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Stock Picking Process

Stock Picking Process. Securities offered through LPL Financial. Member FINRA/SIPC. Stock investing involves risk including loss of principal. Our Objective. To reduce the universe of all possible stocks in the market to the top 25 stocks that provide a high probability of success.

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Stock Picking Process

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  1. Stock Picking Process Securities offered through LPL Financial. Member FINRA/SIPC. Stock investing involves risk including loss of principal.

  2. Our Objective To reduce the universe of all possible stocks in the market to the top 25 stocks that provide a high probability of success. No strategy can assure success or guarantee against loss in declining markets. General risks inherent to investments in stocks include the fluctuation of market prices and dividend, loss of principal, market price at sell may be more or less than initial cost and potential illiquidity of the investment in a falling market

  3. INVESTING UNIVERSE First Screen Popular Lists Screen-Based List Current List Master List Top 400 Stocks Second Screen Growth Category Value Category Quality Category Analyst Favorites Category Sentiment Category Ultimate List Top 100 Stocks Scoring Process Final List TOP 25 STOCKS

  4. INVESTING UNIVERSE First Screen Three Evaluation Lists • Popular List: • Top 50 stocks IBD • Top 100 stocks VL • Top 36 stocks SS • Top 37 stocks MS • Top 50 stocks B • Screen-Based List: • Value Screen • Growth Screen • Momentum Screen • Current List: • Current Nominees • Personal Nominees Master List TOP 400 Stocks

  5. INVESTING UNIVERSE First Screen Three Evaluation Lists • Popular List: • Top 50 stocks IBD • Top 100 stocks VL • Top 36 stocks SS • Top 37 stocks MS • Top 50 stocks B • Screen-Based List: • Value Screen • Growth Screen • Momentum Screen • Current List: • Current Nominees • Personal Nominees Master List TOP 400 Stocks

  6. SCREEN-BASED LIST Investment Style: VALUE Screen Tests Investment Style: GROWTH Screen Tests Investment Style: MOMENTUM Screen Tests Stock Screener Stock Screener Stock Screener Growth Screen 1 Relative Growth Value Screen 1 Relative Value Momentum Screen 1 Relative Strength Growth Screen 2 Comparative & Financial Strength Growth Screen 3 Comparative & Sustainable Growth Momentum Screen 2 Moving Average & Behavioral Value Screen 2 Comparative Value & Growth Value Screen 3 Contrarian Opportunities Momentum Screen 3 Relative Momentum

  7. Screen-Based Tests * *The formulas have been altered to protect Proprietary Information

  8. Value Screen 2: Comparative Value P/E Ratio <= Indy. Avg. P/E Price/Sales <= Indy. Avg. P/S TTM ROE > Indy. Avg. TTM ROE TTM ROE > 0 5 y Avg. ROE > 5 Y Indy. Avg. ROE LT Debt/Equity ratio <= Indy. Avg. LT Debt Ratio Price/Book <= 3 EPS Growth Est. > Indy. Avg. EPS Growth Est. Y1 EPS Est. Growth > 0

  9. Screen Results: Value Screen 2 Securities offered through Triad Advisors, member FINRA/SIPC. Advisory services offered through Lee Johnson Capital Management, LLC (LJCM). LJCM is an independent Registered Investment Advisor and is not affiliated with Triad Advisors.

  10. First Screen INVESTING UNIVERSE 10,000 + Stocks Master List TOP 400 Stocks

  11. Second Screen Second Screen Master List Top 400 Stocks Growth Category: 1.Historical comparison 2.Industry Comparison Quality Category: 1.Industry Leaders 2.Fastest Turnover Value Category: 1.Catching Up Stocks Sentiment Category: 1.High P/E Multiples 2.Institutional Ownership Analyst Favorites Category: 1.Most Repeated Stocks

  12. Second Screen* *The formulas have been altered to protect Proprietary Information

  13. Third Screen • Ultimate List: Top 100 • Scoring Process: • Growth Score • Profitability Score • Financial Health Score • Momentum Score Stock Stars List TOP PROBABILITY STOCKS

  14. Glossary of Screen-Based Tests • %Chg = Percentage Change. • 1Q = Recent quarter. • Asset turnover = The amount of sales generated for every dollar’s worth of assets. • CF = Cash Flow: a revenue or expense stream that changes a cash account over a given period. • Current Ratio = A liquidity ratio that measures a company’s ability to pay short-term obligations. • D = Days (example: 27D=27 Days) • EPS = Earnings Per Share: the portion of a company’s profit allocated to each outstanding share of common stock. • EPS Est. = An analyst’s estimate for a company’s future annual EPS. • FCF = Free Cash Flow: a measure of financial performance calculated as operating cash flow minus capital expenditures. • Gr. = Growth. • Inventory Turnover = A ratio showing how many times a company’s inventory is sold and replaced over a period. • LT Debt/Equity Ratio = Long-Term Debt/Equity Ratio: a measure of a company’s financial leverage calculated by dividing its long-term debt by stockholders’ equity. • Net Income = A company’s total earnings (or profit). • Net Margin = The ratio of net profits to revenues for a company, expressed as a percentage. • Price/Book Ratio = A ratio used to compare a stock’s market value to its book value. • P/E = Price to Earnings Ratio: A valuation ratio of a company’s current share price compared to its per-share earnings. • P/FCF = Price to Free Cash Flow Ratio: A valuation metric that compares a company’s market price to its level of annual free cash flow. InvestopediaAAII

  15. Glossary of Screen-Based Tests • P/S = Price to Sales Ratio: A ratio for valuing a stock relative to its own past performance, comparing a company’s market price to its level of annual revenue. • Pr = Price (example: Pr4D%Chg=Four day price percentage change) • Price/CF = Price to Cash Flow: A measure of the market’s expectations of a firm’s future financial health. • Q1 = Present quarter • Q2 = One quarter prior to the present quarter • Q3 = Two quarters prior to the present quarter • Q4 = Three quarters prior to the present quarter • Q5 = Four quarters prior to the present quarter • Q6 = Five quarter quarters prior to the present quarter • Relative Strength = A measure of price trend that indicates how a stock is performing relative to other stocks in its industry. • ROA = Return on Assets: an indicator of how profitable a company is relative to its total assets. • ROE = Return on Equity: the amount of net income returned as a percentage of shareholders equity. • ROI = Return on Investment: A performance measure used to evaluate the efficiency of an investment. The return of an investment is divided by the cost of the investment. • TTM = Trailing Twelve Months: The timeframe of the past 12 months used for reporting financial figures. • Turnover = The number of times an asset is replaced during a financial period. • W = Weeks (example: 52W=52 Weeks) • Y1 = Recent Year • Y = Yearly (example: Y EPS= Yearly EPS), or Years (example: 3Y= 3 Years) Investopedia AAII

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