The Stoplight System with Tykr founder Sean Tepper

What It Covers

Sean Tepper, founder of stock analysis platform Tykr, explains his stoplight rating system for value investing — scoring stocks green, gray, or red based on eight financial metrics across 16 quarters and a 50% margin of safety threshold, helping everyday investors replicate fundamentals-based strategies used by billionaire investors.

Key Questions Answered

• •The Stoplight System: Tykr rates stocks across two criteria: a financial health score of 50 or higher (measuring revenue, net income, EPS, free cash flow, assets, equity growth, plus declining liabilities and debt across 16 quarters) and a margin of safety of 50% or higher. Green means both criteria are met; gray means one; red means neither.
• •The Seven Rating: A secondary checklist scores stocks zero to seven, checking on-sale status, financial score, margin of safety, four-M score above 80, five-year returns beating the S&P 500's 80% benchmark, three consecutive quarters of rising EPS, and three quarters of beating earnings estimates. Only 42 of 51,000 stocks currently score a perfect seven.
• •Stockpiling Strategy: Rather than reacting to market drops with fear, value investors should treat price declines as buying opportunities. Each week, identify which holdings are down the most and purchase additional shares to lower the cost basis. Sell only when a stock flips to overpriced — red rating combined with a four-M score below 60.
• •Portfolio Concentration: Wealth-building investors should hold 10 to 15 stocks maximum, not broad ETFs or mutual funds. Over-diversifying into 30-plus positions effectively replicates an index fund and reduces return potential. Tykr's community averages 18% annual returns over five years versus the S&P 500's 12%, attributed largely to concentrated, high-conviction positions.
• •EPS as the Primary Metric: Earnings per share is the single most consequential line on any financial statement for stock analysis. Tykr specifically looks for three consecutive quarters of rising EPS before assigning high scores. Stocks like Nvidia show EPS climbing from $1.31 to $1.77 to $2.40 sequentially — the pattern that signals institutional-grade business performance.