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Nearly 1 year ago, on December 13, 2006, I bought some OXPS. It went down, I bought more. Today, it hit my target price and I sold my initial investment, pocketing 30 shares as my profit.

If you search this blog for OXPS, you’ll see I’ve talked about them a few times in the past. I was sold on this stock, and it paid off. However, it now rates a -8.3741 on the NetNagel Stock Index. Time to get out!

Look at the post where I told you about OXPS, PRAA, TIVO and IRBT – each one of them has given me 33% and I’ve sold 3 of them already, pocketing the profits. (I’ve got a 10% trailing stop order on Tivo now, as I’m trying a new strategy – more on that after Tivo sells, but it’s up 44.07% for me so far)

So from the principle that I’ve gotten back, I averaged-down GPIC. They rate 97.0948 on my stock index, and after being down a few times present a great buying opportunity today. I’ve got enough cash in my IRA to either average-down another pick, or open a new position. Still undecided.

I don’t think I’ve yet made a single post outlining my investment strategy. There are plenty of posts about little bits & pieces, but not a single post that outlines it all. This post will attempt to do that.

First, I’m not formally educated on investing. Serious investors may think this is the biggest joke ever, but it works for me, giving me just over 30% returns year after year. Even when times are bad, there are stocks that will go up.

Let’s start with a simple concept: what makes a stock price rise? P/E ratio? Earnings? Leaked news? No. Much simpler than that.

A stock price will rise when there are more buyers than sellers.

So I don’t care what’s going on with the company – as long as I know what others think of a stock, I can generally pick good ones. So what do I look at?

In the end, I look at the NetNagel Stock Index, which is an ever-evolving formula that takes numerous sources into consideration. The one constant, however, is that I need a stock that’s positioned to go up at least 33%. That’s my trigger point. I also look at ratings on other websites and analyst opinions.

So let’s say I find a stock that I like… say OXPS. I love OXPS, actually. Not today, but I loved it about a year ago. So I ran out and bought some, then bought some more when it went down.

I should make a side-note here that if I believe in a stock, it goes down, and there is no reason for me to change my opinion on the stock, I buy more. Now, it has to go down enough to make it worth-while… say 10%. OK, back on track…

I then figure in my commissions: $7 per buy, and $7 to sell. I keep track of the dividends I’ve received from the stock, and from that I have a total cost (shares & price paid plus commissions minus dividends). Now take the total cost, divided by the total shares, plus 33% and that’s my target selling point. Finally, take the target selling point, divided into the total cost and that’s how many shares I will sell at that price. Here’s my OXPS example:

Shares: 118
Paid: $23.3839
Commissions: $21.00 (I bought twice, and will sell once (well, I’ll sell twice, but only once short-term))
Dividends: $22.14
Total cost: $2,758.16
Target price: $31.17
Sell off: 88.5

Paid: $2,758.16
Sell 89 at $31.17
Remaining: 29 (valued at $903.80 )
Cashed in $2,773.74

What I’ve done is sold enough to cover my initial cost, but held onto the rest. That’s my “profit”. I’ve done this time & time again, and in doing so have built up a wide portfolio that includes FDO, DLB, JBLU, DIS, CDL, VEIEX, GRMN, YHOO, UTI, NTDOY.PK, PRAA, IRBT, and ADY.

The final element to my investing strategy is that I must understand the company that I’m buying. You’ll hear that a lot from other places, too. You can understand the numbers, but if you don’t understand what the company does, how can you be confident in your buy? Doing this means my portfolio is a bit tech-heavy, but I also own a couple coffee stocks (I love my coffee), retail stores, financial institutes, an automaker, a railroad, energy companies, and others.

One word of caution: investing in foreign markets can be tricky. Not only do you have to look at the company you’re investing in, but also the currency fluctuations that’ll affect the stock price.

Now be strict with this plan… once you’ve bought your stock, figure out what your target sell price is, and put that sell order in! It’s OK to do a trailing stop, though… you can squeeze out a few more bucks, and still be OK if the stock comes back down.

In accordance with my investing strategy, I sold ADY today for a 35.28% gain. I bought ADY on July 20th. Of course, I only sold my initial investment, and kept 10 shares as my “profit”.

ADY is a milk company based in China. Even though more than 90% of Chinese adults have lactose intolerance, this company focuses on schoolchildren and I believed their alliance with the Chinese government would prove to be profitable for the company (well, at least profitable for me).

I took the proceeds from the sale and re-invested in Toyota. This is my second purchase of TM, averaging down my price per share to $120.48. I’m now looking to sell at $162.80. Long term, TM will get there. They’re leading the auto-industry, IMO, and with rising gas prices and Toyota setting the bar for fuel-efficient vehicles, I believe TM is a good buy.

A few other stocks are on the verge of being sold, including WLT, OXPS, TIVO. Even my emotional pick, Tim Horton’s, is up nearly 20%. Go-go Timmy Ho!

Wow… I just read that this guy over here reads my blog for stock picks! How cool is that??? Sure, I have a pretty good track record, and we use similar buy & sell techniques (wait for a %, sell the initial investment, keep the profits as another position in your portfolio), but now I feel bad that I haven’t said to buy something in a while.

My last picks were OXPS and PRAA on January 31st. I’m still holding both of them. At that time, I was watching TIVO and IRBT and have also bought both of those.

Results:
OXPS – up 9.84%
PRAA – up 31.11% (almost time to sell)
TIVO – down 3.05%
IRBT – up 18.38%

Since I don’t have cash on hand, I haven’t been looking to buy anything, but I am looking to sell PRAA and NTDOY. They’re both just about 30%.

So how do I pick? Well, I start with the Motley Fool Stock Advisor and Hidden Gems. I login & look for picks that are DOWN from when they were recommended. Example: OXPS

OXPS is down 14.64% since it was recommended in November, 2006. There may be a reason, though, so I look at more data. deminvest is smart, so he looks at P/E ratios, etc. etc. etc. I look at what other people think.

I have a little PHP script that I plug in a ticker symbol, and it returns lots of useful information. Example:

esnagel:~/temp> php stocks/index.php OXPS
Data on OXPS
tickerobj Object
(
[fLastTrade] => 25.76
[fRecThisWeek] => 1.9
[fRecLastWeek] => 1.9
[fMeanTarget] => 29.67
[nNoBrokers] => 6
[aSurprises] => Array
(
["Jun-06"] => 3.6
["Sep-06"] => 4.0
["Dec-06"] => 6.9
["Mar-07"] => -2.9
)

[nCaps] => 5
[nTotalOutperforms] => 803
[nTotalUnderperforms] => 23
[nAllStarOutperforms] => 290
[nAllStarUnderperforms] => 5
[nWallStOutperforms] => 3
[nWallStUnderperforms] => 0
)

So it was last traded at 25.76, and 6 brokers have an average target set at 29.67. So you can expect a 15% return. That’s what those 6 analysts think. It’s rated a 1.9 – 1.0 is strong buy, 5.0 is strong sell. 1.9 is pretty good.

They missed the analyst opinion by 3% in March of 2007, but exceeded it (slightly) three quarters before that.

The Caps rating is 5. That’s big – 5 is the best it gets. But don’t just look at Caps – who says what? 803 of 826 rate the stock Outperform. More importantly, though, 290 of 295 all stars and 3 of 3 Wall St. professionals rate it Outperform.

When I buy, I don’t buy more than 3% of my entire portfolio. I do this because I’m ready to buy a stock 3 times. If I put 3% in each time, I’m done at 9%, safely under the 10% rule.

I’ve done this with Starbucks, and would buy more but I’d be breaking my own rules. 16 brokers say SBUX will get to 38.34; it’s currently at 26.75. That’s a 43% return! Go buy SBUX.

I’ll work on getting a page up that shows my holdings, purchase price, and ROI. That way, you’ll know when I buy, and can make a decision on your own if you want to buy yourself.