Unofficial SuperModels FAQ

SuperModels is a mechanical investment strategy by Jon Markman. His column on MoneyCentral Investor and his book, Online Investing (ISBN 0-7356-0650-1), covers the strategy in detail. As a quick overview, you run the few screens on the Investment Finder (Flare-Out Growth, Redwood Growth, MVP Growth, and MVP Value), pick the top 3 (or 5 or 10 ) stocks, buy them, and then rebalance at some set time (he recommends a year and a day). Another more aggressive strategy is to hold the Flare-Out Growth stocks for just a month and rebalance. Some people also like the hold-a-quarter system.

1.3 Who can I Email regarding questions or comments about this FAQ?

Please Email me, Paul_H at paul_hardware_chump@hotmail.com. By the way, I’m not an investment professional. I just invest for my own personal benefit. My MoneyCentral Communities profile is here.

1.4 Where is the official FAQ?

As far as I know, there is no official FAQ. The closest thing to a FAQ for the community is Mini-FAQ: Screens & Stops. I recommend you read Jon Markman’s book, Online Investing (ISBN 0-7356-0650-1), his older articles, and (if you have plenty of spare time) the older message threads in the SuperModels Community.

1.5 Where can I find the archive of Jon Markman's articles?

You can find the archive of Jon Markman's articles in MoneyCentral Investor's Article Index.

1.6 What does HAM mean? What does HAY mean? HAQ? What does FOG mean?

HAM stands for Hold A Month. HAY stands for Hold A Year. FOG stands for Flare-Out Growth. In the same vein, HAQ means Hold A Quarter.

1.7 What is mechanical investing?

See the Foolish Workshop, “What is Mechanical Investing.” Mechanical investing is where you take a (backtested) strategy with concrete rules and apply that to your trading to get maximum results. The object is to reduce your emotional input in the buying and more importantly selling of stocks.

2. Screens

2.1 Where are links to Jon Markman's current official screens?

The official screens for the Year-Trader are: Flare-Out Growth (Year-Trader), Redwood Growth, MVP Growth, and MVP Value. The official screen for the Month-Trader is Flare-Out Growth (Month-Trader).

2.2 What is the performance this year for Jon Markman's official screens?

The performance for the Year-Trader can be found here. The performance for the Month-Trader can be found here.

2.3 How do they calculate the performance for the Month-Trader?

At the beginning of the month, they sell last month’s stocks and then purchase the next months stocks using the current Flare-Out Growth (Month-Trader) screen. The price that is used for these transactions is the closing price the last day of the month. Jon Markman writes about this in the thread, ** How We Calc Monthtrader *

2.4 What are the backtested results for the official screens?

Screen	Average Yearly Return	Standard Deviation
MVP Growth (top 3 stocks, hold-a-year, since 1986)	71%	78%
MVP Growth (top 7 stocks, hold-a-year, since 1986)	47%	53%
Flare-Out Growth (Hold a Year) (top 3 stocks, hold-a-year, since 1986)	70.1%	45.8%
Flare-Out Growth (Year-Trader) (top 3 stocks, hold-a-year, since 1991)	97%	85%
Flare-Out Growth (Month-Trader) (top 3 stocks, hold-a-month, since 1986)	? something like 58%	? something like 47%

The Redwood growth can’t be backtested using the software that is used for the above models. The MVP Value screen is just the MVP Growth screen with Price/Sales Ratios less than 4.0.

2.5 What are the Small-Cap Scorchers and Mighty Microcap Checklist screens?

Small-Cap Scorchers and Mighty Microcap Checklist screens are not backtested mechanical screens. They are meant as a means of finding small-capitalization companies on the rise. In other words, do your own research before buying these stocks (Jon Markman suggests reading their SEC documents).

2.6 What are other screens that people in the community have been developing?

WestLinn has done a great job keeping the list of screens up-to-date. You can find his list in the threads: Non-Standard screen list...new update., Supermodel Finder Screen List Update..., and Click Here for a List of FOG Finder Links....

3. Investment Finder

3.1 Where can I find the Investment Finder?

You can find the Investment Finder here.

3.2 When is the Investment Finder's data updated?

The Finder is updated with the current day’s data at 7:30wpm PST (an experienced Investment Finder user, MGBloomfield, says that you may have to wait until after 10:30pm PST, though).

3.3 What caused a stock to disappear from the Investment Finder screen? How come my stock disappeared from the top of the FOG screen?

Here’s an easy way to answer your own question. Say TQNT was in the top three of the Flare-Out Growth (Month-Trader) screen then suddenly disappeared. Go to the Investment Finder and run the screen. In the “Compare With:” edit box, type the stock that disappeared (TQNT). Look at the data displayed for your stock and compare that with the Criteria. In TQNT’s case on 3/9/2000, the “% Price Change Last Month” became negative which is against the Criteria “% Price Change Last Month >= 0.1.”

3.4 How do I create a link to my screen?

In the investment finder, click on Edit/Copy Criteria to Clipboard and a link to your screen will be saved in the clipboard. To post the link in the SuperModels Community, follow the instructions below in “How do I post a URL without messing up the width of the message thread?”

3.5 What is an IFF file? How do I create one? How do I import it into the Investment Finder?

An IFF file is the criteria for an Investment Finder screen exported to an ASCII text file. You can create one by clicking on File/Export/Criteria… and saving the file to your drive. To import an IFF file, you click on File/Import Criteria… and select the IFF file that you want to import.

3.6 How do I save an IFF file from the message board?

When saving the IFF file from the message board, click on the attachment, when it displays in the browser, click on File/Save As…, type the name of your IFF file with double quotes “” around it and a .iff at the end. Then save it where you want it to be on your drive. You may also be able to right click on the link that is given in the warning box that appears when you click on the attachment and Save Target As…

4. Strategy

4.1 Is it too late to buy stocks that have already been run up?

Flare-Out Growth is a momentum screen and as such is supposed to pick stocks that are being run up. Some interesting comments about this can be found at Just Starting. Too late this month for DIGL?. Of course, you would be set back if you bought stocks right before the market goes down, and it would be great to start right after such an event. But, unless a correction or worse has already happened, are you willing to have your money sitting on the sidelines until something major happens when it could be in the market working for you?

4.2 How can I diversify my portfolio properly using these mechanical models?

See Year + Month Trader_enough diversification?. Following Jon Markman’s lead, you could buy the top 3 Flare-Out Growth (Month-Trader), the top 2 Flare-Out Growth (Year-Trader), the top 6 Redwood Growth, the top 7 MVP Growth, and the top 2 MVP Value and hold them all for year and a day. You would need some serious cash to follow this method. You could buy a smaller amount of different stocks from the screens. It is recommended that you keep your Flare-Out Growth stocks under 20% of your portfolio (see “What percentage of my portfolio should I put in my FOG HAM?” below) due to their volatility.

4.4 When should I rebalance? How long should I hold?

When you rebalance is entirely up to you. It is important that you pick a set time frame and use it consistently. Common time frames for rebalance are: once a month, a certain weekday at the end of the month (like the last Sunday of the month), once a quarter, once a year.

4.5 What is a Rolling FOG?

Rolling FOG is a strategy where people buy the top 1, 2, or 3 FOG stocks, hold them while they are in the top three of the FOG Finder Screen, and then sell them a month after they fall off for good. The idea is to let the winners win and sell off the losers, so that in the long run, they can make better gains than holding for an arbitrary amount of time (like the Hold-a-Month method does). Some threads about this method are Rolling Fog, Results of ROLLING FOG, and TQNT and Rolling FOG.

4.6 What are the 10,000% gainers? What is 100x10y?

This is a stock picking concept started by Jon Markman and the Community to see if they could pick stocks that will appreciate by 10,000% in 10 years. The first column that introduces this is Could these 3 stocks soar 10,000% in 10 years?, where Mr. Markman picks Plug Power (PLUG), Xcelera.com (XLA), and Sensar (SCII). In his article, Value? Hah! Stick with growth in 2000, he added Kopin (KOPN) to the list. And in his article, How to spot the hottest 'stealth stocks', he added Superconductor Technologies (SCON) to the list. The threads that follow this are 10,000% Gainer Ideas - Part 2, and the older thread 10,000% gainer ideas (these are long threads and may take some time to load).

Here are the split-adjusted prices of the stocks when Jon Markman picked them (as of 3/10/2000):

Stock Ticker	Date Jon Published Pick	Price
PLUG	January 5, 2000	25.75
XLA	January 5, 2000	36.5312
SCII	January 5, 2000	22.625
KOPN	January 19, 2000	60
SCON	February 16, 2000	13.125

4.7 What percentage of my portfolio should I put in my FOG HAM?

I believe Jon Markman says that you should keep the FOG HAM in the high resk part of you portfolio at under 20%. It’s really up to you since it’s your money. The rule of thumb is if you can’t bear to see your FOG HAM part drop 20-30% or more in a short time, then you have too much invested in them.

4.8 At what time of day should I make my stock purchases?

It is generally thought that placing market orders before the day’s trading starts is a bad idea. The momentum stocks picked by the FOG screen have a tendency to go up quickly during the first hour of trading and then level off at a lower price throughout the day. Many people have success making their purchases during lunchtime or using limit orders.

4.9 When can I start buying stocks? Should I wait until then end of the month?

You can start buying stocks anytime that is convenient for you. There is no need to wait until the end of the month. Remember, the important thing following this mechanical investment strategy is to pick a fixed time to hold these stocks before rebalancing them and stick to it.

4.10 I want to follow the mechanical strategy. How am I supposed to rebalance?

To be strictly mechanical, you would sell all your stocks in your mechanical portfolio on the rebalance date, and then buy equal dollar amounts of the new stocks picked by the screen. Many people don’t see the point in selling and buying back the same stocks, so they hold any stocks that are still on the screen. Also, some people keep all of the stocks that stay on the screen and others sell enough shares to keep the stocks at equal dollar amounts. An Excel spreadsheet that I found useful in calculating equal dollar amounts is the Foolish Buy Calculator.

4.11 What is HiMARQ?

HiMARQ stands for “Historical Monthly Average Return Quotient.” It is based on the assumption that some stocks tend to go up consistently at certain times in the year. This method attempts to quantify these seasonal price increases by examining a stocks price history. Jon introduces HiMARQ in his article How to track the hottest stock sectors and talks about changes in his article How to hunt the market's mighty mites. Wireman explains the history of HiMARQ in the thread, Hi-Marq Confusion.

Jon has a new thread called: * HiMARQ: Preparing for April *. It is worth a read.

4.12 Where can I find the latest HiMARQ spreadsheet (macro)?

The current HiMARQ Explorer v2.52a is here (553KB).

5. Message Board

5.1 What are the rules for posting in the SuperModels Community?

Jon Markman posted rules in this thread: * Members: Rules on Threads *. To paraphrase:

1. Don’t start a new thread when there is already an old one on the same subject (with the exception of threads that are well over 100 messages).

2. If your new thread references an old one, place a link in the first message to the older thread (to place a link, select the text and press <Ctrl>-K – See “How do I post a URL without messing up the width of the message thread?” below).

3. Always use the embedded-URL feature of the text editor (See “How do I post a URL without messing up the width of the message thread?” below).

5.2 I’ve posted this great stock and nobody replies or people give me a hard time, why is this?

People in this community don’t like it when someone just posts a stock they like without giving their reasoning. So, if you are interested in a stock and want to hear what the community says, when you post, be sure to explain what interests you in the stock from your own research.

5.3 I keep posting all this great research about a stock, but nobody ever replies to my messages but me.

That’s the community’s way of saying, “Go away.” Were hip to the “pump and dump” schemes so prevalent on Internet message boards. If you are sincerely trying to help the community and nobody is interested, move on.

5.4 How do I post a URL without messing up the width of the message thread?

(from * Members: Rules on Threads *)

1. Copy the browser link into your computers' "clipboard" memory by highlighting the URL in your browser address bar, and typing <Ctrl>-C.

2. Return to your bulletin board message, and type a word or two like click here.

3. Highlight that word or words as if you were going to bold or italicize them.

4. Type <Ctrl>-K, or go to our text-editor menu bar and click the symbol of the globe with the link in front of it.

5. A dialog box pops up. type Control-V, and your URL will be pasted into that box. make sure it starts with a single "http://" and not two.

6. Click OK.

5.5 I’m using Netscape Navigator and cannot post a URL. What do I do now?

(from 69 Camaro)

When the URL is way too long, cut it into narrower chunks by placing the cursor in the midst of the URL where you want to cut the first chunk and press both <SHIFT> and <RETURN> at the same time. This way, no spaces are entered into the middle of the URL, and it's considered to be one continuous line by the powers that be. The URL just continues onto the next line as if it were word-wrapped within the text message box.

Repeat these cuts as many times as necessary to get the URL to fit the width of the text message box (actually, lengths cut a little wider than the message box itself look best on the page when the message is later posted).

5.6 The message board is too slow. How can I speed it up?

There are two ways to reach the message board. The first is from the MoneyCentral site to use the extra features that they offer. The second method is to go through the MSN Communities. Some people claim that the second method is much faster and less error prone.

6. Chat

6.1 Where can I find more information about Jon Markman’s chats?

You can find the chat schedule here.

6.2 Where are Jon Markman’s latest chat transcripts?

The chat transcripts are eventually posted here.

6.3 How do I get in the chat room?

You can either go in through the web or, using IRC software (like mIRC) log into the chatserver, chat.msn.com, and go into the room #investor.

7. Stop Loss Methods

7.1 Should I use a stop loss?

It is up to you and your ability to take risk. The Hold-a-Month or Hold-a-Year is a time based stop. Jon claims that he hasn’t found any other stop loss strategy that can be backtested to beat the performance of his mechanical models. If you find one, please let us know.

7.2 What is ATR stop loss?

ATR stop loss calculates a stop based on the moving average of the Average True Range. Here is a definition of Average True Range.

7.3 Where can I find the macro that calculates the ATR stop loss value?

The “Average True Range” stop loss macro (v3.4) is here (261KB). The default multiplier of the moving average of the ATR to calculate the stop may be too small for stocks as volatile as those picked by the FOG screen. Some people recommend using a multiplier of around 2.5.

7.4 What is MAE stop loss?

MAE stands for Maximum Adverse Excursion and is the worst price movement that has occurred to your stock for a winning trade during the allotted time. This is used in HiMARQ analysis to help determine a possible initial stop loss price.

8. Options

8.1 What are people’s experience using options with these screens?

Pam & Taze have worked with HiMARQ options and have posted results in these threads: March HiMARQ Options, "Unofficial" February HiMARQ Options, Options, Options, Options, The "Unofficial" January HiMARQ Portfolio, and Speaking of Options. . ..

scJohn is doing studies with MVP Growth Options and has a website here. His thread about MVP Growth Options: MVGP Options.

9. Community Macros

10. Miscellaneous

10.1 Great Threads as posted in The Best of Supermodel Posts by Leveraged:

(Note: Most of these threads are very long and will take awhile to display.)

Downside Protection, Bull Flag or Just Bull?, Tulip Bulb Mania, Excellent Weekly Returns, FOG5YHIMARQ, Calling Successful Investors..... , MVP Growth Killer Screen , Revised Sector Seasonality with Performance , What is Your North Star , Help!!! I have 455,000 to invest, A Surgeons Perspective

10.2 SuperModels All Time Greatest Posts by Ed_May

Say It Ain't So Jon! - 10/13/99 MGBloomfield, JonMarkman
MGB brings up HAM backtest results leading to discussion of stops and ways to improve results.

ATR Excel Marco 2.0 - 10/21/99 MGBloomfield, JonMarkman
MGB's ATR macro 2.0 version w/ good discussion.

Stop/Loss Method - 10/25/99 MGBloomfield, JonMarkman
More stop loss talk with PRQ spreadsheets attachments.

SuperModels PRQ Marco + Instrux - 10/26/99 JonMarkman
Jon's PRQ marco version 2.0

ATR - the good, the bad and the ugly! - 10/28/99 LoopJammer, JonMarkman, Wireman
Discussion of the MGB's ATR macro

New ATR Excel Marco v3.0 - 10/27/99 MGBloomfield
Newer version of MGB's popular marco

Portfolio Stop Loss v3.2 marco at last - 11/6/99 Paul Cushman
Yet another version of the stop loss macro

10,000% Gainers Ideas - 11/12/99 JonMarkman
Endless ideas on 10,000% gainers in 10 years

Speaking of Options... - 11/20/99 Taze
Great essay by Pam & Taze on options.

A PRQ Heat Map for the Market - 11/23/99 gitansu
This wonderful post led to the eventual development of HiMARQ

XLA - 11/24/99 - NasdaqDan
Start of an endless post on the most popular 100x10 stock.

Want some devil's candy little girl? - 12/2/99 Yclept
Good discussion of FOGs

A PRQ Heatmap for Fidelity Sector Funds - 12/6/99 gitanshu
Further work by gitanshu that eventually led to development of HIMARQ

Portfolio Enhanced HiMARQ - 12/14/99 Wireman
Excel spreadsheet for backtesting HIMARQ

Psychology of Investing - 12/20/99 Leveraged
A fine discussion on general investing principles.

Tulip Bulb Mania - 12/21/99 - BIGBEAR, Yclept, Leveraged
Good discussion on speculative mania

Downside Protection - 12/25/99 gitanshu
Another gitanshu classic clinic

HIMARQ Explorer, Backtest App - 12/26/99 Wireman
Excel spreadsheet for backtesting HIMARQ

HIMARQ Explorer v20 - 1/1/00 Wireman
An update of the HIMARQ Explorer

EMLX and the Markman Effect 1/3/00 WestLinn
The first of many discussions about the effect the popularity of FOG on stock prices.

A surgeons perspective - 1/7/00 gsworlhns
Using different professions to form analogies to investing

Getting a Grip on Volatility - 1/12/00 gitanshu
Yet another great essay by gitanshu

The Lesson Learned from This - 1/12/00 Wizarium
Another good discussion of investing principles

"Bull Flag" or just "Bull" - 1/28/00 Isacc
Experiments with FOG variations to produce better bull flags

Ten Mechanical Investing Tips - 3/2/00 Hitman
Fine essay and discussion on the principles of mechanical investing

Non-Standard screen list...new update - 3/4/00 WestLinn
A great compilation of links to the various Finder screens developed by community members.

Hurry! Hurry! Don't Miss Out!!! - 3/12/00 Wizarium
Cautioning investors to be aware of pump & dump schemes on the internet

Margin Players Beware - 3/15/00 ping11
A warning to people buying FOGs on margin, long before the market crashed

2 Stock HAM Backtest = $33 Million After 15 Yrs - 3/16/00 69_Camaro
Excellent analysis of HAM with '99 data added.

What to do when retirement day comes - 3/13/00 traderbob, thephysicist
Good discussion of portfolio management during retirement.

Exploiting Loopholes to Get Ahead in Career - 3/17/00 Hitman
An OT post--focusing on careers and what it takes to get ahead.

Improved FOG using Stop/Loss & TA - 3/23/00 ibefat
Another popular stop loss varation is first explored here

Panic selloff Mon April 3rd - 3/30/00 cybertooth
A prediction that largely comes true and a good discussion of having a long term investment perspective

We Need More Women - 4/5/00 otis2000
focusing on female investors

Stochastic Calculation Marco - 4/5/00 B-Man
calculates stochastic crossovers with ibefat's stop system

10.3 List of Helpful Websites by bross11

There are too many to link from here, but check out the thread above to see them.