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February 14, 2007
Strategy for ORR
Over the years I have honed my approach to investing.
I like to find modestly valued companies, that are in the early stages of a new growth phase (both earnings and revenues), with both strong business outlooks and robust balance sheets. I start my search process with an exhaustive approach to finding individual companies - examining the earnings reports of every reporting issuer in the United States to discover the undiscovered.
After I screen this down to a select group of companies, I create an alert list using price/volume data in an attempt to identify changes in trading patterns that indicate a substantial new 'interest' in the stock. At this point, if the relative valuation of the company to its peers allows room for a large price rise, then I take a position in that stock.
My system doesn't inherently put any restrictions on which stocks I'm looking at. However, in practice, many of the stocks that fit my criteria for both growth and valuation are microcap and smallcap issues. The exception to this is when entire sectors have had their stock prices in a long downtrend but the businesses are now showing signs of a new growth phase.
I attempt to adapt my approach to changes in market patterns. New groups of stock traders, broader access to information and new trading systems influence and change the way stocks behave. Since the fall of 2004 these changes have modified the major signals I use to identify broad market trends. Going forward, I plans to incorporate these changes into my trading system, and will be spending more time analyzing sector patterns in conjunction with individual stock picking.
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