Investing Site Odds & Ends

Here are some odds and ends about sites or stock picking strategies that I’ve described in recent columns.

Bankrupt Contrarian
Last month I described a group of 19 stock portfolios available on the Reuters Investor site (www.investor.reuters.com). The portfolios are updated daily using screens developed by Reuters’ Director of Investment Research, Mark Gerstein.

In the column, I mentioned that Gerstein’s Contrarian Opportunities portfolio was the most volatile, but produced the highest returns. Several readers wrote to tell me that one of the stocks listed in the then current Contrarian portfolio had filed for bankruptcy. Some of you even asked if you should buy the bankrupt stock.

That incident illustrates what every investor should remember about all stocks picked by screening programs: Consider the results of any stock screen, no matter how well designed, as a list of research candidates, not a buy list.

Regarding the stock in question, never buy a bankrupt stock unless you have solid information that shareholders will not be wiped out in the bankruptcy process. In most cases, when the company reorganizes, bondholders get new stock and the old stock is worthless.

Portfolio123 Changes
In April, I described Portfolio123 (www.portfolio123.com), a site that offers tools for automatically creating and managing stock portfolios. You could develop your own buy and sell strategies, or you could select from a menu of 24 pre-defined trading systems. Before investing real money, you could run a simulation showing how much you would have made or lost by following each of the trading systems since March 2001, which is as far back as the site’s database goes.

When I wrote my original column the site was still under development and everything was free. Unfortunately, that is no longer the case. Now you must become a paid member to access most of the site’s tools. Fees range from $9.95 per month for an Entry Level membership up to $99.95 to access all of its features.

But the news isn’t all bad. Portfolio123 recently added a stock screening program that, at least in my view, is the most powerful available on the Web to individual investors.

It not only offers more screening parameters than other search programs, but you can combine two or more parameters into a single statement. For instance, you can subtract long-term capital spending growth (one parameter) from sales growth (second parameter) to come up with companies that are spending adequately on new plants and equipment.

The number of available screening parameters varies with the membership level purchased. However, the parameters offered with the $9.95 Entry Level membership should be enough to satisfy most investor’s needs. Portfolio123’s founder, Marco Salerno, told me that he will soon be adding a backtest feature to the screen, but using that will set you back $39.95 per month.

O’Shaughnessy: How Long?
Several readers wrote to ask how long they should hold stocks turned up by O’Shaughnessy’s Cornerstone Growth stock picking strategy that I described in a recent column. As you may recall, O’Shaughnessy’s strategy, which has produced market-beating results in good times and bad, is remarkably simple to implement. All you have to do is list all stocks with price/sales ratios below 1.5, and with earnings higher (by any amount) than the prior year. From that list, pick the 16 stocks with the highest percentage returns over the past 12-months.

What I didn’t make clear in the column was that you are supposed to hold the portfolio for 12-months and then sell the stocks and repeat the process.

Wall Street City Going
Wall Street City (www.wallstreetcity.com), one of the best investing sites, will cease to exist as of November 1. That’s too bad, especially since I just featured WSC’s easy to use Quick Search stock screener in this space a couple of months ago. Quick Search, plus WSC’s powerful sector analysis tools, to my knowledge, are not available anywhere else.

The Quick Search screener’s most compelling feature was its ease of use. However, I’m told that WSC’s ProSearch screener, which provides many more screening variables, will still be available on the Business Week site (www.businessweek.com). To get there from Business Week’s homepage, select Stocks on the Investing menu, and then scroll down to the Investing Tools section and click on Stock Screeners.

Note: as of 1/17/07, Business Week's screeners were no longer available. You can run similar screens using MSN Money's Deluxe Screener (moneycentral.msn.com) or Reuters Investor's PowerScreener Lite (www.investor.reuters.com). MSN's screener requires downloading special software and Reuters' screener requires registration, but both are free.

WSC’s portfolio tracker, which allows you to track a variety of fundamental factors such as insider trading and analysts’ buy/sell ratings for each stock, will also still be available on the Business Week site. In fact, Business Week’s version is better, because it also shows you S&P Star rating for each of your portfolio stocks that S&P follows.

As with the screeners, you can access Business Week’s portfolio tracker from its Stock Tools menu. Business Week doesn’t charge for these features, but you have to register to use its portfolio tracker.

Wall Street City’s demise continues an unfortunate trend. Many great investing sites were established in the late 1990s when nobody worried much about a site’s ability to turn a profit. Now reality has set in. One by one, most of the free sites are disappearing or converting to a subscription model.
published 10/17/04