One of the most powerful nuggets of the modern investment club movement is the stock analysis method.  Individual investors (and groups known as clubs) are guided through a series of milestone judgments while forming a long-term expectation (return forecast) for the companies we study.  The result is a long-term forecast that can be used for discovering high-potential stocks to buy and we leverage this directly into portfolio design and management.

This is not “just for clubs” and it is not your grandfather’s investing black box.

You’re invited to our webcast covering the key influences and some favorite resources.

Date: Saturday, December-01-2012

Time: 9:30 AM ET

Registration: http://tinyurl.com/c3qxqyp

This week we take a look at the candidate companies from our “fusion screen.” At Manifest Investing, we start first and foremost with the fundamentals and focus on the return forecast (PAR) and quality rating. Subscribers recognize the combination of these two primary characteristics as our Manifest Rank. For the fusion screen, we add a dab of technical analysis — seeking not only companies with the best Manifest Rank — but those that also have bullish sentiment and positive momentum. That short list of companies is shown here. (CVS Caremark was selected for the November Round Table based on these results)

The Value Line low total return forecast is shown on the left. Reinforcing opinions (based on fair value according to Morningstar and S&P) are shown on the right. The Fair Value Ratio (FVR) is the comparison of the current price to the fair value. A negative fair value RATIO indicates an opinion that the stock is undervalued. Conversely, a positive FVR suggests an overvalued opinion. Resource Connections (RECN), Molson Coors (TAP) and Intel (INTC) are the best current values according to Morningstar. S&P favors Walgreen (WAG), Masimo (MASI) and CVS Caremark (CVS). Mesa Labs (MLAB) is compelling and is not covered by any of the three research services. The return forecast shown here is the MANIFEST PAR. MLAB was one of the most compelling companies in last month’s Forbes Best Small Companies for 2013.

It’s that time of year again.

Forbes.com is out with their annual list of spooky small companies, the Best Small Companies for 2012

This year’s headliner is SolarWinds (SWI) — a company that we’ve featured and tracked at Manifest Investing for the last several months. In fact, we discovered it on this list last year and SWI has proceeded to gain 103% over the last twelve months — leading last year’s selections. We’ve been meticulously adding shares of SWI to our Core Diem demonstration portfolio over the last week.

But they don’t have to be scary. As we’ve hunted down buying opportunities from this annual listing over the last several years, we’ve discovered that the best returns tend to come from the entrants with the highest quality ratings.

• Forbes Best Small 2011
• Forbes Best Small 2010
• Forbes Best Small 2009
• Forbes Best Small 2008
• Forbes Best Small 2007
• Forbes Best Small 2006

We obviously like to talk about the companies featured in 2008. These are the selections we bring up at the hair salon or barber shop. There are lessons to be learned (and celebrated) in companies like Neogen (2006), DXP Enterprises (2007), Stratasys (2008), Middleby (2008), Dril-Quip (2008), Boston Beer (2008), Bio-Reference Labs (2008 & 2011), Buffalo Wild Wings (2007-2011), FactSet Research (2008), Peet’s Coffee (2009), Portfolio Recovery (2010-2011) and SolarWinds (2011).

And there are also lessons to be learned — along with the potential for patience for works in progress — from the educational services stocks like Strayer and Capella in recent years … and Quality Systems (2006-2008,2010-2011) — a multiple selection that’s done considerable damage to the all-time results.

All in all, the outperformance accuracy is 50% (3-for-6) and the relative return since 2006 is -1.9% (8.8% vs. 10.7%). But the road ahead is bright, the average overall PAR for the six portfolios is 11.0% vs. MIPAR at 8.9%.

The Good Old Days

I noticed that Forbes had released the 2012 listing on Saturday morning.

Going back over ten years or more, we’ve dissected the list, seeking opportunities for deeper dives. In the good old days, we’d divide the list up among 8-10 people and go about studying and raking — building results to share over a period of several days.

Fast forward to today. Our own Kurt Kowitz has changed all that. Instead, Kurt has liberated us — allowing us to concentrate on auditing the core characteristics and substantiating our milestone assumptions and forecasts. How?

From the time I noticed the listing on Saturday morning, it took all of fifteen minutes to produce the following dashboard: Forbes 100 Best Small for 2012

(Most of the 15 minutes involved looking up ticker symbols.)

It took a little longer to cover the (10) uncovered companies and refresh the database, but we’re now able to isolate the highest quality faster-growing companies with superior return forecasts in another 5-10 minutes.

Copy to Worksheet … sort by quality … and start hacking the companies, reducing the list down to the screening results shown here: Forbes Best Small for 2012

The difference between tricks and treats? Quality.

Thanks, Kurt!