Bull markets make it difficult to beat the markets , situations & opportunities do present themselves , but are becoming harder to find & act upon . How to keep ahead in the "Beat the Market " game ?
1. Use appropriate discriminatory financial ratios to classify opportunity type from growth to turnaround , compute peer & absolute valuation .
2. Size them up from mega cap to nano cap , high liquidity to illiquid .
3. Identify business model strength & business space related economic factors to gauge potential future earnings . Develop possible outcome scenarios & associated returns .
4. Identify valuation affecting triggers & use statistical and non statistical expertise to assign numerical value & weight to the triggers .
5. Apply multi-factor dynamic modelling to rank the investment opportunity vs peers & the total stocks universe .
6 . Fine tune to factors in the model as per news & factors affecting stock market , industry & company .
7. Is a daily job , keep at it , keep applying , keep testing , the algorithm keeps getting better .
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