Here's a theory I'm toying with. Please poke holes in it.
The theory is to use PEG ratio on large or mega cap stocks (10 bill+) making money hand over fist to decide on a long.
http://en.wikipedia.org/wiki/PEG_ratio
I've used Yahoo Finance for PEGR, which is measured over 5 years, which is a pretty good range to see company growth. The idea is that mega cap stocks that are making lots of money tend not to be super volatile, which is one of the problems of PEGR. If the megacap stock has been growing over the past five years and their PEGR is between 0 and 1, then they are most likely to be undervalued, and, barring any particular bad news about the company to the contrary, can pretty much be autobought and held until the PEGR approaches 1 again, whereupon it reaches fair value and can be sold.
A caveat that I will add is that stocks that have been hyped up in the news or have displayed ridiculous volatility in the past should be discarded.
A quick glance from that metric provides the following:
AAPL, BMW.DE, BAC, CAT, C, and GOOG to name a few well known examples.
From that list, AAPL and GOOG strike me as being very hyped in the news, so they should be ignored. BAC and C are probably too volatile and violate the "making money hand over fist" rule, so those are discarded.
BMW.DE is interesting, because I don't see anything about them in the news really, good or bad, though they are not particularly making absurd amounts of money. It may be a good long.
CAT strikes me as a very good long based on that metric.
I don't think investing could be this easy, so what is wrong with this?