No. of Recommendations: 6
A couple of other things to add to my listing of "How I select stocks":

First (or is it Seventh?), Purchase stocks with both revenue and earnings growth rates above 40% Y2Y.

Second, first the illustration, then the rule:
Regarding increasing earnings: Two stocks could have increasing earnings every quarter for the previous ten quarters and grade 100.0 for momentum. But they would not be of equal worth or potential:

Stock ABCD could have 9 quarters of negative earnings, the loss getting smaller each quarter, and finally breaking out into positive territory only at the most recent quarter (chinadotcom does not fit this perfectly, but it's close to the idea).

Stock WXYZ could have 7 quarters of negative earnings, the loss getting smaller each quarter, and breaking out into positive territory 3 quarters ago, and the earnings growing each year.

Rarely will I buy Stock ABCD. chinadotcom is my only exception to this rule. All my other stocks follow this rule that I did not mention:
Stocks must have earnings the last three quarters, and those earnings must be increasing Y2Y and Q2Q. [along with rule 1 above]

Here is the main reason for that: my system helps me decide when to get out of a stock (generally, when it falls below a rating of 70.0)
But if you don't have a rating/ranking system, a good guideline is when earnings start declining.
Get out of that stock, and stay out of that stock! Until it again fulfills the criteria for purchase.
Forgetting and ignoring this rule is what cost me a lot of money in the fall of the Nasdaq. I haven't made that mistake since -- and don't you hold on, hoping for better times. Instead, find a better STOCK. [THIS may prove to be the most important thing I have said in these two posts.]

You will notice that these two rules eliminate a lot of stocks from my potential purchasing universe. My guess is that my prior list of factors brought the list down to 200-250 stocks. The 40% rule brought it down to 100, and the three quarters of earnings rule brought it down to 50 to 60.

That's it for the rules/factors/criteria.

Next, a statistical analysis of eight China stocks, plus two others.


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