Wall Street Winner

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Wall Street Winner

The Wall Street Winner is a Growth model fundamental analysis.

The model supports the idea that price-to-earnings ratios are not the best indicator of a stock's value, and that small-company stocks, contrary to popular wisdom, don't as a group have an edge on large-company stocks.

Wall Street Winner favors companies with a market value of at least $150 million and a price-to-sales ratio below 1.5. To avoid outright dogs, it also looks for companies with persistent earnings growth and shares that have been among the market's best performers over the prior 12 months.

This strategy makes sense for value-oriented growth investors who have the patience and personality to stick with a purely quantitative investment approach. Wall Street Winner looks for large companies with strong sales and cash flows, and from those that meet that profile (as measured by four relevant criteria) it selects the 50 with the highest dividend yield. It is appropriate for income-oriented investors.

Analysis / Calculation

The following are some of the criteria used in the Intelligent Investor analysis:

The four relevant criteria are:

Large Market Capitalization

Market Capitalization is calculated by multiplying the stock price by the number of stocks issued and is one of the most common ways to measure the size of a company.

Large capitalization companies tend to be more established businesses. Smaller capitalization companies are often seen as being greater risk as most start-up companies are in this category.

Wall Street Winner screens the market for stocks with a market capitalization of more than $150 million to avoid illiquid stocks.

EPS Persistence

EPS persistence refers to the company's ability to grow its Earnings Per Share from year to year.

Wall Street Winner requires that a company has grown its earnings for the last 5 years in order to receive a PASS.

Low Price/Sales (PS) Ratio

The Price to Sales ratio is calculated by dividing the share price by sales. It is one of the most important ratios for determining whether a stock is overvalued or undervalued in relation to its peers.

In order to identify growth stocks which are still reasonably priced, Wall Street Winner uses the price to sales ratio to screen out stocks that the model determines are too expensive. A PASS indicates a stock has a PS ratio of 1.5 or less, a FAIL more than 1.5.

Top 50 Relative Strength

Relative strength is calculated by dividing the change in stock price over a period of time by the change in an appropriate market index over the same period of time. The higher the number the better the performance of the stock.

Wall Street Winner requires that the relative strength of a stock be in the top 50 of the market. A PASS reflects that the relative strength of a stock over the last 6 months puts it in the top 50 of the market.

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