570% in 10 Years… Is This the Greatest Investment Strategy Ever?
Last week, I introduced you to Michael J. Carr’s latest research.
I told you a little about his history (he retired as a Lieutenant Colonel in the Air Force before managing $200 million) and how he was working on a project that used a few simple trading techniques to help investors see bigger returns in the stock market.
But at the time, his research wasn’t finalized. I couldn’t jump the gun and go into too much detail.
Now Mike is finished… and today he is talking for the first time about what he’s found.
By using the same stocks recommended by Carla Pasternak, Elliott Gue, Amy Calistri and the rest of our StreetAuthority experts (stocks that many of you already own), Mike generated a 570% return in his decade-long test. And he did it without using complicated tools like derivatives, options or futures.
It’s a system that anyone can follow.
There was Mike’s win in Costco (NASDAQ: COST), where his system scored 34%… PVR Partners (NYSE: PVR), which gained 77.9%… and Taseko Mines (NYSE: TGB) and its 241.3% gain in a little over seven months. Mike’s system flagged all of these winners — each gleaned from a StreetAuthority newsletter portfolio — during his decade-long back-test.
In total, Mike calculated his system turned $100,000 into $670,613 during the past decade. And in just the past year, his system would have earned 50.8% for investors, compared with 16.9% for the S&P 500.
I know that people want to know more, so I’ve asked Mike to share the details about his research to give Profitable Trading readers the scoop.
Bob: Can you explain what exactly you discovered?
Michael: I’ve made a career out of trading. But I know many people think “trading” is a dirty word. So to prove that a few simple trading techniques can help people make significantly more in the stock market, I decided to apply a system I created to the current holdings in StreetAuthority’s newsletter portfolios.
By using the same stocks held by Carla, Amy, Elliott and others, the back-tested results of my system showed an annual return of 21.5% during the past decade, compared with about 7% in the S&P 500. Over the entire decade-long test period, the total return for my system was 570%.
Bob: How did you do it?
Michael: I applied a few simple trading techniques that anyone can follow.First, I start only with stocks currently held within StreetAuthority’s various portfolios. This ensures I’m focusing on the very best, most fundamentally sound investments that our experts have found.
From there, I run every holding through a test of “relative strength.”
Relative strength simply compares the past six months’ performance of a stock with the entire market. If a stock is rising faster than 70% of the market, then it passes this part of my test.
If you want to make money the fastest way possible, you want to buy stocks that are already on their way up. It’s like the difference between waiting at a bus stop and hopping on a moving train.
If a stock passes this test, then I look at the strength of its cash flow per share.
Cash flow measures the amount of money coming into a business. It’s the lifeblood of any company. This is the money a business uses to buy new factories, pours into research and development, or delivers back to its investors via dividends and share buybacks.
I focus on a stock only if it’s seeing cash flow per share rising faster than 70% of all available stocks.
After accounting for relative strength and cash flow growth, my system will only rank a maximum of 10 stocks as “buys.” Only 10 stocks from the dozens that our staff of experts recommends — and the thousands traded on the market. That’s the cream of the crop.
Bob: Doesn’t “trading” require a lot of buying and selling, not to mention racking up commissions?
Michael: Absolutely not. Any time you mention “trading,” most people envision day trading, where individuals move in and out of stocks quickly.
My back-test of this strategy registered about two trades per month during the past decade. The average holding period for a stock was 10 months. I’d be willing to bet most “long-term” investors invest for shorter time periods than that right now.
Bob: Where can people learn more?
Michael: StreetAuthority has created a new presentation that outlines everything you need to know. It has the complete details of my research, more on how the system works, and more about the specific winning stocks this system has found.
It’s taken everyone several weeks to finalize this test and present the findings. This is the first time it’s being released to the public. You can click here to see this presentation now.
[Note: Mike has also ranked the top 25 stocks held by StreetAuthority experts using his system. The 25 stocks are all top-tier investments, and there’s something for every type of investor. Out of the 25 stocks, nine yield 4% or more. And if you’re just looking for solid companies likely to outperform the market, any stock on this list would make for the perfect starting point.]