@patrick72 Haha. Financial markets are chaotic. In chaotic environment, more information is not equal to more edge, quite the opposite. You only need two or three tools for confluence and that's enough imo (even for spotting financial shinanigans)
I'm a trend follower but I also understand financial statements. I'm surprised that nobody here mentioned how it works in quant firms.
Well, first you start looking at GDP growth and
personal consumption. If both of them are negative, then deep value stocks (low price to some fundamentals, such as earnings, revenue etc) outperforms growth stocks and when both GDP and personal consumption is up, growth stocks (high revenue growth, high profit margins) dominates value stocks. You can find those figures at
here
For growth investing (during economic expansion), first look for sectors (For example, CNX IT etc). The strongest sector will have strongest stocks that's beating the market. Now list all stocks in that sector (above midcap) and then look for highest revenue/profit growth rate in last 5Y. Then plot a 10M moving average. If the price is above 10M MA, then stay long and wait for annual report of next year. If the annual report shows both net income and net profits negative (or one of these drop too much, like 25% to 5%), and price closes below 10M MA, sell. Now most will argue that these two matrics are not sufficient but I challenge there's no better predictor of fundamentals than price itself. I believe market is quite efficient (around 80%) and rest 20% inefficiencies where everyone keeps fighting for. If your holding is having a violent selloff while index is quiet, sell that company immediately
Value Investing process is simple & easy. When there's an economic contraction, stocks often get oversold. You want to own cheapest price to some fundamentals (earnings, free cashflows, revenue etc) and hold around 30+ of them for like 6Y (or sell at 100% gain) and repeat.
Demonstration:
