half of the names that i made the most money so i made a lot of money in eight names started off just like that when you get crushing thunder thunder volume like that can you just go buy one buy to the right was the volume what was the volume that day on this day it was uh up 216 percent and were the share count that day uh 2.4 million or two more more than that but uh 2.4 pretty significant volume on a massive gap up and then the next day it shook a little 500 stock just to let people yeah yes yes exactly so that's that's a dollar volume that's a lot of money so when they do that and then they kind of hold tight if the market turns up the names that gap up a day or two before a follow-through day or within two or three weeks after are going to be your leaders now the market is mushy and we aren't in an uptrend we just need the whole market to turn we need um the market is like a calmed sailboat in the middle of the ocean there's just no wind the deckhands are sitting back drinking a beer there's nothing to do but that wind could come in five minutes you could have if amazon would have had a good report the whole market might have turned yeah right back to dextecom their product is amazing i have a few children who uh use the product to change their life about monitoring their glucose level i believe they're waiting for an fda approval um up to down volumes 2.3 earnings next year in 2022 are supposed to be up 40 percent relative strength is not sky high because it's coming out of a huge base it's 85 and that's generally a little bit low for me i like to like it to be in the 90s i call 80 the floor i think bill would go a little lower i don't like to depending if it's been basing for a long time it has institutions it's got 11 weeks in a row up not counting this week and it's just super steady accumulation i mean that's what you'll see in a lot of monsters um and jim also with the that earnings reaction it was a monster move on on that day but when you look on the weekly chart it was it was also a break out of a a much larger base into all-time highs there are some really good stocks that have a ton of overhead right now and i think cloudflare is an example of another i'm sorry uh snow still broke out yesterday just like it broke out three weeks ago and it got hammered back it's it's much more observable on the daily and i think the reason it broke right uh it right here what broke out yeah so it was a wonderful breakout on 9.9 million shares yep but the overhead i think was just too much and it rammed it back you you certainly got stopped out on that now it ripped it broke out violently again yesterday on a now you have growth pulling back at the same time there you know as well so everything was kind of pulling back i mean overhead is just it's every time you sacrifice one variable a can slim your risk goes up doesn't mean it won't work it just means your risk is higher your risk that it it will fail or and fail badly so i try to listen there's probably about 20 stocks that are tml potent true market leader potential why would you monkey with something that doesn't have all the variables they're all you can buy anything you want you don't have to buy something that doesn't meet all the variables so if i segwayed way away from dexter no no and jim that that gets it so if there if there are 20 stocks right so in your in your portfolio seven eight stocks you're trying to get concentrated positions is it lower than that um okay so five so you only need five of those twenty i'll take eight i'll buy eight okay um but the market's mushy yeah you know if and i don't have big i'm only about 80 percent long i actually have a short position on on the qs right now i am short the queues not the calls on the queues okay but um listen if the market if the wind would come into the sales and that becomes ship the deckhands in this shop are going to get there up and go go go chop chop right i mean i could be 130 long theoretically by early next week if things change yeah i i will move fast and i actually have caught myself being moving back and forth between bearish and bullish way more than normal but you know i've been questioned a lot about that and i would talk to bill one week and he'd say yeah i'm really bullish and i talked to him a week or two later he's like i'm out yeah turn on a dime a lot like and all you listen you have to keep we're in this period where you're probably getting chopped up you have got to change and change when this when the information presents itself but you have to be i have to feel like i'm being forced into it i'm not going to force money in the market because i want to i have to feel compelled to like i'm missing out like i've got to go because if you're just swinging the bat swing in the back you're going to get chopped ribbons and next thing you know you'll be down 20 that's a no good nick yeah you'll get tired out mentally you know and you know it's just it's no good or then the turn will come and you'll miss it right exactly because you'll either be psychologically damaged you're like oh i you know again it knocks down your confidence just as you said before you have to kind of protect your confidence so let's go ahead and switch over to something a little bit different um let's talk about coin uh what is it that you like about this one uh you've mentioned uh crypto uh that you have a crypto fund um what what is it that excites you about this this stock all right if bill were here on this call he would be saying what are you thinking about now i i have a crypto fund and i understand the fundamentals of crypto really really really well so i do see some accumulation in a in a bottoming type pattern of sorts bill would probably never monkey with this but i am so confident in the next five ten years for crypto beyond that it's like jello it's like xerox when you mention to somebody not a sophisticated person but like the average guy in the street who's thinking about buying crypto he's going to go to coinbase he doesn't know what gemini is and he doesn't have a institutional account like at cumberland trading he's going to go here and the this is the on-ramp to the digital world for the average man i see no end to this now i i have a small position in it if i will i actually bought a tiny bit today because of the volume bar i'm kind of working my way into this slowly but i will hit it a lot harder over 250 and over 260 i intend to have my whole position on but bottoming bases are a messy messy affair it's like a downtrend line break it's like a re-test of the 50-day there's no one it's very rare that is a one-and-done like set it and forget it you may have to work around this above and below 250 264. it could be six months but the pot look pl please if you could put up the earnings sales and so okay this is displayed a lot different but look at that look at these quarters right okay i mean these this growth is massive and i don't see i do see competition and i do see margin compression but i don't want to fool around with the brand name leader in probably autonomous driving crypto you know digital is probably one of the biggest innovations in our lifetime and this is just the crux of it now it may take more time to get through the institutional due diligence phase but i real and look relative strength is nine bills hit my hand with a ruler okay but when you're talking about those triple digit numbers just just so people are clear you know because a lot of times you might see a triple digit growth number and it's off of like a penny you know earnings per share or something like that um this you know this is off of 16 cents you know in this latest one um you know and and for the revenue growth again you've had triple digit you know this is this is a 1 billion in the last 1.8 billion in the last quarter so this is triple digit growth off of some real meaningful numbers not you know not some small numbers here yeah bill would say to me when you have a stock that has triple digits sales and earnings growth it it can go so much farther than anyone thinks before it breaks the 50. he he basically didn't forbade me but he's like you you can't sell that triple digits sales and earnings growth until it breaks the 50. and i've had a few that have gone to mars and this has the possibility look zoom zm is not over can we just look at the sales and earnings there guys hello eight quarters yeah look at those numbers um the relative strength is 74 and it's really crummy but you've got three buy points here a little over 400 little over 450 and then through the highs at 590. that's just a gigantic base that looks just like broadcom when i bought broadcom in 1989. um you know no one's got i'm segwayed this thing's so far off no keep going you get triple due to sales and earnest growth there might only be 10 companies in the whole market maybe five that have liquidity in that listen get your laser beam out and focus on this i'm holding this thing from like a hundred or something i don't even know and i had no listen i hedged through the top and all the way down but i'm i'm unhedged right now i think this thing could come out and i again the relative thing is 74 the ghost you know bill would be beating me up and not he would say you need to be in the leaders of the day but i'm also not into paying taxes like bill was cool with the paying the taxes uh i'm into making the money and i think this stock could re resurge so yeah it has some overhead supply that has to work through so it may take a little bit of while but yeah i mean you never want to lose track of of a stock with zoo the potential as zoom we're using obviously zoom right now to do the the podcast just very very quickly going back to coinbase and i i do own some shares of coinbase to a small amount i think jim's had a a wonderful influence on me on on crypto talking about krypto and all that and i have a coinbase account too yeah uh and uh well the the one thing that i was looking at as i thought about this more and more is and obviously this is still far away from really being actionable and kind of your classic canceling leader on a technical basis uh but i i was thinking back like 98 99 schwab right it was a discount broker big brand name where people were starting to get into stocks where were they going they were going to schwab so same thing here cryptos online exactly they went online and so same thing here crypto is getting a little bit more familiar with the mainstream where are they like jim was saying before where are they going to go they're going to a coin base like i did i want to say one thing this is a special occasion like when i was a little kid i'd say mom i want to go sleep over at johnny's house and they'd like no i'm like special occasion like okay but you're going to get once per year i have done something like buy a bottoming base once in the last three years like i had to call eve up and say look i'm doing this and i know it's against the rules but i don't want you to do it okay like i don't do this this is so rare i've probably done this in my life well early on i probably did it a lot more but i haven't done this in three years so don't think this is how i operate don't think this is the way you should operate but when you have fundamental knowledge that gives you an edge and i'm leaning into my edge a little bit but i am going to wait till the bulk of this overhead clears before i throw a monster position on and don't enjoy and jim if this broke into new lows right under him made new lows you're out right so i i think that's the other big lesson here is yeah jim is incredibly optimistic about this i'm very optimistic about coinbase and the potential that being said if the stops are hit if the risk is is too high at that point you cut and let the stock set up again and prove itself again yeah you could just say it's not the right time right listen cutting losses is such an automatic it's like a zero defect policy we don't even have to discuss it if you don't have that you're done you will you will blow up for sure and if you listen to me long enough i will drag you down the crypto ravital well that's probably going to be it for this show so maybe we can have you on again jim because it's always a pleasure um so thank you so much for sharing your knowledge your years of experience and uh again some some great ideas of what people can do for success in their own training so thanks a lot for that jim dude thank you for having me i want to say three things get in the water to catch the wave until the golden goose of capitalism is killed by socialism these names are going to keep coming and anybody and i mean anybody can level up their life whether it's from first class to private jet or rented house to their first house it's all possible using the system stay with it and uh that's it guys thanks for having me yeah a good good note to end on so thanks again jim uh next week we're gonna have george young he's a partner and portfolio manager at valera and company so again thanks for tuning in to investing with ibd i'm justin nielsen and of course my my partner in crime arusha paris thanks for tuning in and we'll see you next week and for this week's notes and charts make sure to go to investors.com podcast where you'll find details for each episode in the podcast episode section and make sure to subscribe rate and review our podcast if you haven't already we'd really appreciate it you can also send us your questions and comments to investing podcast at investors.com we would love to hear from you and may use your comments on an upcoming episode hey everyone thanks so much for watching investors business daily on youtube if you want to watch more videos make sure you hit that subscribe button so you don't miss a thing

Channel: Investor's Business Daily

Views: 5,745

Rating: 4.878788 out of 5

Keywords: investor's business daily, investing tips, Jim Roppel, Investing With IBD, Cloudflare, Dexcom, Zoom Video, Coinbase

Id: d00k-9b7C-E

Length: 58min 11sec (3491 seconds)

Published: Thu Aug 05 2021