Peter Kurata: From Microsoft to Covestor, Learn About Peter’s CANSLIM System

Peter Kurata is one of the select investors who is on Covestor Investment Management (CVIM).  Utilizing William O’Neil’s system called CANSLIM, he transformed from an engineer working at Microsoft to a full-time investor.

He kindly agreed for an interview recently and has shared his knowledge on the CANSLIM system along with the valuable lessons learned through his nine years of experience.

“So Peter, you had a career in IT/engineering working for Microsoft, and you’re now trading full-time after retirement.  What else can we know about your background?”

At Microsoft, I worked on identifying new technologies for Windows experience, which now comes in handy for finding tech stocks. I also like to backtest and think about ways to analyze stock data. One idea I’m kicking around is an intelligent backtester, so instead of guessing which indicators to use, the backtester will make its recommendations.

I got into investing after retiring from Microsoft in 2001 and seeing my financial advisor lose 53% of my portfolio during the internet crash.  He sold nothing during this time. After much research, William O’Neils’s CANSLIM  made the most sense to me.  He’s a computer guy and pioneered the use of computers to analyze stocks. In fact, his research group has backtested charts dating back to the 1890’s, using US and foreign market data.  I also liked how stock selection is based on both fundamental and technical analysis, profits never fall below 7%, and CANSLIM’s very accurate market timing system.

“You’ve been investing for quite some time. Over your investment career, you’ve seen both the bullish and the bearish times.  Can you share with us some of your most successful and unsuccessful trades you’ve had in the past?”

Most successful is BIDU, a 97% profit in 9/07. I bought it on a cup with handle breakout and sold it at the top as it triggered one of my sell rules. Worst buy is SKF, a 33% loss, in 7/08. I locked in a 21% gain, got greedy and tried to go for more.

“What has been the most important learning from these experiences?”

Hard work and discipline. I like the John Wooden quote, “The harder you work, the luckier you get”. For trading, the more time is spent building a repertoire of proven stock setups, the better your chances of finding your next winner. Discipline is important to keep emotions out of trading. As much as possible, I follow a set of rules and have a plan before the market open. This was the difference between BIDU and SKF.

BIDU was a textbook CANSLIM trade. Buy on a cup with handle breakout, sell on my rule to hold for 8 weeks if it gained 20% in less than 3.  On the other hand, SKF was a textbook emotional trade. I was being featured in the Investor’s Business Daily newspaper and was trying to get my returns up for the article. Already up 21% on a very volatile ETF that was going parabolic, I ignored the rules and let my greedy emotion keep me in.  Sure enough, SKF gapped down more than 20% at the open, and continued to tank from there.

“Can you tell us more on your trading strategy?  I’d love to know more about CANSLIM.”

I like to think of my strategy as “stock whispering” and it involves getting a reading of the market trend and action of leading stocks.  Market trend is important, as most  stocks will follow this. This market status is updated daily in The Big Picture Section on investors.com or http://twitter.com/ibdinvestor. When the market is moving in the right direction, focus on the leaders. These are stocks with accelerated earning and sales, and confirming price and volume action. Getting down to the nuts and bolts of my strategy, I created over 300 rules to navigate my moves.  Each one can be traced back to studying CANSLIM seminars, books, and William O’Neil interviews.

“As you know, there are various methods to trading, and many succeed in various ways.  Do you believe in investment methods other than CANSLIM?”

Yes, in fact, CANSLIM was derived from the work of other great investors: Jesse Livermore, Gerald Loeb, Nicolas Darvas, Stan Weinstein. I have also spent time with Gil Morales and Chris Kacher, William O’Neil superstars, and I am a subscriber to their newsletter on gilmoreport.com.  Furthermore, Fred Adrich, a childhood friend of William O’Neil, has a very good newsletter at stratinv.com.  These three guys have lifetime returns well over 1000%, and studying their newsletters will shave off years of self study.

Thanks for sharing your expertise on the CANSLIM system Peter.  There are many systems that investors employ for investing.  What’s important is choosing the right strategy that works for you, because what works for one may not work for the other.  On that note, CANSLIM is certainly an established system worth peaking at.