Introduction to the Cara 100
Before we trade any instrument in the market, we must decide on what we need to trade. What we need is Growth, Value and/or Income. With a huge universe of tens of thousands of companies whose shares trade daily in the market, many of which may fit into these categories, we must sort the Good Companies from the Bad Companies based on Fundamental and Quantitative analysis.
Capital market prices and Technical Indicators of Price Trends and Cycles should be unimportant factors in selecting a relatively small group of high Quality companies one must study before trading.
From a review of the many different industries that make up our diverse national, regional and international economy and the individual companies in each industry, using an extensive database system, I selected a large (and growing) universe of 1059 companies to study in detail. I could have used one or more of the publicly accessible databases such as from Yahoo, Google, StockCharts, FinViz, Zacks, ADVFN, and so forth, but I purpose-built my own.
By detail, I mean that every trading day, my system collects roughly 18 data points of mostly corporate fundamental data for each company. A series of rules that I designed for my own trading needs then is applied to this mass of data. The result is the production of what I refer to as the Cara 100, which is my tradeable universe of Good Quality Companies.
Due to evolving business and economic conditions, the Cara 100 is always a work in progress. Moreover, because of political and social developments, there are also Macro-economic changes that affect the capital market prices of these companies.
As you know from Daily Lessons, a company is not a price. We trade prices.
As market prices fluctuate, at any point in time for each of these Good Companies, there will be Good Stocks (i.e., with Trends and Cycles that are rising) and also Bad Stocks (i.e., with Trends and Cycles that are falling). Technical Indicators help sort the difference to enable us to buy whatever it is we need to trade whenever the price is low and to sell it when the price is high.