How I Trade My IRA

I like this approach because it takes all long-term financing into account and looks at operating earnings before variables such as interest expense and taxes. Actually, I ran into a bit of a problem with this ratio because I couldn't find a data provider (that I could afford) that would allow me to screen on this variable. Therefore, I made a slight change and now use the ratio of enterprise value to EBITDA, which includes depreciation and amortization in the earnings number.

More specifically, I am looking for companies that are valued at a minimum 20% discount to the median company in their industry, according to this valuation metric.

I have some other factors in my screening system; for example, I exclude American depositary receipts, and a stock's average daily trading volume (in dollars, not shares) must exceed $500,000. But those are the basics.

And this is just a starting point; after applying these screens, I take a more conventional look at the company's prospects.

I also have a standing set of sell rules that are activated immediately when I purchase any stock. I will sell any of my holdings if the price of the stock goes up enough to make the stock fairly valued, if the company reports down earnings or forecasts down earnings, or if I have held the stock for seven months and it no longer appears on my screens as a buy.

I have had a great deal of success using this investment approach. From March 31, 2001 through Feb. 28, 2007, the total return for my IRA has been 247%. Over the same time period, the S&P 500 was up 34%, and the Russell 2000 was up 77% (not including income).

I invite you to follow along with me and my IRA investments in a weekly column that I will be writing for RealMoney.com starting in late April. I will be discussing my market outlook and any transactions that I undertake in my IRA.

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