The Little-Known Stock Picking Method That Consistently Beats the Market
The High Caliber Stock Watchlist is composed of quality U.S. stocks that are considerably undervalued and poised to rise.
The High Caliber Stock Watchlist comes with 24/7 login access to view the watchlist on-demand. When you purchase the watchlist, you unlock an entire year’s access to the High Caliber Stock Watchlist, which is updated weekly on Friday afternoons. Depending on how many stocks are meeting our rigorous criteria, there will be anywhere between 20 and 100 stocks listed every week.
What are the criteria for the High Caliber Stock Watchlist?
Here at Follow the Money, we have discovered a little-known indicator called the F-score that has a proven track record of revealing stocks poised to rise.
If you have never heard of the F-score, don’t worry. It was created back in 2000 by an accounting professor named Joseph Piotroski.
Piotroski, who shuns publicity and rarely gives interviews, was virtually unheard of until a 2008 report from the American Association of Individual Investors revealed that his unique approach to stock picking was the only method out of the 56 they tested that had positive returns in 2008. So what is Piotroski’s approach to stock picking?
As mentioned, it’s called the F-score. The F-score is a metric based on financial statement data, and it has a track record of revealing stocks poised to rise in value.
It uncovers fundamentally sound companies by giving a one-point score for each of the following nine attributes:
– Positive return on assets for the current year
– Operating cash flow is positive
– A rise in return on assets
– Operating cash flow is greater than net income (this measures the quality of the company’s earnings)
– A decrease in debt funding (also known as leverage)
– An increase in short-term liquidity
– The company has not diluted the value of its stock by issuing more shares to fund the company’s activities
– An increase in gross margin
– The company is converting its assets into revenue at a quicker pace than last year
A company’s F-score can range from 0 to 9, with 9 signifying the strongest companies and 0 the weakest. In order to select the highest quality stocks, we like to stick with value stocks that have an F-score of 8 or 9.
How has the F-score approach to picking stocks actually performed over the years?
According to Piotroski’s 20-year study from 1976 to 1996, if you would have bought the strong companies (F-score of 8-9) and shorted the weak companies (F-score of 0-2), you would have earned an average of 23% per year, substantially outperforming the overall market return of 15.8% over the same period.
As fantastic as that sounds, the F-score approach is even more precise and profitable in recent years. In fact, think back to the market turmoil in 2008…
Had you been using the F-score, your portfolio would have risen when everyone else’s dropped like a rock. In 2008, the S&P 500 fell 43% while the high quality F-score stocks rose on average 32.6%.
Equally impressive is what the F-score can predict about weak firms. From 1976-1996, stocks with an F-score of 0-2 were five times more likely to wind up bankrupt or to delist from the stock exchange due to financial problems.
How do you find high-quality stocks that score an 8 or 9 on the F-score scale?
Here at Follow the Money, we have built a custom program that screens for stocks that currently have an F-score of 8 or greater, and this is how we put together the High Caliber Stock Watchlist for you.
Remember that the F-score is a rigorous financial litmus test, and very few stocks will score an 8 or 9.
We only want the highest quality stocks, so we are screening out all the under-performers and providing you with those stocks that make the cut.
According to Piotroski’s time-tested model, the companies on the High Caliber Stock Watchlist have the potential to soar.
BONUS: The best way to use this watch list is to pair it with our Profit Trakker software, which will give you the precise entry and exit signals for these stocks. And when you purchase the High Caliber Stock Watchlist, you will receive an exclusive, limited-time offer to try the Profit Trakker software completely free!
That’s right, purchase this watchlist, and you will receive a special link for a 7-day free trial of our Profit Trakker software (included in the Gold Membership)!
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