For the Conservative Investor: - 25% in small and mid-cap stocks;
- 75% in large cap stocks.
For the more Aggressive investor: - 35% in small and mid-cap stocks;
- 50% in large-cap value stocks;
- 15% in large-cap growth stocks.
This week I will go over some of the requirements he uses to make investment decisions in the above areas. We will break down the differing approaches into: Growth Market Leaders; Small Cap Growth and Value; All Cap Value with a Growth Twist; and finally the Tiny Titans. I'll quickly discuss the requirements for a stock to pass and then I will give you a list of stocks that have passed the criteria for each of the aforementioned categories as of January 31, 2007. The list is courtesy of American Association of Individual Investors or AAII for short.
All Cap Value with a Growth Twist
This screen requires: a market capitalization more than $200 million (inflation adjusted). Then sort by lowest price to sales ratio; plus lowest price to cash flow ratio; and highest dividend yield. Then choose the top 25 stocks with the greatest 12 month relative strength. Those passing this test as of 1/31/07:
file:///C:/stocks/O'Shaughnessy/Prudent%20Trader%20Newsletter.files/ptltr031007-Rpts.png
Growth Market Leaders
This screen excludes utilities and foreign stocks. All of the following must be greater than the average stock: Market Capitalization; Shares outstanding; Cash flow for the previous twelve months; Sales for the previous twelve month period; Price-to-sales ratio less than the average stock; Earnings for the last twelve month period must be greater than the previous twelve month period. And finally choose the top ten stocks with the greatest twelve month relative strength.
Small Cap Growth and Value
This screen looks for cheaply priced small-cap stocks with upward price momentum. Market Capitalization between $200 million and $2 billion (inflation adjusted), price-to-sales ration of less than 1.5, and price appreciation above average. Then choose the top 25 stocks with the greatest twelve month relative strength.
And finally Tiny Titans
This screen looks for cheaply priced micro-cap stocks.
Market capitalization between $25 million and $200 million (inflation adjusted). Lowest price-to-sales ratio and lowest price-to-cash flow ratio; and the highest dividend yield. Then choose the top 25 with the greatest twelve month relative strength. Very often these stocks are thinly traded and can have relatively wide bid/ask spreads; they also can experience some of the greatest price appreciation and greater than normal volatility, a word to the wise.
Two items that should bother you about this approach: first and foremost is the shear amount of diversification that is required, and secondly your portfolio is only rebalanced once a year. During your rebalancing period you drop (sell) the stocks that no longer make the list, replacing them with new names that make the list.
The diversification above represents 85 stocks in total which would be required to follow this methodology. That would require you as an individual to virtually be your own mutual fund. It is for that reason and that reason alone, that last week, I suggested looking through the ETF categories (i.e. growth & value ETF's) on site, for those that may fit the requirements or contain at least some of the stocks listed above. Largest Changes In Raw Numbers (21 Days)
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[ 本帖最后由 rollcat 于 2007-4-20 13:37 编辑 ] | 
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发表于 2007-4-20 11:43
