When trading options or investing into stocks I always wanted to develop a system which would tell me which stocks to buy and which to avoid. I wanted as manual and automated system as possible to avoid emotion in selecting stocks. I wanted something you can almost program into a computer and forget about it.

I tried many systems, but I was never satisfied with the results. Some were too tedious to work with and because I had to do most of the work manually I wasn’t able to eliminate the human factor which makes our decision making irrational and emotional.

And I didn’t like it.

I had a good system at some point. I called it a “Stock Picker Rank”. Based on selected criteria I assigned a rank to the stock and then based on the rank I could arrange stocks to buy or drop from my portfolio. I tested the system and it wasn’t bad. The results were nice and I last year my simulated account ended with 17% gain. Not bad, right?

But the work associated with the stock selection process, running it thru the filters and selecting the right stock was horrible and very discouraging. But I didn’t give up. I was looking for ways how to automate this system and also how to make my criteria focused more on the valuation to pick a stock which is deemed as undervalued.

I think I found a strategy which can do that. It is based on current price, current P/E, forward P/E, current EPS, and EPS forecast. Of course, there is slightly more to it, but this is all I am willing to reveal.

Then, I was able to code this into a Google Spreadsheet, insert my stock watch list in it and now the spreadsheet is screening all of my 150 dividend paying stocks as well as some growth stocks too.

Now I want to put this screener into testing, but I will do it publicly, so you can see yourself how that works and if it pays to follow it and invest. For the following year I plan to publish my selection of stocks and show results of the stocks what it would look like if you invested in it.

How the investing process would work?

 

1. Every month I will publish new stock selection.
2. You can buy those stocks (in your paper money trading account for example) and hold until next month.
3. You place a stop loss 10% below your entry price. If you get stopped, get out of the stock and move on.
4. Those stocks which remain in your portfolio let them run up holding them until they reach 25% gain. Then sell.
5. At the beginning of the new month a new selection will be published.
6. Buy only those stocks, which you do not have in your portfolio, avoid those you already have.
7. Sell all other stocks which are not in the list anymore, and are showing a loss. Move stop loss to break even of the remaining stocks.

 

The procedure above may change over time as I will be playing with this strategy more during the year.

And here is the list of January 2015 stocks

 

I will use this screener to buy stocks in my ROTH IRA account. In my options trading TD account I will use these stocks (which are optionable of course) to trade bullish spreads. For example, if you are my newsletter subscriber, you have received an option trade alert to trade a bull put spread against Agrium (AGU). In fact, this trade was based on the screener above. And we opened a bullish put spread at 85/90 strikes. If the stock stays at these levels or even grow higher, this trade will end up profitable.

What if you do not have enough money to buy all selected stocks?

It is easy. Each stock has a rank added to it. The highest the rank the better, so just go and pick stocks with the highest rank and continue down the list. For example, if you can only invest $1000, then buy only 1 stock. With $2000 buy 2 stocks, and so on.

Of course the rank won’t guarantee a winning stock, but gives you a high probability of a winner.

And do you know what the best with those stocks is? Many of them are dividend paying stocks so while you are waiting for them to grow to give you nice capital gains, you will be also collecting dividends in the mean time!

Now let’s put this in test and see how that will work.

Happy trading and investing!
 

Previous selection:

Stocks to buy in February 2015
Stocks to buy in March 2015
Stocks to buy in April 2015
Stocks to buy in May 2015
Stocks to buy in June 2015