Thursday, March 24, 2016

A sample strategy on stocks

A Sample Strategy

It is an example. Adjust it to your preferences and requirements. Instead of buying stocks, just save them in a watch list and buy them when the entire market is on sale. It consists of the following three steps.

1.       When to search stocks to trade. For example, it is once a month and the market is not risky.
2.       What to buy. It will be described in more detail later.
3.       Sell the stock(s). When the market is plunging, your objectives have been satisfied, or the bought stock(s) does not satisfy most criteria described in #2.

Step #2. There are several steps: Fundamental Analysis, Intangible Analysis, Qualitative Analysis and Technical Analysis.

For simplicity, stick with Fundamental Analysis here. The stocks have to satisfy most of the following criteria. Try to use a screener to limit your selection. If you do not find any stock, relax the criteria or do nothing as the market may be peaking. Skip those criteria that you do not have subscription or access.

·         Must be in one of the three major U.S. exchanges. No ADRs and partnerships (unless you’re expert in the countries/fields).
·         Market Cap is over 100 M.
·         Price is over $2.
·         Average daily volume must be 20 times more than your potential position.
·         Expected P/E is less than 20 and E must be positive.
·         Price/Cash Flow is less than 25 and Cash Flow must be positive.
·         Debt/Equity is less than 1 (preferable .5).
·         Blue Chip Growth: A or B in both Total Score and Fundamental Score.
·         Fidelity’s Analyst Opinion is 7 or higher.
·         Piotroski’s (from GuruFocus or other sources) F-Score is 7 or higher.


For more of my reasoning, check out the book described next. It has 800 pages (6*9) for $9.99. It could be the best $10 you ever spend.

The above is an abstract from my book "Complete the Art of Investing" which is available from Amazon.

I challenged to have the best-performed article in Seeking Alpha history, an investing site, for recommending 5 or more stocks in one year after the publish date. The concepts for that article are discussed in this book.

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