John V.'s  Instablog

This weeks results from my Super Stock Screener.  Screening is an excellent starting point for finding winning stocks.

My thoughts:

This past week saw the stock market rise and begin to possibly, possibly start recovering from the crash during August.  Green was found in many places and more importantly, a few leading stocks broke out to new highs on high volume.  In a bad market this does not happen, so this should be taken as good news.

However, not everything is positive.  In Europe we still have a giant mess with defaults hanging like a proverbial sword of Damocles hovering over us, ready to sever our heads from our torso financially.  Just this weekend it was learned that another rogue trader lost $2.3 Billion dollars (yes $2.3 Billion!) in fraudulent trading since 2008 and finally got caught.  What is it with these traders and investment banks that they keep having these types of problems?  Unbelievable.

Despite all these problems things are showing potential improvement and so is the Super Stock Screener.  Last week the screener featured 27 stocks that made the list, and this week the screener improved and is now showing 34 stocks for an overall improvement of 7 new names.  Some are familiar ones that have clawed their way back onto the list while a few others are brand-new.

One thing to keep in mind is that I do not feel stocks are buy-able if they trade below their 50-day moving averages, and several of the stocks on the screen do trade under those levels.  You can always buy them if you want (don't let me stop you), but I feel there is a higher probability of success if the share price is above the 50-day.  Thus that is something to consider when you do your own analysis.

Below you'll see the new stocks highlighted and underlined, so take a look at each one if they interest you.  If you have a process like I do then you can go thru them quickly and efficiently.  I don't think I talk about process enough, so let me re-iterate what mine is:

1.  I first do Screening for stocks.  This ensures that stocks I look at (below) have passed my minim thresholds for Sales growth, Earnings growth, Return on Equity, etc.  That is why my screener is a good starting point in my process and it is amazing how people will buy stocks with unfavorable metrics.

2.  I'll review the charts for every stock on the list as I am looking for very specific characteristics.  I want to see big up-volume spikes with few down-volme moves, I want to see new highs, and an upwards trend.  I want to get a positive impression that big institutional investors like the stock as well.

3.  If I like the chart then I'll go further in-depth into researching the company.  I want to understand what the product is, I want to see the quarterly Sales and Earnings, I want to see Analyst Estimates, and I'll look at recent News as well.  I'll put a lot of thought into why people might be buying the product (and continue to buy) and I want to come away with a good feeling for the business.  This step is probably where I spend the most time because no matter how great a chart may look, if the underlying business is bad or not growing as much in the future then the stock will eventually reflect that and why so many stocks seem fine one day and then get crushed the next.  The best example of this is Sodastream (NASDAQ: SODA). 

4.  After I've done the fundamental work I have to decide whether to buy the stock.  If I decide to buy then I consider what the general market is doing (good or bad) and whether there is a high-probability spot for buying that can help increase the odds of a successful trade.  Also to consider is how much to buy as well.  You never know what will happen so being flexible in this step is important.

5.  After buying I then implement risk-management rules using stop-loss trade-triggers, and after inputting my parameters I then become a big cheer-leader for the stock.  If things are right then I will make money, if I'm wrong then I hope to only lose a little.

And that my friends, is my system in a nutshell.  Hopefully it will help you as you form your own system for investing in the market.

As always this is not a buy list but rather a starting point for doing more research.  Stocks that are new are underlined and have an Asterisk (*) next to their company name.

Stock that fell off the Super Stock Screener results from September 10th are below: