Finding An Edge In Growth Stocks

Charts, of course, are evolving. Doug Howarth, president and founder of Los Angeles-based consulting firm Multidimensional Economic Evaluators (MEE Inc.), has devised and patented a new way to view a stock based not simply on technical performance. His firm's software can present four dimensions of information on the same page.

Howarth's 3-D physical models, such as the one in the photo below, may help investors better see what makes a great investment truly stand out.

"The goal is to rapidly decrypt data in 4-D," Howarth told IBD in an exclusive interview. He hopes that his chart innovation "codifies something you know that you've not seen before."

A Military And Defense Industry Background

Howarth has done work at Lockheed Martin (LMT) and Raytheon (RTN). His firm's past and present clients include the two major defense contractors as well as NASA and United Technologies (UTX).

He had long wondered how to show the dynamics of a marketplace, financial or commercial, beyond the ancient vectors of price and demand.

In Economics 101, teachers introduce a line chart that measures the quantity of a product sold on one axis (or sales) and price on the other axis. The higher the price of a product, the lower the sales. The cheaper the price, the higher the sales. Plot these interactions to get a demand curve across the 2-D chart.

Simple, right? Yet consumer behavior is not so simple.

People make decisions not simply on price. Consumers also think about what features make a particular product carry more value. Manufacturers want to know which features may add value and boost demand.

How can this thinking apply to stocks?

The Future Stock Chart? Price, Volume, Value

Price and volume represent how much investors are willing to pay for a piece of a company. They express the limits of demand.

But do the biggest winners of each bull market cycle also show excellence beyond simply big price gains and heavy share volume? Absolutely.

Howarth's 4-D charts combine the two-dimensional "demand plane," or the red portion of the chart, with the green-tinted two-dimensional "value space." The latter highlights desirable features in a product, service or investment security.

The 4-D MEE left-side chart shows value in terms of market cap and return on assets (ROA). Every yellow sphere on the "value chart" corresponds to a white sphere on the 2-D "demand chart."

The above chart, created by a 3-D printer, illustrates how burrito and taco chain Chipotle Mexican Grill (CMG) stands out in terms of the measures of share price, market cap and (ROA).

Top Growth Stocks Today: A 4-D View On Celgene Stock

Celgene (CELG) remains on track to be acquired by drug giant Bristol-Myers Squibb (BMY). The right portion of the accompanying 4-D chart created by MEE shows how within the S&P 500, Celgene lies roughly in the heart of the S&P 500, as of the market close on July 22, in terms of share price and daily trading volume.

But the value chart shows that the big biotech and creator of the blockbuster psoriasis drug Otezla ranks quite well in terms of market value and return on equity.

Wall Street sees Celgene continuing to grow the bottom line. Analysts surveyed by Refinitiv expect the Summit, N.J., firm's earnings to expand 22% to $10.84 a share in 2019 and jump another 13% to $12.23 in 2020. It holds an outstanding 98 Earnings Per Share Rating from IBD on a scale of 1 (horrible) to 99 (heavenly).

The chart shows most of the S&P 500 companies "huddle" within an area of the chart. Howarth likens this pattern to the formation of penguins in the Arctic circle during cold spells. They form an elliptical mass to stay warm as a group. An occasional bird emerges from the middle and leaves the mass, perhaps to get some fresh air.

On Wall Street, some companies exhibit such strong performance that they seem to "stray" from the huddle. The 4-D chart makes them appear as true outliers.

Let's go back to the right-hand "demand" chart. Several spheres hover close to a pair of yellow lines drawn by Howarth. They include some of the FAANG companies, and reflect the current "ceiling" within the S&P 500 in terms of share price and daily trading volume. But they also represent the stock market potential in which other large caps may reach.

Applications In Industry, Beyond Stock Charts

Howarth has studied the electric vehicle (EV) market and asserts that his charts can help automakers spot an "economic opportunity space."

For instance, what if a car company decides to try to sell a six-seat EV with a certain amount of horsepower (two value factors) at a less expensive price (a demand factor) than that at which its rivals sell today?

Howarth hopes that his charts can help clients find what's called the "meatball" — that is, an underserved area of the market. "We also see applications to markets such as ground beef and cannabis," he said.

Finding An Edge In Growth Stocks

Charts, of course, are evolving. Doug Howarth, president and founder of Los Angeles-based consulting firm Multidimensional Economic Evaluators (MEE Inc.), has devised and patented a new way to view a stock based not simply on technical performance. His firm's software can present four dimensions of information on the same page.

Howarth's 3-D physical models, such as the one in the photo below, may help investors better see what makes a great investment truly stand out.

"The goal is to rapidly decrypt data in 4-D," Howarth told IBD in an exclusive interview. He hopes that his chart innovation "codifies something you know that you've not seen before."

A Military And Defense Industry Background

Howarth has done work at Lockheed Martin (LMT) and Raytheon (RTN). His firm's past and present clients include the two major defense contractors as well as NASA and United Technologies (UTX).

He had long wondered how to show the dynamics of a marketplace, financial or commercial, beyond the ancient vectors of price and demand.

In Economics 101, teachers introduce a line chart that measures the quantity of a product sold on one axis (or sales) and price on the other axis. The higher the price of a product, the lower the sales. The cheaper the price, the higher the sales. Plot these interactions to get a demand curve across the 2-D chart.

Simple, right? Yet consumer behavior is not so simple.

People make decisions not simply on price. Consumers also think about what features make a particular product carry more value. Manufacturers want to know which features may add value and boost demand.

How can this thinking apply to stocks?

The Future Stock Chart? Price, Volume, Value

Price and volume represent how much investors are willing to pay for a piece of a company. They express the limits of demand.

But do the biggest winners of each bull market cycle also show excellence beyond simply big price gains and heavy share volume? Absolutely.

Howarth's 4-D charts combine the two-dimensional "demand plane," or the red portion of the chart, with the green-tinted two-dimensional "value space." The latter highlights desirable features in a product, service or investment security.

The 4-D MEE left-side chart shows value in terms of market cap and return on assets (ROA). Every yellow sphere on the "value chart" corresponds to a white sphere on the 2-D "demand chart."

The above chart, created by a 3-D printer, illustrates how burrito and taco chain Chipotle Mexican Grill (CMG) stands out in terms of the measures of share price, market cap and (ROA).

Top Growth Stocks Today: A 4-D View On Celgene Stock

Celgene (CELG) remains on track to be acquired by drug giant Bristol-Myers Squibb (BMY). The right portion of the accompanying 4-D chart created by MEE shows how within the S&P 500, Celgene lies roughly in the heart of the S&P 500, as of the market close on July 22, in terms of share price and daily trading volume.

But the value chart shows that the big biotech and creator of the blockbuster psoriasis drug Otezla ranks quite well in terms of market value and return on equity.

Wall Street sees Celgene continuing to grow the bottom line. Analysts surveyed by Refinitiv expect the Summit, N.J., firm's earnings to expand 22% to $10.84 a share in 2019 and jump another 13% to $12.23 in 2020. It holds an outstanding 98 Earnings Per Share Rating from IBD on a scale of 1 (horrible) to 99 (heavenly).

The chart shows most of the S&P 500 companies "huddle" within an area of the chart. Howarth likens this pattern to the formation of penguins in the Arctic circle during cold spells. They form an elliptical mass to stay warm as a group. An occasional bird emerges from the middle and leaves the mass, perhaps to get some fresh air.

On Wall Street, some companies exhibit such strong performance that they seem to "stray" from the huddle. The 4-D chart makes them appear as true outliers.

Let's go back to the right-hand "demand" chart. Several spheres hover close to a pair of yellow lines drawn by Howarth. They include some of the FAANG companies, and reflect the current "ceiling" within the S&P 500 in terms of share price and daily trading volume. But they also represent the stock market potential in which other large caps may reach.

Applications In Industry, Beyond Stock Charts

Howarth has studied the electric vehicle (EV) market and asserts that his charts can help automakers spot an "economic opportunity space."

For instance, what if a car company decides to try to sell a six-seat EV with a certain amount of horsepower (two value factors) at a less expensive price (a demand factor) than that at which its rivals sell today?

Howarth hopes that his charts can help clients find what's called the "meatball" — that is, an underserved area of the market. "We also see applications to markets such as ground beef and cannabis," he said.