Much of the CAN SLIM investment model stresses the focus on leading stocks. Buy leaders, not laggards.
What exactly is a leading stock?
Even within the hottest groups there usually are just one or two stocks that are blazing the path.
Look at that stock. It will have almost everything going for it — earnings and sales growth, margins, return on equity.
Sponsorship? Institutions should be on the stock like ants on a candy bar.
For months, the fertilizer industry has garnered the top spot in the 197 industries tracked by IBD.
This is a reaction to a new market phenomenon, the N in CAN SLIM. Soaring fuel prices have sparked a scramble for corn-based ethanol.
What do you need to grow corn? Fertilizer.
So if you're in the fertilizer business, you're probably in Fat City. But that's not good enough when it comes to building your portfolio. You want the leaders of the leading groups, the best of the best.
You are looking at, say Agrium, (AGU) a Canadian fertilizer company. Views for this period are for $1.59 a share, 50% higher than its year ago.
View larger image But it lost 8 cents a share in the previous report, and suffered profit shrinkage in the previous two. Is this the best you can do?
No. The IBD Stock Checkup, available at investors.com, can help. Call up Agrium, and you'll see a stock that ranks seventh in its group for technicals, fifth for fundamentals and eighth for attractiveness. In a group of 13 companies, that's the middle of the pack.
The Stock Checkup also gives the top five names in the group, by Overall Rating. No. 1 is Potash Corp. Saskatchewan. (POT)
Potash's earnings rose 53% and 63% the past two quarters. Pretax margin was 22% in 2006 (Agrium's was 6%). Potash's 3-year EPS growth rate is 69% (vs. 6% for Agrium). Potash is rising fast. Your best chance to buy recently was a dip to its 10-week line in late June. Agrium is about 8% above a cup-without-handle buy point.
Potash is the leader, Agrium is just following as best it can.
