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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Chart Patterns: After the Buy
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Bulkowski's Stocks That Double

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Busted
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 05/23/2017
20,938 43.08 0.2%
9,010 45.02 0.5%
711 1.33 0.2%
6,139 5.09 0.1%
2,398 4.40 0.2%
YTD
5.9%
-0.4%
7.7%
14.0%
7.1%
Tom's Targets    Overview: 05/15/2017
21,400 or 20,450 by 06/01/2017
9,500 or 8,700 by 06/01/2017
685 or 720 by 06/01/2017
6,350 or 6,000 by 06/01/2017
2,330 or 2,450 by 06/01/2017

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

My book, Fundamental Analysis and Position TradingFundamental Analysis and Position Trading: Evolution of a Trader book. pictured on the left, has an entire chapter dedicated to how to double your money. Plus it has two chapters on 10-baggers, stocks that rise by ten times their initial value.

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This article discusses fundamental criteria shared by stocks that double.

 

For the last year, I have been working on my fifth book (pictured above). Part of it covers fundamental analysis, or picking stocks based on value. I just finished a chapter on stocks that double in price within five years and I thought I'd share the results with you. I used data from 1992 to 2007 on almost 1,000 stocks, but not all stocks covered the entire span. Fundamentals were provided by Value Line.

Here is the list of common elements.

  • Start with small cap stocks, those with market caps (shares outstanding times stock price) less than $1 billion.
  • Stocks priced between $5 and $20 have the highest frequency of doubling.
  • Look for low price to book ratio, below 2.5.
  • Find stocks that are reducing capital spending (cap ex).
  • Price to cash flow below 8 is good, below 2 is better.
  • Focus on stocks that do not pay dividends, but this is a 60/40 thing.
  • Look for companies cutting their long term debt.
  • Increasing net profit helps but it's not that important.
  • A price to earnings ratio below 25 is good, below 20 is better.
  • Keep the price to sales ratio below 1.0.
  • Look for return on equity between 8% and 14% but be flexible.

I picked the items I liked and did a scan for those fundamentals and found 31 stocks. Here's what I looked for:

  • Small caps,
  • Stocks priced from $1 to 20,
  • Price to book value less than 2.5,
  • Price to cash flow less than 2.0,
  • PE ratio less than 25 and
  • PSR less than 1.0.

Preliminary testing showed the criteria performed well. I would add a test for reduced capital spending since that helped boost performance.

After looking at the stocks that this criteria found, I can see why they are priced so cheaply. Most of them are trash, but you can do your own scans and see what you can find.

-- Thomas Bulkowski

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Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. I'd love to go out with you, but I never go out on days that end in 'Y.'