Individual Investor

James Roberts

Financial Writer,Financial Services

Education Vanderbilt University
Investment Experience 30 Years

StockDiagnostics

Exceptions
Sell Discipline
Allocation Discipline
Research
Approach
Summary

StockDiagnostics.com publishes a list of recommended stocks that sometimes includes more than 300 stocks. This model selects stocks from this universe.

This model selects stocks from the universe of those recommended by StockDiagnostics.com, for which I am a contributing analyst. Stocks are added to the StockDiagnostics list for a variety of reasons. Reasons could include institutional purchasing trends, discounted cash flow analysis, analyst upgrades or insider buying and selling.

The model uses a fundamental approach, focusing on cash flows, ROE and growing sales.

The model will not invest in ADRs, but will invest in companies with an international presence. The model may invest in ETFs or Closed End Funds to gain exposure to a region or sector.

I currently write company stock reports for StockDiagnostics.com, selecting from companies with superior cash flow characteristics. StockDiagnostics.com is an independent financial research company that creates investing software. I am an independent contributor and am running the Covestor models independent of my work with StockDiagnostics.com. However, my research does plays a role in the selection process.

In deciding which stocks to feature for StockDiagnostics, I have used a number of other services including Barron's online, GuruFocus.com, IBD's Investors.com, SeekingAlpha.com, and Zacks to gather both fundamental and technical analysis. Brokerage firm data comes from Charles Schwab and Stifel Nicolaus, among others.

Rebalancing is not a regularly scheduled activity. More than likely several stocks will be sold and replaced with stocks that appear to be better values from time to time. Weekly changes are much more important than daily ones. Monthly rebalancing is the most likely frequency for this model.

The Value Line Investment Survey, explains sell decisions in the majority of cases as "dynamics of the system". That terminology refers to the practice of replacing a less attractive company with a more attractive one as dictated by monitoring one or more data points. Stock market systems usually use numbers. StockDiagnostics is among several services employed that assign numbers or letters to denote attractiveness levels. When a potential investment company is deemed to be more attractive than an existing holding, the more attractive company may be purchased with funds derived from the sale of the existing holding.

Quite often the process will begin with the decision to sell a security based on any one of a number of factors including earnings coming in surprising low, insider selling, analyst downgrades, or the announcement of an acquisition that seems expensive. If representation in the group is of continuing importance, the stock in question might be retained despite the bad news.

Approach Fundamental
Asset class Equity
Geography US

Replicability

100.0%

Replicable

Top 5 Holdings View all

9.4%

6.5%

6.1%

5.4%

BRK B
AAPL
INTC
V
YUM

Model commentary

Researching retail stocks the old fashioned way

14 May 2012

I like investing in retailers because you can keep your finger on their pulse by visiting their stores.
Why our portfolio is John Deere green 18 April 2012
Apple, PepsiCo and IBM Join Our Most Admired … 14 March 2012
How to lower correlation with the broader market 15 February 2012
Right now, dividends are king 11 January 2012

Performance detail

Manager
Russell 3000
S&P 500

30D 90D 365D SI

Performance

Inception May 31, 2011

as of May 22, 2012	Manager	Russell 3000	S&P 500	Average Subscriber
Past 30 days	-3.1%	-4.7%	-4.5%	-
Past 90 days	1.4%	-3.6%	-3.0%	-
Since Inception	7.1%	-3.4%	-2.1%	-
2012 (YTD)	6.3%	4.8%	4.7%	-

Risk Metrics

Since Inception

as of May 22, 2012	Manager	Russell 3000	S&P 500
Best 30 days	12.1%	14.2%	13.6%
Worst 30 days	-10.2%	-18.0%	-16.7%
Volatility	18.6%	24.4%	23.4%
Sharpe Ratio	0.38	-0.15	-0.10
Sortino Ratio	0.54	-0.20	-0.13
Maximum Drawdown	-13.1%	-20.5%	-18.8%
Value-at-risk (95%, 1 week)	-4.3%	-5.7%	-5.4%

	vs. Russell 3000	vs. S&P 500
Information Ratio	1.13	1.07
Alpha	9.1%	8.3%
Beta	0.71	0.75
R-Squared	0.88	0.88

Latest transactions view all

Average trades per month 7.4

Executed	Symbol	Security	Replicable	Type	Price
05/01/12	UNH	UNITEDHEALTH GROUP INC		Sell	$57.00
04/27/12	RCI	ROGERS COMMUNICATIONS INC-B		Sell	$37.35
03/26/12	DE	Deere & Co		Buy	$82.79
03/16/12	BMY	Bristol-Myers Squibb Co		Sell	$33.13
02/29/12	A	Agilent Technologies Inc		Buy	$43.92
02/29/12	QCOM	QUALCOMM Inc		Buy	$62.80
02/24/12	DELL	Dell Inc		Sell	$17.58
02/24/12	INTC	Intel Corp		Sell	$26.61

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$5,000 subscription min
1.1% fee

Important Information

1. Past performance is no guarantee of future results.

2. Performance of the model manager's account is calculated by Covestor on a daily time-weighted basis, including cash, dividends and earnings distributions, and broker commissions. Manager returns include trades that fail Covestor's trading rules, do not reflect any Covestor suitability or risk score restrictions and are exclusive of Covestor fees. More

3. Average subscription returns ("Avg Sub" or "Avg Client") are calculated by Covestor and are composed of the average, daily, time weighted returns of all active subscriptions to the underlying model. These daily average returns are then linked together for the timeframe requested. In addition, these returns include cash, dividends and earnings distributions, brokerage commissions, Covestor advisory fees, and reflect individual client suitability and risk score restrictions. More

4. All graph data is as of the end of day for the referenced period, unless otherwise specified. The subscription minimum is the minimum subscription required to follow a particular model. The minimum amount is determined by Covestor, based on the characteristics of the underlying model. It should not be considered as specific investment advice for your investment situation.

5. Benchmark returns have been calculated by Covestor using a time-weighted calculation of daily index valuations and do not include cash, dividends and earnings distributions, or transaction costs. More

6. Leverage indicates the level of margin utilized and is calculated by dividing gross exposure by portfolio net liquidation value.

7. All Model Manager information including personal data, profiles, strategies, monthly investment reports, and historical results outside of Covestor has been provided by the Model Manager. Covestor makes no representation or warranty of its accuracy, completeness or relevance and it does not represent the opinions of Covestor. Transaction history is available upon request. Model classifications (Approach, Asset Class) are provided by Covestor, and are intended to serve as a general guide.

8. Top Replicable Holdings: These securities are currently held in the model manager's brokerage account. Those marked as "Replicable Holdings" currently pass Covestor's trading rules, subject to individual client constraints. Eligibility for replication may change over time. Actual client subscription holdings may vary.

9. Latest Transactions: These transactions were executed in the model manager's brokerage account. Those marked as "Replicable" () passed Covestor's trading rules and were eligible for replication at the time of execution, subject to individual client constraints. Eligibility for replication may change over time. Actual client subscription trade activity may vary.

10. S&P 500 Index is an unmanaged index compiled by Standard & Poor´s Corp. Index returns do not reflect any management fees, transaction costs or expenses. Individuals cannot invest directly in an Index. S&P 500 index data: S&P 500 Copyright © 2012.

11. Dow Jones index data: CME Group Index Services, LLC 2012

James Roberts