Finding #1 Stocks: Screening, Backtesting and Time-Proven Strategies

Acknowledgments xiii

Introduction xv

Chapter 1 The Importance of Screening and Backtesting 1

Why Should I Use a Stock Screener? 1

Backtesting! 2

Chapter 2 Identifying What Kind of Trader You Are 5

Question 1: What Kinds of Stocks Do You Want to Invest In? 5

Question 2: What Characteristics Do You Want Your Stocks to Have? 6

Question 3: What Do You Want Your Stocks to Do for You? 7

Chapter 3 Defining the Basic Trading Styles 9

Momentum Style 9

Aggressive Growth Style 11

Value Style 12

Growth and Income Style 12

“All Style” Style 13

Technical Analysis 14

Winning in Style 14

Chapter 4 Trading the Zacks Rank 15

The Zacks Rank versus the Market 15

About Len Zacks 17

Calculating the Zacks Rank 18

What the Rankings Mean 20

Four Factors of the Zacks Rank 24

Chapter 5 Beyond the Zacks Rank 27

Filtering the Zacks Rank 27

How Many Stocks are Right for You? 32

Chapter 6 How to Trade the Strategies 33

Once a Month 33

Once a Week 35

Combining Holding Periods 35

Chapter 7 Winning Momentum Strategies 37

Big Money 37

Earnings Acceleration 42

Increasing Earnings 44

New Highs 46

Using New Highs for Sector and Industry Analysis 50

Summary 53

Chapter 8 Winning Aggressive Growth Strategies 55

Small-Cap Growth 55

All-Cap Growth 61

Sizing Up the Markets 64

Zacks Rank 5 or 4 to 1 66

First Profit 68

Summary 70

Chapter 9 Winning Value Strategies 71

Value and Spark 71

R-Squared Growth 78

ROE for Your ROI 82

Cash is King 83

Price to Cash Flow 84

Statistical Analysis of P/CF, P/E, P/S, P/B, and PEG 85

Combined Valuation Screen 94

Summary 95

Chapter 10 Winning Growth and Income Strategies 97

Growth and Income Winners 97

Growth and Income Method 1 102

Modifying Your Strategies 103

Dividend Attraction 104

Summary 108

Chapter 11 Winning “All Style” Strategies (and Other Stuff That Works) 109

Finding Growth and Value Stocks the Right Way 110

Sales and Margins 113

Relative Price Strength 115

Broker Rating Upgrades 118

New Analyst Coverage 121

Top Stocks, Top Industries 122

Combining Two Great Ways for Identifying the Best Sectors and Industries 124

Earnings Yield 125

Calculating Price Targets 127

Summary 129

Chapter 12 Applying Technical Analysis 131

Increasing Price and Volume 132

TA and FA Winners 133

3 Days Up, Price and Volume 135

Moving Averages 139

Summary 148

Chapter 13 Identifying Chart Patterns 149

Symmetrical Triangles 150

Ascending Triangles 154

Descending Triangles 158

Flags and Pennants 162

Rectangles 171

Wedges 176

Head and Shoulders 182

Inverted Head and Shoulders 184

Screening for Chart Patterns and Consolidation Areas 192

The Pattern That Called the Market Top and Bottom in 2007 and 2009 195

Summary 198

Chapter 14 The Right Tools for the Job 199

A Good Ranking System 200

Screeners and Backtesters 201

Research Wizard: A Complete Research Tool 204

Chapter 15 Getting Started Screening and Backtesting 207

Screening for Stocks 207

Backtesting Your Screens 211

Advanced Screening and Backtesting 221

Summary 233

Chapter 16 Short Selling Strategies for Bear Markets 235

Toxic Stocks 236

Decreasing Earnings Two Years Out 239

Summary 241

Chapter 17 Managing Risk and Cutting Losses 243

Using Stop Losses 243

Diversification and Portfolio Weighting 245

Summary 247

Chapter 18 Know Your Options 249

The Option is Yours 249

Buying Calls and Puts 252

Straddles and Strangles 258

Spreads 260

Covered Call Writing 262

Uncovered Call Writing 267

Put Option Writing 268

Stock Screening for Options 273

Summary 277

Chapter 19 Investing in ETFs 279

ETFs for Any Market and Any Direction 279

Screening for the Right Sector and Industry ETFs 281

Chapter 20 Putting It All Together 283

Disclaimer 285

Free Trials and Other Resources 287

Index 289