Strategy

How do we pick winning stocks with a +90% accuracy?

Weekly Stocktip relies on sound Value and Growth investment principles to achieve our high win-ratio and high annual returns. Our mandate is to grow your capital at a high rate of return over a long period.

To do this, Weekly Stocktip analyzes and evaluates the actual companies behind the ticker to find the best stock picks.

Below you can see a very simplified example of this by reviewing these 2 hypothetical companies.

Company A

  • Share price

    $6.00
  • Market Cap

    $100M
  • Net liquidation value

    $11 / share
  • Debt

    -$1M
  • Earnings per Share (EPS)

    $16 (steady YoY growth)
  • Dividend yield

    2.4% (consistent)
  • Profitable years

    10/10 years
  • Growth rate

    consistent YoY growth
  • Weekly Stocktip AI Score

    +84

Company B

  • Share price

    $12.00
  • Market Cap

    $100M
  • Net liquidation value

    $7 / share
  • Debt

    -$97M
  • Earnings per Share (EPS)

    $3 (inconsistent)
  • Dividend yield

    0 - 1.2% (inconsistent)
  • Profitable years

    3/10 years
  • Growth rate

    inconsistent growth
  • Weekly Stocktip AI Score

    -100

Which company would you trust with your money? Hopefully, you chose Company A for some of the following reasons:

  • It's selling for cheaper than the company's assets & intrinsic value
  • Pays good consistent dividends
  • Consistent year over year growth
  • Consistently profitable
  • Low debt to equity ratio

This is essentially what Weekly Stocktip does. But instead of comparing two companies, on a few factors, it compares thousands of companies on +500 factors as well as evaluate all historical financial reports and SEC filings for every single registered company.

Our algorithmic approach allows us to find unique opportunities to buy shares in high quality, profitable companies that are selling for much cheaper than they should be.

Weekly Stocktip then holds onto these companies while often benefitting from dividends as the stock slowly increases towards it's "real" value. +93.67% of the time, the stock increased in value before we sold it for an average return of +102.37% (over double it's original purchase price.)

While each of these algorithms is highly complex, we have simplified the outputs down to a single score between -100 and +100 in 8 different categories:

  • AI Score - Overall score
  • Reward - Estimated future reward (return + dividends)
  • Safety - How risky is the investment?
  • Value - Is it selling for less than it's intrinsic value?
  • Growth - Estimated future growth
  • Profitability - The company's estimated future profitability
  • Stewardship - Estimated stewardship to investors
  • Soundness - How sound is the investment?

Weekly Stocktip uses a combination of proprietary and public investment principles. While we safeguard our proprietary intelligent investment technologies, we can share one of the well-known calculations we use Benjamin Graham's formula from The Intelligent Investor. While we now have over 100 different algorithms and over 20 methods to calculate the intrinsic value of a company, many of our investment principles are derived from Benjamin Graham and Warren Buffett's work.

In 2003 when we started working on our value investing algorithms, we started with nine simple criteria laid out by Benjamin Graham:

  • Adequate size of enterprise, (large companies are generally safer)
  • A sufficiently strong financial condition
  • Continued dividends for at least the past 20 years
  • No earnings deficit in the past ten years (No loss)
  • Ten year growth of at least one third in per-share earnings
  • Price of stock no more than 1.5 times net asset value
  • Price no more than 15 times average earnings of the past three years.

While our requirements for investment candidates today are much more strict, merely following these 9 statistical requirements has outperformed the S&P500 in the long run. The principles we use today are the same: Finding high-quality predictable companies that are selling at a bargain price.

We're able to achieve such high win ratios and high returns by investing for the long-term, and that comes other added benefits:

  • It only takes a few minutes every week to invest in 1 stock
  • Many countries including the US, has great tax benefits for long-term investors
  • Fewer trades correlates directly to fewer fees and expenses
  • Slippage is not a concern
  • Doesn't require expensive trading tools and brokers

In short, Weekly Stocktip analyzes thousands of companies every week, to find the company with the best reward-to-risk ratio. Every buy signal Weekly Stocktip recommends will eventually be followed-up by a sell signal when it's time to sell the stock.

Want to know more? Read our 2008 white paper, or contact us for any questions you might have!