How To Pick Cheap Stocks - 10 Simple Rules
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How To Pick Cheap Stocks - 10 Simple Rules

Discover 10 simple rules for investing in the stock market. A quantitative value investing approach.
4.7 (84 ratings)
Instead of using a simple lifetime average, Udemy calculates a course's star rating by considering a number of different factors such as the number of ratings, the age of ratings, and the likelihood of fraudulent ratings.
895 students enrolled
Created by Joe Marwood
Last updated 6/2017
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Current price: $10 Original price: $25 Discount: 60% off
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  • 1.5 hours on-demand video
  • 2 mins on-demand audio
  • 15 Articles
  • 2 Supplemental Resources
  • Full lifetime access
  • Access on mobile and TV
  • Certificate of Completion
What Will I Learn?
  • Learn how to scan and find cheap value stocks.
  • Learn 10 rules for successful stock selection.
  • Learn to make confident investment decisions in the stock market and manage a portfolio of shares.
  • Learn to backtest and trade a strategy that has produced over 20% annual returns since 2000.
View Curriculum
  • This course is suitable for beginners as well as intermediate and advanced investors. You are expected to know some basic financial terminology, however, a glossary is also provided.

Whether you're an experienced stock market investor or you're looking to buy stocks for the very first time, this course will show you a hassle-free way to find deep value investments.

The Marwood Value model is an original quantitative investing strategy that I developed to select cheap stocks.

If you don't take this course today, you might never realise the potential to be gained from compounding your wealth in the stock market.

Recent performance

Just recently, the Marwood Value system has produced some outstanding trades on stocks trading on US exchanges.

For example, the model recently picked out Shanda Games Limited (GAME). GAME is a Chinese technology company that traded on the Nasdaq. I wrote about the company in a Seeking Alpha article and said how the company had been selected by the model for outperformance.

Then, on the 3rd April, it was announced the company would be taken over in a $1.9 billion deal. Shares immediately jumped to $6.80, giving a 19% gain in less than a month.

There have been many other examples too. This is a model that finds cheap stocks trading below their intrinsic value. Stocks that often experience a rapid turnaround of fortune or get taken over by larger companies.

Introduction To Quantitative Value Investing

This Marwood Value Model is based around 10 key rules for buying and just one rule for selling.

Of course, the rules are not simply plucked out of thin air. They are grounded in the principles of successful value investing and historical performance. They take their cues from academic research and align with the viewpoints of successful value investors such as Warren Buffett, Benjamin Graham, Peter Lynch and others.

The nature of this strategy makes it both highly flexible and easy to use. Entries and exits are made every two weeks, which means this is another stock market strategy that requires very little maintenance.

It is the perfect strategy to combine with another system, such as a trend following system, a short-term trading system, or a growth investing system.

By using more than one system together, it is possible to reduce drawdown and risk – so long as those systems are significantly different from one another.

Impressive Historical Performance

Using the latest analytical software, I take the 10 value investing rules and I apply them to historical stock market data. The results are recorded live and show an impressive 19 percentage point outperformance against the benchmark S&P 500.

Over the last 15 years, this strategy was shown to produce annual returns of 21.50% with a maximum drawdown of just 30% and a Sharpe ratio of 0.90. Meanwhile, the S&P 500 has only been able to return 2.28% annually in that time.

How the strategy came about

The actual story about how the Marwood Value Model came about is not a random one. In fact, rules for the strategy came about after I realised that many of my best performing stock picks all shared the same inherent characteristics.

Characteristics such as strong cash generation, low price-to-book values and consistent earnings growth. To my delight, when I put these simple rules into the Portfolio simulator to test, they worked amazingly well. First time!

I then spent some time tweaking and fine-tuning the rules, particularly the exit, and I found that the most success came from keeping everything simple and straightforward.

What you will need

The course details the full rules to the strategy; when to buy, when to sell, and how much to buy and sell. But it also explains each rule in detail, so you know why it's being used and what makes the rule important.

In terms of software, the strategy is run on the simulator from Portfolio123. This is an institutional quality simulator that's used by the likes of Merrill Lynch, Bank of America and the University of Columbia. It's a high powered and expensive tool that costs around $200 a month to use.

However, the Marwood Value Model has been especially designed to be used without need for any expensive tools. As I show on the course, the model can be set up and run using free stock screeners that are found online.

As a result, this is a strategy that anyone can learn from, use, and enjoy.

If you are interested in building a portfolio of winning investments and you're tired of getting burned in the stock market, I strongly recommend you take a look at this course.

And remember, if you are not completely satisfied for any reason, you have a 30-day money back guarantee from Udemy.

I'm sure you will great value in this course and I truly hope to see you do well with your investments. See you on the other side.

Who is the target audience?
  • This course is for anyone wanting to find cheap, value investments.
  • The course is suitable for long term investors, medium term traders, beginners, and even retirees.
  • The course is ideal for investors or traders looking to diversify with an alternate investment strategy.
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Curriculum For This Course
59 Lectures
Before We Begin
4 Lectures 08:16

How to take this course and get in touch.

What is this course all about? How is it structured?

Preview 01:15

Introducing the course and how to take it.

Preview 04:33
Goals, Tools & Some Theory
8 Lectures 17:42

Our goals on this course, what we hope to achieve.

Preview 02:17

This course comes complete with closed captions that will allow you to follow along at your own pace and understand every word.

Don't forget to use closed captions (CC) on the course videos

Rules are essential for professional investing. All the most famous value investors of our time use rules to help them make their investment choices.

Some theory & why you need investing rules.

The tools we will be using to build and test the value investing strategy.

Tools we will be using.

Evidence of how value investing works and the principles we will use to build the strategy.

Evidence of value investing and principles.

Our benchmark shall be the S&P 500 index. This is what we will use to compare our trading performance against.

Our benchmark. How to measure performance.

Some required listening from Winton Capital Chief David Harding. Originally aired on CNBC.

The S&P 500 is a trading system. David Harding from Winton Capital speaks.

Benjamin Graham was Warren Buffett's teacher and is considered the father of value investing. Here are his original rules for successful investing.

Benjamin Graham's investing rules.
Getting Started
2 Lectures 07:02

How we will attempt to combat the perils of data mining, curve-fitting and optimisation.

A word about data mining and optimisation.

In this lecture we look at transaction costs, additional settings and how to avoid survivorship bias.

Transaction costs, survivorship-bias and other settings.
The 10 Rules
11 Lectures 21:21

A simple liquidity rule to protect capital.

Rule zero: liquidity.

Rule one: market cap.

Another liquidity rule based on the minimum price of a stock.

Rule two: minimum price filter.

The PE ratio can help to find cheap value stocks.

Rule three: PE ratio.

Lower Fwd PE ratios are preferable to value investors.

Rule four: forward PE ratio.

Learn how price-to-sales can be used to find cheap stocks.

Rule five: price-to-sales.

Use the price-to-book ratio to find bargain basement stocks.

Rule six: price-to-book.

The strategy prefers stocks with high levels of free cash flow.

Rule seven: price-to-free-cash-flow

An important measure of balance sheet strength.

Preview 01:24

The strategy prefers stocks with strong recent earnings growth.

Rule nine: 5-year EPS growth.

Our final buy rule is based on momentum.

Rule ten: momentum.
When To Sell
1 Lecture 02:05

When to sell a stock.

Sell rule one.
Risk & Ranking & Finer Details
4 Lectures 07:54

Optimum portfolio size and how many shares to buy,

Risk: how many shares to buy.

Some extra details for trading the strategy.

Extra important details.

Sometimes more than one stock will meet the rules. We need a way to choose which stocks to buy first.

Ranking criteria: how to choose between stocks.

Understand how many stocks you should hold based on different levels of starting capital. From $1,000 to $1,000,000.

Capital requirements.
Back-Testing The Rules
4 Lectures 11:33

Setting the rules up in the simulator ready to test on historical data.

Setting up the simulator with the 10 rules.

We take the 10 rules and use the simulator to test them on historical data. First in-sample and then out-of-sample.

Back-testing the rules on historical data: in-sample and out-of-sample

Back-testing the strategy between 2000 and 2015 and results.

Full sample test: 2000 - 2015.

This lecture shows some key charts and tables from the trading system as it is presented on the course.

Performance Reports & Statistics.
1 Lecture 06:43

Can we break the strategy?

Stress-testing the strategy
Some Finer Points
3 Lectures 08:05

What are the advantages and disadvantages of the strategy and how to overcome them.

Strategy advantages & disadvantages.

We can include ETFs at certain times, this is optional.

Introducing ETFs into the mix.

The loose version of the model delivers a wider selection of stocks which can be used for further research.

Marwood Value: loose version
Extra Rules (Qualitative)
10 Lectures 15:16

You should understand how the business makes it's money.

Rule 11: understand the business.

Insiders provide clues to stock direction.

Rule 12: insider transactions.

Consistent earnings are best according to Buffett and Graham.

Rule 13: consistency of earnings.

It's a good idea to keep a macro view on the economy and world.

Rule 14: keep a macro view.

Diversification can help smooth your portfolio returns.

Rule 15: don't put all your eggs in one basket.

Learn to avoid profit warnings and dangerous chart formations.

Rule 16: profit warnings & chart patterns.

Avoid gambling and emotion-based investing.

Rule 17: don't gamble.

Always be analysing the strategy performance and your own results.

Rule 18: analyse your performance.

Stocks with compelling story lines enjoy more publicity and investor exuberance.

Rule 19: look for compelling story lines.

Follow the rules and try to avoid short-term price movements and noise.

Rule 20: ignore the noise.
5 More Sections
About the Instructor
Joe Marwood
4.4 Average rating
587 Reviews
18,622 Students
7 Courses
Trader & Investor

Joe B Marwood is a trader and investor specialising in financial trading and mechanical trading systems.

He began his career trading stock and bond futures for a prop trading firm in the UK and now works through his own private company.


How did you get started?

I started my career as a professional day trader for a UK-based prop firm where my principal products were the FTSE 100 future and German Bund.

Today I trade a portfolio of individual stocks and occasionally futures and I have a passion for building automated trading strategies and systems.

What is your trading style?

I use a mechanical strategy to trade on a largely end of day basis. I look at both fundamental and technical analysis and use strategies that are based on historical simulations. I often combine those strategies with my own experience and discretion to come up with trades that I believe are the most attractive on a risk/reward basis.

Mean reversion or trend following?

I have found that traditional trend following methods do not work as well as they once did. My methods are based on my own observations on the market whether they are based on momentum, trends, mean reversion or anything else.

Who taught you how to trade?

My mentor was a former head of trading at a well known German investment bank. I have also read and studied countless books, journals, and articles, and have spent many hours in the market. You can never stop learning.

Why did you make this course?

To educate others so that they don't make the same mistakes I made. Learning to trade can be a very expensive and drawn out process. As a trader, it is also extremely beneficial to have sources of side income as that takes the pressure off your own trading. Putting what I have learnt into a course also solidifies my own learning.

What are the secrets to successful trading?

First of all, you must have the passion to succeed. If you are in it only for the money you will have a very tough time and will be doomed to failure. You must also be comfortable with risk and be able to separate your emotions from the money.  Having a system with a profitable expectancy is also crucial and for that you will likely need a strong ability with numbers.

Why do most traders fail?

Most traders start off under-capitalised and then chase unrealistic returns which results in them blowing their account after a couple of big losses. Most beginner traders do not realise the realities of trading which is why they have trouble sticking to trading plans and dealing with their emotions. Trading should be treated as a business.