Friday, July 28, 2006

8 Easy Steps to Picking Stocks

Aka: The Lazy Way to Make Money in the Stock Market

I've read somewhere the most expensive financial advice is often free. Maybe it was Gary North. More about him later. Anyway, with that caveat, here's what I've been doing.

I've tried many stock systems, read many books, looking for the Holy Grail of stock picking. Some work, most don't, some require too much effort, some too much risk.

But here's one I got out of a book, Straight Talk About Stock Market Investing, I think it was called that. Written by a guy name Statterly. He's got many systems, but the one below is one I've been using, and the results are not too shabby.

It's simple, takes very little work. I call it the DOW Stock Pick 6. It's a contrarian method, that picks out of favor stocks on the Dow 30.

Step 1. Go to the Dows of the Dow site.
Click on the YTD, then click on the Yield of current year to sort by Highest Yield to lowest. For example, for today, Verizon would be at the top, Disney at the bottom.

Step 2: Take note of the top 6 stocks with the highest yield.

Step 3: Go to the MSN Money site: Put in the first stock symbol of the five to get a quote. Scroll down the left side to OWNERSHIP. Click on that to get the Ownership Activity, Total Positions. This is the number of Institutional owners, usually around 1000.

Step 4: Do that for all 6 stocks. Pick the one with the lowest number of Institutional Owners (IO).

Step 5: To recap: You now have 1 pick and 5 in the group. Add the 7th highest Yield stock to your group of 5, then pick 1 with the lowest IO. That will give you stock pick #2.

Step 6: Repeat Step 5 until you have a total of 6 stocks. Congratulations. These are your Dow Stock Pick 6.

Step 7: Buy equal dollar amounts of all 6 stocks. I.E. if you have about $3000, buy $500 of each stock. Don't forget about the broker commissions.

Step 8: Hold for one year. Sell and repeat.

That's it.

And now here's my performance data with this system.

On Dec. 21, 2005, I purchased the following stocks and how they are doing:
  • AA +.15 %
  • CAT +10 %
  • DD -2.5 %
  • GM +59 %
  • HON +.47 %
  • MCD -3 %
On June 6, 2006, I purchased another 6 stocks. Here's the results for those:
  • DD -5 %
  • GM +26 %
  • MO +12 %
  • MRK +22 %
  • T +11 %
  • VZ +6 %
Happy stock picking.


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