Base Counting Tutorial

[Mike]

I have been asked if I could create an article on counting bases. I am attaching a powerpoint file on this subject. Because counting bases and setting price targets are interrelated the subject of calculating a 130% PE expansion price target is here also. I can answer questions on the base counting process if the powerpoint file is not self explanatory.

[Ken]

for sharing this excellent and very comprehensive gem of a tutorial! For P/E determination on the original first stage base breakout, do you just annotate at initial breakout or is there a better method to derive P/E based on EPS ? Interesting that you noted GMCR still have not exhausted its upside potential. It's definitely one of the leading issue that's holding tough today.

Thanks!
Ken

[Mike]

I either annotate PE at the time of the first base breakout or look at the historical 4 quarters of EPS prior to the breakout and calculate PE. What works well however and fairly quickly is to archive electronic versions of IBD. I can open up the day of the breakout and just look up PE in the tables. I have eIBD going back 8+ years to January 2003.

[ericoleman]

Mike,

Thanks for the tutorial. There is a lot of useful information here to learn. One question - does the P/E expansion model similarly apply to cyclical and/or commodity stocks? I remember when US Steel, X, traded with a 7 p/e or so and close to $200 back in 08 (wow, that seems crazy now!). Thanks for all the lessons.

Best,
Eric