Stock

2020 Q3
Guide
Risk Management:
Fine-Tuning Your Offense and Defense

Feature Article: Interview: Good Trade/ Ask a Portfolio

Risk Management David Ryan Bad Trade Manager
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Stock Guide // 2020 Q3
Risk: Like it or not, it’s an aspect
that every investor should become
comfortable with. It’s natural to feel
emotions when your hard-earned
money is on the line, but those same
emotions can cloud your judgment
and lead to big losses when you
pursue strategies based on gut
feelings instead of following your
rules. Risk management is one key to
creating a balanced, stable portfolio
that will keep growing for years to
come. In this issue’s feature article,
we’ll cover the essential elements of
risk management and show you how
to minimize your downside on
every trade.
For this quarter’s Q&A, we spoke
with David Ryan, a longtime portfolio
manager, three-time U.S. Investing
Champion and founder of his own
capital management fund. David
spoke about how risk management
strategies differ between professional
and personal portfolios, as well as
how he’s adjusted his appetite for risk
over the years. He also spoke about
hedging strategies and shared a few
stories about what he learned working
alongside William O’Neil.
In Good Trade / Bad Trade,
MarketSmith Product Coach Daniel
Melgoza opens the books on two of his
recent trades. He practiced patience
with a “slow and steady” megacap
tech stock that ran up for over four
months and netted a nice profit. On the
other side of the ledger, he jumped in
aggressively on a volatile growth stock
with a choppy chart and got shaken
out with a loss. Daniel breaks down
his buy and sell points plus what he
learned from each trade.
As always, if you have any questions
or comments about your investing
research or any MarketSmith features,
please call one of our product coaches
at (800) 831-2525 or email us at
reachus@marketsmith.com. We’re
here to help you make more money in
the market.
Best returns,
The MarketSmith Team
MarketSmith.com 2020 Q3 Stock Guide 3
 Market Chart Nasdaq Composite
Nasdaq Composite

4 2020 Q3 Stock Guide MarketSmith.com

 Table of Contents
Market Chart.................................................................... 4

Feature Article: Risk Management............................. 6

Stock Screen:

Lower Volatility, Higher Stability*............................... 9

Tractor Supply Co (TSCO)..................................... 10

West Pharmaceutical Svcs (WST)...................... 11

Pool Corp (POOL)................................................... 12

Simulations Plus Inc (SLP)................................... 13

Featured on page 6
Q&A: David Ryan............................................................. 14

Good Trade/Bad Trade: Daniel Melgoza................... 18

Stock Screen:

Three Strong Quarters*................................................. 22

Docusign Inc (DOCU)............................................. 23

Zoom Video Comm Cl A (ZM).............................. 24

Chegg Inc (CHGG).................................................. 25

Solaredge Technologies (SEDG).......................... 26

Ask a Portfolio Manager: Irusha Peiris..................... 27

Features Highlight: The New Resources Section.... 28

CONNECT WITH US

*All screen results are computer-generated and were run on July 31, 2020.

MarketSmith.com 2020 Q3 Stock Guide 5

Feature Article 5 Strategies for Effective Risk Management
With any investment, you need to
weigh the balance of risk and reward.
Buying stocks is a fantastic way to
grow your portfolio, but your relative
risk depends greatly on your investing
strategy. Here are five tips for managing
downside risk and avoiding giving back
hard-earned gains.
1. Always follow buy and sell rules.
Buy rules help you wait for a proper
entry point where the trade has the
highest likelihood of working. This
is based on years of research that
shows that the best growth stocks will
consolidate gains from a strong uptrend
for weeks/months, then break out above
an area of prior resistance and run up in
price. Waiting for a high-volume breakout
from a base gives you the best chance
of catching these strong, fast runups at
the ideal time.
6 2020 Q3 Stock Guide MarketSmith.com
MARKETSMITH TIP: The blue shaded
area on MarketSmith charts next to a
chart pattern is the buy zone—the price
area within 5% of the pivot. Hover over
any chart pattern with your cursor to
see the exact pivot point. Buy within 5%
of the pivot and don’t chase extended
stocks—there’s always the next time.
Sell rules ensure you don’t lose a
significant amount when a trade doesn’t
work. You’ll live to fight another day if
you keep your losses small, like the 5-8%
loss-cutting zone in MarketSmith (the
red shaded area). Never be afraid to cut
your losses and move on.
2. Don’t over-diversify, concentrate on
quality over quantity.
When it comes to the stock market,
sometimes it’s better to put your eggs in
a few baskets and watch those baskets
very closely. If you own too many
stocks, you’re unlikely to know any of
the companies very well, which is a key
aspect of identifying the real leaders in
the market.
The number of stocks to own at one
time depends on the value of your
portfolio, but between 5 and 10 is a
smart target for many growth investors.
Enforce this limit by refusing to add a
new stock until you’ve sold one of your
worst-performing stocks.
 5 Strategies for Effective Risk Management Feature Article
That being said, some diversification
is warranted. For example, it’s best
not to put more than 35% to 40% of
your portfolio in any single stock. As
far as allocation to one industry group
or sector, 25% to 30% might be a
reasonable limit for a new investor. As
you gain more experience, you can go
above this limit. But you must be fast
on your feet, always executing strict sell
discipline to protect yourself.
3. Buy a stock in increments as it
displays good initial performance.
Building a full stock position in several
purchases can help you reduce risk if
the trade goes against you. This buying
strategy is called pyramiding, a concept
made famous by legendary investor
Jesse Livermore.
Here’s an example of an effective
pyramiding strategy: buy 50% of a full
position at the pivot (or as close as
possible). When the stock performs
well and rises, you add 30% more when
it’s 2-2.5% up and a final 20% when it’s
another 2-2.5% up. You’ve now rewarded
a stock that proved its strength and
brought you profits from your initial
buy point.
This idea seems counterintuitive to
some, as people often want to buy
stocks when they’re lower in price—as
in the thinking, “I’m buying on sale, my
profits will be bigger!” The truth is this:
the best stocks can cost more money
but will often bring the best rewards.
Research shows that stocks reaching
a new price high will often continue
higher, and stocks moving down in price
will usually fall farther. Strength begets
strength in the stock market.
MARKETSMITH TIP: Calculate the
dollar value of a full position by taking
your total portfolio value and dividing
it by the number of positions you feel
comfortable holding.
For example, say your portfolio is worth
$100,000 and you feel comfortable with
8 full positions for 100% exposure. One
eighth of $100,000 is $12,500 – the
value of a full position.
At the pivot point, your first buy would be
50% of your full position: $6,250.
At 2-2.5% above the pivot point, your
second buy would be 30%: $3,750.
At 4-5% above the pivot point, your third
and final buy would be 20%: $2,500.
MarketSmith.com 2020 Q3 Stock Guide 7
Feature Article 5 Strategies for Effective Risk Management
4. When the overall market shifts,
adjust your exposure.
Three out of every four stocks follow the
overall market trend. If you’re trying to
pick winning stocks during a downtrend,
you’re facing a serious headwind when
75% of stocks are likely to lose value in
the short term until the trend changes.
Don’t take those odds!
When the market’s in an uptrend, you
can be 100% invested (or more, if you’re
on margin). But when the market trend
changes to “Uptrend Under Pressure,”
consider reducing your overall exposure
by selling your worst-performing stocks.
If the trend shifts to “Market in
Correction,” consider reducing your
exposure drastically—perhaps even
going 100% to cash. There’s no harm in
sitting on the sidelines with your money
intact and waiting for the next uptrend to
begin. That’s when you can start wading
back in and gradually increasing your
exposure.
5. Advanced investors: Hedging can
help protect unrealized gains.
It’s always nice to have profits on a
stock, but those profits aren’t real until
you decide to sell and lock in your gains.
If you find yourself holding a top-quality
stock and you think it has more gas
in the tank to continue its run, consider
8 2020 Q3 Stock Guide MarketSmith.com
a few hedging strategies that can help
protect your gains if the stock were
to falter.
Index ETFs: Buying index ETFs (like SPY
for the S&P 500 and QQQ for the Nasdaq
100) can be an effective hedge against
losses in a specific stock or when sector
rotation leaves your current stocks
underperforming.
Inverse Index ETFs: If your portfolio is
long on growth stocks, inverse index
ETFs can serve as a hedge if the market
trend moves downward. Consider this
when the market show signs of topping.
Put Options: One hedging strategy
involves buying put options on a stock
you own that’s already posted significant
gains. This helps you avoid giving back
profits if it falls, as your put options will
increase in value if the stock declines.
If it advances, you’re only out the cost
of the premium of the put options and
you’re making money on your initial
long position.
To learn more about advanced hedging
strategies like these, watch a free
webinar with IBD’s Chris Gessel and
Justin Nielsen at investors.com/
HowToHedge.
 Lower Volatility, Higher Stability Stock Screen

Title Volatility, Higher Stability

Lower
This screen looks for lower-volatility stocks by selecting for earnings stability,
institutional-grade price and volume, and high Relative Strength ratings.

Screen created by Irusha Peiris, Premium Product Group Manager

COMPANY (SYMBOL) INDUSTRY GROUP COMP RATING

Tractor Supply Co (TSCO) Retail/Whlsle-Bldg Prds 99

West Pharmaceutical Svcs (WST) Medical-Supplies 99

Pool Corp (POOL) Retail-Leisure Products 99

Simulations Plus Inc (SLP) Computer Sftwr-Medical 98

Visit Investors.com/MSStockGuide to load the criteria for this and other

Stock Guide screens directly in to your MarketSmith screener.

*All screen results are computer-generated and were run on July 31, 2020. This screen can also be found on marketsmith.com in
shared screens.

MarketSmith.com 2020 Q3 Stock Guide 9

 Stock Screen Lower Volatility, Higher Stability
Tractor Supply Co (TSCO)

10 2020 Q3 Stock Guide MarketSmith.com

 Lower Volatility, Higher Stability Stock Screen
West Pharmaceutical Svcs (WST)

MarketSmith.com 2020 Q3 Stock Guide 11

 Stock Screen Lower Volatility, Higher Stability
Pool Corp (POOL)

12 2020 Q3 Stock Guide MarketSmith.com

 Lower Volatility, Higher Stability Stock Screen
Simulations Plus Inc (SLP)

MarketSmith.com 2020 Q3 Stock Guide 13

Q & A A Conversation with David Ryan

A CONVERSATION WITH

David Ryan
David Ryan is a highly successful money
manager and a three-time U.S. Investing
Champion. He developed his investing
skills under IBD founder and investing
legend William O’Neil, who wrote about
Ryan in his bestselling book, How to
Make Money in Stocks. After working as
a portfolio manager, he founded Ryan
Capital Management and continues
to advise investors on maximizing
their returns.

MarketSmith recently sat down with

David to talk about risk management,
hedging, growth vs. value and the
lessons he learned from working with
William O’Neil.
As a professional money manager,
what’s your approach to managing risk?
David Ryan: There are as many
approaches to risk management as
there are styles of investing. As a hedge
fund and mutual fund manager, I had
a fiduciary duty to protect my clients’
assets. It comes down to your approach
to the market and what your clients
expect of you, both in terms of risk and
reward. I want to avoid giving back hard-
earned gains whenever possible.
I am typically fairly aggressive in trading
CAN SLIM®-style stocks. When
my stocks have a good run, I usually
sell some of my core positions into
strength and take profits. When stocks
get overheated like in July, I like to sell
into strength. I hate to wait until the
market takes a big hit—July 13 is a good
example–and my portfolio gives back
weeks’ worth of profits.
As an individual investor, you have to
know your personal risk tolerance.
If you have an entire portfolio of the
hottest growth stocks, all it takes is
a couple really bad days and you can
lose a huge chunk of the gains you’ve
made over months. If you don’t like too
much volatility, consider having a few
aggressive growth stocks and mix them
in with large cap, slower-growth names
that won’t have as much volatility when
the market cools off.

14 2020 Q3 Stock Guide MarketSmith.com


What kind of hedging strategies do you
favor? How much do they vary based on
market conditions?
At the beginning of a new uptrend, I find
that there’s little reason to hedge. As
time goes on and your profits increase,
I would start to hedge more, especially
when volatility increases. It still takes
a little while longer to reach a top—
though less time than it used to due to
algorithmic trading moving the market
more quickly.
Now, If I felt the market was due to
correct, I’d consider a few broad hedging
strategies. One, I could buy put options
on index ETFs like QQQ or SPY. Two,
I could short double-leveraged index
ETFs like SSO (2x the S&P 500) and
QLD (2x the Nasdaq 100). I’d especially
consider shorting QQQ or QLD if my
portfolio were particularly concentrated
in tech stocks. When the market gets hit
big and you’re heavy in growth stocks
(particularly high-flying tech stocks),
your portfolio can correct 1.5x – 2x
what the general market does. You have
to be careful when you’re running a
concentrated high-growth portfolio.
You worked as a portfolio manager for
William O’Neil for many years. What did
you learn about risk management
from him?
A Conversation with David Ryan Q & A
Bill did one thing really well; better than
anyone I’ve ever seen, in fact. He was
the only person who could take the
entire market and narrow it down to one
single stock. He could find the strongest
name in the whole market, sit through
corrections and take that stock through
its entire run. To this day I’ve still never
seen anyone else who could do that and
sell very close to the top.
For Bill, small details made the big
difference in his stock selection. He
would tell us that you have to study the
charts extremely closely. You have to
train your eye to recognize what a stock
looks like at the beginning of a move,
the middle part and at the end. It takes
years of looking at the biggest winners
to engrain in your mind what those
charts look like, but when you gain that
ability you can look at current stocks
in MarketSmith and recognize similar
patterns in leading stocks of years past.
How do you react during big corrections
like this past March – do you take
money off the table or look for shorting
opportunities?
In this case, it happened so quickly. On
February 19 we reached a new high
and then it went virtually straight down.
I hate to ever take a loss, so I started
selling the majority of my positions
MarketSmith.com 2020 Q3 Stock Guide 15
Q & A A Conversation with David Ryan
quickly. You have to take it day by day
and follow your rules: set and obey your
stop-losses, and don’t rationalize not
selling by thinking that you’re locking
in losses.
Stick with your stops—the classic rule is
7 to 8 percent below the price you paid
for the stock. Personally, my stop-losses
are less than that. Once the stock has
moved away from your buy point, you
can use other technical factors like
moving averages and trend lines to
help with your sell decisions. A lot of it
depends on an individual stock: Some
are very fast movers that run up along
the 10- or 21-day lines; when they break
below those lines, that’s a sell signal. If
you’re in a bigger, slower-moving stock,
maybe you’re looking to sell when it
breaks the 50-day or 200-day lines.
It is nice to have some short positions
to negate some of the downside. If
there’s a sector starting to roll over and
underperform, I might short it even if
the broader market is still holding up.
When the market corrects, shorts can
help offset losses in long positions. If
the market’s going so strongly that it’s
starting to get ahead of itself, I’ll start
selling intro strength. If the market looks
like it’s going to correct in the near term,
I’ll start hedging so I don’t give as much
back as if I’d remained fully invested.
16 2020 Q3 Stock Guide MarketSmith.com
As an investor who generally favors
growth stocks, do value stocks enter
into your strategy during periods of high
volatility?
No, I’m never looking at value stocks. I’m
always looking at growth, because that’s
where the big money is made. Over
many years, growth has been shown to
dramatically outperform value.
Let me tell you a quick story about when
I worked with Bill O’Neil. Every Monday,
Bill would hold an all-hands-on-deck
meeting with his salespeople, who would
go all over the world selling institutional
investors on the O’Neil family of
products and stock research. Every now
and then, one of the salesmen would
pipe up and ask Bill if he would finally
add a product geared toward value
investors, because some institutional
clients were asking for one. Bill would
always answer these questions in a
way that taught a person to never ask
it again. Growth was the way, and that
was that.
If you’re too worried about volatility and
the quick moves that come with growth,
then perhaps you’re too concentrated
in a specific type of growth name and
you should diversify a little more. There
aren’t that many people who can have a
concentrated portfolio of 4-5 stocks (and
be on margin) and feel comfortable.
 A Conversation with David Ryan Q & A

s Pictured: The Proshares Ultra QQQ (Ticker: QLD), an ETF that seeks performance equal to 2x
daily performance of the Nasdaq 100 index. Note the steep price decline (over 50%) from the
February 19 highs to the March 23 lows. This is an ETF that David would consider shorting if he
felt the markets were going to correct.

Last question: You won the U.S.
Investing Championship three times
when you were in your twenties. Which
famous three-peat would you say that
most resembled: young Michael Jordan
and the ’90-’93 Chicago Bulls or the
“Last Dance” ’95-’98 Bulls?
I would probably say the early ‘90s
Chicago Bulls. When I won those three
championships, I was in my late twenties
and I had a “no lose” attitude. Don’t get
me wrong, I was controlling risk—but my
portfolio was concentrated in a total of
3-5 growth stocks at a time, plus I was
moving my money aggressively to my
strongest performers. At times, 30-40%
of all my capital was allocated in one
stock as it was running. As soon as it got
tired, I’d cut it down to a small position
and move the money into a stronger
horse. It was fast and aggressive, the
way the early ‘90s Bulls played.
Now that I’m older, I don’t have the
stomach or the energy to trade like that.
These days I rarely go on margin. I’m
still trading similar stocks, but I’m not as
concentrated. With my age and my risk
tolerance, I’ve adjusted my trading style
to still stay profitable, but not take the
big swings that I did as a younger man.
That being said, I’m still a long way off
from my last dance. n

MarketSmith.com 2020 Q3 Stock Guide 17

Good Trade/Bad Trade Daniel Melgoza
Good Trade/Bad Trade
THE TRADER
Daniel Melgoza
MarketSmith Coach
In this edition of Good Trade / Bad
Trade, MarketSmith Coach Daniel
Melgoza shared a couple of his recent
trades—one winner and one loser—and
told us what he learned from each. Pull
up the charts for MSFT and AAXN and
follow along to see how you would have
handled these trades.
GOOD TRADE:
MICROSOFT (MSFT)
The Timeframe:
September 2019 – February 2020
Stock Background: I’m guessing you’re
familiar with Microsoft. Most people on
earth have used a Microsoft product
in one form or another; their Windows
operating system runs on one billion
devices and counting. So not only do
they control over 80% of the desktop
computer OS market, but they also have
so many additional revenue streams
it’s hard to keep count: gaming (Xbox),
hardware (tablets and laptops) and
18 2020 Q3 Stock Guide MarketSmith.com
software (like the perennial cash cow
Microsoft Office) are among the largest.
But don’t overlook their aggressive
move into cloud computing. Microsoft’s
Azure is the #2 IaaS (infrastructure-as-a-
service) vendor in the world, second only
to Amazon’s (AMZN) AWS and ahead
of Google (GOOGL) Cloud Platform.
I can see this becoming one of the
biggest future revenue streams for
companies like Microsoft—as it already
has for Amazon.
Technical Picture: When I’m scouting
a potential buy, I like to focus on
the weekly chart to look at the long-
term trends. Stocks have their own
“personalities,” and MSFT is a slow and
steady gainer. It’s not a wild IPO that
will shoot up 100% in a few weeks. This
is a stock you can put in your portfolio
and hold for big gains over months (or
possibly years, if you’re so inclined).
Going back to July 2019, MSFT was
building a relatively shallow second-
stage flat base. MarketSmith Pattern
Recognition showed a pivot of $141.68.
On September 18 it retook its 50-day
moving average line with a bullish
closing range of 93%.

My Buy Point: September 19, 2019 at
$141.25. The following day, the stock
broke out to a breakaway gap on the
news that Microsoft would execute
a $40 billion stock buyback. It briefly
crossed the pivot point but ended up
closing below it (not a deal-breaker
for me). What gave me conviction in
this breakout was the fundamentals:
a strong 94 Composite Rating, an EPS
Rating of 93 and ROE of 40%. This
stock also had a steadily rising relative
strength line throughout 2019 and
accelerating earnings growth quarter
after quarter.
How I Held It: The first week I was a bit
nervous, as the stock tested the 50-day
line on September 24 but bounced back
strongly the following day. I knew that
this was a stock that I wanted to hold for
the long term, so I tried to ignore daily
movements and focus more on
the weekly chart.
My Sell Point: February 21, 2020 at
$178. On February 20, 2020, I noticed
that MSFT fell below the 10-day line; the
next day, it crossed below the 21-day
exponential moving average line (both
are advanced warning signals). It was
time for me to lock in my profits on this
Daniel Melgoza Good Trade/Bad Trade
position, as the market was starting
to sell off. Take a look at the Nasdaq
(0NDQC in MarketSmith): MSFT was
mimicking what the Nasdaq was doing
right before the worst of the coronavirus
market crash. In hindsight, I was happy
I used early warning signs and larger
market trends to lock in my gains at 26%
on the position. The next day, Microsoft
sold off in heavy volume.
My 3 Takeaways:
• Microsoft has some of the
strongest institutional ownership
of any stock in the game. It’s the
definition of “institutional quality.”
This is the kind of stock that
institutional funds hold for 10–15
years or more, which provides a
very solid floor of price support.
• You will not always sell at the top.
Even though I was up 34.6% at one
point, I was more than happy to wait
for a sell signal and still make 26%,
rather than try to hope the stock
bounces back to its previous high. It
didn’t, FYI.
• The only way to make big money is
by holding stocks and being patient.
This was a great “set it and forget
it” stock for me—good returns, no
stress, just buy and keep an eye on
the weekly chart.
MarketSmith.com 2020 Q3 Stock Guide 19
Good Trade/Bad Trade Daniel Melgoza
BAD TRADE:
AXON ENTERPRISE (AAXN)
The Time Frame:
May 2020
Stock Background: Axon was previously
called Taser International, and as you
probably guessed, they were the creators
of the eponymous stun-gun. They are
now called Axon Enterprise (AAXN) and
they focus on the Law Enforcement,
Fire/EMS, Federal and Corrections
markets, for which they develop and
manufacturer Tasers, body cameras and
cloud services.
This stock came on my radar in mid-
February of 2018 as it was forming a cup
with handle. Even though it reached a
pivot point on February 15, 2018, I didn’t
buy it; I had not done enough research
into the company at that time, and
earnings were coming up soon. I judged
that to be too risky a play. The stock did
gap up 27.82% after earnings, so I felt
a slight sting, but it’s always better to
stick to your rules and leave the stock on
your watchlist for another day. There will
always be another opportunity.
Technical Picture: In May 2020,
Pattern Recognition showed AAXN
forming a cup with handle base with
20 2020 Q3 Stock Guide MarketSmith.com
a pivot of $80.16. The pattern was a
first-stage base, which is good, but
it was somewhat choppy and rather
deep (44%), which are not model book
attributes. At the time, Axon Enterprise
had four straight quarters of increasing
earnings growth, a Composite Rating
of 95 and a #1 ranking in the Security/
Safety industry group.
My Buy Point: May 8, 2020 at $84.23.
On May 8, AAXN broke out to a
breakaway gap after huge earnings were
announced the previous day. They beat
Q1 earnings by 90%. AAXN was added to
the RS Line Blue Dot list in MarketSmith,
meaning its relative strength line
had just hit a new 52-week high—an
extremely bullish signal.
How I Held It: At the market close on
May 8, AAXN stood at $86.13, so I
was already up about 2.2% on the day.
Despite the auspicious start, the
trade didn’t last more than a week. It
started to drift below the May 8 close
a little more each day. On May 14, it
started to test the 10-day and 21-day
moving average lines.
My Sell Point: May 14, 2020 at $77.61.
At this point, AAXN had reached the -8%
sell rule for me. I had to take the loss and
move on to the next play. You cannot
let your emotions take you in; you have

to get rid of hope, pride, greed and fear.
The sell rule is there to help keep losses
small and to preserve capital.
My 3 Takeaways:
• I bought at $84.23, which was
slightly extended from the 5% buy
zone. I should have been more
cautious after earnings, especially
after this huge breakout of 22.5%.
I could have minimized my risk in
this trade by pyramiding into the
position instead of buying a full
position all at once. I could have
started with a 25% position, and if
the stock showed strength by
going up, I could have added on
in similar increments.
Daniel Melgoza Good Trade/Bad Trade
• Words of wisdom: “We are not
in the predicting game; we are in
the interpreting game.” It’s very
important to understand when
to take losses on a position so
that your portfolio does not get
hurt overall.
• More words of wisdom: “Missing a
train is only painful if you run after
it.” I shouldn’t have chased the stock
and bought it more than 5% above
the pivot point. That removes your
downside buffer and increases the
chances that the trade will move
against you. n
MarketSmith.com 2020 Q3 Stock Guide 21
Stock Screen Three Strong Quarters

Title Strong Quarters

Three
MarketSmith Coach Daniel Melgoza’s weekend screen selects institutional-quality
stocks with strong fundamentals, ample liquidity and three straight quarters of
20%+ EPS growth.

Screen created by Daniel Melgoza, MarketSmith Coach

COMPANY (SYMBOL) INDUSTRY GROUP RS RATING

Docusign Inc (DOCU) Computer Sftwr-Enterprse 98

Zoom Video Comm Cl A (ZM) Computer Sftwr-Enterprse 98

Chegg Inc (CHGG) Consumer Svcs-Education 97

Solaredge Technologies (SEDG) Energy-Solar 96

Visit Investors.com/MSStockGuide to load the criteria for this and other

Stock Guide screens directly in to your MarketSmith screener.

*All screen results are computer-generated and were run on July 31, 2020. This screen can also be found on marketsmith.com in
shared screens.

22 2020 Q3 Stock Guide MarketSmith.com

 Three Strong Quarters Stock Screen
Docusign Inc (DOCU)

MarketSmith.com 2020 Q3 Stock Guide 23

 Stock Screen Three Strong Quarters
Zoom Video Comm Cl A (ZM)

24 2020 Q3 Stock Guide MarketSmith.com

 Three Strong Quarters Stock Screen
Chegg Inc (CHGG)

MarketSmith.com 2020 Q3 Stock Guide 25

 Stock Screen Three Strong Quarters
Solaredge Technologies (SEDG)

26 2020 Q3 Stock Guide MarketSmith.com


Ask a Portfolio Manager
Irusha Peiris is the Manager of the
Premium Product Group at Investor’s
Business Daily as well as the host of
the Investing with IBD podcast. He can
frequently be seen as a co-host of IBD
Live and has spoken throughout the
country at numerous investing workshops
including the prestigious CAN SLIM
Masters Program.
Stock Guide: Managing other people’s
money is different than managing your
own. What’s one risk management rule
you learned as a professional portfolio
manager that you’ve applied to your
personal account?
Irusha Peiris: For years, I had essentially
the same approach to my personal
portfolio and the ones I managed
professionally—a traditional CAN SLIM
strategy that favored leading growth
stocks with great fundamentals. I would
build heavily concentrated positions in
a small number of leading stocks, go on
margin and be aggressive in pursuing
big returns.
I’ve changed my approach in the last
few years. It started with the assets
I managed as part of my job, where I
shifted to a greater focus on reducing
volatility and smoothing out my equity
Irusha Peiris Ask a Portfolio Manager
curve. In years past when I had a really
nice runup in my portfolio in a short
amount of time, I would often push it
aggressively and let my positions ride.
Now I’m much more likely to take some
chips off the table and set myself up for
the next move.
The goal: I don’t want to lose too much of
my hard-earned profit when the market
pulls back. I did this too many times when
I was “riding my winners” and hanging on
to full positions even after they made
big gains.
I also spread out my portfolio a little
more. I find that it’s a lot easier to ride out
pullbacks and bumps when a position is
7% of your portfolio as opposed to 20-
25%. It makes it easier to sleep at night,
that’s for sure. n
MarketSmith.com 2020 Q3 Stock Guide 27
MarketSmith The New Resources Section

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 The New Resources Section MarketSmith

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MarketSmith.com 2020 Q3 Stock Guide 29

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Risk Management:
Fine-Tuning Your Offense
and Defense

STOCK GUIDE // 2020 Q3

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