A Look at the Patterns for 1997's Winners and Losers
by Richard Evans
The year 1997 will go down in the record books in several ways. Not only did the major market indexes move into uncharted waters, but also it was the third year in a row that the Dow Jones industrial average rose 20% or better, an achievement never done before.
However, one market phenomenon that occurred in 1997 occurs every single year—some of the best gains in individual stocks came from those that were low-priced (from below $20 to below $5).
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Table 1 lists the top 10 New York Stock Exchange winners for 1997.
Capital Trust earned the distinction of the top stock in 1997. However, the developments of its stock pattern were about as generic as could be. The stock also demonstrated that some of the best gains on Wall Street are from stocks selling under book value. At the end of 1996, when Capital Trust was making its move, the stock was selling for less than its book value of $2.68. One did not hear much about book value in 1997, with the Dow selling at over five times book, but stocks selling under book are still around, and as Capital Trust shows, that can produce winning results.
A low-priced and depressed stock, selling under book, and an unfolding pattern of accumulation around the lows can be a winning combination. Examining the patterns of the winners, and losers, of 1997 can help illustrate the use of technical analysis.
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