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Brian Burns
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Brian Burns is an investor, option trader, and author of "Trading Stock Options". He holds a BS in Business Finance. He currently works as an accountant and auditor for a private CPA firm. His background in accounting influences his investing style as he focuses on valuing stocks from... More
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Trading Stock Options
  • A Simple Screen to Beat the Market 0 comments
    Oct 23, 2010 2:13 PM | about stocks: HLF, PCLN, MNST, UPS, ABEV, ABT, ARIA, AVP, CL, DPS, ETM, EXEL, IT, GHL, HALO, HGRD, HEW, INCY, LLY, MDSO, MPG, NSM-RETIRED, NSR, NTRI, OMC, SNI, SINA, SOHU, TOO, TEF, THRX, TDG, WAT, YRCW, ZAGG, ZIXI
    There's no shortage of stock pickers out there; you may be overloaded with stock suggestions from brokers, analysts, or Joe from the office. Turn on CNBC and you'll see analysts giving their two cents, Jim Cramer giving out 30 recommendations a day, even CEO's appearing to tell you that their stock is the one you should put in your pocket.
    The amount of information out there kind of reminds me of golf; everyone seems to have a swing tip and most people are getting their tips from someone else.
    What I have been striving to do is to focus on finding quality stock names, not by listening to Joe, Cramer, or some CEO but by listening to the performance of the company. In your day to day life I'm sure you don't have time to sit down and research the countless stock names that are dropped into your lap.  The fastest way to find quality names is to set criteria that you think is important and focus on those stocks.
    I ran a screen at the close of the market on 9/8/10 using my favorite research site IMetrix. I set the criteria as follows:
    1. Quarterly Earnings Momentum (Change in quarterly earnings growth rate) at greater or equal to 50%.
    2. Daily Average Trade Volume at greater or equal to 100,000.
    3. Pre-Tax Return on Equity (Trailing 12 Months) at greater than or equal to 30%.

    4. Next Quarter Earnings Growth Over Same Quarter of Last Year at greater than or equal to 50%.

    5. Gross Margin (Trailing 12 Months)at greater than or equal to 50%.
    The Screen yielded 36 names. Some of these I have heard of while others were new to me. The names included Herbalife (NYSE:HLF), Priceline (NASDAQ:PCLN), Hanson Natural Corp (HANS), United Parcel Service (NYSE:UPS), and American Beverage Company (ABV).
    I tracked the performance from 9/8/10 to the close on 10/22/10. The best performer in this screen was Zagg Inc (NASDAQ:ZAGG) with a gain of 120%. The worst performer was YRC Worldwide Inc (NASDAQ:YRCW) with a loss of -13.8%. Out of 36 stocks, 5 (13.8%) finished in the red while 31 (86.1%) closed above where they were on 9/8/10.
    If you had simply run this screen and spread $10,000 (equally weighted) into these names you would have had a gain of 14.5% from 9/8 - 10/22. The DOW gained 7.1%, Nasdaq 11.2%, and S&P 500 7.6% during this same time period.
    I would say more time is needed to track the performance of these stocks in a down market. The screen should also be used as a starting point for further research. The purpose is to weed out the majority of names and focus your energy on researching the few instead of the many. Also, I am testing some changes to the screen and will be posting the tracking performance of that screen shortly. Below is the complete list of names included in the screen:


    Disclosure: No positions in any of the stocks mentioned.


    Disclosure: No positions
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