What should investors do when market conditions are such that the system they use is less valid? That is what we are facing to some degree as markets have skyrocketed to record levels. Our ability to purchase out-of-favour stocks at enticing valuations has become much more difficult.

Benj recently did his review of all of the stocks on the TSX using Globe Investor’s stock filter tool. Based on his criteria, only three new companies passed the initial screen of having been listed for 10 years and being badly beaten down in price, while having traded at much higher levels for a good part of the preceding decade. Normally, the research unveils 20 to 30 candidates, from which we winnow down the field further with additional screens.

Evidently, the pickings out there are slim.

This does not mean that the Stock Watch List is devoid of potential acquisitions. There are many enterprises that were previously on the roll — some for only six months or so, but many for years. Alas, numerous entries that were once of interest have lost their appeal as they increased in price. Some other corporations have become so woebegone or filed for bankruptcy, and therefore no longer warrant attention.

Of course, at various times other systems fall out of favour, or certainly should. For example, we have difficulty fathoming why people would use a buy-and-hold approach for mutual funds and ETFs that focus on particular sectors. At certain points in time, all sectors lose their attraction and value.

That is why wise investors should consider that, when a sector is hot, it may be shrewd to take some money off the table or get out altogether — think technology in 2000, or oil in 2008, or gold in 2012, or . . . you get the idea.

The system we deploy to choose companies is effectively a compilation. Value is at its base, and that is in short supply at the moment. But our methodology also includes fundamental and technical analysis, and there are numerous other items on our checklist. Momentum is also a key factor, especially when looking to sell.

In our perfect world, we will buy a stock under $5, and when it goes above $10 institutional buying will kick in, shooting the stock price up further. Of course, momentum is a two-edged sword, and when stocks swoon, the systems with “mo” as a central ingredient also fall out of favour.

What is the solution for us at this point in time? Since we are very selective in buying and normally do not purchase many positions in a year, cherry-picking some beauties from a smaller pool always remains a real possibility.

And being at an age where we have done this for decades, we do live by the adage that another train will arrive because another downturn is always on the horizon, presenting ripe opportunities. At the end of the day, patience remains our watchword.