Performance of Price Projector Model

Using our Price Projector Model, Channel Trend has calculated the price appreciation potential of stocks for many years. The stocks are ranked from #1 (best upside potential) down to the lowest ranked.

Our Model systematically captures information that can be used to trade stocks better than random stock picking. We believe this is conclusively proven by the following analysis of our rankings from 1997 through 2009.

The population of ranked stocks consists of all stocks in the Value Line Investment Survey: approximately 1700 stocks of leading companies in 97 industries. For purposes of this presentation, we have divided our stock rankings into ten deciles. Each decile thus consists of approximately 170 stocks. Decile #1 is comprised of those stocks that are ranked in the top 10% of the population of stocks in our coverage, i.e., the top 170 stocks. Decile #2 consists of the stocks in the 2nd 10%, and so on.

Here are the highlights:

• The average annualized percent change in price of the entire population of stocks was 8.77%. This is the benchmark we use to grade our own performance.

• Against that benchmark, we have compared the performance of each of the deciles.

• The top two deciles had an average annualized rate of return of 15.31%, which is 6.54 percentage points better than the population average of 8.77%.

• The bottom two deciles had an average annualized rate of return of 5.18%, which is 3.59 percentage points below the population average of 8.77%.

• In our opinion the six middle deciles do not convey sufficient information to be useful for portfolio management purposes.

The decile-by-decile performance, and the performance of the average of the population, is shown in the graph below.