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Dr. Price writes about stocks, options and the market every weekday on Real Money Pro, a subscription site Paul has been a speaker at the International Traders Expo in New York City and the Options and Forex Expo in Las Vegas. He also gives investment seminars for subscribers... More
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  • Value Line’s Timeliness System – Time to Reboot? 1 comment
    Jul 26, 2010 10:07 AM | about stocks: VALU
    I love Value Line as a source for stock information. It’s the only place to find a full fifteen years of data in one place that shows monthly stock price movements right above the statistics for that same year. This makes it very useful in seeing how changing fundamentals were reflected in the stock’s price action.
    Value Line often tries to sell subscriptions based on their “Timeliness Ranking System” where they assign #1 to their best buys, #2 to their next best expected performers  and #4 and #5 to their stocks to ‘avoid’. #3’s are rated neutral or ‘market performers’.
    If their system worked as advertised the #1 ranked issues should be outperforming their #4 and #5 rated stocks. Has this actually happened? Let’s take a look using Value Line’s own numbers as listed in their July 30, 2010 issue (released on line July 26th).
    The source for this data is right from the current issue of Value Line.
    VL Rank*
    * Ranks adjusted weekly by VL  
    ** First half data only
    In seven of the past ten years (including 2010 through June 30th) the must-avoid #5 rated shares have significantly outperformed the top-rated #1 ranked stocks. In six of those seven periods the #4 ranked stocks also did better than Value Line’s #1 ranked issues.
    After a decade long losing streak like this I am hoping that the newly installed management figures out what has been going wrong and adjusts their methodology. 

    Value Line's own stock [VALU- $15] looks extremely cheap with a better than 5% dividend and a debt-free balance sheet.

    Disclosure: Long VALU shares
    Stocks: VALU
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  • Stephen Castellano
    , contributor
    Comments (161) | Send Message
    It's a low-quality rally -- this has happened across the board with all basic quant approaches I've seen. Low-quality stocks have been beaten down much more than higher-quality stocks, so as investors anticipate improving macro drivers, these stocks appreciate more. At the same time, whenever pessimism regales, you will still see these low-quality stocks decline more as well.


    For individual stock picking, one good way to use lists like these may be to look for stocks that have recently moved from 5 (worst) to 4 (not as bad). If the macro picture stabilizes or improve slightly, you might see the prices of some of these stocks surging ahead of the recorded fundamentals.
    27 Jul 2010, 03:40 PM Reply Like
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