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TheStreet Open House

Your Homework: Prep for the Market Turnaround Now

Stocks in this article: ESIOSCMRDAR

In spite of my views on the market, I run my screens every week. I look for stocks that meet the Schloss criteria -- those selling below book value with little debt and insider ownership. This helps me find the small, cheap stocks like Sycamore Networks (SCMR) trading for less than cash that I want to own now. It also helps me find companies like Darling International (DAR) -- profitable, solid companies I will want to buy in a selloff.

I also run my Ben Graham screen every week. This produces a list of profitable companies trading at P/E ratios below 8 that own at least twice as much as they owe. I may not buy shares of Forest Labs (FRX) today, but it is on my list to buy when the market reaches my downside targets. Garmin (GRMN) probably has more weakness ahead of it due to very weak consumer spending, but given its strong financial condition and dominant market share, it is on my list of recovery stocks to buy at lower prices. Running the screens and finding promising stocks now gives me time to do the homework. When the stock market gets to my levels, I will not have the time to read 10-Qs and 10-Ks. No one will ring a bell a week in advance so I can go through the institutional shareholder lists or read the latest proxy filing.

I also take advantage of what I consider my personal research department. I search at least once a week for 13-D filings of interest. When I see that an activist firm with a long-term track record of success is buying shares of Jackson Hewitt Tax Services (JTX), I want to take a deeper look at the company. If Bill Gates' investment firm Cascade buys shares of Otter Tail Power (OTTR) and wants to meet with company management, I want to look at the stock.

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