A turn around strategy

Many value stocks tend to stay in this phase for a long time. When the turnaround starts, it could be very profitable.

Market Timing

Do not buy any stock when the market is risky as described elsewhere in the book. Actually you should sell most of the stocks when the market is risky.

Buy Metrics

Metric	Value	Conservative	Aggressive
General
Market Cap	>300 M	>1,000 M	>100 M
Price	> 2	>10	>1
Avg. Volume	>20,000	>50,000	>10,000
USA	Only	Only	Foreign but listed in USA
Fundamental
Forward P/E	<15 span="">	<10 span="">	<25 span="">
Earning Gr Q-Q	>5%	>8%	>3%
ROE	>10	>15	>5
P / FCF	<10 span="">	<8 span="">	<15 span="">
Debt / Equity	<.5	<.25	<1 span="">
Technical
SMA-50%	>10	>15	>5
Misc.
Blue Chip       Growth	A or B	A	A or B
Fidelity	>6	>8	>5
IBD	>60	>90	>50
Vector Vest	>=1	>=0.8	>=12
Value Line Proj. 3-5% return	>5%	>10%	>5%
Zacks	>=4	5	>=4
ASSS	>=2	>=5	>=2

The assignment values for the metrics are not fixed; feel free to change it according to your own risk level. I do have suggestions for conservative investors and aggressive investors.

Some of the metrics are not readily available in Finviz.com and the following describes how to modify them.

Explanation

·        Market Cap. The free version of Finviz.com does not allow you to specify the range. Use ‘Any’ and then select the stocks according to the specified values. Average Volume has the similar restriction.

·        The conservative values for Market Cap, Price and Average Volume try to select larger companies. The aggressive values try to select smaller companies, which historically are more risky but perform better.

·        I prefer ‘USA’ for Country. Stay away from small companies from developing countries unless you can trust their financial statements.

·        Forward P/E measures the value of the stock. Ensure “E” (Earnings) is positive. I prefer it over P/E (from the last twelve months).

·        Earnings Growth Quarter to last Quarter is preferred to be positive unless it is during a recession.

·        ROE measures how well the company has been managed.

·        P/FCF. “Price / Free Cash Flow” cannot be manipulated easily. Together with low “Debt / Equity”, it measures whether the company would bankrupt.

·        SMA-50%. Some stocks tend to stay in a value stage for a long while (termed value trap). We like to select stocks just starting being noticed and on its way up.

·        Misc. Many sites have evaluated the stocks for us. Some only let their customers to access such information, some are available for free trials or are available from the library.

·        ASSS is my scoring system.

With the above, I have 35 stocks on 10/28/16. If you need 10 stocks for further evaluation, try to sort Forward P/E in descending order and select the top 10. If you cannot find any or substantially less than normal, it implies the market is risky, so take a break. If the performances of the last few stocks you selected are poor, take a break too as the market conditions do not favor the value metrics we specified. 

Qualitative analysis

Double click on the stock and read as many articles described on the stock as possible. If it meets all the criteria, buy the stock. Recommend to use market orders for large companies in a non-volatile market (when the average daily fluctuation is less than 0.5%). If the selected stock is the one you just sold, make you only buy it after 31 days to avoid Wash Sale penalty.

Keeping informed

Check the company updates of the stock you owned every month. One easy way is to enter the stocks in a portfolio in SeekingAlpha.com.

Sell the stock

Re-evaluate the stocks every 6 months.

If it does not meet the criteria or the market is risky, sell it. If it is only a few days away from the long-term capital gain, sell the losers right away or hold on the winner for a few more days.

Re-balance the portfolio after a stock has been sold. Ensure it is diversified enough into large/small cap and sectors.

Top-down Investing

It is similar to the above. Find the sectors that perform the best last month. Under Finviz.com, select the best sector under ‘sector’ one at a time. Several sites such as Fidelity compare the stock to the averages of stocks in the same sector.

 

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This is part of one chapter of my book "Complete the Art of Investing". If it helps you, envision how 850 pages will help you. 

For more of my reasoning, check out the book described next. The Kindle has 850 pages (6*9) for $9.99. It could be the best $10 you ever spend. Paperback is also available.

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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