Here it is! The new Rayno Report Model portfolio for 2013. We have selected 13 stocks for 2013, in order to fight superstitious numbers with even more superstitious numbers (cheeky, eh?).

What exactly is in this portfolio? It is a collection of attractive stocks based on valuation and growth numbers. Our methodology looks for stocks that have attractive sales & profit growth relative to valuation, using forward P/E, return on equity, and growth calculations. The model likes a low P/E relative to its growth rate or Return on Equity. If the P/E is lower than its growth rate (PEG Is less than 1), excellent. If the P/E is lower than both the growth rate and the Return on Equity, fantastic! Lots of studies shows that stocks selling at a discount to growth and ROE outperform over time.

The bulk of our stocks are you would call "low-PEG" stocks that meet this formula. This could also be known as a "GARP" -- or Growth at a Reasonable Price strategy, though some of these stocks are priced low enought in P/E terms to be considered value investing.

To be clear, not all of the stocks this year fall into this strict valuation criteria. There are two indices -- the iShares Nasdaq Biotechnology index and the iShares MSCI Emerging Markets index -- which is a bet that those sectors will outperform. And I've included two precious metals companies (First Majestic Silver -- AG; and Royal Gold -- RGLD) because I believe that precious metals will reassert their outperformance in 2013. Precious metals companies are typically valued on reserve values, not P/E ratios. I think both these companies are attractively priced and silver seems especially poised for upside in 2013. Precious metals stocks have been unfairly punished by the market in 2013 because of the perceptions that their costs are too high, however I think rising metals prices and profitability in 2013 will show these fears to be overdone.

Overall, in running my screens and analysis for 2013, I was surprised at the number of quality high-growth companies available at reasonable valuations. IACI (Nasdaq: IACI), Priceline.com (Nasdaq: PCLN), and Omnicare (NYSE: OCR) all fall into that category. I like Riverbed (Nasdaq: RVBD) and have been looking forward to the day where it traded at a PEG of 1 or less, and that day is here. On this basis, the market does not appear overpriced. Many high-quality technology names appear quite cheap.

The energy sector is also appealing to me. Drillers have sold off, but Seadrill (Nasdaq: SDRL) has attractive profitability and growth and pays an 8% dividend. Northern Oil and Gas (NOG) is a small, fast-growing oil-shale in the Bakken region -- one of the strongest economic growth stories in the world. Go where things are happening!

In the interest of getting the portfolio out, here it is. I will profile these companies in the coming months.

(Disclosure: At the time of writing, the author and his direct family members owned many of the shares included in this model portfolio. He plans to own all of them by the end of Q1.)

Our model portfolio as reflected by the Investor Uprising Index is up 11% 2012, which is under-performing the S&P 500 index by 1% (it's up about 12% YTD). Yes there is one trading day left (today). I don't mind at all a positive double-digit year even if I under-perform the S&P 500, because I know that the model portfolio I have built is less risky than the market as whole and has done better in the long run. Personally I believe the S&P 500 is a flawed index.

As I have already mentioned, earlier in the year I left Investor Uprising, where we kept the new "IU25 Index" since 2010. That site is still up, but I will move my model portfolio back to the Rayno Report in 2013. Just a recap of the Rayno Report model portfolio strategy: When I suspended the Rayno Report Portfolio in 2010 to build the Investor Uprising site, it had a remarkable track record of 7 straight years with no losses. The model portfolio avoided the 2008 crash by being 100% in cash. The average annual return of the 7 public portfolios I published between 2004 and 2010 was a 52% annual gain.

All of this data has been transparent and published to my readers. I believe the methodology works and continues to work. The portfolio reflects not one single investing dogma, but a blend of things I've found work over time: 1) Looking for undervalued companies that appear to have been penalized by the market and 2) Spotting quality growth companies that are undervalued by the market (low-PEG stocks) and 3) Sticking with secular (long-term) trends.

My methodology is structured and refined. It is a multi-step process. I run tons of screens and look at every stock individually. I start with a bucket of about 30 ideas and reduce them to 10-12 for the year. Why do I think this formula works and it works consistently? Because it is disciplined and data-driven, it ignores the "noise" and emotion of the market. It's not driven by marketing hype or fads, which influences many of the "picks" in the media and by prominent brokers. In fact what you will find is some of the best performing stocks that have been selected by this formula were "discovered" when the market ignored them or didn't care.

Some of the best picks (with 12-month performance) have included Agrium (AGU), up 47%; Atwood Oceanics (ATW), up 12%; Celgene (Nasdaq: CELG), up 15%; Gilead Sciences (Nasdaq: GILD), up 78%; Priceline.com (Nasdaq: PCLN), up 28%, and Veeco Instruments, up 34%. All of these stocks were carefully selected after they screened for bargain valuations and my qualitative research determined that they would be good additions to the portfolio. I am still working on the list for 2012 which I plan to publish on January 6. It's okay with me that we miss a few trading days of 2013, I hope that's okay with you. There is still some more homework to do. Stay tuned: The list will be out next week.

As you know, The Rayno Report is religious about finding low-PEG stocks. Like a little child before Christmas, I get excited about finding them under the tree. Some of our low-PEG Hall of Fame stocks are Apple (Nasdaq: AAPL), Celgene (Nasaq: CELG) and Gilead Sciences (Nasdaq: GILD), low-PEGers that we found on these pages before they steadily took off like rocket ships.

What's a low-PEG stock? It's a stock that is priced by the market below its growth rate. Common wisdom is that "growth" stocks, with fast rates of profit and revenue growth, receive premium market valuation -- they have earned the right to be expensive. But what's interesting is that the market doesn't always assign a premium valuation to growth stocks. Sometimes they can be found on sale, for whatever reason: the market is skeptical of the name, the market thinks that growth will slow, there may be issues with the company, or our favorite reason -- the market is being irrational and wrong.

The reason I like the low-PEG stock strategy is that it lowers the risks you take for the potential for great rewards. Odds are, the crowd is wrong that a high-growth company should be valued below market rates. Take a look at Apple: the crowd has been proven wrong again and again.

These are the specific situations we seek: the market irrationally pricing in a cheap valuation on a quality growth name. So how is valuation "measured" and rationality assessed? Fortunately we have metrics like the price/earnings ratio and the PEG ratio. I like to define cheap or expensive in the terms of the price/earnings (P/E) ratio, which is generated by dividing the share price by the earnings per share (EPS). The PEG ratio is generated when you take the P/E ratio and divide that in turn by the earnings growth rate. Let's take an example: Let's say fictional Community Growth Corp. has a share price of $20, earnings of $2 per share, and a growth rate of 15% annual. The P/E ratio would be 10 ($20/$2) and the PEG would be .66 (10/15).

A low-PEG stock by my definition is any stock trading below a PEG of 1, meaning that it's P/E ratio is lower than its earnings growth rate. You might think by my description that low-PEG stocks are rare and hard to find. Oddly, in this market, they aren't! In fact Apple Inc. (Nasdaq: AAPL) by definition has been a low-PEG stock throughout its meteoric rise.

In fact, it seems like every time we run a stock screen of your basic Low-PEG ideas, Apple pops up.  But everybody knows Apple right? Its PEG is currently an absurd .48 -- low for what is considered basically to be the best company in the world. Why is this? I think the market discounts Apple because 1) it is so huge and 2) it's worried that at any minute one of its core franchises will come under sudden pressure 3) Highly publicized manufacturing issues with labor and quality control problems in China. Apple stock just dropped $100, trading closer to $600 than its all-time high of $700. If you think any of these issues is overdone buy the thing.

What about some new stuff?

I spent some hours on the weekend looking up some screens and scouring the charts for some interesting names. Two I like that meet my valuation criteria are Syntel Inc. (Nasdaq: SYNT) and Cirrus Logic Inc. (Nasdaq: CRUS).

Syntel is an IT outsourcer based in Troy, MI. Specialities include data warehousing and Web solutions, with a focus on the financial and healthcare sectors. Syntel has very solid numbers including annual net income of about $180 million on revenue of $708 million for an operating margin of 33%. It's got zero debt and $422 million in cash -- nearly $10 per share! With Syntel's shares recently trading hands at $61, it had a forward P/E of about 15 and a PEG of .87. Pretty good numbers for a company with mounds of cash, no debt, and large margins. I love situations like this.

Stock #2 is a little more well-known -- it's Cirrus Logic Inc. Now, Cirrus Logic is a manufacturer for Apple, so if you own Apple you need to be aware of the correlation. But like Apple and Syntel, Cirrus has great numbers. What's good about it is that with a $2.4 billion valuation, there is still a lot of room for growth. Cirrus earns about $90 million per years on $433 million in revenue, for a profit margin of about 19%. It's got a return on equity (ROE) of 20. The forward P/E is 12 and the PEG is .80. All of these are good numbers, in our book. In the last year or so the company has doubled its revenues and quadrupled its profits. I don't see any reason why it can't do that again, yielding a doubling in stock price.

Those are our stocks for the week. Let's see what the screens come up with next week -- I'll have more.

Apple cracked $700 in early September and has now pulled back sharply. It seems to me the pullback has to do with investor concerns over a possible labor strike at Foxconn, Apple's Chinese manufacturing facility.

Certainly, there should be concern. Conditions at Foxconn have been the subject of much controversy, and a plant-wide strike has the potential to shut down iPhone 5 production. But in the past, these things have passed. And they probably will again. More importantly, analysts I have spoken with say Apple could be prepping a huge fourth-quarter product push that many include not just one, but two new products.

The products would be a new iPad as well as the famous Apple TV everybody has been waiting for. If you don't think that Apple is prepping something big, you need to look at this very interesting analysis published by Horace Dediu the ASYMCO Website. Dediu demonstrates the relationship between Apple's groth in Capital Expenditures (CapEx) and revenue growth in new products. What's interesting is that CapEx is a leading indicator because Apple budgets this ahead of the production schedule, so you can see what the company is expecting.

In some shocking graphs, Dediu shows that CapEx has exploded in the just-ended quarter, to a new high of $3 billion, which is almost double what Apple has produced in the past -- just a few quarters ago. This sets the stages for a historic fourth quarter for Apple. Using historical data, Dediu attempted to project the relationship between share price and capial spending, based on what types of revenue growth has occurred in the past after CapEx jumps. According to him $1.5 billion in CapEx -- achieved just a quarter ago -- equates to a share price of $800. If history is any guide, Apple's $3 billion in CapEx would correspond to a doubling of share price from there -- to $1,600.

Of course past history is not guarantee of future results. As of this moment, the market believes a bigger concern are the working conditions in Foxconn. Will it be yet another grand buying opportunity for Apple? I have picked up some Apple shares in the $660 area on this weakness. That's a nice pullback from the all-time high of $700. Apple stock is still cheap with a P/E in the 14 range and a PEG of .63, so it's worth holding. I would no want to miss out on a possible explosion to $1,600 per share

Disclosure: Long Apple

It's been a while since we've updated the goings-on in our model portfolio, which tracks selections based on our proprietary stock-selection formula.

In 2011 I moved my stock-selection process over to www.investoruprising.com, a new Website that I built with UBM for PR Newswire. We created an index based on our stock selection system called the Investor Uprising 25 (IU25). The IU25 Index, which can be tracked in real time here, is up 32% Year-to-date (YTD)! That beats pretty much all of the major averages.

Although the index still has a short track record -- less than 24 months, the way it has behaved affirms my general strategy for picking stocks and building a portfolio -- it requires sticking to a very disciplined, long-term approach based on a value criteria. I don't necessarily buy stocks when everybody likes them, and I don't necessarily buy stocks when everybody hates them (though we try to buy more in the latter case). What I do is try to do is buy the best individual stocks with the most reasonable valuations at certain points in time.

Think of it as shopping for clothes... you want to get the best clothes at the most reaonable price. That requires going shopping often and maybe having to wait until things are on sale.

Here's how I operate my stock-selection system general: I run computer screens of the market and get a group of interesting stocks. Then I further research and analyze them until I believe I can narrow the selection down. I would describe the filtering process as such: 1) Good valuation? 2) Good growth record? 3) Good company? It's very rare that people buy stocks because of these three reasons. I believe that if you look at each particular case, you further reduce the risk in buying a stock. A great company can be available at too high a price. A stock can look cheap until you look under the hood and see the company is terribly managed and not an industry leader.

When all things come together great things can happen. An example I am most proud of is Gilead Sciences (Nasdaq: GILD), one of the IU25's core holdings, which I banged on about for many years. It is a great company, very well run. It got extraordinarily cheap, with a P/E under 10 as it traded as low as the mid-30s. People hated it in 2010. Have a look at the chart, it's very interesting! I bought it, because I believed in the company and I believed in the value. It is now one of this year's best-performing stocks with price north of $60 and just this week hit a new 52-week high.

Because this system ignores the natural bi-polar action of the market, which tends to oscillate between euphoria and panic, we are not always acquiring the trendiest and hottest stocks of the moment.

A great example of this is that we were buying gold stocks when everybody hated them. Often what we acquire are considered "dogs" -- because their valuations are cheap. For this reason, the approach requires patience. Buying mining stocks was the right thing to do, because they were cheap and they have roared back ferociously.

But conversely, we don't necessarly always buy things when they are beaten down. They can still be climbing -- as long as they are cheap relative to the growth rate. A great example of this is Apple, which has always been in our index. The reason? It's always had a very reasonable valuation -- a P/E below 12 generally -- with a high relative growth rate. Apple has historically been a cheap buy in the market.

Another great example is that a few years ago, during the 2009-2012 timeframe, my screening system was spitting out lots of drug stocks such as Merck (NYSE: MRK), Pfizer (NYSE: PFE), and Abbott Labs (NYSE: ABT). They were also paying outstanding dividends, sometimes above 5%. I bought some of these, but the process was painfully slow. These stocks were coming out of 10-year bear markets, and they flatlined for a long time before starting to climb again. But recently they have been outperforming very well.

Using such a system to outperform the market can be boring, because it is often slow, and requires patience. This is not a rapid-fire trading system. It requires trusting the system. At several points in the last year, the IU25 Index and my model portfolios were lagging, bringing out cirticism and self-doubt. But working through this and having patience is the hallmark of great investors.

All of the data on the IU25 Index, which was launched in April, 2011, can be viewed here.

Here are a few facts about the IU25 Index:

Performance, YTD: +32%

Performance, 12 months: +33%

Performance, six months: +6%

Over the last 12 months: 17 gainers, 8 losers

Two biggest gainers: Apple Inc, up 70%; Gilead Sciences, up 65%

Two biggest losers: First Solar, down 72%; Cliffs Natural, down 42%

A word about the future: There will be changes coming and I will be building a new model portfolio for 2013. The reason is that I am no longer with Investor Uprising. Going forward, I will continue to update you with stock selections and new model portfolios on the Raynoreport.com Website. Please check back for updates!

Have you noticed that mobile networks are becoming increasingly commoditized and more efficient for the consumer? Years ago, text-messaging was a value-added service, now bundles of unlimited text messages are common. And while unlimited data plans are no longer widely available, mobile bandwidth is becoming cheaper and more plentiful. The ultimate trend is that profit margins in pure connectivity and basic services are becoming tighter for mobile service providers.

Another big threat to the mobile operators is the app and social-media revolution. This puts pressure on their own messaging services, such as SMS, as users migrated to social-networking tools such as Facebook and Twitter to communicate with other users over the mobile platform.

So, as usual, mobile providers have to look for ways to diversify into new revenue streams. Clearly the app ecosystem is one place to look, although it's unclear exactly how mobile providers can profit from apps as many apps are downloaded from third parties. In the case of the Apple OS, it's Apple that controls the revenue channel -- and clearly service providers have made little headway in breaking down that relationship.

So what's next? Service providers have to look at a spate of new potential business models as the mobile device takes over the world. Here are the top contenders for new revenue-generating services in the mobile network:

Apple is probably the best business competitor in the world. And when you win, eventually you will have to deal with anti-trust accusations, much as Microsoft dealt with in operating systems in the 1990s. Anti-trust actions are famously difficult to prove, but I think in the coming years you'll hear more about it with Apple because it controls huge amounts of business.

I wrote about this a couple weeks back on Investor Uprising, but I thought it would be good to summarize what about Apple makes it so dominant in the market... for, well, everything.

Apple, after all, is not just growing in one segment. It's actually taking huge chunks of profit  out of entire industries.

Apple also enjoys fatter profit margins because of its vertically integrated model -- which has come at the expense of telecom providers who must subsidize customers' never-ending thirst for iPhones and iPads. It also allows Apple to build in excess profits into components such as chips, because it can charge a premium.

 Let's just look at some facts about Apple's dominance.

• Apple has single-handedly boosted the stock market. Bloomberg tells us that Apple alone has accounted for 8% of the S&P 500's rise since the 2009 bottom. And Barclay's analysts recently pointed out that Apple has had an outsized influence on the markets, accounting for 15% of the growth in all of the S&P's rise this year. They estimate Apple contributed four times its weight to the index by having outsized profits. So maybe the government should launch an inquiry into Apple controlling the stock market.

   

• Apple's profits account for most of recent profit growth. According to FactSet research, if you subtract Apple's earnings from the market in the fourth quarter 2011, profit growth for all of the S&P 500 was -1.6%. With Apple profit growth added back in, overall profit growth was flat. That's right folks -- without Apple, there would be no growth in profits. It alone accounted for all of the profit growth in S&P 500 in the last quarter last year, and FactSet expects Apple to the be the largest source of earnings growth in Q1 2012.

   

• Apple leverages major telecoms through subsidies. The retail price on a new iPhone can be as high as $600. A telecom carrier will sell it to you for $199. Think about Apple's core sales channel: telecom operators. Apple has so much leverage that it can largely dictate the terms in these relationships so that telecom operators subsidize sales of its devices.

  In extreme cases, such as the deal with Sprint, the subsidy is a simple transfer of wealth from carrier to Apple. Sprint tagged its subsidy expense at $1.7 billion, up from $1.2 billion a year earlier. Some analysts predict this can't last, that Apple has to give back more of its profits to carriers. But Apple's immense leverage means it can dictate the terms.

• Apple is taking over all of retail electronics. Blog site Zero Hedge recently calculated that Apple's market capitalization now surpasses that of the entire retail industry. How is this possible? Well, as i-devices have added functionality such as music, communications, and video, they have eliminated entire segments of the industry. Maybe this is contributing to Sony's recent woes. Once you have an iPad, you need a portable DVD player?

   

• Apple's winning the smartphone profit battle. Though it's having a see-saw battle with the Android-powered mobile phones and can't quite gain majority market share, Apple recently gained some share back and now represents 43% of the smartphone market to Android's 53%, according to the NPD group. But more importantly, Apple makes more money in this market. Keep in mind that Google does not profit on Android directly because it gives its operating system away for free to phone manufacturers, whereas Apple controls its own manufacturing from the Operating System (OS) to the memory chips. Apple's model results in more profit, because it can charge more for all of the components in its product, including the OS. Even though it's not winning top market share, Apple is winning on profitability.

   

• Apple controls digital music. Remember the music industry? Apple's influence and control of digital music is still growing. It now accounts for 69% of all digital music sales. Amazon is a distant second with 8 percent, according to the NPD group. Apple's growth in digital sales means it now serves up about 25% of all music units, which includes physical units (even though Apple sells no physical music units), according to the NPD group. That's up from 14% in 2007.

I think that Apple's growing power and dominance in a number of industries is likely to be a topic for trade regulators for some time. The regulators have plenty of areas to mine, most notably Apple's control of the relationships in the telecommunications sales channel.

Will they make any progress? It may take years and years, but eventually you may see more legal action against Apple in the realm of anti-trust actions.

Don't get me wrong: I think Apple earned the control of markets that it has. It has better products, and it's a better company. We're also not crying because Apple is one of the leading components of our IU25 Index, which is up 35% in one year.

But it's not just about e-books. Apple's immense control now extends to the broad range of the entire business universe.

Our screening system has delivered some great stock ideas over the years. Our screen looks for leading companies whose valuations are reasonable in relation to growth rates and Return on Equity (ROE).

Here's an example from February 11, 2010 -- in which I said Microsoft, Apple, Sybase, and Gulfmark Offshore were buys:

Stock Buys for the Baklava Bailout.

Solid picks from two years ago. Sybase was bought at a 40% premium, Apple has doubled, Gulfmark is up 40%, Microsoft is up about 15% and has paid you a 3% dividend all along.

I frequently publish these screens and send them to readers and friends. Their first instinct is to analyze every pick. "But isn't Microsoft shrinking Windows deployments?" Don't do this. The point of a screen-based portfolio is to follow the computer and ignore your more likely faulty human logic.

Even if you have sector-specific "knowledge," it can be damaging to use it. The numbers don't lie. Often when companies are cheap it just means they are cheap, and then suddenly somebody buys them. This is exactly what happened with Sybase just three months after it made my screen.

Look at Apple. How many people underinvested in Apple? How many people tried to over-analyze whether they could expand another market, like Pad computing? The stock has been cheap for six years. It's still cheap -- currently trading at a forward P/E of 12.

Enough said. Here is the new screen, which I have published on Investor Uprising in our new Market Report. 

Disclosure: I currently own Buffalo Wild Wings and I am looking to acquire more of these stocks over time. Positions can change at any time.

Table 1: Our Stock Shopping LIst

Returned from CES last week. Slept for a couple days. Woke up. Tried to remember something that will change the world. Couldn't think of anything.

Here's a problem: CES is becoming like the old Comdex. It's like a giant star that's gotten too big and general and will soon Supernova and collapse in upon itself.

Here's another problem. Apple generates the most excitement, both form the technology and a investment perspective, in the mobile consumer electronics space. And Apple doesn't go to CES. So what you have is a gigantic hallway filled with 150,000 people trying to copy Apple.

What's more important is what Apple will do next. Apple will do a sleeker tablet with LTE connectivity. Apple will try to do TV -- again.

That being said, there was stuff to listen to. If you want a list of some potential future tech trends, I wrote about some futuristic stuff on Investor Uprising.

In terms of investment ideas, I believe that the place to look in mobile and consumer is in suppliers and chips, because clearly as devices multiply it opens up many chip markets for many players. Read my CES Investor's Guide on Investor Uprising.

Next week I am launching a new Website for PRNewswire called Investor Uprising. It is going to focus on high-quality investment opportunities and business trends. We'll also pick and watch lots of stocks on a GARP (Growth at a Reasonable Price) basis.

For the first project, we are creating a list of 30 companies which we will use to build an Index. This comes from a methodology I have used for 10 years to screen stocks and build "monkey" portfolios that can be bought and passively left alone. Using this method, the portfolios have averaged a 30% (cumulative) return since 2006 and none of them has ever lost money.

Next week you will find these stock picks on Investor Uprising (which has not yet launched), but today I'm going to give you four of them. Here are some low-PEG stocks we will be following at Investor Uprising.

Dolby Laboratories (DLB)

 12-month sales growth: 28%

12-month income growth: 17%

Forward P/E: 15

Return on Equity: 20%

PEG Ratio: 1

Summary: Dolby is dominating the business for digital music tools. Specifically, it licenses many of the leading digital sound and signal processing systems for digital film, DVS, Blu-ray, and digital 3D systems. It has been steadily growing for years.

Veeco Instruments Inc. (VECO)

 12-month sales growth: 150%

12-month income growth: 1,000%

Forward P/E: 13

Return on Equity: 46%

PEG Ratio: .72

Qualitative: Veeco is a leading manufacturer of important manufacturing and testing equipment in the LED, solar, and seminconductor market. It also makes equipment for the manufacturing of disk drives. If Veeco's growth rates seem absnormally hight, its because it swung from losses to a profit in 2010, yielding what looks like spectacular earnings growth. It has also growth its revenue through merger.

Gilead Sciences Inc. (GILD)

 12-month sales growth: 0%

12-month income growth: -20%

Forward P/E: 9

Return on Equity: 45%

PEG Ratio: .70

Qualitative: Gilead is an extremely well-managed biotech company with a long track record of high ROE. Recently, it's revenues have been flat and earnings have shrunk due to maturity of some key drug markets. However, it is still enormously profitable, booking $2.9B in profits in 2010, and its valuation is just plain cheap.

Medifast Inc. (MED)

12-month sales growth: 57%

12-month income growth: 147%

Forward P/E: 10

Return on Equity: 33%

PEG Ratio: .50

Qualitative: Medifast is a fast-growing producer of diet supplements and nutrition products. The Medifast brands include many varieties of diet and weight-loss shakes, vitamins, food bars, and other food products.

Stay tuned for the launch of the new site! We are looking for moderators and bloggers. If you are interested, ping me at scott.raynovich@investoruprising.com.