1. Stock Picking Process
Securities offered through LPL Financial. Member FINRA/SIPC. Stock investing involves risk including loss of principal.

2. Our Objective
To reduce the universe of all possible stocks in the market to the top 25 stocks that provide a high probability of success.
Our objective is to reduce the universe of all possible stocks in the market to the top 25 stocks that provide a high probability of success.
No strategy can assure success or guarantee against loss in declining markets. General risks inherent to investments in stocks include the fluctuation of market prices and dividend, loss of principal, market price at sell may be more or less than initial cost and potential illiquidity of the investment in a falling market

3. Final List TOP 25 STOCKS INVESTING UNIVERSE Scoring Process
First Screen
Popular Lists
Screen-Based List
Current List
Master List
Top 400 Stocks
Ultimate List
Top 100 Stocks
Analyst Favorites
Category
Value Category
Growth Category
Sentiment Category
Second Screen
Quality Category
This flow chart illustrates the screening process we use in deciding what companies we are willing to own. We begin with the entire universe of U.S. based equities and we reduce it down to a more manageable list of 400 companies. From there, we use our second set of screens to reduce the list further to what we believe are the top 100 stocks. Finally, we use our scoring process to begin to numerically rank the 100 stocks so that we can get down to the final top 25 stocks.
Scoring Process
Final List
TOP 25 STOCKS

4. 400 100 25 Stock Stars Investing Universe 10,000+ Stocks Master List
Ultimate List
100 Stocks
This illustrates stock selection process using funnels.

5. Three Evaluation Lists
INVESTING UNIVERSE
First Screen
Three Evaluation Lists
Popular List:
Top 50 stocks IBD
Top 100 stocks VL
Top 36 stocks SS
Top 37 stocks MS
Top 50 stocks B
Screen-Based List:
Value Screen
Growth Screen
Momentum Screen
Current List:
Current Nominees
Personal Nominees
In our attempt to reduce the universe of stocks to a more manageable list of 400, we use stock lists from other analysts such as Investors Business Daily, Value Line, AAII Stock Superstars, Morningstar, and Birinyi. Then we use our top 25 stocks from the previous month combined with our screening process.
Master List
TOP 400 Stocks

6. Three Evaluation Lists
INVESTING UNIVERSE
First Screen
Three Evaluation Lists
Popular List:
Top 50 stocks IBD
Top 100 stocks VL
Top 36 stocks SS
Top 37 stocks MS
Top 50 stocks B
Screen-Based List:
Value Screen
Growth Screen
Momentum Screen
Current List:
Current Nominees
Personal Nominees
When we look at the screen based list, we are screening for stocks from a value perspective, growth perspective, and momentum perspective.
Master List
TOP 400 Stocks

7. SCREEN-BASED LIST Investment Style: VALUE Screen Tests
GROWTH Screen Tests
Investment Style:
MOMENTUM Screen Tests
Stock Screener
Stock Screener
Stock Screener
Growth Screen 1
Relative Growth
Value Screen 1
Relative Value
Momentum Screen 1
Relative Strength
Growth Screen 2
Comparative & Financial Strength
Growth Screen 3
Comparative & Sustainable Growth
Momentum Screen 2
Moving Average & Behavioral
We have 3 different screens for each discipline: 3 value, 3 growth, and 3 momentum.
Value Screen 2
Comparative
Value & Growth
Value
Screen 3
Contrarian Opportunities
Momentum Screen 3
Relative Momentum

8. Screen-Based Tests *
These are the formulas for screening.
*The formulas have been altered to protect Proprietary Information

9. Value Screen 2: Comparative Value
P/E Ratio <= Indy. Avg. P/E
Price/Sales <= Indy. Avg. P/S
TTM ROE > Indy. Avg. TTM ROE
TTM ROE > 0
5 y Avg. ROE > 5 Y Indy. Avg. ROE
LT Debt/Equity ratio <= Indy. Avg. LT Debt Ratio
Price/Book <= 3
EPS Growth Est. > Indy. Avg. EPS Growth Est.
Y1 EPS Est. Growth > 0
For example, if we look at Value Screen 2, these are the criteria that each stock has to pass to make it to the comparative value list.

10. Screen Results: Value Screen 2
FIELD
OPERATOR
COMPARE TO:
STOCKS
P/E Ratio
<=
Indy. Avg. P/E
2190
Price/Sales
Indy. Avg. P/S
3581
TTM ROE
>
Indy. Avg. TTM ROE
4464
5909
5 Y Avg. ROE
5 Y Indy. Avg. ROE
3452
LT Debt/Equity Ratio
Indy. Avg. LT Debt/Equity Ratio
3864
Price/Book
Average Price/Book Ratio
5459
EPS Growth Est.
Indy. Avg. EPS Growth Est.
1236
1Y EPS Est. Growth
832
7 COMPANIES MET THE CRITERIA: AS OF February 28, 2013
COMPANY NAME
SYMBOL
SECTOR
MYR Group Inc
MYRG
Capital Goods
Virtusa Corporation
VRTU
Technology
Assurant, Inc.
AIZ
Financial
Hub Group Inc
HUBG
Transportation
Jones Lang LaSalle Inc
JLL
Services
Kulicke and Soffa Industries
KLIC
USANA Health Sciences, Inc.
USNA
Conglomerates
For example, as of February 28th, only seven companies passed Value Screen 2.
Securities offered through Triad Advisors, member FINRA/SIPC. Advisory services offered through Lee Johnson Capital Management, LLC (LJCM).
LJCM is an independent Registered Investment Advisor and is not affiliated with Triad Advisors. 10

11. First Screen INVESTING UNIVERSE 10,000 + Stocks Master List
TOP 400 Stocks
Now going from the stock universe to the Top 400 stocks we screen again.

12. Second Screen Master List Top 400 Stocks Second Screen
Analyst Favorites
Category:
1.Most Repeated Stocks
Value Category:
1.Catching Up Stocks
Quality Category:
1.Industry Leaders
2.Fastest Turnover
Growth Category:
1.Historical comparison
2.Industry Comparison
Sentiment Category:
1.High P/E Multiples
2.Institutional Ownership
In the second screen, we are looking for stocks that are most repeated on the analyst favorite lists. We screen for value stock that are showing price appreciation. We look at growth from a historical and industry comparison perspective. We look at quality in industry leadership and inventory turnover. And we look at sentiment; companies with high PE multiples and institutional sponsorship.

13. Second Screen*
These are the formulas for the second screen.
*The formulas have been altered to protect Proprietary Information

14. TOP PROBABILITY STOCKS
Third Screen
Ultimate List: Top 100
Scoring Process:
Growth Score
Profitability Score
Financial Health Score
Momentum Score
Now that we have a list of 100 stocks that was rendered from our second screen, we have to narrow it down further by prioritizing in numerical order. There are 98 different variables in this process in which we look at growth, profitability, financial health, and momentum.
Stock Stars List
TOP PROBABILITY STOCKS

15. Glossary of Screen-Based Tests
%Chg = Percentage Change.
1Q = Recent quarter.
Asset turnover = The amount of sales generated for every dollar’s worth of assets.
CF = Cash Flow: a revenue or expense stream that changes a cash account over a given period.
Current Ratio = A liquidity ratio that measures a company’s ability to pay short-term obligations.
D = Days (example: 27D=27 Days)
EPS = Earnings Per Share: the portion of a company’s profit allocated to each outstanding share of common stock.
EPS Est. = An analyst’s estimate for a company’s future annual EPS.
FCF = Free Cash Flow: a measure of financial performance calculated as operating cash flow minus capital expenditures.
Gr. = Growth.
Inventory Turnover = A ratio showing how many times a company’s inventory is sold and replaced over a period.
LT Debt/Equity Ratio = Long-Term Debt/Equity Ratio: a measure of a company’s financial leverage calculated by dividing its long-term debt by stockholders’ equity.
Net Income = A company’s total earnings (or profit).
Net Margin = The ratio of net profits to revenues for a company, expressed as a percentage.
Price/Book Ratio = A ratio used to compare a stock’s market value to its book value.
P/E = Price to Earnings Ratio: A valuation ratio of a company’s current share price compared to its per-share earnings.
P/FCF = Price to Free Cash Flow Ratio: A valuation metric that compares a company’s market price to its level of annual free cash flow.
Investopedia
AAII

16. Glossary of Screen-Based Tests
P/S = Price to Sales Ratio: A ratio for valuing a stock relative to its own past performance, comparing a company’s market price to its level of annual revenue.
Pr = Price (example: Pr4D%Chg=Four day price percentage change)
Price/CF = Price to Cash Flow: A measure of the market’s expectations of a firm’s future financial health.
Q1 = Present quarter
Q2 = One quarter prior to the present quarter
Q3 = Two quarters prior to the present quarter
Q4 = Three quarters prior to the present quarter
Q5 = Four quarters prior to the present quarter
Q6 = Five quarter quarters prior to the present quarter
Relative Strength = A measure of price trend that indicates how a stock is performing relative to other stocks in its industry.
ROA = Return on Assets: an indicator of how profitable a company is relative to its total assets.
ROE = Return on Equity: the amount of net income returned as a percentage of shareholders equity.
ROI = Return on Investment: A performance measure used to evaluate the efficiency of an investment. The return of an investment is divided by the cost of the investment.
TTM = Trailing Twelve Months: The timeframe of the past 12 months used for reporting financial figures.
Turnover = The number of times an asset is replaced during a financial period.
W = Weeks (example: 52W=52 Weeks)
Y1 = Recent Year
Y = Yearly (example: Y EPS= Yearly EPS), or Years (example: 3Y= 3 Years)
Investopedia
AAII