The Five-Step Formula for Buying Winning Stocks

Source

I hear folks say this all the time… “I wish there was a magic formula for investing.”

It turns out, there is.

Joel Greenblatt, a hedge-fund manager and professor at Columbia University, came up with a “magic formula” investing strategy and shared it with the world in his 2005 bestselling book, The Little Book That Beats the Market. He continued sharing it in his follow-up book in 2010, The Little Book That Still Beats the Market.

This formula was magic because according to Greenblatt's testing, the strategy averaged 24% returns per year from 1988 to 2009. That's more than double the annual return from the broader market over the same stretch.

Greenblatt's magic formula focuses on screening for companies that fit specific criteria and uses a methodical, unemotional process to invest over time.

You set the guidelines and buy whatever stocks are at the top of that list. You just follow the rules. It's investing made easy.

I have my own set of criteria when I look for investment ideas. If you follow these five guidelines in your own investing, you'll sleep well at night… and make money in the process.

Editor's Note: Radical new battery could dismantle $75 trillion oil markets

Here's my formula for buying winning stocks…

  1. Consistent top-line growth.

Back in late 2018, I wrote about two consumer staple stocks: spice maker McCormick (MKC) and condiment giant Kraft Heinz (KHC). At the time, these two stocks looked attractive. Both had products with incredible brand loyalty. And both were cheap.

But there was one major difference between both companies… One consistently grew its revenues over the past three decades. The other did not.

I'll let you guess which stock had consistent top-line growth and which one didn't…

McCormick was the big winner. And that showed in its returns. If a company is struggling to increase its sales, why would you want to own it?

I like seeing a company that has multiple years of consecutive revenue growth.

  1. Does more with less.

You want to buy companies that don't have to spend a lot of money to make a lot of money.

These are companies that are highly profitable and can return money back to shareholders.

One way to find these efficient companies is by looking at something called return on assets (“ROA”).

The formula for ROA is net income divided by total assets. The higher that number, the better a company's management team is at using its assets to generate income. The average company in the S&P 500 Index has a ROA around 2.7%.

I like seeing a company that has a ROA of at least 10%.

  1. Increases dividends every year.

If I'm looking for an investment idea, I always check out the list of Dividend Aristocrats. These are S&P 500 companies that have increased their dividends for 25 consecutive years or more.

No matter what a company does, whether it sells tools, clothes, or soda… if it can raise its dividend payments each year for a quarter of a century, it's a high-quality business. Period.

You know that the management team has done a lot of things right over the years and you know the company is profitable.

There are, however, only 66 Dividend Aristocrats currently. It's an exclusive club to be in. For more ideas, I check out the list of Dividend Achievers – a broader list that includes companies which have increased their dividend for 10 or more consecutive years.

And it's important to own a dividend-paying stock because over the past 90-plus years, dividends were responsible for roughly 40% of the total market return. If you want long-term success in the market, own high-quality dividend payers.

I like seeing a company with at least 10 or more consecutive years of dividend growth.

Editor's Note: Radical new battery could dismantle $75 trillion oil markets

  1. Avoids too much debt.

You want to stay away from companies that are highly in debt. They're the first dominoes to fall in times of crisis.

To measure this, we look at a company's net debt (total debt minus cash) to earnings before interest, depreciation, and amortization (“EBITDA”). We use EBITDA because it's often used as a shortcut to estimate the cash flow available to pay off debt.

The net debt-to-EBITDA ratio shows how long it would take for a company to pay back its debt. The higher the ratio, the less likely a company is to handle its debt burden… And the less likely it is to take on more debt to grow the business. We want to own companies with strong balance sheets.

I like seeing a company that has a net debt-to-EBITDA of less than 4.

  1. Trades for a reasonable price.

We all know quality comes at a price… And if you overpay for a great business – even one that grows revenues, raises dividends, is efficient, and has a strong balance sheet – you can lose money. Price matters.

You can use the basic price-to-earnings ratio to get a sense of a stock's valuation. Right now, the S&P 500 trades for about 22 times earnings.

In general, I want to own stocks that trade for less than the overall market. But again, we're looking at some of the highest-quality companies in the world, so we can expect a bit of a premium valuation.

I like seeing a company that has a price-to-earnings multiple of less than 25.

The more stocks you own that meet these five requirements, the more success you'll likely achieve in the market.

Here's to your health, wealth, and a great retirement.

Related: Expert's newest prediction could send $7 stock soaring

Something strange is happening in the financial system…

And according to the Wall Street Journal, it's causing some investors –- including the world's biggest banks – to move massive amounts of cash out of the banking system.

What exactly is going on and what does it mean for your money?

I recently met up with widely-followed hard asset expert Bill Shaw at his firm's east-coast headquarters.

Over the past two decades, Mr. Shaw's firm has grown from tiny startup into a publishing powerhouse – serving more than a million readers in more than 150 countries.

Since 1999, the firm owes its legendary status as a trusted source of financial research to its eerily-accurate track record of often-controversial financial predictions, including:

  • The Dotcom Crash…
  • The bankruptcy of General Motors…
  • The real estate bubble…
  • The fall of General Electric…
  • And the bankruptcy of Freddie and Fannie.

Recently, Bill revealed a brand-new prediction that has caught many by surprise.

He explained, “I'm not the kind of guy who gives in to hype and big predictions… that's why I've waited nearly a decade — to make sure the timing is right for the biggest prediction of my career.

He went on to explain that over the next few years, he sees massive bull market developing in a sector of the economy that, over the years, has been completely ignored by nearly every investor in America.

The hard-asset expert said:

“Events happening around the world are about to come together at just the right time to create a perfect storm, causing some of the world's biggest investors to dump cash and stocks – and pile into this long-hated asset.

In fact, it's already begun.”

After dedicating hours to painstaking examination, ensuring he considered every possible angle, Mr. Shaw has put together a free presentation to explain exactly what he sees coming… and the best way for Americans prepare.

Go here to see all the details.

   

             

Write This Stock Ticker Down Right Now

Enter your email below to see the the stock name and ticker on the next page.


By submitting your email address, you give Todays Top Picks permission to deliver the report or research you’re requesting to your email inbox. As a bonus, you will also get a free subscription to one of our carefully selected marketing partners. You can unsubscribe at any time To review our privacy policy, click here: Privacy Policy | How it Works

Write This Stock Ticker Down Right Now

Enter your email below to see the the stock name and ticker on the next page.


By submitting your email address, you give Todays Top Picks permission to deliver the report or research you’re requesting to your email inbox. As a bonus, you will also get a free subscription to one of our carefully selected marketing partners. You can unsubscribe at any time To review our privacy policy, click here: Privacy Policy | How it Works

Write This Stock Ticker Down Right Now

Enter your email below to see the the stock name and ticker on the next page.


By submitting your email address, you give Todays Top Picks permission to deliver the report or research you’re requesting to your email inbox. As a bonus, you will also get a free subscription to one of our carefully selected marketing partners. You can unsubscribe at any time To review our privacy policy, click here: Privacy Policy | How it Works

Write This Stock's Name Down Right Now

A new ground-floor opportunity for 8,788% returns has emerged but you must act by December 31st…
Enter your email below to see the the stock name and ticker on the next page. 


By submitting your email address, you give Todays Top Picks permission to deliver the report or research you’re requesting to your email inbox. As a bonus, you will also get a free subscription to one of our carefully selected marketing partners. You can unsubscribe at any time To review our privacy policy, click here: Privacy Policy | How it Works

Write This Stock Ticker Down Right Now

Enter your email below to see the the stock name and ticker on the next page.


By submitting your email address, you give Todays Top Picks permission to deliver the report or research you’re requesting to your email inbox. As a bonus, you will also get a free subscription to one of our carefully selected marketing partners. You can unsubscribe at any time To review our privacy policy, click here: Privacy Policy | How it Works

“The Forever Battery”

Secret Startup Cracks the Battery Code — Wall Street Legend Predicts a 1,500% Surge in Electric Car Sales Over the Next 4 Years…

Enter your email address to receive the name and ticker symbol of this once-in-a-lifetime investment opportunity.


By submitting your email address, you give Todays Top Picks permission to deliver the report or research you’re requesting to your email inbox. As a bonus, you will also get a free subscription to one of our carefully selected marketing partners. You can unsubscribe at any time To review our privacy policy, click here: Privacy Policy | How it Works

3 High-Yield Dividends for Guaranteed Passive Income

Here are the best dividend stocks for smart investors to secure a steady & reliable “second income”. Our top pick is trading for just $2.
Enter your email address for our free report.


By submitting your email address, you give Todays Top Picks permission to deliver the report or research you’re requesting to your email inbox. As a bonus, you will also get a free subscription to one of our carefully selected marketing partners. You can unsubscribe at any time To review our privacy policy, click here: Privacy Policy | How it Works

New EV Set to Disrupt Entire Industry

The Wall Street Journal calls it “an American manufacturing triumph.” It promises to revolutionize the driving experience and hand investors MASSIVE profits.
Enter your email address to receive the name & ticker symbol now.


By submitting your email address, you give Todays Top Picks permission to deliver the report or research you’re requesting to your email inbox. As a bonus, you will also get a free subscription to one of our carefully selected marketing partners. You can unsubscribe at any time To review our privacy policy, click here: Privacy Policy | How it Works

Forget 99% of Tickers - Just Use This One

Larry Benedict is sharing a crazy over-the-shoulder “demo” (less than 10 seconds). Learn how to make all the money you need – in any market – using a single stock.
Enter your email address to watch now and get the name of the ticker you need to get started.


By submitting your email address, you give Todays Top Picks permission to deliver the report or research you’re requesting to your email inbox. As a bonus, you will also get a free subscription to one of our carefully selected marketing partners. You can unsubscribe at any time To review our privacy policy, click here: Privacy Policy | How it Works

Is Amazon Obligated to Pay You?

Thanks to a U.S. law, you can claim your slice of this jackpot and collect up to $48,000 over the next year.

Enter your email below to find out how.


By submitting your email address, you give Todays Top Picks permission to deliver the report or research you’re requesting to your email inbox. As a bonus, you will also get a free subscription to one of our carefully selected marketing partners. You can unsubscribe at any time To review our privacy policy, click here: Privacy Policy | How it Works

By submitting your email address, you give Today’s Top Stocks and Morning Bullets permission to deliver the report or research you’re requesting to your email inbox. You can unsubscribe at any time. To review our privacy policy, click here: Privacy Policy | How it Works

#1 Energy Pick

This little-known Silicon Valley company is using AI to do something incredible…
Enter your email address to receive the name and ticker symbol of the #1 tech bargain stock now.


By submitting your email address, you give Todays Top Picks permission to deliver the report or research you’re requesting to your email inbox. As a bonus, you will also get a free subscription to one of our carefully selected marketing partners. You can unsubscribe at any time To review our privacy policy, click here: Privacy Policy | How it Works

By submitting your email address, you give Today’s Top Stocks and Morning Bullets permission to deliver the report or research you’re requesting to your email inbox. You can unsubscribe at any time. To review our privacy policy, click here: Privacy Policy | How it Works

#1 EV Breakthrough of 2022

Louis Navellier is about to give away the ticker symbol of an overlooked battery company… one set to skyrocket in value as the EV boom gets underway. 
Simply enter your email below to learn the name of this company today…


By submitting your email address, you give Todays Top Picks permission to deliver the report or research you’re requesting to your email inbox. As a bonus, you will also get a free subscription to one of our carefully selected marketing partners. You can unsubscribe at any time To review our privacy policy, click here: Privacy Policy | How it Works

By submitting your email address, you give Today’s Top Stocks and Morning Bullets permission to deliver the report or research you’re requesting to your email inbox. You can unsubscribe at any time. To review our privacy policy, click here: Privacy Policy | How it Works

Anyone can invest like “The People’s Shark” with as little as $100

You no longer have to be rich, famous, or powerful to become an angel investor. Starting now, it’s possible for you to get involved in these life-changing deals.
Enter your email address for all the details of this once-in-a-lifetime investment opportunity.


By submitting your email address, you give Todays Top Picks permission to deliver the report or research you’re requesting to your email inbox. As a bonus, you will also get a free subscription to one of our carefully selected marketing partners. You can unsubscribe at any time To review our privacy policy, click here: Privacy Policy | How it Works

By submitting your email address, you give Today’s Top Stocks and Morning Bullets permission to deliver the report or research you’re requesting to your email inbox. You can unsubscribe at any time. To review our privacy policy, click here: Privacy Policy | How it Works

Is L.A.S.E.R. The Greatest Tech Breakthrough in History?

A $3.5 trillion megatrend… spearheaded by Elon Musk is bringing what could be the most disruptive, revolutionary tech breakthrough the world has ever seen, with one small company sitting at the center.
Enter your email address to receive the name and ticker symbol of this once-in-a-lifetime investment opportunity.


By submitting your email address, you give Todays Top Picks permission to deliver the report or research you’re requesting to your email inbox. As a bonus, you will also get a free subscription to one of our carefully selected marketing partners. You can unsubscribe at any time To review our privacy policy, click here: Privacy Policy | How it Works

By submitting your email address, you give Today’s Top Stocks and Morning Bullets permission to deliver the report or research you’re requesting to your email inbox. You can unsubscribe at any time. To review our privacy policy, click here: Privacy Policy | How it Works

2,467% Return on Israeli Laser Company

Learn the 3 Steps You Need to Protect Your Retirement and One Stock that Could Soar 2,476% in Nine Months.
Enter your email address to receive the name and ticker symbol of this once-in-a-lifetime investment opportunity.


By submitting your email address, you give Todays Top Picks permission to deliver the report or research you’re requesting to your email inbox. As a bonus, you will also get a free subscription to one of our carefully selected marketing partners. You can unsubscribe at any time To review our privacy policy, click here: Privacy Policy | How it Works

By submitting your email address, you give Today’s Top Stocks and Morning Bullets permission to deliver the report or research you’re requesting to your email inbox. You can unsubscribe at any time. To review our privacy policy, click here: Privacy Policy | How it Works

One Tweet From Elon Could Blow This Story Wide Open

Last year, anyone who listened to this man about Tesla could’ve made EIGHT TIMES their money. Now he’s revealing how Elon’s NEXT big move will revolutionize ANOTHER massive $23 trillion market.
Enter your email address to receive the name and ticker symbol of this once-in-a-lifetime investment opportunity.


By submitting your email address, you give Todays Top Picks permission to deliver the report or research you’re requesting to your email inbox. As a bonus, you will also get a free subscription to one of our carefully selected marketing partners. You can unsubscribe at any time To review our privacy policy, click here: Privacy Policy | How it Works

By submitting your email address, you give Today’s Top Stocks and Morning Bullets permission to deliver the report or research you’re requesting to your email inbox. You can unsubscribe at any time. To review our privacy policy, click here: Privacy Policy | How it Works

$25 to Profit from 20,000 IPOs

Days from now — 20,000 ‘IPOs’ could start flooding the market…
Enter your email address to reveal how anyone with $25 can stake their claim.


By submitting your email address, you give Todays Top Picks permission to deliver the report or research you’re requesting to your email inbox. As a bonus, you will also get a free subscription to one of our carefully selected marketing partners. You can unsubscribe at any time To review our privacy policy, click here: Privacy Policy | How it Works

By submitting your email address, you give Today’s Top Stocks and Morning Bullets permission to deliver the report or research you’re requesting to your email inbox. You can unsubscribe at any time. To review our privacy policy, click here: Privacy Policy | How it Works

"Bio-Chip" Sparks Potential 199,900% Surge by 2025

Sign up below for all the details on this tiny company being considered a once-in-a-lifetime investment opportunity.


By submitting your email address, you give Todays Top Picks permission to deliver the report or research you’re requesting to your email inbox. As a bonus, you will also get a free subscription to one of our carefully selected marketing partners. You can unsubscribe at any time To review our privacy policy, click here: Privacy Policy | How it Works