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STOCHASTICS


Hansen Natural Another 10-Bagger

11/09/11 02:07:14 PM
by Mike Carr, CMT

HANS offers an example of one of the all-time great stocks with a gain of more than 17,000% in less than 10 years, an annual rate of return of more than 75%.

Security:   HANS
Position:   Buy

Hansen Natural (HANS) makes natural sodas and energy drinks. Since the beginning of 2003, the stock has gained more than 17,900% (Figure 1). But that is not to say it didn't have any downward moves. Like other big winners, the chart shows times when the stock dropped by a large amount.

FIGURE 1: HANS, MONTHLY. The stochastics indicator shows that this long-term winner spent most of the time overbought, and many traders would miss the gains waiting for a traditional entry signal.
Graphic provided by: Trade Navigator.
 
If you look at the monthly chart of HANS in Figure 1, you will see that in 2006, the stock fell by more than 50% after gaining nearly 10,000% in only three years. Even long-term, dedicated buy and hold investors would be tempted to sell after seeing such a large gain and experiencing such a steep decline. This loss occurred in a generally rising stock market, making it even harder to argue that the stock would continue delivering big gains to investors.

In the 2008 bear market, the loss in HANS totaled 70%. From the March 2009 bottom, HANS is up about 375%. The stochastic indicator in the subchart below the price chart did indicate a buy signal from an oversold level on the monthly chart at that bottom.

Using the moving average convergence/divergence (MACD) on a monthly chart, you would not have had a chance to get into this position until 2009, and that would been a losing trade. The system would eventually make money, but it would not be nearly as much as a buy & hold investor. Like with many big winners, there was no pullback in the momentum indicators after the stock started moving higher.

 
However, if you used a shorter time frame such as the weekly chart (Figure 2), you could have turned $1,000 into about $130,000 using the MACD and being long only. In order to do so, you would have to know that HANS would be a big winner over time. Its industry is boring and unlikely to get anyone's attention.

Finding the 10-baggers of the future is a challenging task. It is worth spending more time looking at what they have in common.




Mike Carr, CMT

Mike Carr, CMT, is a member of the Market Technicians Association, and editor of the MTA's newsletter, Technically Speaking. He is also the author of "Smarter Investing in Any Economy: The Definitive Guide to Relative Strength Investing," and "Conquering the Divide: How to Use Economic Indicators to Catch Stock Market Trends."

Website: www.moneynews.com/blogs/MichaelCarr/id-73
E-mail address: marketstrategist@gmail.com

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Date: 11/10/11Rank: 1Comment: Totally misleading headline about 10 bagger. People don t care about a past 10 bagger. What a sorry article, utterly waste of my time.
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