This guy has an incredible strategy. It's so easy an elementary school aged child could follow it successfully.
It's based on two basic ideas. You want to invest in:
1. Good companies
2. Cheap companies
How does he measure this? How "good" a company is, is measured by its . A companies return on capital employed measures how good it is, while its price-earnings (PE) ratio (how much you pay per dollar of (adjusted) earnings) measures how cheap it is.
With this basic information he:
1. Takes a list of companies (list size depends on how small of a market cap you are willing to invest in (market cap = share price * # of shares outstanding))
2. Ranks each stock from 1 to n (with 1 being best, 2 being 2nd best, etc) on its return on capital employed and then again on its PE ratio.
3. Combine the two ranks for each company
4. Invest in the top ranking (combined ranks) 20-30 companies
5. Repeat each year
This is the simple method, a more advanced analyst can add some slightly more complicated steps. However, his data shows incredible returns when using this simple strategy.
Check out this video of him talking about his approach: