The Big Bet Stocks Philosophy
"While a fundamental analyst may be able to properly evaluate the economics underlying a stock, I do not believe they can predict how the masses will process this same information.
Ultimately it is the dollar-weighted collective opinion of all market participants that determines whether a stock goes up or down.
This consensus is revealed by analyzing price.”
Quote attributed Mark Abraham, from Michael W. Covel's Trend Following
For the past several years I’ve used a couple of screens to identify stocks that offered the potential for significant market gains.
During 2009 those two screens identified 138 stocks that eventually developed trends for gains of 100% or more from January to December. Those trending stocks represented roughly 10% of the total number of Signals that were generated during the year.
We also identified an additional 215 stocks that eventually developed trends for gains of 50% or more during the same time period.
Therefore, roughly one of every four stocks that successfully passed through the two screens in 2009 eventually developed trends for gains of 50% or more.
The problem with those enviable results is that not one of those 353 trends was identified before – or even during - the evolution of those trends. For investors, that represented the same profit potential as reading one of those charts that lists the best performing stocks for the previous year.
In mid-year 2010 I developed several additional screens that would help investors to identify tomorrow’s winning stocks . . . today.
We continue to use Unusual Volume and Institutional Investment screens to identify stocks with trending potential.
Our proxy for institutional investors consists of roughly 40 of the leading institutional investment firms and 40 of the leading hedge funds in the U.S. Included in our institutional investors are BlackRock, Fidelity and Goldman Sachs. Included in our hedge funds are Citadel, ClearBridge Advisors and Elliott Associates.
We have taken these preliminary screens several steps further.
When any stock has successfully passed through our two primary screens it is added to a moving 12-month database.
Every stock in that database is priced daily to identify stocks that have registered a specified percentage increase in market value, today’s closing price versus previous days’ closing prices.
By identifying stocks with measurable and repetitive daily and weekly percentage increases in closing prices we can capture stocks that offer the potential to evolve into significant upward trends.
All potential Trend candidates are made available to Members when they have been identified – after the market closes and before the market opens on the following trading day.
