Find a Stock that moves 1500%

Instructions:

1. Use any of your favorite stock investing software. This example assumes excel based system.
2. Calculate the lowest close for a stock in last 260 days. If a stock has less than 260 days data calculate lowest close for those many days.
3. Calculate percent change from lowest close and select stocks which had 100% plus growth
4. Find the highest price in the 100% move and only take stocks which are within 25% of that highest price.
5. So this is your trading universe of stock which have made significant move of 100% or more and are as of today within 25% of the high during the move
6. Use a significant one day move scan on these stocks. e.g. say a 5% move ( 100 * (C - C1) / C1) >= 5 AND V >= 1000 AND V > V1)
7. Buy next day with 1% risk and stop below the low of previous two days bar
8. Trail with a stop
9. If you get stopped buy again on next breakout
   
10. Enjoy your profits

From StockBee

Investing Strategy: Could it be this simple? Part II

In a previous post I reviewed a strategy called the Foolish 4. It appeared to be a very simple investing strategy which historically beat the Market.

However it turns out that even though it historically beat the market, it has not done will in the following years 2000 to 2008. I'm not sure why but I found that interesting.

I guess it just shows the age old truth: Past performance does not indicate future performance.

Investing Strategy: Could it be this simple?

It should be noted that this strategy is no longer recommended.

Could it be this simple? Here are the rules:

• Get the square root of the stock price
• Take the 5 highest
  
• Drop the top one
  
• Invest 40% into the lowest priced
  
• Invest 20% into the others.
  
• Hold for a year and then reallocate.

Historically this strategy returns 28%

This is the Foolish 4 Investing Strategy, it's from the Motley Fool bunch.

It's a child product of the Dogs of DOW investing strategy.

References:

The Motley Fool - Foolish 4 Investing Strategy
The Motley Fool - Farewell to Foolish 4

Screening Stocks

Screen-Based Investing.

Many quantitative analysts use "screens" to select their investments, meaning that they use a number of quantitative criteria and examine only the companies that meet these criteria. As the use of computers has become widespread, this approach has increased in popularity because it is easy to do. Screens can look at any number of factors about a company's business or its stock over many time periods.

While some investors use screens to generate ideas and then apply fundamental analysis to assess those specific ideas, others view screens as "mechanical models" and buy and sell purely based on what comes up on the screen. These investors claim that using the screen removes emotions from the investing process. (Those who do not use screens would counter that using a screen mechanically also removes most of the intelligence from the process.) One of the proponents of using screens as a starting point is Eric Ryback, and one of the most famous advocates of screens as a mechanical system is James O'Shaughnessy.

Things to check out:

Caps

Yahoo Stock Screener

How to read charts

10 Commandments of Investing

3 Wise Men Said

Picking a Great Stock - Lesson I

Summary of the Rules:

• Invest in Small Cap Stocks Only
• Company must have had a "surprise" of 20% or more in last quarter
• Seeing Lots of Volume? Beware of institutional traders
• Stock must have an EV/FCV/G ration below 1.0
• PEG should be less then 1.0
  

Let's review them one at a time...

Rule: Company must have positive cash flow

The more the better, nuff said.

Information to do the calculation can be found on "statement of cash flows"

The calculation: Cash flow from operations - capital expenditures

From Motley Fool - Free Cash flow defined

Rule: Invest in Small Cap Stocks Only

Small caps give investors the edge, because institutions tend to ignore them and analysts don't cover them. By the time anyone realizes they're there, they've already grown much larger, and appreciated in price.

Companies with market values between $100 million and $2.5 billion to qualify as a small cap.

"The greatest gains from stock investing are to be found not among the Googles of the world, the well-known, much-loved and overanalyzed large caps. They're found in the tiny corners and crevices of the market, where analysts have yet to tread."

The Motley Fool

Rule: Company must have had a "surprise" of 20% or more in last quarter

Seek companies that had an earnings surprise of 20% or more last quarter, but also have the prospect of growing earnings at least 20% annually for the next five years, according to analysts.

The Motley Fool

Rule: Seeing Lots of Volume? Beware of institutional traders

Many investors say volume is where the large institutional traders leave their footprint on the market.

From Yahoo Investing

Rule: Stock must have an EV/FCV/G ration below 10.0

In other words, I want my small caps to sell at bargain-basement prices. An EV/FCF ratio of 10 or less gets my attention real quick. Anything pricier than that, I need to take a good hard look at the company's growth rate and EV/FCF/G ratio.

Calculation looks like the following;

Free Cash Flow = Cash flow from operations - capital expenditures
Market cap = current share price * total shares outstanding
Debt = long-term debt + short-term debt
Enterprise value = market capitalization - cash and equivalents + debt

From The Motley Fool

• Free Cash Flow
• Enterprise Value

After some consideration, I decided to remove this rule. I believe that the guess part leads to areas where I can make errors in judgment. I do reserve the right to come back and examine this. (Plus I'm not sure I understand all of this one)

Rule: PEG should be less than one.

A ratio used to determine a stock's value while taking into account earnings growth. The calculation is as follows:

Calculated as a stock's P/E ratio divided by its projected year-over-year earnings growth rate. In other words, the ratio measures how cheap the stock is while taking into account its earnings growth. If the company's PEG ratio is less than one, it is considered to be undervalued.

From Investpedia - Definition

Rule: Are you investing in a Value Stock or a Growth Stock?

Value stocks are trading for less than their apparent worth and have potential to get back to and surpass there apparent worth.

Growth stocks are trading higher than their apparent worth but have potential to outgrow there current worth.
From Investpedia

Summary of the Rules:

• Invest in Small Cap Stocks Only
• Company must have had a "surprise" of 20% or more in last quarter
• Seeing Lots of Volume? Beware of institutional traders
• Stock must have an EV/FCV/G ration below 1.0
• PEG should be less then 1.0
  

References

• The Motley Fool - The Science of Stock Picking
  
• The Motley Fool - 7 Steps to Finding Gems
• Investpedia - Stock Picking Strategies (still reading)