Scout watching - tracking the StockScouter stock picking system
I love a good stock picking system. The idea of using a computer and the Internet to screen through all available investment choices and net out the best ones for my investment dollar... It's appealing, isn't it?
Think about it for a minute. Every once in a while you fire up your laptop, click the mouse a few times and with no more effort than that you have a list of market beating stocks to invest in for the next few months. Click over to your online brokerage account, and after a few minutes of heavy clicking your work is done. Time to hit the golf course until your next round of trades in a few months' time.
Could there ever be such a system?
If you're a regular reader of Jon Markman's Supermodels column on MSN Money you know that's exactly what his StockScouter system claims to do. Every six months, Jon publishes an updated list of ten stocks chosen by the StockScouter system. These ten stock choices have consistently outperformed the S&P 500 for six years running. His most recent list of ten, chosen for the first half of 2007, bested the benchmark S&P 500 by 8%.
Jon's just published his latest list in his column today, 10 terrific stocks for the rest of 2007. With a track record like this, I think it's something worth watching, so this morning I took a little time to do some number crunching on his choices. I wanted to know what sort of projected returns we might expect on the latest StockScouter screen.
My analysis is based on the trailing 6 months' closing prices of each of the ten stocks. I use a Monte Carlo simulation to model a cool million possible future outcomes for this portfolio. I used the average of these projected year-end closing prices to calculate a compound rate of return for each of the ten StockScouter picks.
Stock 3-July Projected Projected Close End Year Gain Closing DVR 17.04 24.97 38.2% NHY 39.31 54.31 32.3% UMC 3.48 3.56 2.3% HWK 14.08 16.99 18.8% HPGP 37.02 47.31 24.5% BBEP 35.02 53.35 42.1% PVG 31.13 49.57 46.5% APC 52.3 65.85 23.0% PDE 38.26 51.89 30.5% COHU 23.35 28.01 18.2%
With the one exception of United Microelectronics, these are all very impressive returns to say the least. I think we'd all be pretty happy with even 18% over 6 months.
Are these returns too good to be true? We'll just have to wait and see. I intend to watch these ten picks and update my analysis from time to time. My plan is to track the StockScouter stock picking system - look over his shoulder, if you will - and see how it does. I'll let you know what I find as we go along.