Saturday 5 October 2013

My stock picking criteria

So here is my list of stock picking criteria that I have been asked about so many times.

Lucky number 13 - 13 criteria that I stick by!
Note: Please exercise caution when reading this post and using these criteria, I accept no responsibility for the use of these criteria.
Please DYOR (Do Your Own Research) whenever you trade anything.
  1. EPS Annual Growth % - greater than 15
  2. EPS Growth Qtr on Qtr % - greater than 5
  3. Sales Annual Growth % - greater than 10
  4. ROE % - greater than 15%
  5. Market cap - greater than £50m
  6. Current price greater than %5 of 52 week low
  7. Net debt < 3 times operating profit
  8. Not a collective investment stock
  9. Not AIM listed
  10. Positive net income
  11. Positive operating cash flow
  12. Decrease in leverage (compared to previous year)
  13. Increase in liquidity (compared to last year)

And that’s it. This system works very well in a bull market (as those who have followed my blog will know). It doesn’t however work very well in sideways (like the one we are in at the moment) or bear markets.

I have made my profits spread betting which is hugely risky and certainly not for everyone. My PnL can jump £5k or more on any given day so it is certainly interesting but can also be heartattack material if your risk appetite doesn’t suit the game.
Any comments, thoughts?

I hope you all have a good weekend - I’m off to watch the final of the rugby championship!
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21 comments:

  1. Anonymous5 October 2013 at 21:15

    Mr O. Tamahawk thank you for shedding light on your selection criteria much appreciated. Even if they dont say it you have been a inspiration to a lot of people truss me.

    Give credit where credit is due coz u could have sold your criteria as part of a ebook i know you had offers earlier on.

    Your the f*!cking man!!!

    May the wind stays at your back.

    Anakin.

    ReplyDelete
  2. Anonymous14 October 2013 at 16:29

    Do you also choose stocks within say 4 weeks of an IMS/Final results? I have noticed your stocks usually have something coming up on the horizon, and therefore benefit from an uplift closer to the event. Is that just coincidence?

    ReplyDelete
    Replies
    1. Oliver Tomahawk16 October 2013 at 18:34

      It's not a specific strategy that I employ to be honest. I will always check the events diary of a company before opening any best to make sure I am not too close to results or dividends as the rise or fall may have already happened, but I will certainly consider upcoming results or dividend payouts.

      If a company looks solid and they have upcoming results that might exceed expectations according to what I read, then I will definitely hold them in higher regard!

      Delete
  3. Anonymous16 October 2013 at 11:19

    Hi,

    "6. Current price greater than %5 of 52 week low" - is that meant to be "50%"?

    Cheers

    ReplyDelete
    Replies
    1. Oliver Tomahawk16 October 2013 at 18:37

      The price must be at least 5% above the 52 week low, therefore moving in the right direction (for a long bet obviously). If the fundamentals look good but the share price is either at the 52 week low or very close (or if the share price is very flat), I would not look to buy. I would watch and wait and see what it does.

      Delete
  4. Anonymous17 October 2013 at 00:02

    Mr. O Tamahawk what programme or website do you use for your screens?

    Much appreciated

    Anakin

    ReplyDelete
    Replies
    1. Oliver Tomahawk24 October 2013 at 05:31

      There are lots of free screening tools, Google it and you will see.

      I'm lucky in that I work for a large investment bank and we have all the data I need. When I leave the bank, I will have to find a good site for this but like I said there are many options!

      Delete
    2. Anonymous24 October 2013 at 17:31

      Hi Mr Tomahawk

      I am half way through your blog and its very uplifting to see you're producing some really good results. Just wondering how do you conduct top down analysis. for instance
      What factors do you really consider before selecting sectors and industry, or Is it the price and volume element.
      Do you also use DCF analysis for valuation for short term trading?

      Many thanks & good luck
      Sami

      Delete
    3. Oliver Tomahawk2 November 2013 at 07:38

      Hi Sami

      I purely look at the factors criteria listed in this post. I do look at diversifying though, so I wouldn't want too many stocks in the same sector.

      I used to do DCF etc. (many years ago) when I was investing in underlying stocks (i.e. not spread betting) but it's very time consuming and in my opinion, not always worth it !

      Delete
  5. Anonymous27 June 2014 at 22:36

    very interesting blog mate and congrats on having quadrupled your initial account. Are you trading Daily Rolling Bets or the quarterly ones with big spreads. Thanks

    Alps

    ReplyDelete
  6. Oliver Tomahawk4 July 2014 at 07:08

    Thanks mate! Not going so well at the moment, but it's the markets and not my strategy which is an important distinction - I have proved my strategy works so I just need the markets to stop their sideways chaos and I'll be up again no doubt!

    I trade daily..

    ReplyDelete
  7. webpax3 September 2015 at 20:04

    Hi Oliver I've just come across your great blog.
    I'm trying to recreate you're screening process using a website called Stockopedia. I'm fine with the first 11 criteria but struggling with numbers 12 and 13 on your list. Is there any other way of expressing these or could you perhaps expand a little on what they mean?
    Many thanks in advance,
    Jon

    ReplyDelete
    Replies
    1. Oliver Tomahawk4 September 2015 at 06:56

      Hi Jon

      Have a look at these links:
      http://www.investopedia.com/articles/investing/073113/leverage-what-it-and-how-it-works.asp
      http://www.investopedia.com/terms/l/leverageratio.asp
      http://www.investopedia.com/ask/answers/062714/what-are-main-differences-between-current-ratio-and-quick-ratio.asp

      Delete
    2. webpax4 September 2015 at 11:41

      Many thanks Oliver.

      Delete
  8. scuk8020 January 2016 at 13:13

    Hi, With Japan now bearish and reports that the FTSE could also be bearish soon, does your stock picking criteria alter?

    Great blog - thanks, Simon.

    ReplyDelete
  9. Oliver Tomahawk25 January 2016 at 14:53

    Thank you. And to answer your question; no. I don't change my stock selection criteria. Would be helpful if the market was more bullish though TBH

    ReplyDelete
  10. Unknown25 January 2016 at 17:28

    Hi Oliver I note in your stock picking criteria you have a 7% stop loss. However how do you decide when to sell winners? E.g. on Friday you sold Rightmove, was the sale based on a trailing stop loss or some other criteria?
    Many thanks - great blog.
    Jonathan

    ReplyDelete
  11. Oliver Tomahawk28 January 2016 at 04:09

    Hi Jonathan

    Thanks!

    Normally based on a trailing stop loss. I sometimes set targets (at least 100% of my total risk on the bet) and move the stop loss up to that point once it has been reached, and then more often than not, I just let the bet run. For example, in the current round JD Sports' total risk was £3745 and profits are now £21k, so way more than 100% (but I did move the stop when I had hit 100% back in Sep)

    ReplyDelete
  12. Retenzo1223 May 2016 at 16:10

    Hi Tom

    Is there anyway you can identify the criteria is google finance: Listing 1 = A 2 = G and so on....I'm a beginner and was looking to set the above up and filter through google finance. It would be a great help

    A)1y fwd P/E
    B)Quote change (%)
    C)Price to book
    D)Price to sales
    E)Last price
    F)EPS
    G)Quote change (%)
    H)52w high
    I)52w low
    J)52w price change (%)
    K)50d avg price
    L)150d avg price
    M)200d avg price
    N)13w price change (%)
    O)26w price change (%)
    P)Market cap
    Q)P/E ratio
    R)1y fwd P/E
    S)Div recent quarter
    T)Div next quarter
    U)Div per share (Recent yr)
    V)Div rate indicated annual
    W)Div per share
    X)Div yield (%)
    Y)Div from cash flow
    Z)Book value/share
    A1)Cash/share
    B1)Current ratio
    C1)LT debt/assets (Recent yr) (%)
    D1)LT debt/assets (Recent qtr) (%)
    E1)Total debt/assets (Recent yr) (%)
    F1)Total debt/assets (Recent qtr) (%)
    G1)LT debt/equity (Recent yr) (%)
    H1)LT debt/equity (Recent qtr) (%)
    I1)Total debt/equity (Recent yr) (%)
    J1)Total debt/equity (Recent qtr) (%)
    K1)Interest coverage
    L1)Return on investment (TTM) (%)
    M1)Return on investment (5 yr avg) (%)
    N1)Return on investment (Recent yr) (%)
    O1)Return on assets (TTM) (%)
    P1)Return on assets (5 yr avg) (%)
    Q1)Return on assets (Recent yr) (%)
    R1)Return on equity (TTM) (%)
    S1)Return on equity (5 yr avg) (%)
    T1)Return on equity (Recent yr) (%)
    U1)Beta
    V1)Float
    W1)Institutional percent held
    X1)Volume
    Y1)Average volume
    Z1)Gross margin (%)
    A2)EBITDA margin (%)
    B2)Operating margin (%)
    C3)Net profit margin (%)
    D3)5y net income growth rate
    E3)5y revenue growth rate
    F3)10y revenue growth rate
    G3)5y EPS growth rate
    H3)10y EPS growth rate


    Many thanks - Excellent blog,

    Alan

    ReplyDelete
  13. Oliver Tomahawk26 May 2016 at 07:42

    Hi Alan

    Take a look at https://www.google.com/finance/stockscreener
    http://www.fool.com/investing/general/2014/11/07/the-best-free-stock-screeners.aspx
    https://www.youtube.com/watch?v=2Dg8AMhZ5oU

    Or try a good one in my opinion, and UK based, it costs though:
    http://www.stockopedia.co.uk/

    Good luck!
    Oliver

    ReplyDelete

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