Investment research tools come and go, but one that research analysts and portfolio managers all seem to like is Microsoft Excel. Spreadsheets have been an integral part of investment research since the beginning, but what used to be a standard part of stock analysis is likely costing you valuable time.
With the advent of Web 2.0 investment research tools, the important functionality of a spreadsheet is incorporated into the user's browser. Why is this a big deal? Wouldn't a tool as advanced as Excel be even better than a "lighter" web-based application? The answer is no, because a standalone spreadsheet isn't receiving live data.
The workflow using spreadhsheets is tedious. It reminds me of being a kid before the World Wide Web and trying to write a report. The steps involved were through a library and finding the information, reading, understanding and summarizing the information, checking to make sure that the information supported the hypothesis... and if it didn't, revise the hypothesis or continue searching for data. This is basically what investors have been doing for years. Finding information on Google or Yahoo Finance, exporting it to a CSV file, importing it to a spreadsheet (or even worse - reading data off a screen and typing it into a spreadsheet, as is often required), comparing the information against that of other companies and seeing if it meets there investment objectives, and if not, head back to Yahoo or Google Finance and download more data. A major difference, however, is that an investor's data is constantly changing, so their spreadsheets have to be constantly brought up to date.
Savvy investors are rapidly switching to Web 2.0 workflows and conducting their analysis on the fly with live data. A typical workflow is far simpler and is as fast as surfing the web - the steps are deciding what type of investor you are, clicking on a screener that matches your investment style, or defining a screen that is custom-tailored to your liking, seeing the list of stocks that meet your investment objectives, seeing how those stocks compare against each other, their industry, sector and an index or two, read news about those companies. Curious about how how the companies' sales are progressing? Simple, select the Growth view and immediately see each company's 1 year, 3 year, 5 year sales growth. With a Web 2.0 workflow, this is all as simple as clicking on links. And the beauty is, once you add a stock to your portfolio (or virtual portfolio), you can run the same screens against them in the future and determine whether they still meet your objectives. Again, as simple as a click of the mouse, which is hardly the case without a Web 2.0 workflow.
To illustrate this point with a Web 2.0 tool (in this case, Stock Rover), suppose I'm interested in seeing today's large cap growth stocks. My workflow is as follows:
I'm curious about large cap growth stocks, so I select the screener called Large Cap Growth Stocks by clicking on it. I can't remember what the screen considers a qualifying stock so I right click on the screen (or click on the drop down menu) and select edit, and the screen's criteria is displayed. It looks like this:
I can see that 39 stocks pass the screen. I can add any of hundreds of metrics or change the criteria and the number of stocks matching will change on the fly. I can also change the screen and save it so that I can access it again with a single click.
So I'm happy with that screener and I close the edit window and decide to look at the stocks. I'm curious about growth, so I click on the Growth View and I'd like to sort the stocks by 1 year sales growth, so I click on the Sales 1-Year chg (%) column. AAPL catches my eye, so I click on the + symbol next to it and expand the view so I can see quarterly growth. This is now what I see:
Now I'm curious as to how these stocks compare to the market, so I click on the Returns vs S&P500 View, and once that's up I click on the Return column to sort by 1 year return (and if I wanted 5 year, I'd simply click on the word "1 Year" and change that to 5 year). This is what I see:
How long would all of this take using Excel instead of a Web 2.0 tool? I have no idea, because my time is far too valuable. But I bet it would take me all day, if not several days. Instead, I've processed this information with just a few clicks. Literally, less than a minute of my time. You've harnessed the power of technology in just about every other aspect of your life. Doesn't it seem a little silly to still be researching stocks the way you did 15 years ago?