Stock Investing Blog

Jan 1, Investment Strategy for 2010

Fri, 01 Jan 2010 16:17:11 GMT

What strategy should be favored in 2010 ?

Check the Investment Strategy for 2010 for more details.

Oct 16, Market Timing - MACD Buy signal

Fri, 16 Oct 2009 18:07:26 GMT

As of the close of October 16th, both MACD of the S&P500 and the Dow are positive.

It is therefore time to re-enter the market at the open of October 19th.

This year, the Best 6 Months + MACD strategy appears to perform poorly: from the Sell signal on April 22nd to the Buy signal on October 16th, the S&P500 gained 28.8 and the Dow 26.7.

This is the best performance of the "Worst 6 months + MACD" since it's being tracked from 1950.

Apr 22, Market Timing - MACD Sell signal

Wed, 22 Apr 2009 23:23:24 GMT

As of the close of April 22nd, both MACD of the S&P500 and the Dow are negative.

The Dow triggered a signal on the 21st of April, the S&P500 on the 22nd of April.

So at the open on 23rd April, it is time to sell all holdings and stay on the side waiting for a MACD Buy signal from mid October 2009.

Feb 14, Market Timing Performances - Update

Sat, 14 Feb 2009 18:16:48 GMT

With 2008 closed, we clocked another 4-year US presidential cycle and it was time to update to market timing performances.

The Best 6 Months ("Sell in May and Go away") and the 50-Day/200-Day moving average crossovers systems avoided the 2008 Bear Market.

The other systems were in Buy mode and could not avoid the severe losses in October 2008: obviously, they did not fare worse than Buy and Hold.

The table uses the S&P500 excluding dividends from 1950 to 2008.

Feb 9, Quantitative strategies for achieving alpha - Book Review

Mon, 09 Feb 2009 00:08:36 GMT

A recent book that provides backtest results of more than a 100 mechanical models over 20 years timeframe.

The author (Richard Tortoriello) also includes 21 stock screens (with backtest results) that you can build with a stock screener.

Jan 31, Cheap Stock Screeners Review - Updated -

Sat, 31 Jan 2009 18:24:13 GMT

I updated the page on cheap stock screeners.

You may wonder why should you pay for a screening tool when there are many free ones online.

In fact, the screeners reviewed allow you to build more complex strategies that would be difficult (often impossible) to build with a free tool.

The stock screeners featured here are all reasonably cheap: from 58$/year for SmartMoney Select to 227$/year for AAII Stock Investor Pro.

Jan 5, Dow Under Dogs

Mon, 05 Jan 2009 12:04:19 GMT

An alternative to the Dogs of the Dow focusing on price appreciation rather than Dividend Yield.

Jan 5, Tiny Titans

Mon, 05 Jan 2009 12:04:19 GMT

Reasonable Runaways applied to small micro caps.

One of the best strategy from What Works on Wall Street if you don't mind high volatility.

Jan 1, Investment Strategy for 2009

Thu, 01 Jan 2009 14:12:09 GMT

2008 was a year to forget with losses of 35 to 45 for every market.

The recommended portfolio of Cornerstone Growth and Magic Formula Investing stocks underperformed due to its exposure to small cap growth stocks: the worst performing stocks in 2008.

What strategy should be favored in 2009 ? Check our Investment Strategy for 2009 for more details.

Dec 17, Martin Zweig stock screening "a la AAII"

Wed, 17 Dec 2008 14:07:48 GMT

Many readers are interested in the Martin Zweig stock screen from AAII, probably due to its great performances

Last year, I helped a reader building a similar Zweig screen with the MSN Deluxe screener. This article details this screen.

I also provide a Zweig screen using Morningstar Premium Screener.

Oct 29, Best 6 Months MACD Buy signal

Wed, 29 Oct 2008 03:56:33 GMT

We're approaching the best 6 months for the Stock Market (November-April) .

At the market close on October 28, both the S&P500 and the Dow triggered a Buy Signal (MACD turned positive).

So it is time to commit some money to the market.

From the Sell signal at the close of April 15 till October 28, the performances are as follows:
- S&P500: -29.7 percent (YTD -35.9 percent)
- DJIA: -26.7 percent (YTD -31.6 percent)
- recommended portfolio: -41.4 percent (YTD -44.7 percent)

The recommended portfolio has been particularly affected due to exposure to lower market caps.

If you haven't sold the recommended portfolio on April 16, then keep it till the next rebalancing at year end.

If you sold, here are the new Stocks that pass the 2008 recommended screens (For liquidity reason, only Tier 1 stocks at Foliofn are kept from the screens):

Cornerstone Growth Stocks

Symbol	Company Name
UFI	Unifi Inc
FFH	Fairfax Financial Holdings Ltd
LDG	Longs Drug Stores Corp
LG	Laclede Group Inc
PRGO	Perrigo Co
AMED	Amedisys Inc
DCM	NTT DoComo Sponsored ADR
FLO	Flowers Foods Inc
ZEP	Zep Inc
WMT	Wal-Mart Stores Inc
PNY	Piedmont Natural Gas Inc
MANT	ManTech International Corp
APSG	Applied Signal Technology Inc
ROST	Ross Stores Inc
GTIV	Gentiva Health Services Inc
SEAC	SeaChange International Inc
CALM	Cal-Maine Foods Inc

Magic Formula Investing Stocks

Symbol	Company Name
LGCY	Legacy Reserves Units
XOM	Exxon Mobil Corp
EV	Eaton Vance Corp
SVA	Sinovac Biotech Ltd
HWCC	Houston Wire & Cable Co
SII	Smith International Inc
SYX	Systemax Inc
APWR	A Power Energy Generation Systems Ltd
FII	Federated Investors, Inc
ABB	ABB Ltd Depository Receipt
MHP	McGraw-Hill Companies Inc
MLHR	Herman Miller Inc
USNA	USANA Health Sciences Inc
JCG	J Crew Group Inc
COL	Rockwell Collins Inc
GGG	Graco Inc
CLB	Core Laboratories NV
ENG	ENGlobal Corp
IMO	Imperial Oil Ltd
WDR	Waddell & Reed Financial, Inc
TS	Tenaris ADR
TKG	Telkom ADR
BHI	Baker Hughes Inc
MVL	Marvel Entertainment Inc
CLF	Cliffs Natural Resources Inc
TJX	TJX Companies Inc
BJS	BJ Services Co
BLKB	Blackbaud Inc
FOSL	Fossil Inc
JOYG	Joy Global Inc

Times are challenging and the market is reaching volatility never seen before.

In addition, we will soon enter the years 1 and 2 of Presidential Election Cycle: those are volatile years with below average returns.

For the next 2 years, I strongly recommend combining Mechanical Stock Picking with Market Timing.

The Best 6 Months (with or without MACD) that I have been following in this Blog is one of the simplest timing strategy yet it is extremely effective. Check Stock Picking and Best 6 Months Market Timing

Sep 23, Advanced formulas with MSN Stock Screener

Tue, 23 Sep 2008 02:31:25 GMT

I regularly receive questions on the MSN Stock Screener. One of them is how to build complex formulas such as the ones on the Improved Magic Formula Investing page.

So here is a step by step guide to build advanced formulas with the MSN Deluxe Stock Screener.

Jun 12, Investing Universe - Market Leaders - Updated

Thu, 12 Jun 2008 21:53:50 GMT

SmartMoney Select is the best screener to get a list of Stock Market Leaders.

I've updated the screen after receiving some comments (for instance, the criterion on Sales was not restrictive enough).

The new screen does not use any absolute criterion and also filters out Utilities.

Apr 20, New Dogs of the Dow

Sun, 20 Apr 2008 15:53:31 GMT

This article details an improved version of the Dogs of the Dow that ranks stocks through the Shareholder yield (Dividend Yield + Share Buyback Yield ).

Now, Stock Screeners seldom include the Share Buyback as screening criterion.

So I include a link to a site that ranks the 30 Dow stocks through the Shareholder Yield for free.

Apr 16, S&P500 MACD Sell Signal

Wed, 16 Apr 2008 03:02:51 GMT

The Stock Market typically exhibits lower performances in the 6 months from May to October.

The usual Sell signal is around April, 30th while the enhanced version checks for a MACD Sell Signal around mid-April.

We are in mid-April and the S&P500's MACD is in Sell Mode.

If you follow this Market Timing strategy, it's time to exit the market and come back in 6 months time.

Year to Date, the Dow is down -6.8 and the S&P500 down -9.1.

The 2008 stock picks (Check the Permalink) are doing better with a loss of -4.9 (Cornerstone Growth is down -1 while Magic Formula Investing is down -7.6)

Apr 8, Free Stock Screeners Review - Update

Tue, 08 Apr 2008 00:53:35 GMT

After the discontinuation of Reuters Power Screener, it was high time to review the free stock screeners page.

I've updated the comparison and it now includes:

MSN Deluxe

Yahoo Finance

CNBC Screener

Morningstar Free Screener

Zacks Custom screener

I've also changed the format and hope it is more readable.

Feb 29, The Bunny Stocks Porifolio

Fri, 29 Feb 2008 01:46:34 GMT

The Bunny Portfolio is a mechanical growth and value investing strategy created by John Dorfman (Thunderstorm Capital).

Use the Yahoo Stock Screener to pick stocks highlighted by this simple yet effective strategy.

Feb 29, Robot Stocks

Fri, 29 Feb 2008 01:46:34 GMT

Robot Stocks is a typical mechanical value investing strategy created by John Dorfman (Thunderstorm Capital).

Despite severe losses in 2007 - due to too heavy weight in Homebuilders - the strategy is very effective if you maintain sector diversification.

Jan 15, 2007 Portfolio Returns

Tue, 15 Jan 2008 01:11:06 GMT

The performances of the two 2007 recommended portfolios show great disparity in each stock's return.

It is important that you look at the performance of your portfolio globally rather than focusing on each stock individually.

Dec 28, Investment Strategy for 2008

Fri, 28 Dec 2007 10:16:14 GMT

The recommended portfolio of Cornerstone Growth stocks and Magic Formula Investing stocks outperformed the market in 2007.

What strategy should be favored in 2008 ? Check our Investment Strategy for 2008 for more details.

Mar 27, Magic Formula Ranking with MSN

Tue, 27 Mar 2007 23:09:14 GMT

An observant reader highlighted that the PE/ROIC field in the Improved Magic Formula Investing screen returns 0.00 for all stocks.

He was then wondering whether the screen was correct.

The short answer is "Yes, MSN Deluxe Screener does rank properly despite the 0.00s".

For more details, read on:

In fact, it is just a displaying issue due to truncating.

Let's check the last company that pass the screen. A time of screening, I get:
Ticker CFK
EY=17.25
ROIC=43.27
Therefore PE/ROIC=1/(EY*ROIC)=1/(17.25*43.27)=0.00134

MSN just displays 2 decimals so will display 0.00

Since this is the last stock that pass the screen, the others have PE/ROIC <0.00134, which will also be truncated to 0.00.

Therefore, you will see 0.00 for all stocks.

Notes:
MSN used 17.25 and 43.27 for EY and ROIC but not 17.25 and 43.27.
Had MSN used 17.25, then PE/ROIC would have been 13.4 !

Now, you know that the "0.00s" are due to truncating but does MSN get it right in the ranking ?

The answer, as I said, is "Yes, MSN does rank properly despite all stocks showing PE/ROIC=0.00".

To convince yourself, rank with ROIC/PE = "High As Possible" which is obviously the same.
Compare these 2 screens:

ROIC/PE Ranking
PE/ROIC Ranking

The results are indeed the same confirming that MSN ranks properly despite the "0.00s".

I thought of timing the PE/ROIC formula by *100 to avoid the "0.00s" display but MSN does not accept it as it finds this too complex !

So why not just rank with ROIC/PE = "High As Possible" to avoid the 0.00s ?

You can definitely do that. I personaly prefer the ranking with PE/ROIC = "Low As Possible".
PE/ROIC reminds me of PE/Growth used in Growth At Reasonable Price (GARP) investing.

Mar 20, Improved Magic Formula Investing with MSN Deluxe Screener

Tue, 20 Mar 2007 01:45:49 GMT

In Magic Formula Investing, I proposed a screen to emulate Greenblatt's popular strategy with the MSN Deluxe Stock Screener.

This article improves the MSN's definitions of Return On Invested Capital and Earning Yield = 1/PE to better match Greenblatt's strategy.

Feb 19, Value Line Timeliness and the Presidential Cycle

Mon, 19 Feb 2007 12:56:46 GMT

Value Line updated their Timeliness performances by adding results for 2006.
Check Value Line's Ranking System Performance

Stocks with Timeliness #1 (w/o weekly rebalancing) failed to beat the market by returning just 5.7% compared to the S&P500's 13.6% and the Dow's 16.3% in 2006.

This confirms the poor track record of Value Line Timeliness Rank #1 in the year 2 of the 4 years presidential cycle: see Stock Picking and Calendar Market Timing

2007 is a year 3 of the election cycle and Value Line Timeliness should perform extremely well.

Jan 2, Investment Strategy for 2007

Tue, 02 Jan 2007 07:14:25 GMT

Here is an investment strategy for 2007 for mechanical investors.

In a nutshell:

2007 should be a positive year for the stock market

Favor Growth stocks

Best Wishes for 2007.

Nov 27, How every investor can benefit from mechanical stock picking ?

Mon, 27 Nov 2006 12:09:48 GMT

Don't like the idea of computers selecting stocks for you ?

Here is a strategy using mechanical investing that can improve any stock picking technique.

Oct 17, Best 6 Months MACD Buy signal

Tue, 17 Oct 2006 10:43:53 GMT

We're approaching a period where the market historically performs better: the 6 months from november to april.

Sy Harding enhanced the entry signal by checking for a MACD buy signal starting from october 16.

After a steep correction in may-june, the market rallied powerfully and is now at its year to date high (all time high for the Dow) with MACDs for both S&P500 and Dow Jones in Buy mode.

If you follow the Best 6 months timing system - which works well with Mecanical Stock Picking as highlighted in Stock Picking and Market Timing - you can either jump back now or just wait the standard entry signal in 2 weeks time on november 1.

If you don't follow this timing system, then good for you: from april 15 to october 15, the S&P500 gained 5.9 percent while the Dogs of the Dow jumped 17 percent.

Jul 21, Reasonable Runaways

Fri, 21 Jul 2006 16:10:47 GMT

Reasonable Runaways was the most profitable strategies in "What Works on Wall Street" (and "How to retire rich") until O'Shaughnessy improved Cornerstone Growth in 2005.

The strategy can be used with large or Small Caps and even micro-caps (Tiny Titans).

Jul 21, Dogs of the Dow

Fri, 21 Jul 2006 16:10:47 GMT

The most famous mechanical stock picking strategy.

Include links to historical backtests.

Jul 21, Cornerstone Growth

Fri, 21 Jul 2006 16:10:47 GMT

James O'Shaughnessy's most performing growth stock picking strategy actually includes both Growth, Value and Momentum all in one.

Can be used with Blue Chips (The Market Leaders) to reduce volatility.

Jul 21, MAGNET Investing - CANSLIM At Reasonable Price

Fri, 21 Jul 2006 11:30:03 GMT

MAGNET is an interesting mechanical stock picking strategy. The acronym stands for:

M: Management / Momentum

A: Acceleration in Revenues/Earnings

G: Growth At Reasonable Price

N: New Products/Management

E: Emerging Product/Industry

T: Timing

As you can see, it is similar to CANSLIM but with the addition of Value through Growth At Reasonable Price.

The strategy was created by Jordan Kimmel in his book "MAGNET Investing - Build a portfolio and pick winning stocks with your home computer".

Check the following link for more info on how to pick MAGNET stocks.

Jun 23, Best 3 months in a Year 2 of the Election cycle

Fri, 23 Jun 2006 19:54:23 GMT

Many of you are probably wondering what to do with the current market. At the begining of the year, I mentioned that 2006 - being a year 2 of the presidential cyle - sets to be a challenging year for the stock market and to watch out for a buying opportunity around october-november timeframe. Those predictions were exclusively based on historical stock market patterns without trying to make any judgement. This article (click the Permalink) - motivated by a reader - gives you further insight as to the timing of a possible bottom. In a nutshell, around october 1st, 2006 should be a good entry point to the market. Another 3 months to wait.

May 6, Magic Formula Investing

Sat, 06 May 2006 11:56:52 GMT

Build your own Magic Formula Investing with our stock screening process. Use the PE/ROC (Price to Earning to Return On Capital ratio) to rank stocks like Joel Greenblatt.

May 6, The Little Book that Beats the Market - Joel Greenblatt

Sat, 06 May 2006 11:20:46 GMT

Review of Joel Greenblatt's Little Book that Beats the Market.

May 2, "Sell in May and Go Away" in a Year 2 of the Election cycle

Tue, 02 May 2006 08:11:32 GMT

Check this interesting article from Bloomberg on the "Best 6 Months strategy" or "Sell in May and Go away" in a year 2 of the US presidential election cycle.

The average performance of the S&P500 in years 2 of the election cyle is 5.9 (from 1950-2004, dividends excluded).
The YTD performance for the S&P500 is 4.6 (dividends excluded) so based on history the market has not much room on the upside. Since we're now entering the worst period, it looks very prudent to take some profits.

May 1, Tailored Stock Investing strategies with the Investor Profiler Tool

Mon, 01 May 2006 05:00:24 GMT

Find out what type of investor you are and what are the best Stock Investing strategies for you using this personality and risk analysis tool.

Apr 15, Prepare for a Market Exit - MACD Sell Signal

Sat, 15 Apr 2006 10:44:33 GMT

We are approaching the time of the year where the stock market typically makes lower gain: the 6 months from may to october. This is widely known as "Sell in May and Go Away".

Sy Harding enhanced the exit of the market (usually around 30th of April) with the addition of the MACD indicator. He uses the 20th of April as starting date to check if the Market exhibits a MACD Sell signal while Stocktradersalmanac uses the 1st of April.
I will simplify and just use mid-April !

We are now mid-April and both the MACD of the S&P500 and the Dow Jones are in Sell Mode. So it might be a good idea to exit the market - or at least reduce exposure to shares - and come back in 6 months time. Alternatively, you may just wait the normal exit signal without MACD timing which will be in 2 weeks time.

The Dow is up 3.9% YTD while the S&P500 is up 3.3%. The recommended strategy at the beginning of the year, the Dogs of the Dow, is up only 2.4% (Dividends excluded) but the Dogs have higher dividends so performances are essentially similar to the Market.

Mar 5, Growth at Reasonable Price Stock Screening with the Zacks Rank

Sun, 05 Mar 2006 08:38:49 GMT

Zacks has a weekly column called "Screen of the week". Usually, the screens highlight just a few stocks and are not really adapted to mechanical investing. However last week's "Best of Both Worlds" screen is extremely well suited to mechanical investors.

It is a Growth at Reasonable Price strategy using Zacks Rank <= 2 as Investing Universe and then filtering companies with Historical Earning Growth in the Top 20% of all companies and PE in the Bottom 20% of all companies.

The screen uses monthly rebalancing and shows pretty good results in the last 5 years.

Jan 28, Successful Investing - Avoiding Implementation Shortfalls

Sat, 28 Jan 2006 12:27:24 GMT

Successful Investing requires avoiding few shortfalls. Oftentimes, when you try to implement some investment strategies, they fail to deliver the superior returns...

Jan 8, Market Timing with the Fed Fund Rates

Sun, 08 Jan 2006 23:08:40 GMT

An error was made in the description of the Simple Monetary Market Timing system.

The model actually uses a 12 month delayed signal by looking at the direction of the Fed Fund rates 12 months ago: the delayed signal is due to the fact that it takes 6-12 months for interest rates to take effect.

The performances provided are however correct, including the performances for the combined Monetary+Presidential cycle Timing system.

My apologies for any inconveniance.

The model does not change for 2006 since interest rates 12 months ago were already rising.

2006 is still a combination of Year 2 of the Presidential Election cycle + increasing interest rates: the suggestions to favor Large Cap Value for 2006 is still valid.

Jan 3, Stock Screening

Tue, 03 Jan 2006 23:55:06 GMT

Step by Step Stock Screening process to help you build succesful investment strategies

Dec 29, Stock Ratings

Thu, 29 Dec 2005 07:27:16 GMT

Use Stock Ratings from various Investment firms to build portfolios with superior returns.

Dec 27, Investment Strategy

Tue, 27 Dec 2005 00:37:19 GMT

Find out what is the best stock market investment strategy adapted to your situation.

Dec 27, High Yield Investment Strategies

Tue, 27 Dec 2005 00:26:23 GMT

Use a Stock Screener to build High Yield Investment strategies focusing on solid stocks with high dividends or Preferred Stocks.

Dec 26, Stock Picking and Market Timing

Mon, 26 Dec 2005 12:56:59 GMT

Combine Stock Picking and Market Timing to turbocharge your investment returns with lower risks. Many stock picking styles and market timing strategies are presented to suit every investors.

Dec 26, Investment Returns Calculator

Mon, 26 Dec 2005 12:43:58 GMT

A neat Investment calculator that allows you to check how investment strategy, rebalancing frequency, turnover, and tax affect your Returns. You can compare 2 strategies simultaneously to check which one is best

Dec 26, Stock Broker Fees Calculator

Mon, 26 Dec 2005 12:39:05 GMT

Reduce your broker fees thanks to this calculator. Allows you to check which discount stock broker gives you the lowest fees based on your investment strategy and activity.

Dec 26, Calendar Market Timing Systems

Mon, 26 Dec 2005 05:35:56 GMT

Market Timing systems based on the calendar (Best 6 Months improved with MACD, Presidential cycle). They provide same returns as Buy and Hold but with much lower risks (one system was out of themarket in the great Bear of 2008).

Dec 26, Warren Buffet Investing

Mon, 26 Dec 2005 05:21:24 GMT

Build a Warren Buffet Portfolio with Stock Screeners.

Dec 26, Cheap Stock Screeners - Review

Mon, 26 Dec 2005 05:14:41 GMT

Review of cheap screeners (Stock Investor Pro, SmartMoney Select, Morningstar Premium, Stock Prospector, Stock Tables, PowerInvestor) to help you choose the best one suited to your Investment strategy and budget.

Dec 26, Discount Stock Brokers - small Portfolios

Mon, 26 Dec 2005 04:26:06 GMT

Is Sharebuilder the Best Discount Stock Broker when you have a small Portfolio ? Trading fees can add up quiclky if you don't choose the right stock broker.