The first step in our rating system is to determine whether a stock is a growth stock or a cyclical stock.

If the stock has a growth rate of 9%, or more, it is classified as growth; if the figure is under 9% it is cyclical; of course, these are guidelines and there can be exceptions.

If the stock is in the growth category it is evaluated in terms of debt/equity ratio; P/E ratio; demonstrated management ability; past 2-5 years earnings; current earnings; next 2-5 years earnings estimates; and finally, the very important yield.

If the stock is cyclical we emphasize the cash flow and the book value.

On the technical side, we consider the chart pattern; the moving average; the relative strength; and the chart in Elliott terms. The stock is then given a number; #1 is substantially undervalued (top pick); #2 is moderately undervalued; #3 is average; #4 is moderately overvalued; #5 is substantially overvalued.