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Dark-Liquidity.com operates a free website primarily with a interest in quantitative trading strategies. The site tracks the stock / ETF holdings and performance of various trading strategies and several other mainly free trading strategy websites. The site focuses on market timing with many... More
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  • Consensus: Stocks That Pass the Most Screens
    AAII published an article in their December 2010 issue listing stocks that passed 4 or more of the 60 stock selection screens that they track.  Many of these screening methodologies are based upon the principles of well know investors such as Warren Buffett, William O'Neil, John Neff, Peter Lynch, John Templeton and Martin Zweig.  Other screens are based on basic investing principles such as a low PE ratio or improving earnings estimates.

    The list was created based on financial data dated November 12, 2010.  So, would it have been a good strategy to purchase all these stocks to create a portfolio of 25 stocks based on these mainly fundamental qualitative selection methods?

    It has been almost 6 months since the AAII list was created.  At the time China Automotive (NASDAQ:CAAS) was tied with MWI Veterinary Supply  (NASDAQ:MWIV) and EZ Corp (NASDAQ:EZPW) for first place, each passing 6 screens.  Seemingly, these stocks should be the best of the best since their is consensus in the differing stock screen selection methods.   MWI Veterinary Supply and EZ Corp. have performed well, rising 41% and 25% respectively.  However, China Automotive has declined almost 40% indicating that simply selecting stocks by this method does not guarantee automatic success.

    Indeed, if we look at the performance of the whole portfolio (with the exception Psychiatric Solutions (OTCPK:PSYS) which was taken over shortly after the AAII list was published), it has risen 11.6%.  This performance is about the same as the market indexes (SPY 12.9% and QQQ 11.3%) during the same time period. See the table below for the individual performances: 



    What does this tell us?  Blindly buying and selling stocks based on this method is not a particularly good idea.  It would be easier to buy a market index ETF and obtain similar results with less effort.

    As of today's date, China Automotive now commands first place in the number of screens passed with a total of 10 screens. Does this make it a 'buy'?  Probably not yet as it appears still to be trending downwards and remains under it's 10, 50 and 200 day moving averages.

    We'll update this post after a one year holding period to see if the relative performance improves, degrades or remains the same.



    Apr 24 9:55 PM | Link | Comment!
  • 2011 Stock Picks
    At the end of every year various personal finance magazines and stock brokers publish their best stock ideas for the upcoming year. Often these are selections are never mentioned again. We decided to track the stock pick portfolios for SmartMoney, Money, Fortune, Kiplinger and Barrons publications and also brokers, J P Morgan, Morgan Stanley and Goldman Sachs.
    As of April 15th, only 3 of the 8 stock pickers are beating the S&P and Nasdaq indexes.
    YTD Bar Chart

    Fortune had an early lead up over 6% in the first 2 weeks but is now in last place. Kiplinger had a bad start, down almost 3% in the first week but has since recovered into positive territory. The chart below shows the portfolios profit / loss plotted weekly at the Friday closing prices.


    Goldman Sachs currently holds five of the top ten best performing stocks selected.
    Stock Name
    Stock Symbol
    Profit
    Magazine / Broker
    Rubicon Technology
    RBCN
    31.15%
    Goldman Sachs
    Blackstone
    BX
    30.48%
    Goldman Sachs
    Tyco international
    TYC
    24.07%
    Morgan Stanley
    Chicago Bridge & Iron
    CBI
    21.40%
    Goldman Sachs
    JBHunt
    JBHT
    17.20%
    Goldman Sachs
    VF Corp.
    VFC
    16.53%
    Kiplinger
    Pfizer
    PFE
    15.99%
    Barrons
    Treehouse Foods
    THS
    15.72%
    Goldman Sachs
    TJX
    TJX
    15.37%
    Smartmoney
    Polo Ralph Lauren
    RL
    15.10%
    Kiplinger

    The three bottom stock pickers hold two stocks each from the overall 10 worst performing stocks selected.
    Stock Name
    Stock Symbol
    Profit
    Magazine / Broker
    hhgregg
    HGG
    -38.46%
    Kiplinger
    Entropic
    ENTR
    -36.61%
    Fortune
    Royal Carribean
    RCL
    -19.75%
    Fortune
    General Motors
    GM
    -18.97%
    Barrons
    Cisco Systems
    CSCO
    -16.72%
    Barrons / Smartmoney
    Freeport-McMoran
    FCX
    -16.72%
    Smartmoney
    US Steel
    X
    -15.90%
    Kiplinger
    Ford
    F
    -14.79%
    Goldman Sachs

    It is only a little over one quarter the way through the year. We'll publish a mid year update to monitor how they continue to perform.
    Apr 16 4:13 PM | Link | Comment!
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