The First Place Winner of the VectorVest 2008 Bear Market Beaters Contest is Mr. David Silber, currently living in Boca Raton, FL. David has been a VectorVest subscriber since 2002 and was fully prepared to become the winner of the $2,500.00 First Place Award. He attended virtually every type of educational Clinic, Seminar and Workshop we give and he owns a VectorVest Simulator. What more could you ask for?

His strategy is named Silber's Singles/BMB and it showed a 56.17% gain from November 1, 2007 through March 7, 2008. Fantastic!

Last week I wrote about the differences in the approaches used to beat the bear market by the Second and Third Place Winners. This week I'm going to write about the similarities between David's First Place strategy and Eugene Blyar's Second Place strategy. First, let us consider the all-important subject of the sort. David's strategy sorts stocks by RS/RT Desc. Eugene's strategy sorts stock's by RV/RT Desc. Amazing! Both RS/RT and RV/RT are "bottom fishing" sorts because low RT ranks stocks highest that have been beaten down the most in price. Although RS is quite different from RV, both sorts also favor stocks with the better array of fundamentals. Is RS/RT a better sort than RV/RT? I don't know. I haven't done enough testing to know. But I do know that this is the first instance of using RS/RT as a sort that I can recall while RV/RT has been used in many successful strategies.

In regard to stock selection criteria, both strategies used Price - (Actual) > 2 and AvgVol > 100000. David did not forget about valuation, however. He included the following line of code: GPE > 1, which is a classic measure of valuation.

Now let's look at another extremely interesting comparison, the exit criteria. David's strategy uses an incredible %G/L combination of a 3% Gain and 10% Loss. How can this combination produce any profits? Everyone knows that any reasonable person would use a ratio of two or better. How could you expect to make any money when you make only 3% on your winners and lose 10% on every loser?

You may recall that last week I said, "Another interesting point is that both Eugene and Richard used a %G/L ratio of 2.00 or greater. This fact is especially important in Eugene's strategy because his win/loss ratio was about 1/2." David's strategy produces about 3 winners for every 2 losers, which is very good but not good enough to make the math work out. So how does David do it?

The answer is simple. A lot of David's trades make more than 3% and many of his losses may have been less than 10%. This comes about because the decision to sell a stock is made at the end-of-the day based upon the closing price. The execution of the order to sell is made the next day at a price which may be above or below the prior day's close. So the actual gain or loss on any specific trade may be well above or below the 3% Gain and 10% Loss limits.

Is this strategy practical? Our tests showed that 237 trades were made over the test period of about 80 days. So that works out to about three trades each day. That's not outrageous. I haven't done it, but if I were to try this strategy with real money, here's how I'd do it:

1. Run Silber's Singles/BMB within Portfolio Manager to see which stocks to buy and how many shares to buy.
2. Place limit orders, good for the day, to buy to open at 1/8 point above the previous close.
3. Place orders to trigger a 10% Stop-Loss on each position that was opened.
4. At the end-of-the day, check to see which stocks had a gain of 3% or greater.
5. Place limit orders to sell the stocks identified in Step (4) at the previous day's close or better.
6. Return to Step (1).

If I didn't want to do this every day, I'd do Step (1) on a week-end and buy my stocks on Monday. I would sell stocks during the week as indicated above, but I wouldn't open any new positions until the following Monday. I back-tested a Silber's Singles/BMB in this fashion since November 1, 2007 and produced about a 20% gain...not close to the day-to-day combat, but not bad.

Overall, I want to congratulate each of our Bear Market Beaters Contest Winners for the outstanding jobs you have done. Each strategy is intriguing in its own way and I plan to do more work with each of them...especially Silber's Singles/BMB.