Dear Reader,
It was an incredible experience to see two different lakes up in the mountains near Zug, Switzerland. More importantly, it was nice to largely detach from the markets and technology - and center my focus on family and friends.
My mind is still in my office in Baltimore. I left on Monday still somewhat dissatisfied by last week's experience. While I feel like I did my very best to explain the corporate vision of Money Map Press moving forward - it felt abrupt to some people that I was traveling. I'd booked this trip in early March, right after the banking crisis started. I felt a moment of fear in the markets and felt that I might as well see Switzerland quickly (especially with Credit Suisse collapsing).
My Flashpoint Elite members knew of the trip, but most people did not since we folded my live free show. (More updates are coming on the future of our live content, and I'll be doing an event when the Federal Reserve makes its decisions on June 13.)
Today, I wanted to talk a bit about one of the most important investing tools in our arsenal - especially while momentum is negative. You might have recognized it from yesterday.
To do that, I'll introduce you to the most underrated investor of all time.
Underrated Investors?
Who is the most underrated name in the history of finance?
Is it Adam Smith? Or Warren Buffett? Jim Rogers? Or Benjamin Graham?
What about Stanley Druckenmiller?
There's a case to be made for all of them...
But let me introduce you to Joseph Piotroski.
He created one of the most important money-making strategies in financial history. As I've explained, his (Piotroski) F-score system is one of the most successful algorithmically driven strategies out there - a "poor man's" momentum gauge that tells you everything you need to be assured a company is well run and driving shareholder value to the extreme.
Piotroski's career has centered on undervalued stocks with deep upside and financial discipline. He began his research at the University of Chicago as an assistant professor and later moved to Stanford University.
When Ben Graham's methods were dominant, a lot of investors focused their attention on assets trading under their "book value" or "net asset value."
Piotroski had looked at Ben Graham's strategies, but quickly determined less than half of the value stocks under book value would generate positive returns in two years. So, he believed it wasn't effective. Basically, most stocks see a drop in their shares when trading under that metric.
So, he turned his focus to the stocks that were working for investors. And he created one of the most influential and significant stock-ranking strategies in finance history. This system not only helps investors identify breakout stocks but can also serve as a secret weapon when using momentum signals through TradeSmith Finance.
Now, let's explore this strategy further.
The F-Score Wins Big - and Wins Often
In 2002, Piotroski published a paper outlining his renowned "F-Score" model. This model evaluates a company's financial strength based on improving or declining metrics on the balance sheet. Piotroski's research revealed that stocks with higher F-scores outperform over the next 24 months, while those with lower scores underperformed.
The scoring system relies on nine specific metrics, allowing a company to earn a maximum of 9 points or a minimum of 0.
A point is awarded if the company meets the following criteria:
- Its return on assets exceeds 0.
- Its operating cash flow exceeds 0.
- Its return on assets is higher than the previous year's figure.
- Its operating cash flow is higher than its after-tax net income.
- The company has reduced its long-term debt as a percentage of assets.
- Its current ratio (current assets divided by current liabilities) is higher this year than the previous year.
- The total number of shares outstanding has decreased compared to the previous year.
- Its quarterly gross profit margin is higher than the previous year's gross margin.
- The sales divided by total assets yield a higher value than the previous year's calculation.
This is just one of the value strategies we use over at Flashpoint Elite, and it will be a driver of long-term investing success and options trading for investors in the future. I want to show you how to use it the right way. We'll be talking about this strategy tomorrow night during our live trading session from Zug, Switzerland.(Click Here to learn how you can master the fundamentals with me in Flashpoint Elite)
Today's Momentum Reading
WORLD'S BIGGEST INDICATORS
Recap: The World's Biggest Indicator (Momentum) is Red
The situation with this market continues to deteriorate. And I'm rather upset, because this was a good day to intraday trade reversions and actively trade leveraged ETFs in banking, energy, and more. It's fitting that I leave the country... but that coincidence always seems to occur.
The Early Bird
I'd like to bring your attention to a thrilling investment story that my esteemed colleague, Money Map Press' Chief Investment Strategist Shah Gilani, recently shared with me. It's about a technology firm that he's particularly excited about, and its circumstances seem to mirror a success story that we're all familiar with - Hopin.
When Hopin first emerged on the tech scene in October 2019, it was a fledgling entity valued at a humble $3 million. It was a virtual event platform aiming to take a slice of the increasingly digital marketplace, but it was still essentially a tiny sapling in a forest of established tech giants.
Fast-forward to February of the following year. In a breathtaking span of just four months, Hopin's revenue had accelerated at a staggering rate. It was now a firm worth a whopping $40 million. To put that in perspective, early investors saw their stake grow by 12 times. But this was just the beginning of a remarkable growth journey.
Hopin didn't rest on its laurels; it continued to grow, impressively so. Its investors were constantly rewarded as their investment multiplied manifold. From $40 million in February, it leaped to a dizzying $244 million by June. The real kicker? By that December, Hopin was valued at a mind-boggling $1.48 billion.
Let's digest that for a moment - over 47,000% growth in just slightly more than a year. By July of the next year - less than two years after they first began seeking investors - they were worth an astronomical $7.6 billion. This translates to an astounding growth rate of more than 246,000% in less than two years.
To bring this into focus, consider this scenario - a modest investment of $900 in Hopin's early days would be worth over $2 million today. It's hard to wrap your head around it, isn't it? But it happened, and it was a goldmine for those who believed in Hopin.
Here's the kicker: Shah believes there's another tech company right now that shows the same promising signs Hopin did. And you have the opportunity to get in on the ground floor, just like those early Hopin investors.
The best part? Shah is going to guide you on precisely how to seize this opportunity. So, if you're ready to potentially make life-changing fortunes, follow Shah's guidance right here.
Cheers,
Garrett
The post Your Next Big Market Win, Brought to You By the Letter "F" appeared first on Midday Momentum.
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.