Searching for the Upcoming Stock Market Winners
by John Bajkowski
In September 1989 the AAII Journal published an article by Marc Reinganum, titled Investment Characteristics of Stock Market Winners. The article revealed characteristics that were common to 222 stocks highlighted as winners prior to their rise to super-stock status. These types of examinations can be noteworthy if they help to establish financial relationships likely to hold true over time.
Reinganum developed nine trading rules to identify these winners and found that the use of these rules or screening criteria produced returns that were significantly higher than the market. While the group passing the filter was slightly more risky than the market, the additional risk did not account for the extraordinary returns of the winners. The rules lay down the maximum price to pay for a stock, minimum levels of profitability and growth, and price momentum targets.
A slightly modified set of the rules has been programmed into Stock Investor Pro—AAIIs fundamental stock screening program and research database.
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