To consistently beat the market is hard but not impossible. O’Neill, Greenblatt, Buffett, and Klarman are legendary investors who have beaten the market. I test and show you how to implement 14 epic market-beating strategies.
You want to be a successful investor, perhaps even perform better than the market itself. But it is difficult to know where to start. Many mindless articles on websites state that you should buy low and sell high, diversify, or even use a hedge fund.
I have been developing investment strategies for twenty years, and this deeply researched article will provide you with 14 strategies developed by leading investors, portfolio managers, and myself, so you can try to beat the market on your terms.
Beating the market is the nirvana for every investor. But many investors realize that it can be challenging to outperform the stock market’s returns year after year. This rings true as over 60% of professional fund managers fail to beat the market in any single year.
What Does Beat the Market Mean?
To beat the market means that your stock investments will need to outperform the underlying index of stocks. In the USA, the market to beat is generally the 8% annual return of the S&P500 index. Anyone could beat the market in a single year, but outperforming the market over the long term is the challenge.
Can You Beat the Stock Market?
Yes, according to some of the greatest investors of all time, you can beat the market. You will need investing knowledge and the discipline to implement a specific investing strategy that can lead to market outperformance. There are different approaches to using value investing, growth investing, or simply excellent stock selection.
In this in-depth article, we will share with you many of the proven strategies to beat the market by legendary investors, such as:
- Warren Buffett, the world’s most famous and successful investor
- Joel Greenblatt, legendary fund manager and creator of “Magic Formula Investing.”
- William O’Neil, creator of the CAN SLIM investing method and CEO of Investors Business Daily.
- John Bogle, the creator of the world’s first Index Tracking Fund
- Tom & David Gardner of creators of the Motley Fool Stock Advisor Service.
- and many more
I will also show you how to implement all the strategies for yourself so that you can be in control of your investments.
Can You Beat The Market Consistently?
To beat the market consistently, you need to have a defined and actionable investment strategy. This means finding and investing in stocks with a significant chance of returning more than 8% per year. Most market-beating systems will have been backtested for many years to prove the validity of the system’s hypothesis.
The following list of famous strategies has beaten the market in the past, and many still beat the market today. But there is one thing they all have in common. They do not beat the market 100% of the time; even Warren Buffett has an occasional bad year or two.
1. Beat the Market with the CANSLIM Method
CANSLIM is a stock investing strategy designed by William J. O’Neil to produce market-beating profit performance. Using the CAN SLIM criteria in your investing should mean profitable returns. Current Earnings, Annual Earnings, New Products, Supply, Leaders, Institutional Sponsorship & Market Direction, are vital criteria.
It combines fundamental analysis and technical analysis into a cohesive strategy.
The CANSLIM Criteria
- C – Current Earnings
- A – Annual Earnings
- N – New Products or Management
- S – Supply and Demand
- L – Leaders
- I – Institutional Ownership
- M – Market Direction
The full breakdown of each element of this strategy, criteria, and how to implement this screener can be found here: A CANSLIM Stock Screener That Beats the Market.
You can also deep dive into CANSLIM in our What is CANSLIM Article.
Implement CANSLIM with the Best Stock Screener
Here are the 5 Steps to implement the Stock Rover CANSLIM stock screening strategy.
1 – Register with Stock Rover
You will need a Premium Plus Membership, which gives you access to all the criteria and the database with a unique 10-year history. It will also allow you to implement all our Warren Buffett screeners and our full list of stock screening strategies, and our Dividend growth and dividend yield strategies.
2 – Browse Screener Library
- See the image to the right.
- Launch Stock Rover and select:
- Screeners (Down Arrow)
- Browse Screener Library
This takes you to the following screen.
3 – Import CANSLIM Screeners
Stock Rover has a built-in screen for CANSLIM called “CAN SLIM – Less Restrictive,” which has a good performance record.
This is the screener we will be using.
- In the Screeners, search box type “CAN SLIM.”
- Select the two CANSLIM Screeners
- Click Button – Import (2 Items Selected)
4 – View the Portfolio Performance
Now that you have imported the screener, here is how to set up the excellent comparison view vs. the S&P 500
- Select Screeners
- Select the CAN SLIM – Less Restrictive Screener
- In the Chart Below, Select “Compare To”
- Select Benchmarks
- Select S&P 500 or NASDAQ
- Select Return vs. S&P 500 Column Views
Learn Exactly How To Beat the Market With CANSLIM
2. Implement Joel Greenblatt’s Magic Formula
This market-beating system is provided by the investing legend Joel Greenblatt in his best-selling book “The Little Book that Still Beats the Market.”
The strategy Greenblatt shares is called the Magic Formula, based on two specific formulas, now known as the Greenblatt ROC and the Greenblatt Earnings Yield.
I have backtested this system personally, and it works very well, it is a little high maintenance, but the lessons contained within the book are vital.
Greenblatt Return on Capital Ratio
Good Companies Make Great Use of Assets!
This variation of Return on Capital takes Earnings before Interest & Taxation (EBIT) as a percent of Net Property, Plant, and Equipment (PPandE) plus Current Assets.
Greenblatt Earnings Yield
This variation of earnings yield compares Earnings Before Interest & Taxation (EBIT) to Enterprise Value. Joel Greenblatt uses it in his bestselling book The Little Book That Beats the Market.
Using the Magic Formula to Find Stocks
You can register with https://www.magicformulainvesting.com/, the website that accompanies the book, to get free access to a very basic stock screener that implements the magic formula.
The problem is that the site provides no ability to change screener parameters or help you specify your filters for companies. It will also not help you track which companies you want to invest in or show your past performance or any real financial data.
How to Utilize the Magic Formula
Stock Rover has the Magic Formula Screener built-in and is available for Premium Plus Members.
You will need a Premium Plus Membership, which gives you access to all the criteria and the database with a unique 10-year history. It will also allow you to implement all our Warren Buffett screeners and our full list of stock screening strategies, and our Dividend growth and dividend yield strategies.
Importing the Magic Formula Strategy into Stock Rover
The Magic Formula Criteria
Joel Greenblatt specifically suggests you should sell all your “Magic Formula” stocks at the end of the year, re-run the screener and buy the newly recommended shares on the first trading day of the new year to achieve the market-beating results.
3. Beat the Market with Motley Fool
The Motley Fool team has a 20-year track record of beating the market which their first-class stock research and stock selection process.
One of the first books I read on investing was the Motley Fool Investment Guide back in 1997. The investment team of Tom and David Gardner and I have not looked back since.
While I love to perform my own research and not be influenced by others, I have found the Motley Fool Stock Advisor Service incredibly useful.
The team focuses on specific stocks that they feel will, over the long-term, significantly beat the S&P 500. They then provide lightweight, easy-to-read research reports and recommend why they feel the stock will be a superior long-term investment.
Motley Fool does not try to perform research on every stock and fund in the USA. The team focuses on specific stocks that they feel will, over the long-term, significantly beat the S&P 500.
You can manage your favorite stocks through their simple to use portfolio tracker, although, unlike Stock Rover, they cannot connect to your broker. Motley Fool is the first in this list to provide its audited track record of performance against the underlying benchmark. The track record is what is unique about the service; they try to beat the market and help you succeed in the long term. You could give them a try and follow their advice.
Motley Fool Stock Advisor Portfolio Performance 2002 to 2020
- Motley Fool Stock Advisor 421%
- S&P 500 85%
My independent analysis of the stock advisor service’s audited results reveals that since 2002, 48% of the stocks beat the S&P 500. The average winning stock outperformed the S&P 500 by 780%. 28% of the stocks recommended made a loss of 42% on average, while 82% of the stocks made a profit averaging 640%.
What does this mean? It means that you still have a 28% chance of losing money on any single stock recommendation. But at current performance levels, you have a 72% chance of investing in a company that will make you a profit.
Motley Fool Stock Advisor Summary
The Stock Advisor service is well priced at only $99 for your first year and provides an audited track record of successful stock selection. The research reports are easy to read, act upon, and target long-term investors. They provide specific buy and sell signals on stocks they recommend, but the service does not include fund ratings.
I signed up for the service two years ago because I wanted to see what the competition was up to, but I found the service very simple and the research extremely compelling, insightful, and useful.
You could give them a try and follow their advice.
4. Try My Beat the Market Growth Stocks System
The Liberated Stock Trader Beat the Market Strategy seeks to select stocks with a significant chance of beating the S&P500 returns. The screener uses growth in free cash flow and explosive EPS growth. Combining this with Joel Greenblatt’s ROC and Earnings Yield formulas, the “Magic Formula,” we have a selection of stocks that beat the market 5 in the last 7 years.
Ever Dreamed of Beating the Stock Market
Most people think that they can't beat the market, and stock picking is a game only Wall Street insiders can win.
This simply isn't true. With the right strategy, anyone can beat the market.
The LST Beat the Market Growth Stock Strategy is a proven system that has outperformed the S&P500 in 8 of the last 9 years. We provide all of the research and data needed to make informed decisions, so you no longer have to spend hours trying to find good stocks yourself.
The LST Beat the Market System Selects 35 Growth Stocks & Averages a 25.6% Annual Return
★ 35 Stocks That Already Beat The Market ★
★ Buy The Stocks & Hold For 12 Months - Then Rotate ★
★ Fully Documented Performance Track Record ★
★ Full Strategy Videos & eBook ★
Take The Pain Out Of Stock Selection With a Proven Strategy
LST Beat the Market Screener Performance.
| 9 Year Performance | S&P500 % Gain Jan 1st to Dec 31st | LST Beat the Market Growth Strategy % Gain | Result |
| 2013 | 29.8% | 49.4% | Beat |
| 2014 | 11.4% | 16.9% | Beat |
| 2015 | -0.7% | 2.6% | Beat |
| 2016 | 9.5% | 23.2% | Beat |
| 2017 | 19.4% | 37.4% | Beat |
| 2018 | -6.2% | -24.9% | Lost |
| 2019 | 28.9% | 46.8% | Beat |
| 2020 | 18.4% | 51.8% | Beat |
| 2021 | 26.9% | 27.2% | Beat |
| Average Yearly Return | 15.27% | 25.6% | Beat |
9 Year Results Based on $100,000 Invested.
| Investment Performance | S&P500 Index Returns | LST Beat the Market Growth Strategy |
| Initial Investment | $100,000 | $100,000 |
| 2013 | $129,800 | $149,400 |
| 2014 | $144,597 | $174,648 |
| 2015 | $134,475 | $179,189 |
| 2016 | $147,250 | $220,761 |
| 2017 | $175,817 | $303,326 |
| 2018 | $164,916 | $227,797 |
| 2019 | $212,577 | $334,407 |
| 2020 | $251,961 | $507,630 |
| 2021 | 319,397 | $645,706 |
| Cumulative 9 Year % Gain | +219% | +546% |
| LST Beat The Market By: | 102% |
Performance vs. S&P500, 2020
This year to December 31, 2020, the LST screener has done very well; although only 13 stocks met the criteria, the LST screener has returned 51% versus the S&P500’s 19%. This means it beat the market by 32%.
- Read the full details of the Beat the Market Growth Stocks System with 8 years of backtested results.
The Criteria & Explanation of Logic
- Free Cash Flow – Healthy Companies Have Cash
- EPS Growth – Good Companies Grow Earnings
- Greenblatt Return on Capital – Good Companies Make Great Use of Assets
- 1 Year Return vs. the S&P500 – Great Companies Demonstrate They Can Beat the Market
- EPS Growth Now Greater Than 20% – A Surge in Earnings
- Previous Year EPS Greater Than Zero – They Made a Profit
- Demonstrating Growth Across the Board vs. industry Competitors
- Greenblatt Earnings Yield
How to Beat the Stock Market With Stock Rover
I love Stock Rover so much that I spent 2 years creating a growth stock investing strategy that has outperformed the S&P 500 by 102% over the last eight years. I used Stock Rover's excellent backtesting, screening, and historical database to achieve this.
This Liberated Stock Trader Beat the Market Strategy (LST BTM) is built exclusively for Stock Rover Premium Plus Subscribers.
Learn more About the LST Beat the Market Growth Stocks System
5. Value Invest with the Warren Buffett Method
Warren Buffett has proven over the last 50 years to be the most successful investor of all time. With an average compound rate of return of 23.3% per year, he and his good friend Charlie Munger have a reputation that Wall Street can only dream of. His wise investing has grown his company Berkshire Hathaway (BRK.A), into a behemoth worth over $500 billion.
But how did Buffett achieve these high investing returns? He analyses stocks better than anyone else and understands what makes a great company.
The most detailed analysis of Buffett’s investing methodology is outlined in the book “The New Buffettology” by his daughter Mary Buffett. We will use the Buffettology book, plus the two single most important criteria created by his mentor, the great Benjamin Graham, Fair Value (Intrinsic Value) and Margin of Safety.
The Warren Buffett Stock Screener
A Warren Buffett Stock Screener needs to filter on investing criteria such as earnings per share (EPS) growth, consistent return on equity (ROE), high return on invested capital (ROIC), and low debt using the solvency ratio. Finally, the screener needs to calculate the margin of safety using discounted cash flow (DCF).
How Does Buffett Screen for Stocks?
Buffett screens for stocks using specific criteria is the company profitable and generating a healthy cash flow. He then predicts and discounts the cash flow ten years into the future. If the cash flow value is 30% higher than the company’s stock market valuation, then it has a reasonable margin of safety, and it is a candidate for purchase.
Specific Rules for the Warren Buffett Investment Include:
- Look for a Fair Value Higher Than The Current Stock Price
- A High Margin Of Safety
- A Strong Earnings Per Share History & Growth Rate
- A Consistently High Return on Equity
- Does the Company Earn a High Return on Total Capital?
- Is the Company Conservatively Financed?
- The Initial Rate of Return for the Stock is Greater than The Return on US treasury bonds?
This entire methodology, criteria, and explanation of implementing this strategy are detailed in our article: 4 Easy Steps to Build The Best Buffett Stock Screener.
Investing In Stocks Can Be Complicated, Stock Rover Makes It Easy.
Stock Rover is our #1 rated stock investing tool for:
★ Growth Investing - With industry Leading Research Reports ★
★ Value Investing - Find Value Stocks Using Warren Buffett's Strategies ★
★ Income Investing - Harvest Safe Regular Dividends from Stocks ★
"I have been researching and investing in stocks for 20 years! I now manage all my stock investments using Stock Rover." Barry D. Moore - Founder: LiberatedStockTrader.com
Get Stock Rover Premium Plus Now or Read the In-Depth Stock Rover Review & Test.
6. Beat the Market with Klarman’s Margin of Safety Method
Buying stocks with a large margin of safety means reducing your risk in the trade and maximizing your potential gain. The margin of safety method was popularized by both Warren Buffett and Seth Klarman, both elite investors.
What Is The Margin of Safety?
If a company’s stock price is below the actual value of the cash flow (income) and assets of a company, the percentage difference is the Margin of Safety. This is the discounted price at which you buy a share in the company.
If a company is worth $5 per share on the stock market exchange, but the value of its earnings, property, and brand is worth $10, then you have a discount of 50%.
If you buy the stock at $5, then eventually, the stock price should rise 100% to get to $10 per share.
Simple really! Or is it? How about an infographic to help explain.
If a stock price is significantly below the company’s actual fair value, that percentage difference is known as the Margin of Safety. Essentially the percentage that the stock market undervalues a company.
In other words, the Margin of Safety is the percentage difference between a company’s Fair Value per share and its actual stock price. If a company has profits and assets that outweigh a company’s stock market valuation, this represents a Margin of Safety for the investor. The higher the margin of safety, the better.
In classic value-investing theory, the margin of safety is the level of risk an investor can live with. The margin of safety is an estimate of the risk a stock buyer takes.
Warren Buffett’s Explanation of Margin of Safety
If you understood a business perfectly and the future of the business, you would need very little in the way of a margin of safety. So, the more vulnerable the business is, assuming you still want to invest in it, the larger the margin of safety you’d need. If you’re driving a truck across a bridge that says it holds 10,000 pounds and you’ve got a 9,800 pound vehicle, if the bridge is 6 inches above the crevice it covers, you may feel okay; but if it’s over the Grand Canyon, you may feel you want a little larger margin of safety. Warren Buffett
Read a detailed explanation of how to use and apply Magin of Safety in this article: Margin of Safety – The Key To Warren Buffett’s Wealth.
Ultimately the calculation of Fair Value and Margin of Safety is critical to the strategy of value investing. If you want to make good profits long-term, you need to minimize your risk by purchasing companies that are selling at a significant discount due to market irrationality. We have included an excel spreadsheet to help you calculate fair value and margin of safety manually. Still, if you want to be effective and efficient, you will need a great stock screener with these calculations built-in. Stock Rover offers a full 14-day trial and a free service; try Stock Rover.
7. Buy the Stocks Warren Buffett Buys
On your path to beating the market, you could skip much of the stock screening or strategy development and simply buy the stocks that Warren Buffett buys. This would be a simple strategy to seek to emulate the great investor and seek outperforming returns.
Here is a list of the companies that Warren Buffett and specifically Berkshire Hathaway, the company that he and Charlie Munger own in 2020.
| Ticker | Company | Stake |
| KHC | Kraft Heinz Co | 26.70% |
| DVA | Davita Inc | 24.10% |
| AXP | American Express Company | 18.30% |
| LSXMK | Liberty Sirius XM Group Series C | 15.20% |
| LSXMA | Liberty Sirius XM Group Series A | 14.40% |
| MCO | Moody’s Corporation | 13.00% |
| DAL | Delta Air Lines, Inc. | 11.00% |
| VRSN | Verisign, Inc. | 10.90% |
| AXTA | Axalta Coating Systems Ltd | 10.40% |
| BAC | Bank of America Corp | 10.20% |
| LUV | Southwest Airlines Co | 10.00% |
| AAL | American Airlines Group Inc | 9.80% |
| LBTYA | Liberty Global PLC Class A | 9.70% |
| KO. | Coca-Cola Co | 9.40% |
| WFC | Wells Fargo & Co | 9.30% |
| BK. | Bank of New York Mellon Corp | 8.60% |
| UAL | United Airlines Holdings Inc | 8.50% |
| USB | US Bancorp | 8.40% |
| STOR | Store Capital Corp | 8.10% |
| AAPL | Apple Inc. | 5.50% |
| LILA | Liberty Latin America Ltd Class A | 5.40% |
| GS | Goldman Sachs Group Inc | 5.10% |
| GM. | General Motors Company | 5.10% |
| STNE | StoneCo Ltd | 4.80% |
As described in the table above, you could seek to build a portfolio with the same size stakeholding as a percentage of your capital. Don’t forget Berkshire Hathaway is regularly selling investments and buying others, so keep checking in on the Berkshire Hathaway Annual Reports and Buffett’s letters to investors.
- For a Full Analysis of Warren Buffett’s Portfolio, see 20 Insights Into Warren Buffett Stocks + Full Portfolio Analysis.
8. Try the MOSES ETF Investing System
Whether you actively invest in the stock market or passively invest through mutual funds, or exchange-traded funds, it is essential for you to reduce any losses you incur over the years of your investment.
Avoiding or minimizing the impact of major stock market crashes is at the heart of the MOSES ETF Investing System. There are three core indicators in the Moses strategy; you can use the best approach to eliminate most losses and compound your investments to beat the market.
Market Outperforming Stock ETF System
MOSES will help you to be alerted before the next crash happens, or at least before the significant down move begins. MOSES will also provide you with an idea of when the bear market is over.
Market – The strategy is designed to be used on entire market indices
Outperforming – The Moses strategies beat the majority of USA & European Stock Markets
Stock – Moses is designed to work on large, liquid stock market indices.
ETF – Using Moses on broad market ETFs to trade an entire index is the ideal strategy.
Strategies – 3 Strategies You Can Choose to Improve Your Decision Making
M.O.S.E.S Performance
Here are the exact results of the three MOSES strategies. The backtesting started in 1997 to enable the system to act on three major stock market crashes, 2000, 2008, and 2020. The Buy and Hold strategy is the profit from staying invested during the entire period and not avoiding the crashes. The Winning MOSES strategy is highlighted in Green.
| Test Timeframe | Jan 13, 1997 | Sept 21, 2021 | |
| Duration | 24.75 years | ||
| Initial Investment | $ 100,000 | ||
| Nasdaq 100 vs. MOSES Strategy | $ Return | % Per Year* | Total Return |
| Buy & Hold | $ 1,763,807 | 12.30% | 1664% |
| Buy Bull – Sell Bear | $ 2,885,542 | 14.55% | 2786% |
| Buy Bull – Sell Catastrophe | $ 2,024,919 | 12.92% | 1925% |
| Buy Recovery – Sell Catastrophe | $ 2,298,661 | 13.50% | 2199% |
| S&P 500 vs. MOSES Strategy | $ Return | % Per Year* | Total Return |
| Buy & Hold | $ 581,225 | 7.37% | 481% |
| Buy Bull – Sell Bear | $ 485,441 | 6.59% | 385% |
| Buy Bull – Sell Catastrophe | $ 595,737 | 7.48% | 496% |
| Buy Recovery – Sell Catastrophe | $ 645,796 | 7.83% | 546% |
| Russell 3000 vs. MOSES Strategy | $ Return | % Per Year* | Total Return |
| Buy & Hold | $ 613,637 | 7.61% | 514% |
| Buy Bull – Sell Bear | $ 529,573 | 6.97% | 430% |
| Buy Bull – Sell Catastrophe | $ 640,279 | 7.79% | 540% |
| Buy Recovery – Sell Catastrophe | $ 715,652 | 8.28% | 616% |
| Nasdaq Composite vs. MOSES Strategy | $ Return | % Per Year* | Total Return |
| Buy & Hold | $ 1,128,396 | 10.29% | 1028% |
| Buy Bull – Sell Bear | $ 1,233,086 | 10.68% | 1133% |
| Buy Bull – Sell Catastrophe | $ 1,076,990 | 10.08% | 977% |
| Buy Recovery – Sell Catastrophe | $ 1,124,536 | 10.27% | 1025% |
- Annualized Compound Return (ACR)
Beat The Market, Avoid Crashes & Lower Your Risks
Nobody wants to see their hard-earned money disappear in a stock market crash.
Over the past century, the US stock market has had 6 major crashes that have caused investors to lose trillions of dollars.
The MOSES Index ETF Investing Strategy will help you avoid or minimize the impact of major stock market crashes. MOSES will alert you before the next crash happens, so you can protect your portfolio. You will also know when the bear market is over, so you can start investing again.
MOSES Helps You Secure & Grow Your Biggest Investments
★ 3 Index ETF Strategies ★
★ Outperforms the NASDAQ 100, S&P500 & Russell 3000 ★
★ Beats the DAX, CAC40 & EURO STOXX Indices ★
★ Buy & Sell Signals Generated ★
MOSES Helps You Sleep Better At Night Knowing You A Prepared For Future Disasters
9. Invest Ethically to Beat the Market
If you care about the environment and the planet’s state, you are probably already taking steps to try and reduce your impact on the world. Perhaps like me, you have an electric or hybrid car, reduce your use of plastics, recycle, and eat more vegetarian or even vegan dishes.
But you can do more to help promote and encourage more companies to adopt better Environmental, Social, and Governance (ESG) best practices. You can put your money to work in companies with robust ESG policies.
ESG Investing Principles
ESG investing (Environmental, Social & Governance) enables ethical investors to channel their capital to companies that demonstrate environmental sustainability, social responsibility, and good corporate governance. ESG investing can be done by investing in specific companies or investing in some of the new ESG Exchange-Traded Funds.
ESG Portfolio Performance
Interestingly, investing in companies doing the right thing ethically is not bad for your investing returns. In the chart above, you can see that the portfolio performance for the Top 20 ESG Companies for the previous two years was 40%, compared to a return for the NASDAQ 100 of 36.9% and only 28.5% for the S&P500.
ESG Portfolio Performance Over 2 & 5 Years
| ESG Investment | 2 Year Performance | 5 Year Performance |
| Stock Rover Top 20 ESG Stocks | +40% | +113% |
| S&P500 Index | +28.5% | +77.3% |
| NASDAQ 100 Index | +36.9% | +108% |
5 Year ESG Portfolio Performance
If we look even further back, we can see that the 5-year return for this Stock Rover ESG portfolio was 113%, compared to 108% for the NASDAQ 100 and 77.3% for the S&P500.
Interestingly, some of the best companies in America are pushing hard to improve their ESG profile, so it is not surprising that the ESG portfolio performs well. What is surprising is that ESG companies can outperform the market.
- Get All the Details on the ESG Beat the Market Strategy in our In-Depth Article
10. Find High Growth Dividend Stocks
Do you want to find companies that are continually raising their dividends? It is a wise move as businesses with significant dividend growth usually grow sales and market dominance.
What if you could find companies that have experienced dividend growth over the last ten years and are on sale at bargain-basement prices by the stock market? This is called Dividend Growth + High Margin of Safety.
10 Year Dividend Growth Strategy
10 Year Dividend Growth Screening Criteria
|
The Dividend Kings or Dividend Aristocrats strategy essentially means investing in companies with a long history of continually paying and increasing dividends.
For this, you will need a stock screener with a significantly sizeable historical database (at least ten years) of earnings and dividend payments, such as Stock Rover.
The criteria shown here is the calculation for a 10-year period.
Dividend Growth Criteria Explanation:
- Dividend Yield > 1.5%. This is a simple filter designed to ensure only companies paying a dividend above 1.5% are listed. Anything less than 1.5% will not even payout in line with inflation.
- Dividend 1 Year Change > 8%. We want to see only companies who have increased dividends in the last fiscal year of over 8%.
- Dividend 3 Year Change > 8%. Next, we filter down to companies with at least an average increase of 8% over the last three years.
Dividend Growth Screener – Criteria Implemented Into Stock Rover - Dividend 5 Year Change > 8%. Again, only those companies increasing dividends by more than 8% over the last five years.
- Dividend 10 Year Change > 8%. You get the idea. :)
- Payout Ratio >10 < 40. The payout ratio is designed to ensure the company makes enough profits to continue paying the dividends and sustain the increases. You can reduce the “<10” to see more stocks in the scan. We do not want companies paying more than 40% of their profits out in dividends; they need to retain cash flow for future growth and capital investments.
- Sales 5 Year Average (%) > 4%. This is designed to ensure that the company increases sales, at least on average, to pay for the above growth in dividends.
- Margin of Safety > 0. (Exclusive to Stock Rover) The most important criterion of all is the Margin of Safety, using Warren Buffett’s calculation of the forward discounted cash flow (see our article on Intrinsic Value). Essentially, the higher the margin of safety, the more of a discount you are buying a stock for.
These criteria would typically return a list of only 5% of the NYSE or NASDAQ listed stocks.
- Learn all the details and methodology behind the high dividend growth strategy.
- Our 7 Best Value & Dividend Investing Strategies & Scans
11. Outperform the Market with the NASDAQ 100 ETF
If beating the market is defined as your portfolio, making a profit higher than that of the S&P500, then you are in luck. The simplest way to beat the S&P500 is to invest in a NASDAQ 100 exchange-traded fund (ETF). I have approximately 50% of my investment capital in a NASDAQ ETF. The other 50% I use to invest in individual stocks.
An excellent reason is to invest in the NASDAQ 100; it simply outperforms all other major developed world indices, including the UK FTSE 100, the German DAX, France, Japan, and the MSCI world index. All major indices lose to the NASDAQ 100.
NASDAQ 100 30-Year Performance
As you can see in the above chart, the NASDAQ 100 has by far outstripped that of other major G7 economy stock markets.
Table: 30-year returns of the Nasdaq 100
| Index | 30 Year Returns |
| Nasdaq 100 | 4,122% |
| Dow Jones Industrial Average (DJIA) | 789% |
| Standard & Poors 500 (S&P 500) | 738% |
| German DAX | 526% |
| The UK. Financial Times Stock Exchange (FTSE 100) | 150% |
| Japan Nikkei | -47% |
12. Try a Robo Advisor
A Robo Advisor is a digital application that offers users financial advice created by algorithms, artificial intelligence, or mathematical formulas. The term Robo Advisor is short for robot advisor. However, the phrase Robo Advisor is inaccurate. To explain, a Robo Advisor is a digital construct, usually an algorithm or artificial intelligence (AI) rather than an actual robot.
Do Robo Advisors Beat The Market?
The short answer is that most Robo Advisors fail to beat the market. The goal of most Robo Advisors is not actually to beat the market but to automatically invest your money based on your requirements and risk tolerance. If you have a low tolerance for risk, your portfolio will be more heavily weighted in favor of bonds, which would inhibit the ability to beat the market.
Robo Advisors vs. the S&P 500
If you want to compare Robo Advisors, the best method is to compare their growth rate to the popular stock market indexes like the S&P (Standard & Poors) 500 or the Dow Jones. However, such comparisons only work with specific funds or portfolios. Hence it is often impossible to tell when comparing the performance of a platform to that of the S&P 500.
Generally, a good rule of thumb is that a portfolio should be proven to beat the S&P or Dow Jones; the best Robo Advisors portfolio’s rate of gain should significantly exceed the S&P by at least 5% per year.
However, rates will vary yearly, and outside factors like inflation and taxation can eat up your returns. Notably, some high-income people could lose money if they earn a high rate of return without implementing a tax-loss strategy.
Thus, you will need to do research when looking for a robo advisor. To complicate matters, technology is new and changing all the time.
Performance can change quickly because some firms will continuously add new features and capabilities to Robo Advisors. Hence, you should regularly visit your advisors’ website and check out the new features.
Robo Advisor Fund Performance
As previously stated, many Robo Advisor funds are not entirely transparent with their reporting of their fund’s performance due to possible the complexity of options on offer not being directly comparable to the underlying index or, more likely, because they do not beat the market and do not want to make false claims.
The only Robo Advisor we found that can match or surpass the S&P500 by a few percent is M1 finance.
M1 provides so many different expert portfolios to choose from and depending on when you open an account and decide to invest, the returns on your investment can vary. Suffice to say, M1 claims that, on average, their expert portfolios (pies) are within 2% or slightly above the underlying market return.
In our review, M1 Finance is the only Robo Advisory service that offers commission-free trading for its customers. This means your account will have no management fee whatsoever. This is very positive for the service, but the question is, how do they make money? They mostly make money from short-term lending of any available cash funds to the overnight inter-bank market if you utilize their borrowing facility or invest in an M1 Plus account. Finally, they will receive small rebates from liquidity providers for their order flow. This is all quite normal and used throughout the industry.
Another great bonus of this mature service from M1 is that tax-loss harvesting is automatically integrated into the account. This means that when you choose to withdraw funds from your account, the algorithms will consider which securities to sell, prioritizing those incurring losses so that they can offset future gains.
On top of this, M1 promotes the purchase of fractional shares as a unique selling point; if the portfolio you are invested in dictates a purchase of a stock with a high price, you can still be fully invested with a purchase of a fraction of the share.
13. Implement the Bill Gates Portfolio
I am certainly not saying Bill Gates is an investing genius, but he is a genius nonetheless. I have a huge amount of respect for Mr. Gates; he is one of the world’s richest men, but he has given so much back to the world, not just in monetary measure but in his time and effort. The amount of lives he and Melinda have helped save is countless.
Bill has some very interesting stocks in his portfolio, and as you can imagine, Microsoft, Apple, and his great friend Warren Buffett’s Berkshire Hathaway stocks are in his portfolio.
But how is the performance of Mr. Gate’s portfolio? According to Stock Rover’s excellent portfolio backtesting and performance comparison charting, Bill has managed to beat the S&P 500 by 54% since 2007, which is impressive.
We do not know the origins of Bill Gates’s investing methodology, but we can be sure Warren Buffett and his history have influenced him as a technology mogul.
The Bill Gates Stock Portfolio
| Ticker | Company | Value Score | Growth Score | Price | 5Y Return vs. S&P 500 |
| AMZN | Amazon.com | 52 | 99 | $3,148.53 | 409.20% |
| BABA | Alibaba Group Holding | 63 | 98 | $275.15 | 274.40% |
| AAPL | Apple | 76 | 93 | $113.35 | 236.40% |
| CAT | Caterpillar | 74 | 69 | $149.71 | 77.40% |
| WM | Waste Management | 68 | 86 | $114.36 | 62.10% |
| CCI | Crown Castle Intl | 54 | 95 | $162.38 | 56.60% |
| WMT | Walmart | 89 | 87 | $137.37 | 51.10% |
| CNI | Canadian National Railway | 70 | 81 | $106.97 | 17.40% |
| UPS | United Parcel Service | 67 | 91 | $171.31 | 11.80% |
| ECL | Ecolab | 79 | 80 | $200.18 | 0.10% |
| FDX | FedEx | 73 | 92 | $257.49 | -2.80% |
| TWTR | 53 | 71 | $43.71 | -18.40% | |
| BRK.B | Berkshire Hathaway | 81 | 83 | $215.19 | -25.40% |
| ARCO | Arcos Dorados Holdings | 43 | 53 | $4.28 | -36.90% |
| Cash | Cash | – | – | $1.00 | -91.60% |
| KOF | Coca-Cola Femsa | 84 | 80 | $40.77 | -121.90% |
| LBTYK | Liberty Global | 78 | 58 | $20.78 | -139.10% |
| LBTYA | Liberty Global | 78 | 53 | $21.17 | -141.90% |
| LILA | Liberty Latin America | 69 | 72 | $8.35 | -166.50% |
| LILAK | Liberty Latin America | 69 | 69 | $8.30 | -166.60% |
| TV | Grupo Televisa | 88 | 66 | $6.20 | -168.10% |
Get The Bill Gates Portfolio In Stock Rover Now
14. Create Your Own System
Finally, if you love the chase and are willing to put the work in to develop your unique way of beating the market, then there are two things you must do.
Take a Serious Investing Course.
Many companies offer trading courses or investing courses to help you become a successful investor. We also provide a training course; in fact, this training course was the reason I established the Liberated Stock Trader business. To help you become a free-thinking investor that does not listen to others and forges your own path.
You want to be a successful stock investor but don’t know where to start.
Learning stock market investing on your own can be overwhelming. There’s so much information out there, and it’s hard to know what’s true and what’s not.
Liberated Stock Trader Pro Investing Course
Our pro investing classes are the perfect way to learn stock investing. You will learn everything you need to know about financial analysis, charts, stock screening, and portfolio building so you can start building wealth today.
★ 16 Hours of Video Lessons + eBook ★
★ Complete Financial Analysis Lessons ★
★ 6 Proven Investing Strategies ★
★ Professional Grade Stock Chart Analysis Classes ★
Create Your Own Unique Market-Beating System
After you have built your own experience and knowledge, you will be ready to test your theories and hypothesis. There is, in effect, only one way to achieve this goal.
You need to learn how to backtest your ideas to establish if they provide a unique edge in the market that works repeatedly. I have done this with the Stock Market Crash Detector, and the Liberated Stock Trader Beat the Market System.
You can also learn to backtest with the best software around.
Back-test Your Strategy
Our rigorous selection process chose MetaStock as the most potent backtesting and innovative forecasting platform with a deep ecosystem of community and partner support. TradingView offers an intelligent and effective backtesting solution to individual stock testing and reporting. Interactive Brokers brings the best solution for fundamental backtesting and portfolio management. TrendSpider is our winner for innovation and the hottest new entrant into the system backtesting market.
How to Beat the Market Summary
Stock investing strategies designed to beat the market are sometimes successful, but not always. If there was a single strategy that always beat the market, the free market would cease to exist. That is why our selection of the best strategies is helpful. There is no single way to always outperform the S&P 500, but we can certainly try.
I hope this exhaustive roundup of the best stock market-beating systems was useful to you. If you have experienced success with these systems or others, I would love to hear from you; please leave a comment below.
Warranty
As with any stock market investing system, nothing is guaranteed to work in the future as it did in the past. In fact, the more institutions that utilize a system, the more ineffective it becomes. So this beat the market screener, and LiberatedStockTrader.com accepts no liability for your use of this work. Liberated Stock Trader does not recommend the purchase of specific stocks and accepts no liability for any losses incurred. By using this or any other published article for investing purposes, you agree to our disclaimer.
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Great post to help understand all the different formulas and stratergies that we can utilise to invest in the stock market. It is surely going to help in growing portfolios and beating the market.
Hello Barry, very nice article and I am a new lover of Stock Rover. I have one question. Is No.4 bought on 1/2 and sold on 12/31 just the same way as no. 2?
Yes, Bini