Another screen - will test it out

Ben Graham later on in his life moved from specific stock picking to picking groups of stocks. In a 1975 seminar - not long before he died - he laid this out very well:

http://bit.ly/p3y19a

The last paragraph of this article makes a good point clear:

"It’s also important to remember that in this study, Graham was advising the purchase of a basket of around 30 stocks matching any one criteria of undervaluation, e.g. 2/3 of book. He even went so far as to say “You can’t lose when you do that.” His experience proved that buying a stock at such a criteria was a dependable indication of group undervaluation."

He recommended a basket of 30 stocks when using just one criteria to find an undervalued stock - low Price/Book as an example. I would assume (and it has worked in practical real life investing) that using more than one criteria would make the need for investing in 30 stocks at once less important.

I personally like to screen for:
1) low Price/Book
2) low Price/Sales
3) Price/Free Cash Flow under 15
4) Price/Operating Cash Flow under 5

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I also look for a Price Earning Growth Ratio (PEG Ratio) of less than 1. It should be Number 2 or 3 in that list making 5 value finding ratios in that first set and a total of 8 rather than 7....
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The next three criteria are used to eliminate too many choices usually although I have been known to use the Piotroski Score of 8 or 9 as a starting point rather than use the score as a tie-breaker...

5) Piotroski F-Score = to or better than 5. If they have an Altman Z-Score better than 3 at the same time - they are a standout company in their financials.
6) Dividend Payment over 1%
7) A Forward Intrinsic Value higher than today's price with a negative value being an instant washout no matter how good the stock looks otherwise....

This finds high quality stocks at a value price (Value outperforms Growth over time in any cap stock - company size does not matter) that will pay me to wait until the market finds them. Depending on how long they have paid that dividend and if it is a rising dividend and the percentage of that dividend - the stock could end up in either the Core Portfolio or the Exploration (Trading) Portfolio. The Core reinvests the dividends and is a long-term hold unless the stock fundamentals change (Stock price changes up or down make very little difference here.) and eliminate the stock from the Core.

The trading portfolio can be very short-term or much longer depending on the performance of the stock price itself. If it loses right away, it is gone right away. If it moves up - then I sell some at certain points until I have my starting cash out of the stock. My results doing this have given me 500% profits in a single year more than once and I very seldom ever have a year where I lose by the end of it. Profits from trading are split at the end of the year - one half going to add cash to the Core Portfolio and retaining half to increase trading cash. Free stock (stock with no starting investment left in them) may be kept in the trading portfolio for more than a year and may eventually qualify to go into the Core give time.

Between the two portfolios - I have not had a year that I have not beaten the S&P 500 benchmark in decades....Even when I am not doing well in the trading portfolio - the core supports me and is quite capable of beating the benchmark all by itself with no trading in the trading portfolio at all.

There are years when I have NO stocks in the Trading Portfolio - The Core just keeps right on keeping on - making effortless profits and growing larger every year from the effects of rising dividends that are reinvested and that marvelous compounding that comes from that reinvestment.