BUYING THE BEST STOCKS FOR YOUR PORTFOLIO - By Dr.

David Paul
Let me share the checklist that you should use when looking for stocks to buy. The "Special
Presentation" referenced on the 9th of April will help illustrate this process and is well worth
reviewing before moving on. To view this presentation, please click here.

1. Look for stocks whose price is steadily rising & not volatile.
2. Make sure the company is making money and growing their earnings.
3. You should favor undervalued stocks.
4. Favor safe stocks.

These shares are not volatile, and they are already going up in price. In other words, these shares
are already doing what you want them to do. Remember this, what you see in the past is most
likely what will happen in the future and that is stocks rising in a smooth and steady fashion.
Unfortunately, most people (including your humble correspondent at times) have been
brainwashed into buying falling stocks. The old "2 for the price of 1" strategy has been responsible
for bankrupting many at both retail and institutional levels. I have never seen a stock too high not
go higher and too low not go lower. Really good stocks usually don't look back when they
start moving upwards.

Earnings Per Share (EPS) growth is the engine that drives the share price according to Ben
Graham who was Warren Buffet's mentor. VectorVest calculates a forecasted EPS which makes
this analysis and study very easy for us.

When a company's earnings are rising, that company can grow. It can put more money into
research & development and grow by acquisition. At VectorVest, we have found that companies
with rising earnings have stock prices that tend to go higher. Wouldn't you rather invest in a
company that is making money and making more and more money every year?

In addition, at VectorVest, we favor companies that are undervalued. Susan Thornborough, who
has been using VectorVest for many years, never wavers on this requirement. This brings a
margin of safety into her portfolio and minimizes the probability of a surprise and sudden fall to
value. Over time, we've found that a stock's price and its value meet. Most of the time price will go
to meet value. So, you would want to favor stock prices that are below the value. My grandfather
used to drum into the family that the only way to make money in anything was to "find the value of
the asset and then pay less for it."

A stock's Value is automatically calculated by the VectorVest program using data summarizing
EPS growth, profitability, and many other fundamental inputs. Undervalued stocks offer a higher
probability of achieving gains, the potential for very large gains and lower downside risk according
to Dr. DiLiddo.

The process to find those undervalued shares that are growing earnings aggressively and safely
whilst trending upwards with little volatility is fully discussed in the Successful Investing Quick Start
Course which is built into VectorVest. Just click on the Training tab on the main tool bar and all
five Lessons will appear. A great source of detailed information on finding the very shares for your
portfolio can be found in Dr. DiLiddo's book "Stocks, Strategies & Common Sense." The book can
be downloaded from the Welcome tab on VectorVest.
Chapter 2 on "How to Pick Stocks," Chapter 3 on "How to Value Stocks," Chapter 5 on "Earnings
Growth: The Golden Touch" and Chapter 7 on "Stock Safety: The Missing Link" are particularly
relevant to this Essay. The entire book is a gold mine of information for those who wish to put the
probabilities of success markedly on their side.
Focus on buying the very best stocks. Be strong and fully invested when the overall market is
rising and very carefully watch stops like a hawk when it is falling and protect capital at all costs.
Spend quality time deciding exactly how you will manage the trade or investment. You should
have thought through this process before entering the trade and know exactly where the initial
stop is placed and where or how you are going to harvest profits. click here to see this video.

BE VERY CAREFUL AFTER A WINNING PERIOD By Dr. David Paul

We have had a very good run in the UK market since the Confirmed Call Up of a year ago in April
2020. It has been an excellent year for those using our product. This run of good returns and
relatively easy progress has bred slackness. I am aware of it in myself. In the USA during 2020, all
my trades just blasted off and never looked back. That was not normal. Over the past few weeks,
some measure of normality has returned, but bad habits such as ignoring stops as "The good
shares always come back" are prevalent in my discussions with subscribers. If we get a decent
pullback or bear market, which sooner or later will occur, these folks will pay dearly for that error of
judgement.

"My biggest losses have always come after I have had a great period and I started to think I knew
something."

This quote from winning hedge fund trader Paul Tudor Jones is worth considerable thought over
the next few weeks and over the summer doldrums of 2021 into the worrying Autumn period. The
markets have been very kind to us all over the last year, and I know from the national User Group,
very kind to most VectorVest subscribers. Long may it last and the seasonality for another move
upwards is good.

After a run of winning trades, we change enormously. After a series of winning trades, your
pituitary gland gets to work. "Your pituitary gland is about the size of a pea and is situated in a
bony hollow, just behind the bridge of your nose. It is attached to the base of your brain by a thin
stalk." After a run of good trades, the gland floods the bloodstream with hormones and the result is
a feeling of euphoria. A similar process occurs after a good workout (a different hormone) at the
gym.

I know traders who become euphoric after a single winning trade or investment. Certainly after a
few, good money-making trades in a row, we all change. Euphoria is often defined by a feeling of
invincibility. As these hormones get to work, it's very easy to brush aside the concept of a stop-
loss. It's very easy to forget about correct position sizing. I am invincible and I am sure this is a
winner. If it's a winner, let's accelerate the process of wealth accumulation and have a big bet. It
becomes much easier to justify adding to a losing position while these hormones are in control. In
short, this feeling of invincibility is responsible for a host of trading errors.

Most institutional risk managers agree that the biggest trading disasters occur after a run of good
luck and they are taught to evaluate the traders under their control for their susceptibility to
euphoria. A big difference between institutional traders and retail traders is the risk manager, who
although universally hated, polices the process. At the retail level, we are trader and policeman.
When the hormones kick in, it's sometimes akin to putting a goat in charge of a cabbage patch.

As I have said here on many occasions, we need two things to make money in the stock market
(or any market). We need quality information and certainly VectorVest fulfills that role. We also
need self-awareness. The practice to build presence and awareness is never ending. Keep our
eyes on the present moment instead of focusing on the past or what might happen in the future.
Believe what you see, not what you think. If seeing is believing, then we must learn to accept what
we see and simply heed the Color Guard and follow our trading process.

As a start, become aware of your thoughts in your next trade or investment. Observe what you are
thinking if the trade goes your way. Observe what you are thinking if it goes against you. Your job
is to become optimistic if you have a winner and pessimistic if you have a loser. Honest
observation of your thoughts will normally reveal that your thoughts are invariably the other way
around. Good traders are always very present people. They are focused on what's happening
now. For us, as end of day traders, the present moment is the daily bar/candle.

The rules of using VectorVest to find high probability trading and investing opportunities are simple
and easy to implement. The program does all the heavy lifting associated with the fundamental
and technical position of over 2000 shares in the UK and many more around the VectorVest world.
These rules and guidelines are presented in the "Successful Investing Quick Start Course" which
is built into the VectorVest program under the Training tab on the main toolbar. Please review
Lesson 2, which tackles the subject of risk management and position sizing. The course should be
repeated several times a year to reinforce the principles and core beliefs.

I have written about the process of finding great stocks for your portfolio in last week's Essay. I will
review the three main WatchLists and UniSearch that I use in this week's video. click here