A unique approach to smart investing
First, Michael starts with Fundamental Analysis.
He screens stocks for their fundamental, long-term viability. A company that has built a strong foundation for growth is likely to continue its growth, come what may.
Some key indicators he looks at:
- Turnover – a positive development is a plus
- EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization – a strong record of growth is key
- Stock Yield – a stable, growing and consistent dividend is favored
- Positive Working Capital – whether a company has enough cash on hand to manage its debt obligations; the more the better.
Once stocks have passed through that screen, the ones that remain are put through the Trendsetter Strategy’s second proprietary screen, Technical Analysis.
Here, Michael digs into how these stocks look from a technical perspective. Stocks may be fundamentally sound but are not technically attractive. Both criteria have to be met for the Trendsetter Strategy.
Michael drills down into specific indicators:
- MACD, or Moving Average Convergence/Divergence – a trend-following momentum indicator that shows the relationship between two moving averages of prices. Positive momentum is key
- MOM – a momentum indicator that measures the velocity of price change instead of looking only at the price levels. A reading above 0 is crucial.
- RSI, or Relative Strength Index – compares the magnitude of recent gains and losses over a given time period to measure speed and change of price movements of a stock. It’s used to identify overbought or oversold conditions in a stock.
- Williams %R – the current closing price of a stock in relation to the high and low of the past x number of days.
Once the stocks pass through the technical filter, they are viewed in the context of the relatively new field of analysis, Behavioral Finance.
This looks at the behavioral and psychological aspects of the markets in relation to the economics and finance aspects of the market.
DISCLAIMER: Past experiences are no guarantee for future returns on investments, as the stock market can be volatile.