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Business & Investing Saturday June 11, 2011 Finding #1 Stocks: Screening, Backtesting and Time-Proven Strategies (The Zacks Series) by Kevin Matras   The Importance of Screening and Backtesting One of the reasons why so many people are not seeing the kinds of returns they hope to see in their stock investments is because they don't know which stocks to buy and sell. They find themselves invested in mediocre stocks because they don't know of anything better to get into. For some, their knowledge or "universe" of familiar stocks is relatively small, and this limits their opportunity to invest in better ones. Worse, when they finally do pick a new stock (likely an all too familiar one) and that doesn't work out as planned either, it discourages them even more from going out and finding others. But it doesn't have to be that way. Why Should I Use a Stock Screener? With over 10,000 stocks out there to pick and choose from, we all need a way to find the good ones. Aside from buying stocks that are talked about on TV, written about in the newspaper, or touted on the Internet (not to mention tips from a friend)—how else are you going to find stocks that meet certain characteristics? Even if you don't use a screener now, most people still do their own screening in one way or another. You may hear that a stock has a certain growth rate or a certain P/E ratio or sales surprise or whatever. You then find yourself listening for or reading about or surfing the Internet for stocks that meet this criteria. Well, if you want to find stocks that meet certain criteria, certain characteristics, you can find them quickly and easily with a stock screener. But just because you've narrowed down 10,000 stocks to only a handful, doesn't necessarily mean that you've picked the best stocks on the planet. You might have picked the worst ones. Just because you've narrowed down 10,000 stocks to only a handful, doesn't necessarily mean that you've picked the best stocks on the planet. You might have picked the worst ones. But how will you know? Backtesting! Once you've created a screen, you can then backtest it to see how good or bad your screening strategy has performed in the past. In other words, does your screening strategy generally find stocks that go up once they've been identified? Or does your screen generally find stocks that get buried once they've been identified? This is good stuff to know. With backtesting, you can see how successful your stock picking strategy has performed in the past so you'll have a better idea as to what your probability of success will be now and in the future. Of course, past performance is no guarantee of future results, but what else do you have to go by? Think about it. If you saw that a stock picking strategy did nothing but lose money year after year, trade after trade, stock after stock, over and over again, there's no way you'd want to trade that strategy or use that screen to pick stocks. Why? Because it's proven that it picks bad stocks. Sure, it may turn around and start picking winners all of a sudden, but it may also continue to pick losing stocks the way it always has. On the other hand, what if you saw that a strategy did great year after year, period after period, over and over again? You would, of course, want to trade that strategy. Why? Because it's proven to be a profitable stock picking strategy. And while it may start picking losers all of a sudden (now that you're using it—right?), it may also continue to pick winning stocks just like it had been doing over and over before. Now, keep in mind that a screening and backtesting program isn't a box of magic, but it's a great way to see what works and what doesn't before you put your money at risk. Backtesting is a great way to see what works and what doesn't before you put your money at risk. Unfortunately, too many people have no idea how to pick the right stocks. And this often leads people into staying in the wrong stocks too long or never getting into new stocks altogether. I remember I had a conversation with a friend several years ago who was stuck in a losing stock: Me: Why are you still in that stock if it keeps going down, losing you money? Friend: I don't think it'll go much lower from here. Me: Did you think it would go this low when you first bought it? Friend: No. Me: Do you think it will go up from here? Friend: Probably not right away. It may still go down some more. Me: You know, there are plenty of stocks going straight up. Why don't you get out of that one that keeps going down and losing you money and get into a better one? Friend: I don't know of any better stocks to get into. Me: What if you did know of a better stock to get into, would you do it? Friend: Yeah! (Pause) But I'm not sure how to find better stocks. And that last comment said it all. He was in losing stocks because he didn't know how to pick better ones. But if he had a proven profitable stock picking strategy, he could. Don't get me wrong. Just because you have a great strategy for picking winning stocks, it isn't going to preclude you from ever having another losing trade. On the contrary, even some of the best strategies "only" have win ratios of 65% or 70% or 80%—not 100%. But if your stock picking strategy picks winners far more often than it picks losers, you can quickly cut your losses once you find yourself in a losing trade and feel confident that your next pick will have a high probability of succeeding. If your strategy picks winners far more often than losers, you can feel confident that your next pick will have a high probability of success. And that's why someone should use a screener and a backtester to pick stocks. (Continues...)         BookDaily Top Five Heaven is for Real: A Little Boy's Astounding Story of ... In the Garden of Beasts: Love, Terror, and an American ... Bossypants The Dukan Diet: 2 Steps to Lose the Weight, 2 Steps to ... The Girl Who Kicked the Hornet's Nest   Business & Investing Top Five The 7 Habits of Highly Effective People The Social Animal: The Hidden Sources of Love, Character,... The Intelligent Investor: The Definitive Book on Value ... Outliers: The Story of Success The Total Money Makeover: A Proven Plan for Financial ...

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Today in Slate: Is Iowa Important? Plus, In Defense of the Crotch Shot

Today: June 10, 2011 In Defense of the Crotch Shot When it comes photographs of penises, context is everything. By Annie Lowrey READ FULL STORY | More Double X Is Iowa Important? Before Mitt Romney can win there, he has to decide whether he wants to. By John Dickerson READ FULL STORY | More News and Politics Weiner's Law The Web makes it easier than ever to cheat—and easier than ever for cheaters to get caught. By Farhad Manjoo READ FULL STORY | More Business and Tech The Reform of "Swipe Fees" Is a Victory for Small Business but Not Consumers Super 8: Elle Fanning Is Now Officially My Favorite Fanning Why Does Everyone Hate LeBron James? Blame Michael Jordan. Help! I Go To Strip Clubs When I Travel for Business. That's Not Cheating, Right? Advertisement Briefing Palinisms: Did she really say that? Arizona Wallow fire: Are wildfires getting worse? News & Politics The Undefeated: What the new Sarah Palin documentary gets right, and wrong, about her politics. Eli Pariser's The Filter Bubble: Is Web personalization turning us into solipsistic twits? Arts The Trip reviewed: Steve Coogan and Rob Brydon as rivals, friends, and dueling impressionists. J.J. Abrams' Super 8: How Kodak's low-cost super 8 film influenced a generation of filmmakers. Life Anthony Weiner: What does the pretty boy congressman's lack of chest hair signify about the current ideal of male beauty? Google Kids: Why doesn't a good search engine for children exist? Business & Tech Apple iCloud: Does Steve Jobs finally get the Web? DSK scandal at the IMF: How to choose the organization's next leader. Science Anthony Weiner's cybersex relationships: If it's only online, is it still cheating? European E. coli outbreak: A simple taboo underpins the hysteria over a new German E. coli strain. Podcasts & Video Male Engagement Gifts: Is That a Thing? (VIDEO) Streaming Hitler in a chat room.

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Today's Cartoon: Stuck

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cartoon index Cartoons Updated Monday, April 13, 2009, at 2:48 PM ET Cartoon by Chan Lowe. More cartoons on Afghanistan here. To continue reading, click here. Join the Fray: our reader discussion forum What did you think of this article? POST A MESSAGE | READ MESSAGES Also In Slate The Reform of "Swipe Fees" Is a Victory for Small Business but Not Consumers Tracy Morgan Apologizes for Violent Anti-Gay Jokes: "This Went Too Far" Super 8: Elle Fanning Is Now Officially My Favorite Fanning	Advertisement
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Culturebox: Pretty Boys

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culturebox Pretty Boys A few thoughts on Anthony Weiner's lack of chest hair. By Troy Patterson Posted Friday, June 10, 2011, at 4:01 PM ET The matter of Anthony Weiner provides a chance to discuss many aspects of contemporary life--to talk about technology and infidelity, about the postmodern ego and the atavistic id, about retail realpolitik and wholesale Schadenfreude. But let us take a moment to flap onto the accident scene like pop-culture vultures feasting on the carcass of a reputation. Let us consider the photo evidence--not the bulge portrait, please, and especially not the explicit portrait of the schmuck, thank you--but what we might call Exhibit B, the shirtless self-portrait that perhaps looked best on the front of Tuesday's New York Post. The congressman is flourishing pectorals distinguished by their impressive development and smooth texture. We are, in short, wondering if Weiner waxes his chest. To continue reading, click here. Troy Patterson is Slate's television critic. Join the Fray: our reader discussion forum What did you think of this article? POST A MESSAGE | READ MESSAGES Also In Slate The Reform of "Swipe Fees" Is a Victory for Small Business but Not Consumers Tracy Morgan Apologizes for Violent Anti-Gay Jokes: "This Went Too Far" Super 8: Elle Fanning Is Now Officially My Favorite Fanning	Advertisement
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Moneybox: The 12-Cent Victory

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moneybox The 12-Cent Victory The Senate's endorsement of "swipe fee" reform will help small businesses, but maybe not consumers. By Annie Lowrey Posted Thursday, June 9, 2011, at 7:23 PM ET Yesterday, something rare happened in Washington. Main Street beat Wall Street. Consumers beat lobbyists. Small business defeated big banks. Despite weeks of hyperbolic ad campaigns and a lobbying blitzkrieg, the Senate reaffirmed its decision to limit the "swipe fees" that banks charge businesses for debit card transactions, starting on July 21. But it is not so clear that this unexpected victory will actually help consumers. Currently, banks charge retailers swipe fees, also known as interchange fees, of about 44 cents per transaction, culled whenever an American pays with debit, some 40 billion times per year. Those fees are a moneymaker, earning the banks about $15 billion a year. But they are burdensome for retailers. Indeed, stores actually lose money on some debit-card transactions, and see their margins uncomfortably thinned on others. If you use debit to buy a 99-cent pack of gum at your corner store, that store very well might end up in the red for the transaction if it is kicking 44 cents back to your bank. Big retailers, like Wal-Mart, have the clout to negotiate the fees down with the banks themselves. But small stores do not. To continue reading, click here. Annie Lowrey reports on economics and business for Slate. Previously, she worked as a staff writer for the Washington Independent and on the editorial staffs of Foreign Policy and The New Yorker. Her e-mail is annie.lowrey@slate.com. Join the Fray: our reader discussion forum What did you think of this article? POST A MESSAGE | READ MESSAGES Also In Slate The Reform of "Swipe Fees" Is a Victory for Small Business but Not Consumers Tracy Morgan Apologizes for Violent Anti-Gay Jokes: "This Went Too Far" Super 8: Elle Fanning Is Now Officially My Favorite Fanning	Advertisement
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