Third Group of Portfolios

Finally overcame the evil internet giant and have returned, battered and bloody to the world of the blogs! Here is the third group of portfolios that I track. These are sort of bastard children, not necessarily small or large stocks, altho most of them run to smaller stocks. They look for certain factors and then select stocks regardless of size (unless otherwise noted.) Ignore the bottom portfolio for now; it was included by error and will be discussed in the fourth group, which I've added since the first of the year to track a couple of theories.

The first portfolio (Comp Rating) is one of my favorites. It does select for S&P 500 membership, so it runs towards larger stocks, but it appears to work as well for broader searches as well. I limit it to the S&P simply for manageability; open searches return 100+ stocks, whereas and S&P limiter keeps it to 10-25. It is value seeking system. It takes a series of value oriented measurements and compares it to industry averages; stocks that are better than the industry average are included- stocks that are worse are excluded. The criteria are: P/E LESS than industry average; Price to Cash Flow LESS than average; Price to Sales LESS than average;Price to Book LESS; Profit Margin (net seems better) GREATER than average;EPS Growth GREATER than average; Debt to Equity LESS. What these tend to find are stocks that are financially sound, are doing good to decent business, and are currently priced depressed for reasons other than rational pricing (the market is almost always rational in the long run, almost never in the short run.) I'm working to set this up for a long term backtest, but watching it over the last 2 years, it looks good.

The next portfolio (G+R1- dont ask) is one I'm testing out. It looks at more tradtional growth factors with some value factors tossed in to increase the potential for 'pop'. The Key factor are ROI and EPS growth, Year over Year, and long term, then it looks at financials, a proprietary pricing model, and finally requires and earnings estimate increase recently. Needless to say, that last one has eliminated about 99% of the market in recent days. The MA Cross variant requires that it have moved above it's 50d MA in the last week to be placed in the list.

The last, Rule of Ten, is an effort to systematize and tighten Phil Town's strategy from 'Rule #1". A list of factors must all be greater than 10% (EPS Growth, ROI, Revenue growth,Margin (I use Net and Gross), ROE. Then PEG must be less than 2 (to weed out overpriced stocks). There must be an increase in institutional ownership over the last year. I also screen for a price minimum ($5) and a market cap minimum ($250MM- in a total market search, this minimum only eliminated 6 stocks, so it's VERY optional). Stocks are added to the portfolio when they cross their 50d MA. The strict variant added a few additional restricters which pretty much eliminated everything, so I'm still tracking it, but not putting a lot of faith in it yet (it may surprise me!)

The last group I'll add tomorrow (God Lord willing and the crick don't rise....) is similar to the first group; aiming mainly at the Dow or S&P and using value criteria. They're in test mode, but the underlying theories are good, so we'll see how they develop.




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