Mark Minervini is a successful stock trader and author of the book "Trade Like a Stock Market Wizard." He follows a specific set of criteria for selecting stocks, referred to as the SEPA® methodology, which stands for Specific Entry Point Analysis®. Below are some of the key criteria and principles that Minervini emphasizes:
Fundamental Criteria:
1. Earnings: Look for companies with strong recent earnings growth (e.g., at least 25% quarterly EPS growth). Annual earnings should also be trending upward.
2. Sales: Prefer companies with substantial and increasing sales growth.
3. Margins and Return on Equity: Look for companies with high-profit margins and a strong return on equity (ROE).
4. Debt: Companies with low debt levels are preferable.
5. Industry Group: Focus on stocks in leading industry groups or sectors.
Technical Criteria:
1. Price Trend: Look for stocks in a strong uptrend. The stock should be near its 52-week high and trading above its moving averages.
2. Volume: Prefer stocks with increasing volume, especially when the price is moving up. This indicates strong demand.
3. Relative Strength: The stock should exhibit strong relative strength compared to the overall market and its peers.
4. Base Patterns: Look for stocks that are forming constructive base patterns, such as cup-with-handle, double bottom, or flat base.
5. Buy Point: Identify a specific buy point, which is typically when the stock breaks out of a base pattern on heavy volume.
Other Important Principles:
1. Risk Management: Always have a pre-defined exit strategy to cut losses short. Minervini often uses a maximum loss of 3-4% below the buy point.
2. Portfolio Management: Diversify, but not excessively. Focus on the best-performing stocks and sectors.
3. Market Direction: Consider the overall trend of the market. Minervini often aligns his trades with the general market direction.
4. Psychology: Maintain a positive and disciplined mindset. Avoid emotional trading decisions.
5. Learning: Constantly educate yourself, analyze your trades, and strive for improvement.
Fundamental Criteria:
1. Earnings: Look for companies with strong recent earnings growth (e.g., at least 25% quarterly EPS growth). Annual earnings should also be trending upward.
2. Sales: Prefer companies with substantial and increasing sales growth.
3. Margins and Return on Equity: Look for companies with high-profit margins and a strong return on equity (ROE).
4. Debt: Companies with low debt levels are preferable.
5. Industry Group: Focus on stocks in leading industry groups or sectors.
Technical Criteria:
1. Price Trend: Look for stocks in a strong uptrend. The stock should be near its 52-week high and trading above its moving averages.
2. Volume: Prefer stocks with increasing volume, especially when the price is moving up. This indicates strong demand.
3. Relative Strength: The stock should exhibit strong relative strength compared to the overall market and its peers.
4. Base Patterns: Look for stocks that are forming constructive base patterns, such as cup-with-handle, double bottom, or flat base.
5. Buy Point: Identify a specific buy point, which is typically when the stock breaks out of a base pattern on heavy volume.
Other Important Principles:
1. Risk Management: Always have a pre-defined exit strategy to cut losses short. Minervini often uses a maximum loss of 3-4% below the buy point.
2. Portfolio Management: Diversify, but not excessively. Focus on the best-performing stocks and sectors.
3. Market Direction: Consider the overall trend of the market. Minervini often aligns his trades with the general market direction.
4. Psychology: Maintain a positive and disciplined mindset. Avoid emotional trading decisions.
5. Learning: Constantly educate yourself, analyze your trades, and strive for improvement.
