How to Beat the Market

I'm often asked how I personally invest.  My method isn't for everyone but it works for me. All I really want is a portfolio of about 10 stocks that are all trading above their 20, 50 and 100 day moving averages.  Sounds simple but it takes a good screener, daily tracking and lots of discipline.

I've got a couple of other rules to help prevent me from losing money.  I only want to invest when both the economy and the stock market are expanding - I'm on the side line is either is contracting.  I use the Conference Board  to show me the leading and lagging economic indicators to gauge whether the economy is expanding or contracting and Barchart's Market Momentum page to see if the stock market is expanding or contracting.  The percentage of stocks trading above their 20, 50 and 100 day moving is my guide with 50% above being my benchmark.

A rising tide floats all boats and an ebbing tide lowers all boats.  Now you know why my first bog was titled Financial Tides.  I try to stay on the right side of the market.

Next I don't want to follow or even compete with the herd.  Most mutual funds, managed money and financial institutions have portfolios greater that $10 million dollars.  Because of their size they are almost exclusively invested in the S&P 500 Large Cap, S&P 400 Mid Cap , S&P 600 Small Cap and NASDAQ 100 stocks.  These 1600 stocks comprise well over 95% of the total capitalization of the US stock market.  I want to be in that other 5% where all the big boys with their full time MBAs, CFAs and ungodly computer power really can't operate.

Over time I have found that the  5% I look for usually has the same attributes - Market Cap under $2 billion and currently trading below $10.  I set my screener for those stocks then sort for new high frequency in the last month and use the Flipchart feature to review the charts.

I'm fully invested now and so I have no ability to buy the stocks in today's screen but this is how I found the stocks I presently own in my own portfolio.

The list today includes Energy Recovery (ERII), Kofax (KFX), Enzo Biochhem (ENZ), Obscene Jeans (OBJE) and Newcastle Investments (NCT):

Energy Recovery (ERII)

Barchart technical indicators:

• 96% Barchart technical buy signals
• Trend Spotter buy signal
• Above its 20, 50 and 100 day moving averages
• 17 new highs and up 36.26% in the last month
• Relative Strength Index 64.64%
• Barchart computes a technical support level at 5.64
• Recently traded at 5.87 with a 50 day moving average of 5.11

Kofax (KFX)

Barchart technical indicators:

• 64% Barchart technical buy signals
• Trend Spotter buy signal
• Above its 20, 50 and 100 day moving averages
• 16 new highs and up 30.71% in the last month
• Relative Strength Index 70.71%
• Barchart computes a technical support level at 8.86
• Recently traded at 9.16 with a 50 day moving average of 7.87

Enzo Biochem (ENZ)

Barchart technical indicators:

• 96% Barchart technical buy signals
• Trend Spotter buy signal
• Above its 20, 50 and 100 day moving averages
• 15 new highs and up 45.55% in the last month
• Relative Strength Index 81.05%
• Barchart computes a technical support level at 5.10
• Recently traded at 5.37 with a 50 day moving average of 4.19

Obscene Jeans (OBJE)

Barchart technical indicators:

• 64% Barchart technical buy signals
• Trend Spotter buy signal
• Above its 20, 50 and 100 day moving averages
• 15 new highs and up 190.39% in the last month
• Relative Strength Index 71.25%
• Barchart computes a technical support level at .1368
• Recently traded at .1420 with a 50 day moving average of .0808

Newcastle Investments (NCT)

Barchart technical indicators:

• 80% Barchart technical buy signals
• Trend Spotter buy signal
• Above its 20, 50 and 100 day moving averages
• 14 new highs and up 7.51% in the last month
• Relative Strength Index 63.80%
• Barchart computes a technical support level at 4.98
• Recently traded at 5.02 with a 50 day moving average of 4.68