Mark Minervini, U.S. investing champion in 1997, averaged a 220% return per year from 1994 to 2000 for a compounded total return of 33,500%. Yes, we all know that these astonishing figures coincided with a major bull market, but how many traders came anywhere close to his record during this period?
In Trade Like a Stock Market Wizard: How to Achieve Superperformance in Stocks in Any Market (McGraw-Hill, 2013) Minervini shares his SEPA (Specific Entry Point Analysis) trading strategy. It’s essentially a trend following/breakout strategy that screens for such variables as earnings surprises and relative strength and that looks for catalysts driving institutional interest. It relies on both fundamentals and technicals. Its focus is on youthful small- to mid-cap stocks.
There are strong echoes of Bill O’Neil, Ben and Mitch Zacks, Richard Donchian, even Jesse Livermore in Minervini’s work. That he borrows from such luminaries is not surprising. Having dropped out of school at the age of 15, he subsequently became “a fanatical student of the stock market. … Over the years,” he writes, “I’ve read an incredible number of investment books, including more than 1,000 titles in my personal library alone.” (p. 3) (more…)
1) Relative Strength or Weakness- there’s no reason for me to pick from the mushy middle, as the biggest movers come from the best and worst 5% of the market.