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A System Approach to Investing in Uncertain Markets
(A New Venture for Control Retirees)
Iman Khademi and Kemin Zhou
September 24, 2013
Congratulations to Keith
Your New Life Venture Starts Today!
I Have A Dream
To retire as early as possible so that I can do whatever I want can choose any subject
of research I am interested in
have no need to write proposals for funding
can fund my own research
Reality
• No heritage from a rich Dad
• No hope to win a lottery
• Not dare to rob a bank, too dangerous and illegal
• Not fit to start a business
• ……
Only Solution For Me
Rob Wall Street
Ethically and Legally!!!
How to Get Ready for Retirement
Investment Each Year
Annualized return rate
20 years after
30 years after
$10,000 5% 347,193 697,608
$10,000 10% 630,025 1,809,434
One Time Investment
Annualized return rate
5 years after
20 years after
$100,000 5% 265,330
$100,000 15% 1,636,654
$100,000 80% 1,889,568
Ideal Case for Me (I do not have that much time left)
Initial investmen
t
Annualized return rate
3 years after
5 years after
10 years after
$200,000 25% 610,351 1,862,645
$200,000 60% 2,097152
$500,000 30% 1,856,465
$500,000 60% 2,048,000
Reality Check!!!
1/1/1990-12/31/1999
1/1/2000-12/31/2009
1/1/2010-12/31/2012
1/1/1990-12/31/2012
Annualized return
S&P 500 309% -24% 28% 297% 6%
Nasdaq 786% -44% 33% 558% 8.5%
SPY (S&P500)
-10% 37% 1.5%
QQQ (Nasdaq 100)
-49% 45% -2.4%
• Most mutual funds did worse.
SPY (S&P 500)
QQQ (Nasdaq 100)
London: FTSE100
Australia: All Ordinaries
Hong Kong: Hang Seng Index
China: Shanghai Index
Stock Market
The only certainty in any stock market is uncertainty
That is where robust control people may play a role
Most Stock Market Investors
It is Ok. It will go up, I am a long-term investor.
risky
The best opportunity
Success in Stock Market
• Does not have much to do with your intelligence.
• Smart people are more likely to lose a lot more.
• Believe in yourself in stock market, not the market, is the formula for catastrophes.
Isaac Newton
• Isaac Newton lost 20,000 pounds (about $3 million today) due to his speculation in the South Sea Company stock in the 1720s during the bubble.
• “I can calculate the motion of heavenly bodies, but not the madness of people.”
Warren Buffett • Made his fortune by investing
in stock market • His company stock: 10% per
year
It is quite easy to beat Warren Buffett?
Buy or Sell?
It is getting cheaper. Buy more or take the profit now?
I should have Held My Stock! Let Me Buy More.
Many individual investors could not hold anymore and will sell here
It is Ok. It will come back up.
I learned my lesson and I will hold it this time.
Now it is really cheap! Let me buy more.
Really smart buy!
God, I should have never bought more. I have lost too much. I am given up.
Why I am so unlucky?
Dujiangyan Irrigation Project
(Chengdu,256 BC)
To Make $$$$$, Follow Institutional Money
Jesse Livermore's Trading Rules
One of his favorite principles: "There is nothing new in Wall Street. There can't be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again." • Trade in the direction of the general market. • Buy rising stocks and sell falling stocks. (Go
long when stocks reach a new high. Sell short when they reach a new low.)
• Never average losses (e.g., buying more fallen stocks).
Mutual Funds and Exchange Traded Funds (ETFs)
• Mutual Funds: A Broad Portfolio of Constituent Stocks for Small Investors;
• Exchange Traded Funds: Stock-Like Mutual Funds or Investment Units, Usually Tracking a Market Index; –QQQ Tracks NASDAQ-100
–IWM Tracks Russell-2000
–SPY Tracks S&P-500
Efficient Market Hypothesis
• Efficient Market Hypothesis (EMH):
– Price Movements Modeled by Random Walk;
– Best Prediction for Tomorrow’s Price: Today’s Price!
– No Gain in Technical or Fundamental Analysis;
– Source of Randomness:
“Active participation of every investor to obtain greater wealth”
~ Sornette
Efficient Market Hypothesis
• EMH Criticism: – Lo and MacKinlay in Non-Random Walk Down
the Wall Street:
“Financial markets are predictable to some degree!”
“Predictability is the oil that lubricates the gears of capitalism”
– Grossman and Stiglitz:
“The perfectly informationally efficient markets are impossible”
Fractal Market Hypothesis (FMH)
• Liquidity; • Different Investment Horizons as
Sources of Liquidity; • Stable Market vs. Efficient Market:
Stable market = Liquid Market
• Low Liquidity: Major Cause of Stock Market Crashes;
“Be fearful when others are greedy and greedy
when others are fearful”
~ Warren Buffet
Market Timing: Problem Statement
• To find appropriate times and appropriate stocks to get in or out of the market or to go short or long!
• Assumption: Liquidity (Uncontrollability!!)
Fundamental Analysis
• There is a “Correct Price” for Every Stock; • Stock Prices Fluctuate Around Their
“Correct Price”; • Achieving Profit in a Short-Time from
Mispricing; • To Find the “Correct Price”:
– Study Financial Statements of the Underlying Company, e.g. P/E Ratio, Company’s Capital, Debts, etc!
– Performance of Its Competitors; • Appropriate for the Stock of Individual
Companies;
Technical Analysis
• Using Price and Volume to Catch the Market Trends;
• Daily Prices: Open, High, Low and Close;
• OHLC Charts
• Create a Set of Technical Indicators:
– Exponential Moving Averages (EMAs),
– Stochastic Oscillators, – MACD,
– NASDAQ Summation Index (NASI),
– Distribution Days,
– …
• Appropriate for Large Indexes, ETFs, Mutual Funds;
Mechanical Trading System
Mechanical Trading System
• Economy Observer:(Monthly Data) – Benchmark: S&P 500,
– Unemployment Rate,
– Level of Margin Debt,
– Commodity Price Index,
– Industrial Production Index;
• Technical Trader:(Daily Data)
– Benchmark: NASDAQ Composite,
– Volume, Price, NASI
Moving Averages
Moving Average Convergence Divergence (MACD)
1. MACD line (Black): Difference between 12-period and 26-period MA 2. Signal line (Red): 9-period MA of MACD line
Moving Average Crossover Strategy
10/29/99 11/29/00 12/28/00 1/26/00 2/24/00 3/23/00
3000
3500
4000
4500
5000
10/29/99 11/29/99 12/28/99 1/26/00 2/24/00 3/23/00-1
-0.5
0
0.5
1
Price
EMA(50)
Spectral Technical Analysis(STA): Relative Crossover System(RCS)
• Consider the Following 2-Variable Function: 𝑓 𝑥, 𝑦 = 1 𝑥 . 1 −𝑦 +
𝑥 − 𝑦
𝑥. 1 𝑥 . 1 𝑦 . 1(𝑥 − 𝑦)
• If 𝑥 > 0, 𝑦 < 0 Then 𝑓 𝑥, 𝑦 = 1
• If 𝑥 > 𝑦 > 0 Then 𝑓 𝑥, 𝑦 =𝑥−𝑦
𝑥< 1
• Otherwise 𝑓 𝑥, 𝑦 = 0
Spectral Technical Analysis
• Let’s 𝑃(𝑘) and 𝐸(𝑘) be the daily stock price and an exponential moving average of it:
• Set:
𝑥 = 𝑃 𝑘 − 𝐸(𝑘) 𝑦 = 𝑃 𝑘 − 1 − 𝐸(𝑘 − 1)
• Then 𝑓(𝑥, 𝑦) generate partial “Buy” signals!
• What if we want to get sell signals?
An Example: STA Applied to NASDAQ Composite Index
10/29/99 11/29/99 12/28/99 1/26/00 2/24/00 3/23/002000
3000
4000
5000
6000
10/29/99 11/29/99 12/28/99 1/26/00 2/24/00 3/23/00-1
-0.5
0
0.5
1
Price
EMA(50)
Spectral Technical Analysis Algorithm
• Create a Weighted Summation of “Buy” and “Sell” Signals From Appropriate Indicators to Generate “Buy” and “Sell” Signals:
𝐵𝑢𝑦 = 𝛼𝑖 . 𝐵𝑢𝑦𝐼𝑁𝐷𝑖𝑖
𝑆𝑒𝑙𝑙 = 𝛽𝑖 . 𝑆𝑒𝑙𝑙𝐼𝑁𝐷𝑖𝑖
• Find a “Threshold Level” for “Buy” and “Sell” Signals to Get the “Buy” and “Sell” Commands.
Back-Testing Results: NASDAQ Composite Test 1998 to 2013 With $1 as Initial Capital
Specs Long/Short Long-Only
Total Net Profit $175.3 $18.53
Total Number of trades 54 35
Percent of Profitable 79.25% 79.41%
Return on Initial Capital 17,530% 1,853%
Buy&Hold Return 107%
Annual Rate of Return 40.76% 21.71%
Back-Testing Results: QQQ Test 1999 to 2013 With $1 as Initial Capital
Specs Long/Short Long-Only
Total Net Profit $160.6 $14.32
Total Number of trades 52 33
Percent of Profitable 76.47% 78.13%
Return on Initial Capital 16,060% 1,432%
Buy&Hold Return 59.54%
Annual Rate of Return 42.61% 20.99%
Back-Testing Results: QLD Test 2007 to 2013 With $1 as Initial Capital
Specs Long/Short Long-Only
Total Net Profit $70.95 $12.53
Total Number of trades 27 17
Percent of Profitable 81.25% 81.25%
Return on Initial Capital 7,095% 1,253%
Buy&Hold Return 97.5%
Annual Rate of Return 92.67% 49.44%
Back-Testing Results: TNA Test 2009 to 2013 With $1 as Initial Capital
Specs Long/Short Long-Only
Total Net Profit $21.71 $13.08
Total Number of trades 16 12
Percent of Profitable 60% 54.55%
Return on Initial Capital 2,171% 1,308%
Buy&Hold Return 268.1%
Annual Rate of Return 93.9% 75.2%
Comparison:
Investor Business Daily’s Market Outlook Signals
Investors Business Daily: Investors.com
Interpretation of IBD Signals:
• Buy Signal: “Confirmed Uptrend” or
“Follow Through Day”;
• Sell Signal: “Uptrend Under Pressure”
and “Market In Correction”;
• Short Selling: “Market in Correction”;
Specs STA Timing System IBD Market Outlook
Total Number of Trades 13 30
Percent of Profitable Trades 69% 50%
Return on Initial Capital 153.66% 64.05%
Annual Return 20.46% 10.41%
Comparison: STA vs. IBD Market Outlook Signals(2008-2012)
• “Long-Only” Strategy:
• “Long/Short” Strategy:
Specs STA Timing System IBD Market Outlook
Total Number of Trades 26 61
Percent of Profitable Trades 62% 52%
Return on Initial Capital 381.79% 74.71%
Annual Return 36.96% 11.81%
Comparison:
VectorVest Market-Timing Signals
VectorVest: vectorvest.com
Vectorvest.com Market Timing
Comparison: STA vs. VectorVest Timing Signals(2008-2010)
• “Long-Only” Strategy:
• “Long/Short” Strategy:
Specs STA Timing System VectorVest
Total Number of Trades 6 7
Percent of Profitable Trades 67% 71%
Return on Initial Capital 70.61% 13.76%
Annual Return 30.62% 6.66%
Specs STA Timing System VectorVest
Total Number of Trades 12 14
Percent of Profitable Trades 55% 50%
Return on Initial Capital 163.13% 34.19%
Annual Return 62.17% 15.84%
Questions: There must be many
institutions and investors tried various methods,
why this method works? Why other methods do
not work?
My Answer:
• They do not know Robust Control Theory!
• Works well for ETF funds, not for individual stocks (ETF is only available in recent years)
• Less risk (ETF holds large number of stocks) and more reward (a few bad companies do not affect much of the total return)
• Does not work well for large positions (in billions of $) : Not easy to get in and out
• No frequent trading: Average of 5 trades per year!
Long-Term Comparison with:
Domestic and International Indexes,
Bonds and Treasury Bills
Annual Total Return(%) Total Return (%)
3-Yr 5-Yr 10-Yr Bull Bear
STA Algorithm
QQQ(Long) 25.45 24.94 23.12 72.3 12.71
QQQ(Long/Short) 31.95 42.46 33.19 94.89 148.1
QLD(Long/Short) 71.71 104.04 - 196.43 691.82
INDEXES(Domestic)
S&P 500 (EW) 12.7 4.8 10.2 156.5 -53.7
S&P 500 10.9 1.7 7.1 110.6 -50.9
S&P Mid Cap 400 12.0 3.5 9.0 127.0 -50.4
S&P Small Cap 600 14.1 5.1 10.5 142.5 -51.3
INDEXES(International)
MSCI World 7.5 -0.6 8.1 98.3 -53.6
MSCI EAFE 4 -3.2 8.7 84.2 -56.3
BOND INDEXES
BarCap Long Gov. 13.6 9.6 7.6 41.8 16.0
BofA ML High Yld Bond 11.6 9.9 10.2 113.6 -26.2
Treasury Bills 0.1 0.5 1.8 0.5 2.8
Long-Term Comparison with:
Mutual Funds: Top 50 Most Widely Held
Funds
Annual Total Return(%) Total Return (%)
3-Yr 5-Yr 10-Yr Bull Bear
STA Algorithm
QQQ(Long) 25.45 24.94 23.12 72.3 12.71
QQQ(Long/Short) 31.95 42.46 33.19 94.89 148.1
QLD(Long/Short) 71.71 104.04 - 196.43 691.82
FUNDS
Dodge & Cox Intl Stk 4.9 -1.9 11.6 117.2 -59.9
Vanguard Total Intl Stk Idx Inv 3.9 -3.1 9.4 92.6 -58.5
Fidelity Low-Priced Stk 12.6 4.8 11.1 133.9 -48.8
Fidelity Grth Company 12.8 3.7 10.9 127.5 -50.2
T. Rowe Price Mid Gr 12.9 4.8 11.5 133.6 -48.2
Permanent Port 12.9 4.8 11.5 133.6 -48.2
Oakmark Intl I 8.8 3.5 11.2 147.2 -54.9
Fidelity Blue Chip Grth 11.0 4.0 7.1 128.6 -48.8
Vanguard PrimeCap Inv 8.5 3.0 9.9 100.6 -44.3
Last Five Years Comparison with:
Mutual Funds: Top 10 Performers for 2012
Annual Total Return(%) Total Return (%)
2012 2011 2010 2009 2008 Bull Bear
STA Algorithm
QQQ(Long) 20.88 17.14 39.42 34.63 14.55 72.3 12.71
QQQ(Long/Short) 27.07 17.2 52.03 17.29 124.49 94.89 148.1
QLD(Long/Short) 61.71 33.57 134.37 37.85 406.8 196.43 691.82
FUNDS
Fidelity Sel Constr& Hous
38 2.8 21.5 22.9 -26.9 181.1 -50.2
Fidelity Sel Biotech 36.5 18.1 11.4 10.7 -11.4 115.6 -25.4
Fairholme 35.8 -32.5 25.4 39.0 -29.8 101.8 -47.8
Artisan Intl Sm Cap Inv 34.6 -15.3 14.3 58.1 -51.4 141.3 -61.0
Wasatch Intl Gr 33.0 -12.1 34.2 64.1 -54.0 206.9 -65.9
Walthausen SmCp Value 32.1 -6.0 41.8 42.3 - 241.1 -
T. Rowe Price Health Sci 31.9 11.0 16.3 32.1 -28.8 147.9 -35.6
Matthew 25 31.6 10.4 31.9 47.8 -40.5 245.8 -56.9
Matthews India Inv 31.5 -36.5 32.5 97.2 -62.4 3.4 3.9
TIAA-CREF Intl Eq Rtl 30.8 -23.9 19.6 31.8 -49.7 96.3 -61.3
14-Year Comparison with:
Stock Screens of the American Association
of Individual Investors (AAII)
Historical Annual Return of Stock Screens on AAII's Web Site Vs. STA
STA Avg 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000
QQQ(Long) 19.6 20.9 17.1 39.4 34.6 14.6 21.0 14.7 12.5 17.2 50.3 -14.4 57.4 -8.7
QQQ(Long/Short) 43.4 27.1 16.6 52.0 17.3 124.5 30.9 14.5 9.8 24.1 50.3 17.3 274.7 34.9
QLD(Long/Short) 104.0 61.7 33.6 134.4 37.9 406.8
TNA(Long/Short) 90.5 73.8 8.4 288.3 80.0
Value
Cash Rich Firms 9.5 10.5 -32.8 14.4 56.9 -38.0 7.7 17.2 -2.5 18.6 64.0 -9.4 20.1 40.5
Dogs of the Dow 1.4 9.6 10.7 19.4 8.1 -45.4 -1.8 26.8 -9.8 -1.3 20.4 -9.8 -1.2 4.1
Dogs of the Dow: Low Priced 5 0.4 15.7 13.1 17.3 -7.7 -58.7 -2.7 34.9 -11.8 6.1 17.6 -6.5 7.2 3.2
Fundamental Rule of Thumb 12.6 -6.9 -35.2 17.7 92.1 -41.5 4.1 31.0 5.0 49.6 83.3 4.7 42.3 28.7
Graham--Defensive Investor (Non-Utility) 16.9 18.9 7.0 31.4 57.9 -32.0 20.6 26.6 26.2 11.7 32.7 3.1 61.5 12.0
Graham--Defensive Investor (Utility) 7.5 1.2 8.6 4.6 7.9 -18.4 1.8 29.4 18.5 16.2 16.6 -15.9 5.2 51.4
Graham--Enterprising Investor 17.9 1.1 -1.1 43.5 48.5 -40.7 28.1 72.3 21.3 18.9 25.9 43.5 55.3 24.2
Graham--Enterprising Investor Revised 22.0 -4.9 -4.1 32.9 168.4 -22.6 29.4 34.5 48.2 10.2 50.1 2.2 65.8 -1.4
Magic Formula 10.1 7.9 -30.6 26.6 97.0 -36.3 -5.6 27.9 -9.2 6.5 66.6 6.3 76.1 1.0
O'Shaughnessy: Value 4.7 20.3 -11.2 7.4 31.5 -49.1 -4.2 24.4 2.2 20.2 47.2 -12.1 10.6 22.3
Piotroski: High F-Score 25.8 91.7 -36.4 138.8 34.6 -35.3 1.8 8.1 37.8 37.7 131.6 7.6 76.3 -2.8
Price-to-Free-Cash-Flow 17.0 1.1 -7.0 39.2 147.2 -41.5 -21.2 26.6 10.6 30.9 61.7 13.6 63.8 17.8
Schloss 11.0 13.1 -35.1 12.5 57.5 -23.1 -8.1 30.1 20.0 -26.6 140.7 -0.1 20.5 14.9
Weiss Blue Chip Div Yield 10.4 19.2 7.6 26.9 27.9 -26.2 4.5 14.2 6.4 13.6 48.9 -14.1 25.6 18.8
Historical Annual Return of Stock Screens on AAII's Web Site Vs. STA
STA Avg 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000
QQQ(Long) 19.6 20.9 17.1 39.4 34.6 14.6 21.0 14.7 12.5 17.2 50.3 -14.4 57.4 -8.7
QQQ(Long/Short) 43.4 27.1 16.6 52.0 17.3 124.5 30.9 14.5 9.8 24.1 50.3 17.3 274.7 34.9
QLD(Long/Short) 104.0 61.7 33.6 134.4 37.9 406.8
TNA(Long/Short) 90.5 73.8 8.4 288.3 80.0
Value With Price Momentum
Lakonishok 13.7 7.5 -0.6 32.7 53.5 -23.7 15.1 14.4 14.0 31.2 39.9 -5.2 -3.5 36.7
O'Shaughnessy: All Cap 11.1 12.4 -5.0 29.4 23.3 -40.9 12.5 24.1 21.9 47.4 28.7 -11.8 63.7 6.3
O'Shaughnessy: Growth 15.9 28.8 -7.5 21.3 22.4 -38.2 12.6 17.2 14.4 45.1 90.3 10.1 19.2 11.5
O'Shaughnessy: Growth Market Leaders 5.7 15.8 -1.2 15.7 12.6 -44.5 15.5 9.6 18.9 6.7 26.2 -8.9 5.7 -9.0
O'Shaughnessy: Small Cap Growth & Value18.0 30.3 -0.3 26.1 -3.3 -32.4 29.6 36.2 19.1 26.8 107.5 0.8 13.4 13.2
O'Shaughnessy: Tiny Titans 23.7 20.0 -22.9 21.1 71.1 -56.4 2.2 35.2 7.5 45.8 154.8 51.9 84.1 -6.6
Growth
Dual Cash Flow 12.9 5.1 -21.6 31.0 76.0 -46.8 -7.3 20.4 10.4 24.7 66.9 -13.9 24.6 5.7
IBD Stable 70 10.1 24.6 3.7 21.2 56.0 -37.2 -10.6 6.9 1.8 29.0 48.4 -11.0 9.5 23.9
Inve$tWare Quality Growth 5.7 19.7 -9.4 17.3 39.6 -24.1 -10.9 0.9 14.9 18.0 33.3 -25.0 8.0 18.5
Return on Equity 12.1 10.1 -5.7 32.0 40.0 -33.8 7.2 8.7 17.6 23.9 46.9 -3.8 18.1 31.4
Historical Annual Return of Stock Screens on AAII's Web Site Vs. STA
STA Avg 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000
QQQ(Long) 19.6 20.9 17.1 39.4 34.6 14.6 21.0 14.7 12.5 17.2 50.3 -14.4 57.4 -8.7
QQQ(Long/Short) 43.4 27.1 16.6 52.0 17.3 124.5 30.9 14.5 9.8 24.1 50.3 17.3 274.7 34.9
QLD(Long/Short) 104.0 61.7 33.6 134.4 37.9 406.8
TNA(Long/Short) 90.5 73.8 8.4 288.3 80.0
Growth & Value
Buffett: Hagstrom 13.8 13.0 8.2 27.7 30.0 -25.8 14.4 11.3 11.4 27.6 35.2 -8.7 13.9 11.4
Buffettology: EPS Growth 9.7 17.4 3.8 20.5 57.5 -36.9 5.8 8.8 11.9 13.2 32.8 -10.9 25.7 5.9
Buffettology: Sustainable Growth 10.4 8.8 0.7 18.4 68.0 -28.9 3.9 8.7 9.5 17.5 37.6 -11.9 29.7 3.3
Dividend (High Relative Yield) 7.7 9.8 3.0 19.4 16.4 -21.4 -9.6 14.5 -1.0 19.1 27.9 0.4 24.1 23.3
Dividend Screen: DRPs 7.7 10.9 1.9 19.8 29.4 -24.2 -21.2 20.9 -1.5 17.4 28.3 -1.2 38.9 27.7
Dividend Screen: Non-DRPs 12.4 18.1 4.3 25.3 25.4 -31.7 -7.6 17.1 7.1 22.8 40.5 28.6 54.7 16.5
Dreman 9.9 20.6 -11.7 22.7 37.2 -34.9 -17.5 19.3 18.7 24.2 37.7 8.3 26.4 38.0
Fisher (Philip) 2.2 -0.6 -50.9 9.2 107.9 -43.1 8.2 -1.2 -11.7 -3.9 78.1 -10.7 70.7 -16.7
Foolish Small Cap 8 Revised 16.0 41.8 -49.2 15.4 161.0 -60.6 13.5 44.6 15.3 -3.9 67.8 22.2 29.5 51.5
Kirkpatrick Bargain 8.3 14.9 3.6 9.4 22.2 -25.3 44.2 25.2 29.1 33.4 14.6 -18.4 -5.3 22.6
Kirkpatrick Value 11.1 19.4 -15.1 -25.5 -8.9 -3.7 77.8 18.5 88.2 16.6 45.6 -36.3 40.8 63.9
Lynch 11.7 0.7 -27.9 24.9 82.8 -37.3 11.7 15.6 7.8 59.8 59.0 -7.2 39.3 3.2
Murphy Technology -4.1 42.3 -29.8 40.0 28.8 -49.7 -15.8 -1.9 34.1 107.9 -33.7 -79.6 26.7 -52.1
Neff 18.2 15.0 -4.2 35.0 52.5 -33.6 -13.9 13.9 7.7 29.5 85.1 15.0 65.2 37.3
Price-to-Sales 14.8 11.3 -2.6 29.6 47.1 -38.5 2.4 16.6 16.9 11.1 69.8 1.3 43.3 23.3
Rule #1 Investing 9.9 11.3 -1.0 40.0 99.8 -43.2 -11.7 2.5 -6.7 13.5 48.0 -29.4 38.0 15.0
T. Rowe Price 9.0 -15.0 117.4 11.9 40.1 -47.8 -7.1 -11.3 23.1 44.9 39.2 -15.1 8.4 35.2
Templeton 9.8 31.0 3.2 22.4 54.7 -36.6 4.6 5.3 4.7 22.2 46.8 -32.6 22.0 20.3
Wanger (Revised) 7.8 23.5 -5.2 12.5 24.7 -36.3 15.9 16.5 14.5 22.5 53.2 -13.1 21.1 -2.8
Historical Annual Return of Stock Screens on AAII's Web Site Vs. STA
STA Avg 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000
QQQ(Long) 19.6 20.9 17.1 39.4 34.6 14.6 21.0 14.7 12.5 17.2 50.3 -14.4 57.4 -8.7
QQQ(Long/Short) 43.4 27.1 16.6 52.0 17.3 124.5 30.9 14.5 9.8 24.1 50.3 17.3 274.7 34.9
QLD(Long/Short) 104.0 61.7 33.6 134.4 37.9 406.8
TNA(Long/Short) 90.5 73.8 8.4 288.3 80.0
Growth With Price Momentum
Driehaus 11.9 16.7 -14.1 65.7 106.0 -42.7 28.9 41.4 4.3 -10.8 87.8 -42.6 -27.4 -8.3
Foolish Small Cap 8 11.1 16.9 -14.9 25.2 48.1 -53.5 -2.8 9.4 22.6 10.1 107.7 -19.4 -8.6 24.2
Kirkpatrick Growth 16.2 -9.8 -11.6 15.3 80.2 -34.0 87.2 16.2 35.2 -1.5 100.3 -9.1 -9.8 -11.4
O'Neil's CAN SLIM 24.3 18.0 -10.2 -9.6 97.3 -10.5 30.4 29.5 24.1 -3.8 79.0 20.5 54.4 38.0
O'Neil's CAN SLIM Revised 3rd Edition 14.4 7.3 -30.1 42.7 16.8 -26.3 31.4 -5.4 -1.0 -2.6 74.7 -10.3 33.4 96.3
O'Neil's CAN SLIM No Float 15.8 8.9 -3.9 20.6 36.9 -49.7 35.4 12.8 13.3 8.2 55.8 9.7 25.3 43.9
Growth & Value With Price Momentum
ADR Screen 6.4 1.4 -25.9 18.8 53.2 -58.7 25.3 44.7 12.9 14.5 82.3 -4.4 -5.3 9.9
MAGNET Complex 11.7 -19.6 6.9 -20.4 -31.1 -33.7 40.2 -28.6 26.2 18.6 9.1 4.1 110.6 3.1
MAGNET Simple 21.5 -12.4 19.5 56.1 339.5 -70.2 -17.0 72.1 58.1 38.1 62.1 -6.7 -21.7 -26.7
Muhlenkamp 5.1 -3.0 -45.9 2.7 45.2 -24.5 -20.8 2.0 23.6 31.0 41.2 5.9 43.5 22.2
Oberweis Octagon 13.0 32.6 -14.7 78.4 2.1 -56.8 29.1 24.0 4.1 42.3 67.8 -17.5 20.2 18.4
Stock Market Winners 20.0 13.6 21.2 124.6 -9.0 -34.7 13.0 -5.5 25.9 9.6 131.5 32.1 41.6 27.6
Value on the Move--PEG With Est Growth17.8 9.0 -0.3 29.7 24.2 -37.2 29.5 18.3 23.1 54.1 87.0 7.9 34.8 22.9
Value on the Move--PEG With Hist Growth12.9 4.3 1.0 31.7 23.9 -38.3 20.7 9.1 17.2 32.5 50.1 12.1 22.4 19.4
Historical Annual Return of Stock Screens on AAII's Web Site Vs. STA
STA Avg 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000
QQQ(Long) 19.6 20.9 17.1 39.4 34.6 14.6 21.0 14.7 12.5 17.2 50.3 -14.4 57.4 -8.7
QQQ(Long/Short) 43.4 27.1 16.6 52.0 17.3 124.5 30.9 14.5 9.8 24.1 50.3 17.3 274.7 34.9
QLD(Long/Short) 104.0 61.7 33.6 134.4 37.9 406.8
TNA(Long/Short) 90.5 73.8 8.4 288.3 80.0
Earnings Estimates
Dreman With Est Revisions 15.2 13.0 21.6 26.5 62.9 -37.1 4.3 39.8 9.3 35.0 69.2 16.6 -29.9 38.7
Est Rev: Down 1.1 13.6 -15.2 26.8 57.6 -42.6 -20.0 12.9 -0.4 13.4 51.8 -43.8 26.7 -7.1
Est Rev: Down 5% -0.4 9.2 -31.1 30.3 76.0 -47.8 -24.7 26.1 2.5 8.0 70.9 -61.5 28.3 -4.2
Est Rev: Up 15.6 14.1 2.1 28.8 53.9 -31.2 13.7 21.8 17.3 25.2 57.3 0.8 -3.5 2.2
Est Rev: Up 5% 28.1 28.8 6.1 35.9 86.3 -18.4 25.7 40.3 24.5 25.8 75.0 12.9 -8.1 3.6
P/E Relative 15.9 14.3 -1.9 29.6 51.8 -15.8 3.9 21.2 17.2 24.7 51.1 11.1 16.1 20.3
Specialty
Insider Net Purchases -1.5 11.5 -31.4 7.4 59.0 -51.7 -10.9 4.8 -14.6 33.5 86.8 -20.9 21.8 -38.3
Indexes
S&P 500 2.6 13.4 -0.0 12.8 23.5 -38.5 3.5 13.6 3.0 9.0 26.4 -23.4 -13.0 -10.1
S&P 500 Growth (TR) 4.1 14.6 4.7 15.0 31.6 -33.9 9.1 11.0 1.1 7.0 27.1 -28.1 -16.1 -19.1
S&P 500 Value (TR) 4.0 17.7 -0.5 15.1 21.2 -38.5 2.0 15.3 8.7 15.0 30.4 -16.6 -8.2 -0.5
S&P MidCap 400 7.6 16.1 -3.1 24.9 35.0 -37.3 6.7 9.0 11.3 15.2 34.0 -15.4 -1.6 16.2
S&P MidCap 400 Growth (TR) 10.9 15.8 -0.9 30.6 38.1 -36.9 13.5 5.8 14.4 15.8 37.6 -19.7 -2.6 15.8
S&P MidCap 400 Value (TR) 7.2 20.1 -2.4 22.8 33.7 -33.4 2.7 13.4 10.8 17.2 33.8 -9.4 1.4 19.5
S&P SmallCap 600 6.5 14.8 -0.2 25.0 23.8 -32.0 -1.2 14.1 6.7 21.4 37.8 -15.3 5.7 11.0
S&P SmallCap 600 Growth (TR) 8.0 14.9 4.1 28.0 30.7 -32.2 5.6 10.6 7.3 24.3 38.5 -16.6 3.0 7.6
S&P SmallCap 600 Value (TR) 7.2 17.8 -1.2 24.7 20.6 -28.9 -5.5 19.6 8.5 21.1 39.2 -12.9 9.5 15.8
Dow Jones 30 3.4 7.3 5.5 11.0 18.8 -33.8 6.4 16.3 -0.1 2.6 25.3 -16.8 -7.1 -6.2
NASDAQ 100 6.7 16.8 2.7 19.2 53.5 -41.9 18.7 6.8 1.5 10.4 49.1 -37.6 -32.7 -36.8
All Exchange-Listed Stocks 9.1 14.8 -12.3 26.2 65.8 -46.3 -4.5 17.2 4.5 22.8 81.1 -13.3 21.2 -14.2
Real-Time Implementation (Launched on November 2012)
Return on Capital for Original Code (Nov. 26, 2012 to Sep. 6, 2013)
SYMBOLS Long Trades Short Trades Total
NASDAQ(IXIC) 22.95% No Trade 22.95%
QQQ(1x) 19.33% No Trade 19.33%
QLD(2x) 38.79% No Trade 38.79%
TNA(3x) 100% No Trade 100%
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