Consistency Is King

6/20/2011


Good investment ideas are just one facet of financial success. After all, plenty of people have good ideas but never cash in because of inactivity, indecision, or inconsistency.

Of more import is the unfailing execution of your best ideas, a goal the Forecasts has strived to accomplish for more than six decades. Since we began using our Quadrix® stock-rating system to select equities in 2000, our strategy has been fairly simple:

• Use Quadrix to isolate companies with the best potential.

• Analyze high scorers, then buy those with attractive valuations and the ability to top expectations.

• Sell stocks from our recommended lists when they no longer rank among our best ideas for the next year (Buys) or the next two to four years (Long-Term Buys).

Simple, yes. Easy, not at all. To execute this strategy, we sometimes have to take losses, and nobody likes to do that. Of course, by selling losers we free up capital to invest in better opportunities. Sometimes we must sell shares of companies we still like because they have become uncomfortably expensive or simply because we like another name better.

The combination of discipline and a stock-selection system that works can yield excellent returns. Since the start of 2000, our Focus List has returned 25.3%, with the Buy List up 30.3% and the Long-Term Buy List up 39.7%. All three lists have also topped the index by at least 15 percentage points since the start of 2003.


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