This week’s screen is so awesome I’m just going to get right into it. No witty play on words to tie it into recent events or anything like that. Just the screen and how it’s done.
I’ve been working on this for a while, and I’m very excited about it. It’s shown great results both historically and recently, and has fantastic reward to risk ratio.
I ran a series of tests using a 4-week holding period from 2000 through 2007. I used the “Robustness Analysis Checker” in the Research Wizard’s Advanced Back-tester to verify its robustness and eliminate coincidental performance.
The average total compounded return over the last 8 years is over 4,128 percent. That translates to an average compounded annual growth rate over 58.5 percent a year.
2007: As impressive as a 58-percent return a year is, the strategy surpassed those numbers in 2007, putting in an average compounded annual growth rate of 76.3 percent.
2008: What about now? So far, it’s YTD (through 2/15/08) average total compounded returns are 3.8 percent compared to the market’s -3 percent. That may not sound like a big deal, but that represents a difference (so far) of over 107 percent.
Zacks Rank = 1 (The Zacks Rank is one of the best rating systems out there, with its No.1’s showing an average annual return of over 32 percent a year since 1988.)
Current Price / 52 Week High >= .80
(This makes sure the stocks are trading within 20 percent of their 52-week highs. In bull markets and bear markets this is a great way of finding strength.)
PEG Ratio <= 1
This makes sure the investor isn’t overpaying for future growth. The lower the PEG ratio, the less you’re paying for each unit of future growth.
Price-to-Sale Ratio <=3
While a lower P/S ratio is generally thought to be better than a higher P/S ratio, the cut off at three helps exclude extreme outliers while simultaneously giving enough room to ride the momentum of the stocks being found. (See below.)
Percent Change In Price Over 12 Weeks – Top # 7
After all of the other items have been met, I’m narrowing the list down to the top 7 stocks with the best percent price change over the last 12 weeks.
Here’s three of the seven stocks making it through this week’s screen (2/25/08):
AFSI AmTrust Financial Services, Inc.
NITE Knight Capital Group, Inc.
OIS Oil States International, Inc.
Get the rest of the stocks on this screen and start following this strategy in your own portfolio. Sign up now for your free trial to the Research Wizard and start doing it today: http://researchwiz.zacks.com
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.