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I am an independent investor writing at Scott's Investments ( My site is dedicated to discussing and publicly tracking historically successful investments strategies and sharing free investment resources. I emphasize empirical, historical, and quantitative... More
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Scott's Investments / Stock Loon LLC
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Scott's Investments
  • 23 Top Stock Picks 0 comments
    Nov 29, 2010 9:28 PM | about stocks: AAPL, AIT, AZO, CNU, DDMX, DECK, EZPW, JOSB, LRCX, HUM, PCLN, SH, THO, TSMA
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    I conduct the following screen on a monthly basis. Last month's list of 22 stocks is here and returned an average of 15.45% for the top 5 stocks on the list versus .59% for SPY.  The entire list of 22 stocks last month returned an average of 7.82%, led by Questcor Pharmaceuticals, Inc which returned over 39%for the 1 month period and Deckers Outdoor which returned over 36%.
    The screen looks for the following:
      • earnings growers still reasonably priced as judged by the PEG ratio
      • low debt
      • a history of high return on equity and investment, and
      • price momentum as gauged by the percentage the stock is trading to its 250 day high.
    This strategy of screening stocks has produced stellar returns since this summer. For example, August's list returned a whopping 16.17% versus 7.87% for SPY and July's top 5 stocks returned over 19%.  

    When the screen results in more than 5-10 stocks I have also started tracking returns of the top  5 stocks at the beginning of each list.  The stocks are ranked based on fundamental factors.

    The rational for this screen is based on backtests showing stocks with low PEG ratios, debt, and high returns on equity and price momentum have produced excellent returns.  The screen has tested well historically in bullish periods so strategies an investor could use to avoid drawdowns would be to either a) abandon this type of strategy entirely when the SP 500 or another major index is below a long term moving average, or b) hedge positions with a position in SH or write a short option strategy on an equity index or ETF like SPY.

    Below are 1, 3, and 5 year test results if an investor were to invest in the top 5 stocks in this screen every 4 weeks and moving to cash when the SP 500 was below its 200 day moving average.  Test results exclude commissions but include .5% slippage:

    This month's list contains 23 stocks versus 22 last month.  The top stock on the list is Metropolitan Health Networks, MDF, which has made multiple appearances on this stock list.  Apple, AAPL, remains on this month's list while DECK, one of last month's leaders, has been removed.

    Two possible tools an investor could use to conduct this screen on his/her own are stockscreen123 or Finviz. This screen was conducted using stockscreen123. For the full list of stocks and results, please see the right hand side of Scott's Investments.
    No positions in stocks mentioned

    MDFMetropolitan Health Networks,Here99.13172.31Healthcare Facilities
    AITApplied Industrial TechnologiHere99.071301.74Misc. Capital Goods
    LRCXLam Research CorporationHere98.515732.04Semiconductors
    THOThor Industries, Inc.Here98.091927.35Mobile Homes & RVs
    DDMXDynamex, Inc.Here97.91231.16Air Courier
    EZPWEZCORP, Inc.Here97.241289.95Consumer Financial Services
    JOSBJos. A. Bank Clothiers, Inc.Here96.461216.11Retail (Apparel)
    FCFSFirst Cash Financial ServicesHere95.11880.34Retail (Specialty), Inc. (ADR)Here93.074993.88Casinos & Gaming
    CNUContinucare CorporationHere92.37288.3Healthcare Facilities
    IDCCInterDigital, Inc.Here89.691512.15Communications Equipment
    ARGNAmerigon IncorporatedHere88.91240.95Auto & Truck Manufacturers
    AAPLApple Inc.Here88.46288951.81Computer Hardware
    TSMTaiwan Semiconductor Mfg. Co.Here85.8356988.05Semiconductors
    SNHYSun Hydraulics CorporationHere85.44538.49Misc. Fabricated Products
    QCORQuestcor Pharmaceuticals, IncHere83.15915.76Biotechnology & Drugs
    DECKDeckers Outdoor CorporationHere82.732797.94Footwear
    NVECNVE CorporationHere81.74240.39Semiconductors
    GSOLGlobal Sources Ltd. (Bermuda)Here81.16302.8Printing & Publishing
    AZOAutoZone, Inc.Here80.3511579.5Retail (Specialty)
    CTCMCTC Media, Inc.Here76.283569.98Broadcasting & Cable TV
    CPRTCopart, Inc.Here62.113027.95Retail (Specialty) IncorporatedHere47.6920172.09Business Services

    Disclosure: no positions
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