It is difficult to find a RadioShack (RSH) bull these days. Virtually every article highlights how the brick-and-mortar age is giving way to online retailers and how RadioShack is a dinosaur. I can't argue with that. The mobile phone kiosks in Target stores didn't work out. Point taken and money was lost - but at least it cut its losses. Are sales dropping? Yup. Have a look at this depressing chart showing sales (TTM) and share price since 2006. And even if it could improve sales with mobile devices, the margins are lower and profits will be less.

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When you can go on eBay (EBAY) and order some small electronic adapter for under a buck... and that includes shipping… it makes it difficult to offer the same plug for $15 at your local electronics store. Granted, if you need it ASAP you'll buy locally but otherwise, the

Part of my job is to create investment models for clients. One of the hardest aspects for model builders is to create a highly liquid system that can handle huge amounts of capital and still have alpha or market out-performance. I have made numerous models for smaller investors with an optimal portfolio size in the range of $100K to $1 million, but creating a super liquid system that can support hundreds or thousands of investors is a whole lot more challenging - especially if you are trying to either out-perform the market or manage the downside. The 'Best 6' is such a system that uses cash management and value to pick up to 6 of the best Dow Jones stocks.

Picking the 'Big 6' Dow Jones

Just how does one go about picking what they feel are the best stocks of the Dow Jones Industrial Average (DIA)? I am a

Investors love a good deal and a great story. Who wouldn't want to be the person at the cocktail party boasting how he bought when everyone else was selling right before a massive turnaround, with a quick 50% profit? The harsh reality is that stocks often trend in one direction for a prolonged period of time and today's new low could give way to another low next week and another low after that. Turnarounds are hard to spot and investor sentiment is slow to change.

This week we will look at 2 beaten up stocks to see what potential may exist for a good story at your next barbecue.

J.C. Penney Company, Inc.

First let's look at what I like about J.C. Penney (JCP). Sitting on $4.23 cash per share is sweet based on a $14 share price. With over 43% of the float shorted, this could really have some

The average investor lives in fear of the next big drop, and rightfully so. I don't know anyone who has the luxury of tying up invest capital for the next decade just to have a portfolio at the breakeven point before factoring in inflation.

What can you do about the next bear market to protect yourself?

Go 'All In' During The Drop?

If you believe that the economy will eventually rebound, then a bear market is the time you go all in, leverage, and borrow big for the anticipated bounce after the market bottoms out. But what if the markets never do bounce back? Tell me, how many times have you seen this chart of Japan's economy that went down and stayed there?

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If this scenario plays out here, doubling down will just mean double the pain. If you are going to mortgage the house to buy

No doubt you have played the game of 'what would you bring to an island if you could only bring one item' and heard answers ranging from a good book to a fishing pole or a rocket ship. But what set of trading rules would you choose if you could only pick one set?

Would you buy and sell based on dividend yield? Trailing Sharpe ratios? Market outperformance? Earnings, revenue or dividend growth?

My first choice would be to buy and sell based on a change in earnings forecasts.

Upgraded Earnings Forecast

If you look at the American Association of Individual Investors model performance page, you will notice that the highest average annual returning system buys stocks with earnings revised upwards by 5% or more. I use a similar rule to create my simple portfolio.

My rules are as follows (all simulations are run compliments of Portfolio123):

• Buy

Some people prefer to stay 100% invested at all times. Doing so removes the emotional anguish of wondering when to invest and when to raise cash. Such an investor will buy the highs and the lows for average market performance.

Other people attempt to time the market. They may use market-wide valuation, a trailing moving average, sentiment or some other mechanism to give broad signals of when they should be invested in the market or not. They are either 'all in' or 'all out'.

But how many investors do you know that go 100% in or out of the market? Probably not many at all. The S&P 500 (SPY) market timing approach I will discuss is not some signal that tells you to 100% buy or 100% sell. The system below will tell you the % invested you should be at any given time. In some markets you should be

After writing the controversial titled article, The Hard Truth of Dividend-Growth Investing, I wanted to follow up with a fully automated strategy based on David Fish's CCC list that highlights the happy truth that these stocks can generate significant market-excess returns if you spend a few minutes looking at yields and value.

Dividend Growth Portfolio (David Fish CCC List)

Not wanting to take any credit or detract from the laborious and benevolent work of David Fish, I prominently placed his name in the title of this model and made it available without cost. For those familiar with the work of David Fish, he categorizes stocks according to how long they have been annually increasing dividends.

1. Challengers (5-9 yrs)
2. Contenders (10-24 yrs)
3. Champions (25+)

In the previously referenced article, my tests suggested that survivorship-bias would lower returns by about 5-7% annually. If you wish to subtract this from the following

One of the most common and over-used expressions in finance or investing is 'diversification.' To some it means spreading out your capital among different asset classes and involves buying gold, bonds, stocks and the money market. For others it involves buying a mix of international stocks while having a variety of sectors, industries and market capitalizations. Another investor might incorporate all of the above in addition to other methods and techniques.

One of the goals of diversification is to create a portfolio of holdings that trade independently of each another. Gold goes up and down with little relationship to fluctuating bond yields and the price of corn or the share price of Apple (AAPL). If each holding moves independently, then the combination of your holdings should create a 'diversified portfolio' that has a fairly smooth upwards slanting equity curve.

Simple Asset Class Diversification Works

Creating a simple version of the

Dividend-Growth Investing has become popular among investors wanting stability in a volatile market. The markets go up and the markets go down, but your dividend check keeps on growing every year on through retirement. You can find such stocks by copying the S&P High Yield Dividend Aristocrats index, the Dividend Achievers Select index or the Challengers, Contenders and Champions list compiled by David Fish.

While these lists create quick shortcuts to finding dividend growth stocks, these same lists do not convey accurate historical performance figures of the dividend growth strategy…and neither do these lists claim to. What you will not find on these lists are stocks that froze or cut dividends and others that went belly up. What you have is a list of stock market survivors which does not tell you about the attrition and devastation to a portfolio that followed this strategy over the past 10 years.

There is enough written about the basic Piotroski F-Score system and it is not my intention to simply add another simple stock screen to the pile. Instead, this article will be focused on how to go beyond the original F-Score to potentially improve gain and lower downside risk.

Benefits and Caveats of F-Score

Joseph Piotroski created a 9 point scoring system based on profitability, capital structure and operating efficiency to enhance a simple value strategy (low price to book ratio stocks). One benefit of such a system is that it highlights improvements in many areas that are not apparent to the casual investor who focuses on earnings and revenue only. The F-Score system may highlight some early signals of what may later turn into improved earnings and revenue.

One criticism of this system is that it only considers an improvement while not factoring in absolute numbers. For example, a company

There are two basic ways I like to evaluate stocks, which can be used separately or in combination with each other.

Method 1: Absolute Rules

The first is to develop a set of rules that are like hurdles for the stocks to jump over. An example of this would be the following:

• Dividend yield greater than 4%
• Price to earnings ratio less than 15
• Earnings growth greater than 10%

The advantage to this type of system is that it allows you to place absolute controls on your portfolio. There is a clear yes/no answer for each of these rules. Only the stocks that meet all of these requirements will pass your test for buying.

Method 2: Relative Ranking Rules

The second method I use is to create a relative ranking system. Perhaps I am looking at 100 stocks trying to determine which 10 I will buy. Each stock is given

The underlying principle of dividend growth investing is simple: buy stocks that pay increasing dividends every year. It would seem as if you are able to collect a risk-free check that only gets bigger every year that is independent of the market or fluctuating share price of your holdings. Dividend growth investors realize that this is not true as they try to determine which companies have long-term earnings stability and growth. But can we take this a step further? What role does valuation play in our decision-making process as when to buy and sell various holdings?

Timing Purchases With Valuation

Consider a brief example: you have two dividend growth stocks on your watch list. Both are identical in every way. Both trade at $10 per share and offer 50 cent per share dividends and generate $1 per share profit. You can own one

Utility stocks have been fighting the currents lately, largely due to an imminent fiscal cliff, which will trigger an increase in dividend taxation. Partially due to this, the Utility sector has been a strong under-performer of late. The chart below compares the six-month performance of the Dow Jones Utility Average vs. the S&P 500.

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Are Utility investors just helpless victims of Mr. Market, or is there something that can be done to fight back? Let's consider a couple of counter-measures that may help protect the vital organs of your portfolio.

Benchmarks And Test Setup

Before we look at some performance-enhancers, we need benchmarks to gauge the potential effectiveness. Our initial screen will include any stock in the Utilities sector (GICS 55) that trades over one dollar. Our benchmark will be S&P 1500 Electric Utilities. The test will run over the trailing 10 years with annual re-balancing.

In an increasingly volatile market riddled with flash crashes, high frequency trading and complex derivatives, it is understandable why many long-term investors focus their attention on dividends. Choosing among firms with a solid history of increasing dividends annually helps investors focus on long-term objectives as they can see income growth despite market swings.

Consider a scenario which illustrates this point - the market drops by 50%.

1. An investor holding a portfolio of small caps with no dividends is down by 60% or more. Disgusted that his portfolio is down after a decade of investing, he pulls the remaining 40% and never invests in the stock market again. He misses out on the subsequent rise.
2. The "dividend growth" investor has a portfolio that drops with the market and his capital gains are down 50%, yet his income is still growing. Far from wanting to sell, by focusing on yields with

It is quite likely that the far majority of Seeking Alpha readers are longer-term investors. That being said, even long-term investors engage in some speculative trading from time to time with a small portion of their capital. If trading tiny volatile stocks with very small amounts of money is something that appeals to you… you might be interested in a small caps trading system I developed and what drives it.

Rationalizing Small Caps Trading and Risks

If you are looking to invest in small caps, you can do so by purchasing a broad ETF such as the S&P 600 Small Caps SPDR (SLY). Over long periods of time it does appear that smaller stocks do outperform slightly.

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Some prefer to try selecting stocks on their own as they attempt to stock-pick - or increase their odds of holding a winner instead of buying a broad base

I run various portfolios for a variety of clients - from those wanting short-term small cap swing-trades to a slow and steady utilities strategy that incorporates market-timing. This article is going to be focused on the Dogs of the Dividend Aristocrat portfolio which may appeal to investors wanting the following:

1. High liquidity
2. Blue chip status
3. Low turnover
4. Cash conservation
5. Market-timing
6. Dividend growth
7. Deep value

This is a strategy well-suited for the investors with large amounts of capital that need to stick to big names with lots of daily volume and good analyst coverage, but they also want some exposure to market-timing and value. Let me explain how this portfolio works.

Dogs of the Dividend Aristocrats Portfolio

Stats-junkies can read all the performance and risk ratios on the Dogs of the DA here. But back to the portfolio construction...

First, we use the S&P 500 Dividend Aristocrats universe. Why?

In one of my recent articles, "Is A Stock Market Drop Imminent," I recommended long investors to consider two specific portfolio options - one based on dividend growth and the other on utilities. At first glance these suggestions no doubt seem to be outdated platitudes. But don't be turned off by the words "dividend" and "utility" … these are actually sophisticated models with a twist that will conserve cash, analyze value and include a market timing component.

But before we talk about strategy, we should understand how well utilities have performed over the past 14 years. The chart below invests in any stock over $1 per share that is found in the utilities sector (GICS 55).

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This translates into a 12% compound annual growth rate if you could invest in all utilities. Just buying utility stocks was still a

Are we on the verge of another nasty stock market drop like this horse and jockey doing a hand-less cartwheel? Possibly. What are some of the clues that it might break and what should you do about it?

The Battle of the Analysts

It is hard to know who to listen to and who to ignore when it comes to analysts spouting off. Technical traders are talking trash, while valuation experts say the market still has game. Fundamental analysts lowered earnings guidance for the market while prices rose, and they are now raising guidance while the market is waffling. Who is right and who is wrong and how should we react to the conflicting views?

Which Market Forces Dictate Direction?

Academics are constantly looking for that one golden rule or ratio that will completely explain everything there is to know about the market. I don't think they will ever find

Harry Browne developed a simple system called the Permanent Portfolio which invested equally in gold, stocks, long-term treasury bonds and cash. The idea is reminiscent of the Modern Portfolio Theory where you diversify into asset classes that do not move up or down with high correlation. The performance chart of this originally conceived idea is below:

Chart compliments of crawlingroad.com

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The Permanent Portfolio Mutual Fund

There are mutual funds that have taken the Permanent Portfolio concept and altered it somewhat. One example is the Permanent Portfolio Mutual Fund (PRPFX) that allocates 20% gold, 5% silver, 10% Swiss franc, 15% US stocks and foreign real estate and natural resources, 15% aggressive growth stocks, 35% Dollar assets.

Chart compliments of Google.com

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Between the 10 year period of 2002 until the end of 2011, the Permanent Portfolio tracked by Crawlingroad delivered a 9.33% compound annual growth rate

How do you hyper-compound dividend gains? Isn't dividend re-investment as good as it gets? What other mechanisms are there for speeding up the process to either retire quicker or have more income when you start living off your income investments?

Initial logic would suggest that you need only choose great companies with a good expectation of high and sustainable earnings growth coupled with a high dividend growth number and a solid record of annual dividend increases. Did I leave anything out? The company shouldn't be overvalued either, but you also get what you pay for.

Let's put this "common sense" approach to the test.

Below we will contrast two hypothetical firms (prices are set using a simple valuation process, which is P/E multiplier plus the value of any cash):

1. Company Name: High Growth Systems

• Earnings growth 10%
• Dividend growth 15%
• Initial payout ratio 30%
• P/E ratio 15