Poormans Investment Strategy is focused on growth fundamentals followed by Technical Analysis. Growth fundamentals are based on conservative Biblical principles of good stewardship such as debt management and consistent growth fundamentals for both revenues and earnings. A database has been developed to track stocks fitting this criteria. This page explains the Poormans database and how to best use the data. Potential database stocks are primarily identified at time of earnings release and those meeting Poormans criteria [ideal is 40% annual growth and a unique Earnings/Price (E/P) of 1.00] are identified and tracked regularly on Telescan using tools such as Candlesticks, Moving Averages, Volume changes, etc. Fundamental data comes from a variety of sources which include Quicken, Ameritrade Streamer, Yahoo, Excite tools and company news found on Telescan and various internet sources.
The Poormans database primarily includes growth stocks traded on the Nasdaq with a number of them waiting to be discovered (often having a high PE and not be followed by any analysts). The system for selecting these stocks was developed over 11 years ago and is based on a 12 point rating system. There are approximately 100 stocks in the database, which is updated weekly for my personal use.
Poormans research efforts also includes a second collection of stocks retained on a Telescan watch list. These stocks are screened for good growth fundamentals at reporting time and are placed in Telescan Autorun for frequent review. There are typically 500 - 700 stocks in the watch list. Priority is given for positive charts (e.g. up trends) and stocks which are undervalued based on analysts estimates.
Bruce Brotnov began investing just before the "Crash of 87" and then he began doing his own research and trading equities in 1988, which led to the design of Poorman’s Strategy. After posting on investment bulletin boards from 1991 he started Poormans newsletter in April 1996 with an annual return average of 53.5%; initially for 3 different sized model portfolios but now focused on one $100,000 portfolio. He took an early retirement from being a Federal Facility Engineer in Dec 97 at the age of 52 and joined Henry Brookins as a consultant and research assistant to help initiate and manage the HB Trading Co., L.P. hedge fund. Since then Bruce spent a couple of years in Sacramento area and then moved to Lewiston, ID to be near and able to assist aging parents. At that time he also became registered as an Investment Adviser in the State of Idaho and now manages several portfolios for individuals in addition to publishing the investment newsletter, Poormans Investment Strategy.
Information for Poormans Investment Strategy is normally updated weekly except for the database which is updated monthly except during vacation time. The weekly updates are provided by email (except for weekly updates of targets, which is posted on the website only) and are also found in the "Members" area of website. A mid-week alert (update) is normally sent out on Wednesday evening. The information provided includes:
- General discussion/Notes
- A $100,000 Model Portfolio and any changes
- Database additions/deletions (Some with Buy/Sell recommendations)
- Rating increase/decrease (2 or more points)
- Poormans Statistics
- Poormans Stock Ratings (Maximum rating of 12)
- MID-WEEK ALERT: Shopping list including model stocks, new stocks, core listing, etc.
Best Ways to Use Poormans
- Follow the buy and sell activities in the model portfolios (averages less than one buy and one sell per week)
- Buy/Sell Targets - updated weekly in Mid-week Alert & Core listing of Approximately 10 favorite stocks
- Increase/decrease in ratings (2 or more points)
Buys and Sells
Traders Buys are listed for volatile stocks that may be trending toward a high PE and based on momentum trading or a future story. These stocks may be over extended but still growing. Due to the volatility of these stocks, this information is more suited for seasoned traders and/or investors. Investors Buys are better recommendations for those willing to exercise patience and wait for the street to recognize the fundamental values of a company. For the rated stocks in the database, I recommend buying 80% of stocks rated 6 and higher and no more than 20% of purchases in the "speculative" lower ranked stocks. I use an "intermediate term" investment period: 2 weeks to 6 months. Sells are a liability issue and therefore not specified. Rather sells can be identified by ratings drops and removal from model portfolios and/or databases.
$100,000 Model Portfolio
I attempt to put the best stocks in the database and treat each one as if I were buying (and often do) for my own personal portfolios. Periodically the fundamentals deteriorate and I have to purge poor performers and replace with more promising stocks. There are approaches for using the Model Portfolio as follows:
- $100,000 Model portfolio allows the freedom to buy a wide range of prices for stocks. Generally I have a target of buying about 10 stocks around $10,000 each. The model starts afresh annually on 1 January.
New Investors or Experienced Investors With Little Time
Watch the model portfolios trades; if they make sense, consider buying or selling on a smaller or larger scale.
- When buying Poormans stocks, look for 80% to be rated at least 6 or higher. Allocate no more than 20% to stocks rated 5 or less.
- Take a close look at stocks that increase or decrease in ratings. Ignore all the rest of the database stocks and focus on the ones you follow; most should be in the stocks found in the models.
- Final decision is your best judgment, if it makes sense or not; it should be within your risk tolerance and meet your objectives. It is nice when you feel good about a trade and stick with your plan until conditions change.
Do more thorough research and/or technical analysis with a view of the above approach; perhaps reviewing the rest of the stocks in the databases.
- Particularly check the stocks listed daily as "CANDLESTICK POSITIVE INDICATORS AND INTERESTING CHARTS"" to see if they fall into your investment goals.
- Better to decide on a strategy than play the market only on emotion.
- Spend time researching the charts, check sector activity, and compare PE information to see if stocks are trading at a discount or premium compared to the rest of their sector of related stocks.
Full Time Investors and Traders
If you have lots of time and especially can spend hours during the trading day, then you can often cash in on momentum stocks, company news, etc.
- Most of the actively traded stocks make significant moves up and down during the day and some folks do extremely well playing the market this way. I personally think there is less risk for stocks that have good fundamentals (especially the ones I list as TRADERS BUYS).
- The Poormans databases provide a number of stocks that are candidates for various trading/investment strategies (taking reasonable gains, using buy stops and sell stops, mental and actual, etc.)
Regarding "Buy and Sell" Recommendations
I am prohibited from telling subscribers specifically to buy and sell certain stocks without a license, however, I do my best to provide the best information I can from which subscribers can make an informed decision. Rather than fret over the "best winner", I collect a number of winners (based on growth fundamentals) and there will always be some losers in the midst. However, I strive to find an overall mix that consistently beat the performance of the S&P 500 and other major indexes.