The wise-owl.com Investment Philosophy

Researching over 85 years of stock market history, we find that the overall general rise in stockmarkets has meant greater wealth for many people. Even in the worst stockmarket conditions, there are always some stocks that appreciate in value. But which?

Wise-Owl.com uses a combination of Quantitative, Fundamental and Technical Analysis coupled with our own risk management techniques, to select the opportunities we call 'stocks on the move' or the 'blue chips of tomorrow' - stocks that achieve superior returns.

Our proprietary techniques for selecting "out-performing" or "under-performing" stocks also enable us to identify short-term moves on blue-chip stocks. Derivative strategies can then be used to take advantage of any market condition - up, down or sideways...

How It Works
Once we have determined our recommendation and the risk level associated with a particular stock, we set our Initial Buy Price, 12 Month Target Price and Stop Loss Price. The stock is then monitored every week in the portfolio management section of our website, to keep you updated on any changes in circumstances and price levels.

As the stock goes up, we change the Stop Loss Level to a Profit Stop Level and then continue to raise the Profit Stop Level over the course of the year, until the stock trades below our Profit Stop Level. It is not uncommon for a stock that we have chosen to enter into an S&P/ASX 300 or S&P/AS 200 index over the course of our recommendation. This often fuels the price even further. This is one reason why we pride ourselves on being able to pick the 'blue chips of tomorrow.'

Of course, investment always carries a risk.

Many people argue that as a stock falls, its 'value' will only become more attractive (some use the phrase 'average down'). Our experience indicates that some of the greatest losses occur when there is no clear 'exit point' or 'stop loss' price as we call it. Numerous stocks come to mind that have not only plunged below these stop loss points, but are now worth zero - for example OneTel, HIH Insurance and Pasminco.

When you know what to look for, such stocks often show many sell signals well before show real signs of trouble. It is these early signals that we use to help us steer away from these 'under performing stocks.'

We also believe there is a real opportunity cost (in other words, opportunities for gain that have been lost) in holding stocks for longer than 12 months that have not performed. We prefer to move into stocks that are performing.

Whilst there are never any guarantees of making money, a well diversified portfolio managed in accordance with our risk management strategy, will certainly show you the value of the 'wise-owl.com' approach.

A real case study of a previous recommendation is perhaps the best way of demonstrating our approach. Note that this example is not intended to give you any assurance or even indication of the type of return you can make, but an illustration of our philosophy at work.

'Picking the blue chips of tomorrow' - pSvida (PSD)

Background & Recommendation
pSivida Limited (PSD) is a biotech company specialising in the biomedical and nanotechnology area. PSD were mainly focused on the BioSilicon technology that can be used in a variety of healthcare applications, including drug delivery and tissue engineering.

The company had well positioned itself in key markets such as USA, UK, Europe and Australia. PSD was recommended on the back of a strong and experienced management team that had implemented significant strategic relationships. PSD was recognised as an exciting 'growth story'.

Strategy
PSD was recommended on 16/05/2003 at $0.21c with a nominated Stop Loss price of $0.15c and a 12-month target price of $0.50c



























Result
Once the recommendation was made, PSD's performance was monitored every week in the portfolio management section of the Wise-Owl Equities Report, where members were updated on any changes or important levels to take notice of.

In just over 3 months, PSD was trading at $0.46c (total potential member return at 119%).

Now ask yourself this key question: if you had purchased this performer, what would you do next?

Seeing these gains, most investors would have taken profits, but we simply placed a Profit Stop to lock in gains. Wise-owl.com members knew that if PSD had breached the first Profit Stop (31 cents), they would have sold (the chart below illustrates the progress of the stock.)



























You may, as an investor be happy with a profit of 119%, however had you taken the profit at that point, you would have been disappointed as profits were eventually locked in at 333% (2nd March, 2004).

The chart below shows how the profit stop level was raised, but never breached. You will also notice that the share price performance rapidly increases when Standard & Poor's announce that PSD is to be included in the S&P/ASX 300.



























Even though a stock might reach our 12-month target price earlier, by following the suggested strategy, you would have avoided the disappointment of getting out before the full potential of the stock was realised. PSD continued to outperform and, consequently, the Profit Stop level was revised upwards a number of times.

Before long, PSD went from being an unknown small cap stock to becoming one of Australia's best performing stocks in 2003/04.

PSD was included in the S&P/ASX 300 index and, in the true sense of the phrase, became a 'blue chip of tomorrow'.

It is not uncommon for a stock that we have chosen to enter into the S&P/ASX 300 or S&P/ASX 200 index over the course of our recommendation and this often fuels the stock price even further. A few other examples of this are stocks such as Macarthur Coal (MCC), Funtastic Ltd (FUN) and Great Southern Plantations Ltd (GTP).

Click here to regsiter for a trial of our famous Equities Report today.