Nov 5, 2025
The 6 Filters That Cut Out 95% of Weak Stocks
Every investor dreams of finding “the next Tesla.” That one stock that doubles, triples, or changes everything. But history shows that chasing winners is one of the fastest ways to underperform the market.
Why?
Because most people evaluate companies in isolation, based on headlines, hype, or surface-level metrics, instead of asking a simpler, smarter question:
“What should I eliminate first?”
Filtering out bad investments is the foundation of smart portfolio design. It’s how institutional investors think, and it’s the mindset trade & tonic was built around.
1. Revenue Growth Above 12%
If a company can’t grow sales by double digits, it’s already behind. Markets reward growth because it compounds and compounding is the single most powerful force in finance.
Why it matters: No growth means no momentum.
Example: NVIDIA has averaged over 30% annual revenue growth for the last decade.
A $10,000 investment in 2013 would now be worth over $1.2 million.
In trade & tonic, revenue growth is tracked alongside industry and stage peers so you know whether strong numbers are truly exceptional or just average.
Share Dilution Below 2%
Every time a company issues new shares, your ownership shrinks.
It’s silent erosion that investors often overlook.
Why it matters: Dilution means management is paying itself with your equity.
Example: Apple reduced its share count by over 40% in the last 10 years — a direct signal of shareholder alignment.
trade & tonic’s ownership structure analysis flags when dilution becomes a problem, so you can avoid companies that quietly devalue their investors.
Net Debt to Free Cash Flow Below 5x
Debt is leverage, until it becomes liability.
If it takes more than five years of cash flow to pay off debt, that company is walking a tightrope.
Why it matters: Low debt = resilience in downturns.
Example: Alphabet (Google) carries almost no net debt. That flexibility lets it expand while others cut costs.
trade & tonic adjusts debt metrics by industry norms, giving you context for what’s considered safe vs. risky in each sector.
4. Free Cash Flow Growth Above 15%
Profits on paper don’t pay dividends. Cash does. Free cash flow (FCF) is what’s left after expenses, taxes, and investments, the lifeblood of buybacks, expansion, and long-term survival.
Why it matters: If cash flow isn’t growing, the business isn’t either.
Example: Microsoft’s FCF has grown ~17% annually for the past decade, funding both shareholder returns and new innovation.
trade & tonic’s tracks FCF growth against reinvestment rates, showing whether a company is scaling efficiently or burning capital.
5. Return on Invested Capital Above 15%
ROIC measures how well a company turns capital into profit, and it’s one of Warren Buffett’s favorite metrics.
High ROIC = a company with a moat.
Low ROIC = capital wasted.
Why it matters: It’s the purest test of operational quality.
Example: Visa consistently delivers ROIC north of 20%, generating massive profits from every dollar invested.
trade & tonic benchmarks ROIC against peer medians, highlighting which companies are true capital compounding machines.
Earnings Per Share Growth Above 15%
If earnings don’t grow, stock prices eventually stop too.
EPS growth is what drives long-term value — it compounds wealth just like interest does.
Why it matters: Compounding EPS = compounding portfolio returns.
Example: Costco has maintained 15%+ annual EPS growth for a decade, building investor trust and a sixfold stock price increase.
trade & tonic’s AI continuously refreshes EPS trends, so your analysis reflects current performance, not last quarter’s story.
The Real Edge: Discipline Over Prediction
Most investors look for signals of success.
The best ones look for signs of weakness and remove them first. This approach doesn’t require you to “predict” markets. It simply ensures you’re investing only in companies that already meet the highest standards of financial health, efficiency, and growth consistency.
That’s the mindset embedded in trade & tonic’s analysis engine.
Our system screens thousands of public companies through multi-layered AI filters, combining technical, fundamental, and contextual metrics to narrow the universe to what truly matters.
Because in investing, clarity isn’t about having more data. It’s about knowing which data to ignore.
By focusing on elimination first, you build portfolios that survive shocks and capture long-term compounding without guessing what’s next. trade & tonic helps you get there, automatically.
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trade & tonic is an intelligent investment analysis platform built for thoughtful investors who want to understand why a stock moves, not just whether it will go up or down. It combines advanced AI models with time-tested investing principles to deliver transparent, easy-to-understand insights that replace noise with clarity.
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