Revisiting Flare-Out Growth, Sirius and Mr. P

Editor's note: SuperModels columnist Jon D. Markman is on his second week of vacation, so he has turned the column over to his alter ego, Modelman, to answer reader mail. The letters are edited for grammar and may be condensed.

Hey Modelman: A lot of work went into designing and testing the Flare-Out Growth trading system. How has it fared over the last three years? I'm particularly interested in the monthly model.

-- Bill Reed

Hey Modelman: I would like to know if the Flare-Out Growth momentum screens are available for readers now, as you have provided in the past.

-- Silvio Ramirez

Modelman: Longtime readers will recall that the Flare-Out Growth trading system was the cornerstone of the SuperModels column back in the Bubblemania years of 1997-2000. After extensive testing and achieving excellent real-time results with monthly three-stock portfolios, I also described FOG in great detail in the first edition of my book "Online Investing" in 1999, then updated it in 2001 with a timing component in the second edition of the book.

The system uses the Screener at MSN Money to look for high-momentum stocks that are taking a breather before shooting back up again -- a pattern that chartists call a "bull flag." The timing overlay simply states that the model is in effect only if the Nasdaq's 15-day moving average is higher than its 40-day moving average. Thus constrained, the model was only sporadically in effect during the bear market period of 2000 through 2003. It got caught in a serious whipsaw in 2002, losing one-quarter of its value in a short time, but it made up all that ground and more this year.

In my columns, I have regularly identified FOG stocks in the Fine Print section whenever the model has gone into effect. Those five stocks are up 84% through Aug. 15, vs. a 14% rise in the S&P 500 and 25% rise in the Nasdaq Composite.