MrDPAQs Investment Strategy

STEP #1 Establishing the Rules

1.) Are you an Investor, a Trader or a combination of the two? I am an Investor and I stay out of the Traders playground. I avoid Commodities, Rails, Airlines, Nat. Gas, Oil Drillers, Alternative Energy, and Tankers. 2.) I dont buy anything that hasnt been on my watch list for at least a month, or more. 3.) I Use Twitter and follow Bloomberg, WSJ, Stocktwits, Jim Cramer, and many more. I dont rely on a single source to purchase a stock other than using that recommendation for placement on my Watch List. 4.) I buy the stock for the story. The story could be too big to fail, new innovation, turnaround, or new management and sales growth. As long as the story holds, I hold the stock, even through the dips. 5.) I Pay attention to traffic and fads on Retail: $AAPL $LULU $CMG $JOEZ. Its tough to spot these early but when you do its a home run. 6.) I buy on momentum. Analysts and Traders will let you know when to get in. Follow several and then buy your carefully selected stock when they do. 7.) I dont chase a stock. Its probably too late. 8.) Last but not least, I like to go long on companies whose products I like and am very familiar with, but only after following those guidelines that are listed above. $NKE, $WSM, $AMZN

STEP #2 FINDING STOCKS

Follow your favorite analysts. Remember that you are looking for ideas, breaking news, and trends. These dedicated professionals do the leg work for you. There are many analysts, although in my opinion, the best can be found on #Stocktwits. My approach to stock picking is not as analytical as it may appear. One of the first considerations of making the list is the Analysts Recommendation. After all, if the experts that make their living following the stock arent in favor of it, why should I buy it? These men and women have serious analytical skills and devote hours and hours over 10K reports, news reports, conference calls and the like. Im not in a position to dispute their rating of the stock. There are exceptions but few and far between in my opinion. I need a rating under 2.0 from the analysts before considering purchasing a stock. PE ratios are just a check for me. Is the stock price acceptable to me given its past earnings and projected future earnings? Thats it! As an investor, the most important thing I can do is join the analysts on the conference calls which I do on a regular basis. This is when and where the numbers are revealed for all to hear and analyze. The best part of the call is at the end when it is Q&A time. You can learn a lot from the questions and answers as well as the tone of the conversation. At the very minimum, be on the quarterly calls for all your important stock investments.

STEP #3 CREATE YOUR WATCH LIST

A lot of these stocks that make my Watch List are trading at or near their highs of the last 10 years. The market is after all back to its peak. I find the 10 year chart a compelling story of where a stock price has been and in some cases where it could go back to. Take $MGM which I own. The story here is a return to prosperity combined with expansion in China. The chart would indicate the stock should trade 2-3x what it is today in good economic times and 4-6x in the boom years right up until the bust of 2009. MGM owns 40% of the casino properties on the strip. The Yield doesnt get my attention unless it is a reason for me to buy the stock. I own $CHL China Mobile the largest cell phone carrier in China. I bought it for that reason and for its 3.89% dividend. The stock languished at $48-$50 for a good part of a year. The dividend kept me in the stock as well as the future potential growth. Stay with the story. It is now trading at $55. Finally, I look for red flags in the numbers and see if the rest of the data can offset what I may consider a reason for not buying the stock. A key red flag for a high tech company is sales growth. Why get into a high tech company with declining sales. Move on.

MY WATCH LIST
Date
4/13 4/13 4/13 4/13 4/13 4/9 4/3 3/23 3/12 2/19 2/19

Symbol
GOOG INTU HD NKE TIBX CAT NOV FHN KEYN YUM CNK

Price PE
635 61 51 109 33 104 80 11 19 65 21 21 27 20 22 47 14 17 20 7 22 16

Fwd P.E.
14 20 15 18 28 9 11 12 20 17 14

Analyst Rating
1.28 1.76 1.88 1.71 1.88 1.66 1.21 2.19 1.33 1.69 1.6 0 1

Yield

*Chart
8 10 10 10 10 9 9 2 7 10 9

the story for buying this stock

Growing demand for Search, Storage, Social Media Mobile purchasing at small business, @square Housing comeback International growth, Mega brand recognition Software for Social Media US & Global growth in construction Demand for energy related tools & supplies Regional Bank Turnaround Takeover target- software International growth in KFC, Taco Bell, Pizza Hut High Yield, Growth in people going back to the Movies

2.29 1.33 0 1.74 .6 .38 1.22 1.75 3.93

*Chart = the chart number is a thumb scale metric of where the stock price is in relation to the stock price over the last 10 years. Disclosure: I have purchased 3 stocks ($KEYN $NKE $FHN) on this watch list since it was created. I have also purchased $NOV after searching for a mutual fund that contained it. It is the largest holding of that mutual fund with the funds second largest holding another stock I like; $AAPL.

STEP #4 PORTFOLIO REVIEW

Sync your portfolio follow up dates into your Day Timer, Day Runner or whatever calendar median you use. These will be the conference call dates and days where you are putting aside the time to review and make decisions. First start a simple tabulation like that shown below. This will guide you to the course of action you will be taking. In addition to the individual stocks, you should schedule a date to do a thorough review of your entire portfolio. Do this at least once a year to re-balance it based upon the current economic and political climates. Here is a sample of what your Portfolio Review may look like: TODAYS DATE: April 22, 2012 SYMBOL COST TODAYS PRICE THE STORY ANY CHANGE TO THE STORY NO-2012 1st Qtr very good numbers, Analyst rating went up, 1.75 to 1.68 NO- Analyst Rating is up, 1.64 to 1.54 * ACTION NEXT IMPORTANT DATE 2nd Quarter Report-July TBD 2nd Quarter Report-July TBD Annual Portfolio Review 7/30/12

GE

18

19.36

Turnaround in the financial unit combined with increase in global sales/profitability

11.50

11.41

Turnaround in automotive without TARP

AMZN

121

190

Growth in Retail Sales including Kindle

No

*Course of Action: B= Buy More, C= Cut Losses, H=Hold, TSP=Take Some Profits, S=Sell In conclusion, investing is fun, challenging, and rewarding. You dont have to quit your day job since all the investing tools youll ever need are available free on the internet. Enjoy! Don Paquette April 2012