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Five Stocks
Dual Momentum Stock Picking

Every investor is a stock picker at heart. But to do it right, every pick requires some degree of heavy lifting in terms of time and research, not to mention attentiveness once the trade is made. The latter, because every pick requires two decisions: when to get in, and when to get out.

The new Five Stocks monthly trading strategy promises to crunch the data and shoulder that heavy lifting itself, providing a rules-based algorithm specifically tuned to stock selection.
Five Stocks is our one and only true stock-picking model. Each month it selects up to five individual names from a curated portfolio of U.S. stocks listed on the Nasdaq and the NYSE. These are not your penny stocks or your untested IPOs. Rather, these are among the largest names in the exchanges, stocks that figure prominently in benchmark indices including the Nasdaq 100, the Dow Jones Industrial Average, and the S&P 500.

​This is a guns blazing, pedal-to-the-metal strategy.

A Quick Take
Dual Momentum and a Cash Trigger.

The strategy employs a dual momentum formula to identify its monthly stock picks. A stock must show relative strength over its peers in the curated portfolio (i.e., relative momentum), while at the same time showing a positive - upward - trend relative to it's own historical performance (i.e., absolute momentum).

So far, so good. But individual stocks carry risks that are times greater than ETFs, the assets of choice in our other models. To help mitigate some of that risk, Five Stocks employs a cash trigger. Depending on market sentiment the model could elect to hold 20%, 40%, 60% or more in cash in any given month.

Still, caution.
Five Stocks was not designed to occupy more than a portion of one's total investment portfolio. That might be 20-25% for the most aggressive investors, half that much (or less) for moderate to conservative investors. 

An excellent addition.
For the investor who wants to add a bit of alpha to the portfolio while keeping risk in check, Five Stocks makes an excellent contribution, combining well with one (or more) of the other models such as Bond Bulls, Global Trader, or Lean Muscle to form a more balanced portfolio. 
Explore the new Five Stocks in depth at the white paper...
The Five Stocks Monthly Trading Strategy
Five Stocks is included with your subscription to the Max Pak. There's more information below, but if you're ready, why wait? You can be placing your trades today.  

  • Immediate access to the private Members Page.
  • Download the current Newsletter.
  • $24.95 per month as part of the MAX Pak.
  • Try for 60 days FREE.
  • Cancel any time; no questions, no hassle.
Need more information? OK, let's go in-depth...

Numbers & Charts
Over the past 15+ years, from 2008 to 2023 YTD, Five Stocks has delivered an 80-fold improvement in Total Return over our benchmark SPY. 
Total Return Chart
Five Stocks vs. SPY, our proxy for the S&P 500
Total Return | 2008 - 2023 YTD (updated monthly)
Chart courtesy ETFreplay.com
Annual Returns
Five Stocks vs. SPY
Annual Returns | 2008 - 2023 YTD (updated monthly)
Now, individual years can vary - sometimes dramatically. So just a heads up: not every month, not every year is a slam dunk. This is the stock market, after all. 

​In sum, over the longer term, Five Stocks has demonstrated the ability to capitalize on the momentum of individual U.S. equities while maintaining a reasonable risk profile.

Strategy Assets
At the heart of the Five Stocks strategy is the equity portfolio. This is a curated portfolio of large and mid-cap stocks, the components of which are subject to change over time.
Portfolio (in general)
​In general, the portfolio is overweight technology and underweight financials. Beyond that, represented industries include: aerospace and defense, broadcasting and entertainment, consumer services, financial services, food and beverage, home improvement, industrial and manufacturing, information technology, insurance, managed health care, medical appliances and equipment, pharmaceutical, retailing, semiconductor, software, transportation, utility services and more.

Because the portfolio will periodically add or remove a company, the strategy's list of potential candidates is ever changing. The portfolio will always have a minimum of 50 names, and no more than 100. The current number of components is 77.
Hedge
​SHY - iShares 1-3 Year Treasury Bond ETF (our proxy for cash).

The Mechanics
At any given time, Five Stocks holds up to 5 individual stocks from a curated list of some of the largest U.S. companies, each making up 20% of the strategy. However, if any of these 5 picks are exhibiting a bearish trend at the time of rebalancing, their portion is allocated to cash. Rinse and repeat monthly.

​Details below.
Relative Momentum (selecting the Five)
The strategy employs a dual momentum formula to identify its monthly stock picks. In the first stage, a stock must show relative strength over its peers in the curated portfolio (i.e., relative momentum).

Using a blend of relative strength indicators, the algorithm calculates the momentum of each of the stocks in our equity portfolio. Stocks are evaluated for both short-term performance (outperforming their peers over the past few weeks) and longer-term performance (outperformance over the past few months).

The data is crunched and a rank is assigned each name on the list. The strategy selects the top 5 names.
Absolute Momentum (Cash Trigger)
After the five relative strength names are selected, each of those stocks has to jump one last hurdle; demonstrate an upward trend relative to it's own historical performance (i.e., absolute momentum). To do this, the algorithm uses a long-dated moving average. Long-dated MAs are commonly used by investors to gauge bullish/bearish sentiment in stocks.

Should any of the five names fall below their respective MAs, their portion of the strategy will go to SHY (cash). Investors may opt to hold cash instead of SHY when indicated.

What You Get
Monthly Newsletter
Before the market opens on the first trading day of the month, you'll receive an email newsletter detailing the same actionable buy/sell signals that I will use to trade the strategy in my own account.

Members Page
Subscribers also gain access to the strategy's Members Page, offering up more details including:

  • FAQs
  • Month-to-date returns
  • Weekly performance summaries
  • Total Return charts from 2008 to present
  • A downloadable version of the newsletter
Here's a sample email newsletter...

Ready?
Five Stocks is $24.95 per month as part of the MAX Pak package plan (not available as a stand-alone strategy). Cancel at any time; no questions, no hassle. Follow along and see how the strategy catches market moves to the upside, while protecting hard-earned portfolios against major downdrafts.

First 2 months are FREE.
"I love the 5 stocks concept.  Thank you for your efforts to continue to improve and develop resources." --David U.
"Just want you to know how much I appreciate the value you provide. Knowing that hedge fund managers are charging 2 and 20, I happily send you $180 a year! I am so impressed by the transparency and the ongoing historical data, and the strategies make sense to cover any investor risk profile and mindset. My wife and I are fortunate to be in a position to be just fine for the rest of our lives if we don’t do anything stupid, and your strategies help me manage our portfolio with great confidence. Thanks for all the great work." --Dennis P.
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