Even if you’re a great stock picker, it'
worth getting a second opinion before
you pull the trigger. Super Stock Screener, a site that I only
recently discovered, looks like a good
resource for getting second opinions, and potentially much more.
Run by Ian Braganza, a Chartered
Financial Analyst, who developed systems for hedge funds before
striking out on his own, Super Stock Screener (www.superstockscreener.com)
employs a sophisticated analysis strategy to rate just about any
stock. Even better, as of this writing, use of the site is free.
Similar to published analyst consensus
ratings that you see on many financial sites, Braganza
grades stocks from one to five, where one
corresponds to “strong buy,” two is “buy,” three is “hold,” for is
“sell” and five means “strong sell.” The grades
reflect Braganza’s take on a stock’s three to 12-month outlook.
Get Your Grades
Get to the stock grades section by
selecting “Rankings” on the top menu on Super Stock Screener’s home
page. Once there, enter any number of ticker symbols to see each
stock’s grade. Alternatively, you can use
the Ranking Filter to see all stocks corresponding to any of the
grades. You can narrow the list down to
stocks within a specified sector such as energy or financial, and/or
stocks within ranges that you specify for trading prices, dividend
yields, market-caps, or price/earnings ratios.
Braganza doesn’t personally analyze each
stock. He uses a computerized formula that evaluates a variety of
factors including valuation, profitability, cash flows, analysts’
earnings forecasts, and financial strength.
Unlike other strategies, Braganza doesn’t grade his stocks
based on fixed rules such as requiring profitability or valuation
ratios to fall within certain ranges to qualify for a particular
rating. Instead, his ratings reflect how a stock compares to others at
any given time. For instance, “strong buy” stocks are better valued,
financially stronger, more profitable, etc. than lesser-ranked stocks.
Do the grades
work? Probably, but with a major limitation.
Grading the Grades
Braganza has data showing that “strong buys” outperform “buys,”
and that “buys” outperform “holds,” etc. Although that relationship
holds for all sizes of companies, the effect is more pronounced for
small and mid-sized firms (small- and mid-caps) than for large
companies (large-caps). However, that data is old and it’s hard to
know if it still holds true in this market.
Always "All In"
But, the biggest downside of using Braganza’s
grades is that a fixed percentage of stocks
are always rated “strong buy,” even if the market is tanking.
You can see that by looking at the
returns recorded by four free portfolios that Braganza offers on the
site: small-cap, mid-cap, large-cap, and all-cap. All are rebalanced
monthly, and typically turn over around a third of their holdings each
month. Super Stock began tracking the portfolios in July 2006
Small-caps, up an impressive 229%
since inception, have done the best overall. But, much of that
outperformance can be attributed to 2009 when the portfolio soared
206% vs. 26% for the S&P 500. The 11 stock portfolio also outperformed
in 2007 when it gained 25% compared to 5% for the S&P. However,
because Braganza keeps his portfolios 100% invested no matter what,
small-caps lost 36% in 2008, more or less even with the S&P 500, which
In my view, it’s worth paying attention
to Braganza’s stock grades. Even though he
doesn’t have recent performance data, my impression is that he knows
what he’s doing and is probably getting it
Know When to Fold 'Em
But if you want to follow his portfolios, you need to come up
with your own way of deciding when to get in and get out of the
market. One simple approach is to compare the S&P 500 to its 200-day
moving average, which you can check using Yahoo’s (finance.yahoo.com)
Basic Technical Analysis chart. Be in the market when the S&P is above
the moving average and go to cash when it’s below.
At the very least, consider
Braganza’s grades another tool to add to you
stock analysis toolbox.