Monday, November 29, 2004
Four value investors
Four value investors: Marty Whitman, Chris Browne, Jean-Marie Eveillard, Mario Gabelli gather in New York City
Tuesday, November 23, 2004
two questions
Two questions to ask when deciding on a investment
- Is this a high-quality company that I'd love to own a piece of?
- Is the price right to buy it now?
Sunday, November 21, 2004
Average Broker Recommendation
Zacks.com is first and foremost a free resource to help you make more profitable stock picks. In this space each week, we will provide insights into various tools and data points provided on Zacks.com, and how to use them to improve your portfolios performance.
Average Broker Recommendation
Perhaps the most often used (and abused) stock research item is
the Average Broker Recommendation (ABR). Lets dig into the ABR
and learn how to employ this information to make better
investment decisions.
What is the ABR? It is a simple statistic that tries to
synthesize all Wall Street research into an easy to digest form.
Lets take a look at the example of the ABR for General Electric
(GE). Currently there are 17 brokerage firms that have a rating
on GE with 10 Strong Buys, 3 Buys, 4 Holds and 0 Sells. Now we
layer on a weighting system from 1 to 5 with Strong Buy being a
1. This adds up as follows
10 Strong Buys x 1 = 10
3 Buys x 2 = 6
4 Holds x 3 = 12
0 Sell x 4 = 0
0 Strong Sells x 5 = 0
Total points = 28
28 Total Points divided by 17 brokerage firms with ratings =
1.65 ABR
On the surface an ABR of 1.65 sounds pretty good as it is saying
that the average brokerage firm believes that GE is somewhere
between a Strong Buy and a Buy. However, before you place your
life savings in this stock you may want to read this next
paragraph
The ABR of a stock is virtually worthless in helping you pick
good stocks. Hows that? The usual assumption by investors is
that the better the ABR (closer to 1) the more likely they are
to profit with the stock. However, our studies over the years
show a very minor correlation between ABR and results. In fact,
when the market is going poorly, the stocks with the best ABRs
dramatically underperform the stocks with the worst ABRs.
We dont know the exact reason why this is the case, but the
general assumption is that when everyone on the street is
recommending a stock, then it will probably be priced too high
and more likely to fail miserably on any bad news. Conversely,
an out of favor stock will probably already be trading at a
steep discount and any turnaround will create a nice bounce for
the stock.
So, now youre probably thinking to yourself the key to eternal
happiness is to find stocks with the worst ABRs. Unfortunately
we dont recommend that either because over the long haul these
stocks will underperform the average stock (meaning that both
the best and worst ABR stocks underperform the market).
The good news is that we have indeed found an effective way to
invest using the ABR. Our research has uncovered that stocks
with the biggest positive change in ABR over the last month will
outperform the market. We call this the Piggyback Strategy.
Here are the results of the test for the 10 year stretch from
April 1992 to March 2002
Top 10% of ABR Changes = 18.3% average annual return
Average Stock = 10.7% average annual return
Bottom 10% of ABR Changes = 0% average annual return.
There are some great free resources on Zacks.com to take
advantage of these changes in ABR to find some potential winners
as well as stocks to avoid.
Pre-Defined Screen: Best Change in Avg. Broker Rec 1 Week
http://at.zacks.com/?id=1501
Pre-Defined Screen: Worst Change in Avg. Broker Rec 1 Week
http://at.zacks.com/?id=1502
Profit Tracks: Upgrades and Revisions Strategy. These are stocks
that are enjoying both positive estimate revisions and brokerage
rating upgrades. This strategy has handily beat the market over
the last 4 years. Learn more at http://at.zacks.com/?id=1503
Analyst Recommendations Research Report: This research report
gives details on the break down of recommendations for any
stock. Here is a link to view the report for GE. Once there you
can enter any ticker symbol to get the Analyst Recommendations
report for the stock you want. http://at.zacks.com/?id=1504
Want more insight on the Piggybacking Strategy? Mitch Zacks
covers it in detail in his critically acclaimed book Ahead of
the Market. To learn more about this book and special 30%
discount go here http://at.zacks.com/?id=1505
-- From Profit from the Pros - 9/22/04
Average Broker Recommendation
Perhaps the most often used (and abused) stock research item is
the Average Broker Recommendation (ABR). Lets dig into the ABR
and learn how to employ this information to make better
investment decisions.
What is the ABR? It is a simple statistic that tries to
synthesize all Wall Street research into an easy to digest form.
Lets take a look at the example of the ABR for General Electric
(GE). Currently there are 17 brokerage firms that have a rating
on GE with 10 Strong Buys, 3 Buys, 4 Holds and 0 Sells. Now we
layer on a weighting system from 1 to 5 with Strong Buy being a
1. This adds up as follows
10 Strong Buys x 1 = 10
3 Buys x 2 = 6
4 Holds x 3 = 12
0 Sell x 4 = 0
0 Strong Sells x 5 = 0
Total points = 28
28 Total Points divided by 17 brokerage firms with ratings =
1.65 ABR
On the surface an ABR of 1.65 sounds pretty good as it is saying
that the average brokerage firm believes that GE is somewhere
between a Strong Buy and a Buy. However, before you place your
life savings in this stock you may want to read this next
paragraph
The ABR of a stock is virtually worthless in helping you pick
good stocks. Hows that? The usual assumption by investors is
that the better the ABR (closer to 1) the more likely they are
to profit with the stock. However, our studies over the years
show a very minor correlation between ABR and results. In fact,
when the market is going poorly, the stocks with the best ABRs
dramatically underperform the stocks with the worst ABRs.
We dont know the exact reason why this is the case, but the
general assumption is that when everyone on the street is
recommending a stock, then it will probably be priced too high
and more likely to fail miserably on any bad news. Conversely,
an out of favor stock will probably already be trading at a
steep discount and any turnaround will create a nice bounce for
the stock.
So, now youre probably thinking to yourself the key to eternal
happiness is to find stocks with the worst ABRs. Unfortunately
we dont recommend that either because over the long haul these
stocks will underperform the average stock (meaning that both
the best and worst ABR stocks underperform the market).
The good news is that we have indeed found an effective way to
invest using the ABR. Our research has uncovered that stocks
with the biggest positive change in ABR over the last month will
outperform the market. We call this the Piggyback Strategy.
Here are the results of the test for the 10 year stretch from
April 1992 to March 2002
Top 10% of ABR Changes = 18.3% average annual return
Average Stock = 10.7% average annual return
Bottom 10% of ABR Changes = 0% average annual return.
There are some great free resources on Zacks.com to take
advantage of these changes in ABR to find some potential winners
as well as stocks to avoid.
Pre-Defined Screen: Best Change in Avg. Broker Rec 1 Week
http://at.zacks.com/?id=1501
Pre-Defined Screen: Worst Change in Avg. Broker Rec 1 Week
http://at.zacks.com/?id=1502
Profit Tracks: Upgrades and Revisions Strategy. These are stocks
that are enjoying both positive estimate revisions and brokerage
rating upgrades. This strategy has handily beat the market over
the last 4 years. Learn more at http://at.zacks.com/?id=1503
Analyst Recommendations Research Report: This research report
gives details on the break down of recommendations for any
stock. Here is a link to view the report for GE. Once there you
can enter any ticker symbol to get the Analyst Recommendations
report for the stock you want. http://at.zacks.com/?id=1504
Want more insight on the Piggybacking Strategy? Mitch Zacks
covers it in detail in his critically acclaimed book Ahead of
the Market. To learn more about this book and special 30%
discount go here http://at.zacks.com/?id=1505
-- From Profit from the Pros - 9/22/04
Friday, November 19, 2004
Thursday, November 18, 2004
Phil Knight steps down
Phillip Knight will step down as CEO of Nike. Will remain chairman of the board.
Wednesday, November 17, 2004
betting on Lampert
My latest buys were Kmart and Sears this morning as detailed in my stockmarketeers group. The success of this transaction will lie on Edward Lampert's ability to find value in the combining of the two companies. Given his track record, I'd give him a better than 50-50 shot.
Here's more on Lampert.
New York Times story
More on the merger from fool David Meier.
Morningstar's Pat Dorsey chimes in with this analysis
Here's more on Lampert.
New York Times story
More on the merger from fool David Meier.
Morningstar's Pat Dorsey chimes in with this analysis
Saturday, November 06, 2004
Presidential Rally
The market has rallied furiously in the last couple of weeks pushed up in the last few days by the Bush victory. The Dow has gone from oversold to overbought with an RSI of 69.6 and stochastics of 93.28. While some are looking for a breakout, this hasn't happened the last three times it rallied from a valley. I'm looking to take some profits on overweighted positions that have run up in the rally.
