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Get a
Second Opinion
Even if
you’ve done a thorough job of analyzing a stock, it pays to get a
second opinion before you buy. Here are three sites ready and willing to
give you their take on your picks. All rely on computer formulas to do
the analysis.
VectorVest
VectorVest (www.vectorvest.com),
at least in my view, offers the most comprehensive analysis available on
the Web. VectorVest goes beyond simply giving you an overall “buy,”
“hold” or “sell” rating. It generates a detailed multi page
report offering its opinion of a stock’s valuation, safety, dividends,
and more.
VectorVest’s
analysis is based mostly on fundamentals such as valuation and
profitability factors, debt levels, and earnings forecasts. However, it
also considers a stock’s recent price action when it calculates its
overall buy/sell rating.
VectorVest
requires a subscription for unlimited access to its reports. But it does
give non-subscribers a maximum of three free reports daily, with a
lifetime limit of 50 reports. The only hitch is that you can’t see the
ratings on its site. Instead, VectorVest sends your requested report via
email.
Navellier’s
Stock Grader
Louis Navellier is one of the pioneers of quantitative investing, which
is the process of using computer formulas to pick stocks.
Although it
has slipped in recent months, his MPT Review is usually listed among the
top stock market newsletters over the past 10 and 15-year periods by
newsletter rating outfits such as the Hulbert Financial Digest.
Navellier is
a momentum style investor meaning that he looks for stocks with strong
recent earnings growth, with expectations that future growth rates will
be even stronger, and are currently outperforming the market in terms of
stock price action.
Navellier
makes his Stock Grader Database, a version of the system he uses to pick
stocks for MPT Review, available free at stocks.navellier.com.
Navellier’s Stock Grader gives each stock an overall fundamental grade
ranging from ‘A’ to ‘F’ based on a variety of financial
statement criteria.
Then,
Navellier combines the fundamental grade with a proprietary quantitative
grade that measures past stock price appreciation compared to historical
risk, to produce a Total Stock Grade.
If you’re a
fundamentally inclined investor, stocks with ‘A’ or ‘B’ overall
fundamental grades are your best prospects. On the other hand, as I
mentioned earlier, momentum investors consider recent strong price
action equally, if not more important, than strong fundamentals. If
you’re in that camp, stick with stocks earning ‘A’ or ‘B’
total stock grades.
Stockscores
Technical analysts, or
chartists, don’t pay much attention to a company’s fundamentals. In
their view, everything worth knowing about a stock can be gleaned from
its price chart.
For instance,
the charts will tell you when in-the-know investors are loading up on a
stock in advance of a positive report, or dumping their holdings in
anticipation of bad news that hasn’t yet been announced.
While some
investors scoff at such talk, I’ve found that it pays to look at a
stock’s price chart before buying.
However,
interpreting stock charts can be a subjective exercise. Experts often
disagree on the meaning of the same chart. But Tyler Bollhorn at
Stockscores.com has gone a long way to solving that dilemma by devising
a formula that produces numerical scores that reflect price chart
strength.
Bollhorn, age
34, says he started trading stocks when he was 18. He devised his
scoring formula to help him quickly pinpoint promising stocks.
Bollhorn
didn’t reinvent the wheel. His formula quantifies commonly followed
technical analysis concepts with a few proprietary twists that he says
improves its predictive power.
He gives the
highest scores to stocks that had been quietly consolidating (not moving
much in either direction), but are currently moving above their former
trading range on increasing daily trading volume. Technical analysts
refer to this condition as “breaking out on high volume.” Short of
that ideal, stocks that are trending up, that is, moving steadily higher
in price, are awarded the highest scores.
Bollhorn’s
Quick Report, available from Stockscore’s homepage (www.stockscores.com),
displays two scores:
the Signal StockScore, and Sentiment Stockscore.
The Signal
StockScore measures the current strength of the stock chart, while the
Sentiment score is a slower reacting moving average of the Signal score.
The scores range from 1 to 100, and stocks with the strongest charts get
the highest scores.
Bollhorn says
that the best stocks must meet two requirements: signal scores of 80 and
above, plus sentiment scores of at least 60. However, beyond that;
higher is not better. For instance, according to Bollhorn, a stock with
a 95 signal score will not necessarily outperform another stock with an
80 score.
Bollhorn says
that not all stocks meeting those two benchmarks will be winners. He
advises visually inspecting the accompanying stock charts to validate
the scores. Bollhorn shows examples of chart patterns to avoid in a
section titled “The Basics,” which is listed under Free Services on
StockScore’s homepage.
There’s
no substitute for doing your research, however these resources, all
free, can help you avoid costly mistakes by pointing out factors that
you may have overlooked.
published
7/11/04 |
