Introduction to the Cara 100
Investment means buying and selling a monetary asset such as cash, precious metals, stocks, bonds, exchange-traded funds, and mutual funds. We invest money in these assets for income or capital appreciation based on our analysis of the lowest risk-highest potential reward. The prices of monetary assets are in constant flux, so there is always a matter of speculation in buying and selling decisions. Still, there is a significant difference between speculation and investment.
It has always been my belief that to invest in an asset, we must study and understand the asset, which requires an understanding of fundamental and quantitative analysis, which in turn requires a company to review rather than a pool of companies held by a fund.
Before we trade a company’s securities, we must understand that analysis will show that there are relatively good companies (lowest risk among peers) and bad companies (highest risk among peers). There are shares of many companies held by a fund, which means that when we buy a fund, we are speculating. Moreover, we must also appreciate that a fund invests in some bad companies, which is counter to the reason we invest.
To help investors select a relatively small group of high-quality companies to study, I created the Cara 100 list. The components usually, but not always, are industry leaders in corporate fundamentals like balance sheet strength and operating performance like cash flow, margins, earnings, and possibly dividends. This list is free of sell-side investment analysts’ business and personal biases.
Due to evolving business and economic conditions, the companies’ financial and operating performance are constantly in flux. Hence, the Cara 100 is always a work in progress. Because there are tens of thousands of companies whose shares trade on various stock exchanges, I try to select the Cara 100 from among the S&P 500 index components, each of which trades on a major US exchange. The S&P 500 index represents the world’s largest investable pool of company stocks. To monitor relative performance, I developed a Cara 100 index, noting that, like the S&P 500, there will be changes over time made to the Cara 100.
The Cara 100 is a list of companies we consider investment-grade for trading purposes but is not recommended to buy or sell. There are always times to buy and sell, and for a trade to occur, the buyer and the seller must agree on those times.
Our blog and books show that a company is not a price. We trade prices and seek the best times to buy and sell these fluctuating prices. Political and social developments in the world are constant and result in macroeconomic changes that cause price fluctuations in all securities. Over time, price motion in market prices impacts the trends and cycles of these securities. I trade when I perceive there are reversals in price trends and cycles.
We hope you find value in our Cara 100 list of Good Companies. But, as market prices fluctuate, these Good Companies may be Good Stocks (i.e., with Trends and Cycles that are rising), and at times they may be Bad Stocks (i.e., with Trends and Cycles that are falling). So investing requires price and volume technical analysis. In my practice, I try to buy at times the price is low and sell when the price is high. Your trading system may be different. For example, you may buy high, especially on breakouts from a recent trading range, and sell higher at a profit.
Suffice it to say that each of us has our research methodologies and trading systems. However, do not ignore that successful investing is a matter of finding and understanding good companies (such as the Cara 100) and then trading the good stocks among those good companies.
Here is the entire list of Cara 100 Companies as of January 1, 2023: https://tinyurl.com/Cara-100-2023-Jan-1
This is the FinViz.com chart view: https://tinyurl.com/Cara-100-2023-Jan-1-TA.
This is the FinViz.com industry view: https://tinyurl.com/Cara-100-2023-Jan-1-industry.