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Stock Market Success

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Success in the higher brackets of achievement is something that can be had only by taking others along with you. Napolean Hill

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Certainty for Me: Allows me to act as though it is impossible to fail (Because it is!)

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What barriers are there to stock market certainty? Lack of knowledge and know how No time to learn Intimidated by the industry Education expensive Murphys Law

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What barriers are there to stock market certainty? We remove the barriers and show you a clear path to certainty

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History Repeats Can anyone tell me the one thing that is absolutely certain in the stock market?

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goes up over time, ALWAYS has, ALWAYS will The marketALWAYS

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History Repeats Itself

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The Trading System If we know the market always goes up over time, we need a system that takes advantage of that.

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Exit Here Re-enter Here Exit Here

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Stocks Bonds Mutual Funds Futures/Commodities Precious Metals Currencies ETFs what should you invest in and why? - Potential for Big Losses - Low Return/Low Risk - High Fees/Low Return - 24/7 + Volatility/High Risk - Low Return - 24/7 + Volatility/High Risk - High Return/Low Risk

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Diversification

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Anyone traded a Penny Stock?

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1)Buy and Hold good companies cheaply and/or Low cost Funds 2)Learn to trade a proven system with Index ETFs keeping losses small and letting winners run while compounding returns Only 2 Ways of Achieving Certainty:

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Finding the Best Stocks

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What we will cover Copyright 2013 The Best of the Best The process of elimination Why use the IBD 50? What we are looking for in a stock

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Introduction into Value Investing Ben Graham and David Dodd The Intelligent Investor 1949 Graham taught Warren Buffet at Columbia Simple, common sense concept Estimate the value and compare to current price Paint by numbers process to get to a MOS (Margin of Safety price) Copyright 2013

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4 Stages in Choosing Stocks 1.Find a list of stocks - I Use the IBD 50 2.Top Line filter using Yahoo Finance analysts ratings. 3.Use the value investing formula to find companies that match the growth requirements 4.Find the Margin of Safety Price for the stocks that made it through the first 3 stages Copyright 2013

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What is the IBD50? Weekly list of the top rated 50 growth stocks Rankings are based on a combination of each companys: Recent profit growth record IBDs Composite rating, which includes key measures such as return on equity, sales growth and profit margins Relative price performance in the last 12 months EPS and RS (Relative Strength Ratings) +85 or higher tells you that each stock has stronger earnings and price performance than 85% or more of all the stocks on the market! Copyright 2013

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Why 85? Because history shows the best stocks typically have EPS and RS ratings at least 85 BEFORE they launch their biggest price gains Copyright 2013 IBD 50 = Great Source for Stock Picks As you can see the 85-85 Index vastly outperformed the broader S&P 500 Index since 2000 by quite a margin

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Process of Elimination Using the IBD50 Take 6 months of IBD50 weekly Data (eIBD Subscription at Investors.com - $269 per year or $29 per month) They do not keep weekly records, so you have to download the latest one into excel each week Sort the data into how many times each stock showed up over the 12 weeks Delete any stocks that did not show up at least 3 times on the weekly lists Delete any stock under $30, preference for it to be under $200 Rate using Yahoo criteria from the latest analysts expectations Use Morningstar.com to calculate the MOS (Margin of Safety Price) for each stock (only A & B ranked stocks) Final list must be no greater than +50% of the MOS price and preferably have a RS and EPS rating of 85 or above Copyright 2013

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Summary of Yahoo Finance Stock vetting process Step 1 Open up Yahoo Finance on your browser: http://finance.yahoo.com and type in a ticker symbol for a stock that you are considering and click Get Quoteshttp://finance.yahoo.com Step 2 Under Analysts Coverage heading on the left hand side of the menu, click on Analyst Estimates. Step 3First Section Earnings Est: Make sure Avg. Estimate number is at least 0.10 or greater along the row. Make sure the number of analysts for the stock is at least 3, and preferably less than 25. Again +25 does not discard the stock, but it is a black mark. Step 4 Earnings History Section: The rule is that we are looking for at least three out of the four Surprise % columns to be positive, preferably the last 2. We want those analysts to be low balling our stocks EPS results causing them to pop. Step 5 EPS Trends Section: We want the EPS numbers to be steadily increasing from bottom to top. Again this is not a deal breaker, but more of a nice to have. Step 6 Growth Est Section : Current Qtr and Next Qtr should be +15%, but like EPS Trends, external factors can influence these numbers. So again, they are nice to have. However, This Year and Next Year MUST be over 10% or we discard the stock. Step 7 Growth Est Section : The Next 5 Years (per annum) MUST be over 10% or we discard the stock. Step 8 Growth Est Section : The PEG ratio should be under 2, with 1.5 or less preferred.