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Scott Martindale

 
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  • Sector Rankings Stay Neutral While Charts Take A Bullish Turn [View article]
    Thanks for your interest, Eric. Sabrient's fundamentals-based Outlook rank went live in March 2008 after extensive testing and development showed that it had an outstanding ability to layer predicted performance over an entire universe of stocks (not just the tails, as is typical for most multifactor filters). Because of this, we felt it was our best model to use for aggregrating scores of individual stocks to create bottom-up profiles of stock baskets, such as sectors, industries, and ETFs. Testing at that time showed a top-2 minus bottom-2 sector performance spread of roughly 12% per year.

    The Outlook rank continued to perform exceptionally well through much of 2010, but during 2011 it began to be impacted (like most quant models) by the inordinately high correlations among equities (perhaps driven by the big macro events leading to asset allocation swings at the expense of traditional stock-picking). Implied correlations approached 85% in the fall of 2011. This "risk-on/risk-off" behavior often led to "junk stocks" outperforming. Because the Outlook rank generally rewards higher-quality GARP stocks with conservative accounting practices, its performance lagged in such an environment.

    Nevertheless, quality eventually rises to the top. As equity correlations have receded, the performance of the fundamentals-based Outlook model has shown signs over recent months that it is returning to its former glory.
    Dec 2 01:19 PM | Likes Like |Link to Comment
  • Sector Detector: U.S. Stocks Still The Place To Be For Global Investors [View article]
    Ray, the last section of my article talks about one approach to a sector rotation strategy using ETFs based upon Sabrient's fundamentals-based SectorCast model. An "enhanced" sector rotation version would take the additional step of trading the highest ranked stocks within the highest ranked sectors (rather than the ETFs), and perhaps employing options (both for leverage and for limiting risk). Finally, if one is open to more frequent trading and position monitoring, one could use the rankings to create a watchlist and then use a technical overlay for entry/exits.
    Sep 13 02:02 PM | Likes Like |Link to Comment
  • Insider Sentiment ETF Shows More Promise Than Insider Selling Data [View article]
    Although Guggenheim chooses to categorize NFO as a mid-cap blend fund, in fact the underlying Sabrient Insider Sentiment Index (SBRIN) is really an all-cap index that selects stocks from across a broad eligible universe. Current holdings include Apple (AAPL). So, a more appropriate benchmark for comparison is the iShares Russell 3000 Index Fund (IWV), which NFO has outperformed by closer to 30%.
    Apr 25 07:15 PM | Likes Like |Link to Comment
  • Bulls Are Thankful For An Entry Point [View article]
    Thanks for all your good and challenging comments. To me, bulls are those accumulating long positions and bears are those accumulating short positions or distributing/liquidating long positions. The intraday traders are merely providing liquidity. With this combination of low volume and low volatility, the accumulators of longs have been creeping the market higher, mostly unchallenged YTD, but I believe we'll need to see increased volume coupled with a thrust off of short-term oversold technicals to push through current resistance levels.

    I don't have a TV at the office, so I don't know what the TV personalities have to say. I scan a host of blogs for independent insights and thought-provoking ideas. I do read some mainstream end-of-day market summaries to learn what they say are the consensus "drivers of the day." In any case, I believe that fundamentals drive the market in the longer-term and technicals drive it shorter-term. That's why the market will often shrug off bad news quickly when the chart says it "wants" to rally.

    So long as the world remains awash in fiat currency, U.S. stock market fundamentals on balance look pretty good. The commentators can always come up with a reason-of-the-day for market behavior, when in fact the market simply has been in rally mode in which only a major external event could stop it.

    But again, we now find it trying to test resistance yet again, and I just don't know if there is enough power right now to push through. That doesn't necessarily imply that a massive selloff is in store, with bulls deciding its time to give up on any chance of further gains and protect profits. But a stronger test of conviction might be needed to attract more cash at these levels.

    I can appreciate the view that the market (and the economy) has become a house-of-cards due to collapse. Such massive manipulation of the free market just seems wrong. It might well turn out that we have chosen to avoid enduring a little discomfort now in exchange for severe pain in the future. No, the eventual unwinding of the balance sheets probably won't be pretty. I just don't see any indications that such a scenario is imminent.
    Mar 9 10:45 AM | 1 Like Like |Link to Comment
  • Sector Detector: Financials And Materials Take The Heat [View article]
    Bull and Bear scores can give a quite different perspective than beta. Bull and Bear only look at "key" market days of unusual strength or weakness over the prior 40 days. Beta measures a stock's price volatility on average relative to the overall market, both up and down, whereas Bull and Bear give a perspective on up-market behavior separate from down-market behavior, and only on "key" days over the recent past.

    For example, SYNA has a good combination of Bull and Bear (56 and 63) and its beta is 1.2. SLXP has has a good combination of Bull and Bear (60 and 57) and its beta is 0.8. PROJ has high Bull, low Bear (72, 20) and its beta is 1.1, while SANM also has high Bull, low Bear (77, 25) and its beta is 3.1.

    You might think that the strongest correlation with beta would be in high Bear, low Bull, which would be indicative of a defensive, low-beta stock. For example, NAII (Bull 44, Bear 86) has a beta of 0.5. However, NETL (Bull 28, Bear 81) has a beta of 1.3.

    Bull and Bear scores are simply Sabrient's unique way of identifying which stocks have been leading rallies and/or serving as safe havens over the recent past, with the expectation that such behavior might continue over the near term. Note that the Bear score is the basis for the Sabrient Defensive Equity Index (which is tracked by exchange-traded fund DEF).
    Nov 17 12:35 PM | Likes Like |Link to Comment
  • If You Have Been Waiting For An Apple Entry Point, Wait No Longer [View article]
    From a purely quant perspective in Sabrient's models, AAPL remains a StrongBuy with a perfect 100 Growth Score. It also boasts a 96 Momentum Score, which considers price, earnings, and group momentum factors. And it has a solid forensic accounting score (i.e., no red flags indicating questionable or "aggressive" practices -- no surprise given the tremendous cash position). From my personal perspective, my teenage daughters and every one of their friends own at least one Apple product -- usually several. Apple's innovation, branding, customer service, and customer loyalty are unsurpassed. I am still a PC & BlackBerry user myself, but I constantly feel the pressure from the Apple juggernaut.
    Aug 25 01:03 PM | 2 Likes Like |Link to Comment
  • Walter Energy Looks to Be Acquired. Should You Buy the Stock? [View article]
    Sabrient's quant algorithms like WLT. It carries a StrongBuy rating with a Growth score of 90 and Momentum score (earnings, price, and group momo) of 98, along with a decent forward-looking Outlook score of 80. Our algos also like ARLP and BTU in the coal space. The top Value score goes to ANR, although it currently carries a Hold rating.
    Jul 25 01:24 PM | Likes Like |Link to Comment
  • Synthetic ETF Considerations: No Cause for Concern [View article]
    Given all of the mysterious practices that led to the financial crisis, it's no wonder that investment vehicles available to the public that employ terms like "swaps," "derivatives," and "counterparties" attract headlines and paranoia. Thanks for providing some helpful light on the subject.
    Jun 5 12:42 PM | Likes Like |Link to Comment
  • Salesforce.com Has Defied Gravity for Too Long [View article]
    CRM has been ranked at the bottom of Sabrient's proprietary Company Outlook rank, which is a forward-looking and quality-oriented rank that considers things like current & projected valuation, historical & projected growth, dynamics of Wall Street analysts’ consensus revisions, accounting/governance practices. It is also rated Strong Sell in our quant ratings algo. It is a short position in both the Sabrient Select Opportunity model portfolio and the Sabrient Investor's (H)Edge long/short model portfolio.
    Apr 7 02:57 PM | Likes Like |Link to Comment
  • Cephalon Is Worth Considering [View article]
    Good information and insights, including the comments. I just wanted to add that Sabrient's quantitative ratings algorithm sees CEPH as having a compelling valuation at current prices and maintains a Buy rating as a value pick. Value score is 94 (out of 100). Growth score is a mediocre 61. Forward-looking Outlook score -- which considers factors like current & projected P/E, analyst earnings changes, growth projections, and forensic accounting / corp governance -- is a strong 90, held back somewhat by its aggressive accounting score (as computed by Audit Integrity).
    Feb 18 11:42 AM | Likes Like |Link to Comment
  • Homebuilder ETFs Send Mixed Signals [View article]
    Although some of their forward-looking scores in the Sabrient quantitative ratings algorithm have improved, none of the homebuilders carry ratings better than Hold, with a number of Strong Sells. Low-ranked stocks in the group include RYL, PHM, MDC, and TOL. Because ITB is more of a pure play in the homebuilders (in contrast to what you say in your article), it has our lowest ETF rating of Least Attractive and a score of 6 (out of 100). XHB is more diversified with equal weightings across home supply & decor retailers as well as the homebuilders, so it is rated Less Attractive with a score of 26.
    Dec 14 12:43 PM | Likes Like |Link to Comment
  • Top 30 'Liquid' ETFs [View article]
    Mark, your premise that "puny volume" in an ETF translates into poor liquidity ("difficult to move in and out of") is in error. In fact, so long as the underlying constituents are highly liquid, the ETF is also highly liquid with virtually no discount/premium to NAV. There is a whole industry of Authorized Participants and Liquidity Providers set up to ensure just that -- so even if you want to sell an amount that is a multiple of the average daily volume, you will still get a price very close to the NAV of the underlying stocks.

    Also, I see that the bulk of your list comprises speculative gold, emerging markets, and leveraged ETFs, which most investors shy away from. I'd like to see a similar list of top performers among unleveraged ETFs holding diversified portfolios of U.S. stocks.

    For example, if you look at an ETF like NFO, which tracks (full disclosure: my firm) Sabrient's Insider Sentiment Index, it is a way to follow those who are closest to a given company -- corp officers and Wall Street analysts who follow the firm. It holds 100 high-profile stocks reflecting positive sentiment and has an unleveraged YTD return of about 18%, which easily outperforms both the cap-weighted SPY and the equal-weighted RSP, and a 4-STAR Morningstar rating. Although it has relatively low daily volume (approx 25,000 shares), the bid/ask spread is only a couple of pennies with very low variance from NAV.
    Nov 30 12:20 PM | 1 Like Like |Link to Comment
  • Hedge Fund Maverick Capital Has Its Highest Tech Exposure Ever [View article]
    Sabrient's fundamentals-based quant algorithm has been rating the Technology iShare IYW near the top of the U.S. sector rankings for awhile now, along with Healthcare IYH. www.sabrient.com/blog/... Also, our models have recently put Buy ratings back on MSFT, INTC, and APOL on good valuations. On the other hand, CTV was just downgraded from Buy to Hold after its big price spike.
    Oct 29 02:47 PM | 1 Like Like |Link to Comment
  • 5 ETFs to Play the Coming Wind Energy Revolution [View article]
    Sabrient's SectorCast ETF quantitative rankings employs a bottom-up composite profile of the underlying stocks to score and rate the ETF. PBW is the only one on the list that we currently rank, and it gets a score of 74 (out of 100) and an Attractive rating. It is particularly strong in long-term projected growth and analyst's recent upward earnings revisions. (Note that it was just downgraded this week from Very Attractive on valuation, as its score dropped from last week's 82.)
    Oct 13 04:16 PM | 1 Like Like |Link to Comment
  • As Coal Heats Up, 3 Companies With Persuasive Coal Stories [View article]
    Sabrient's quantitative ratings algorithm gives high marks to PUDA, ARLP, and JOYG in the coal space. Also scoring pretty well are PVG, AHGP, and JRCC. PUDA and JRCC have lagged in the recent rally, and so they sport the highest Value Scores -- particularly PUDA, which scores a 92 and carries a Strong Buy rating. (Disclosure: I hold PUDA in an IRA.)
    Oct 2 07:18 PM | Likes Like |Link to Comment
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