I was recently lurking around an online investment forum when the following post came up –
…“I recently ran an experiment where I generated random 7 to 50-stock portfolios from the 500 largest U.S. traded companies and measured their performance over the past 10 years. All of the randomly selected portfolios outperformed the S&P500 and BRK.B in terms of compound annual rate of return. Has anyone else tried this experiment? I then convinced myself that it worked by looking at the Guggenheim ETF RSP that holds an equal weight portfolio of the S&P500 stocks. It too beat the S&P500 over the past 10 years.
Monte Carlo Simulation
As investors, we all know that each investment we make comes with a certain amount of risk. We can decrease this risk by understanding all possible outcomes. Better yet, we can visualize each outcome through the use of a Monte Carlo Simulation. In a broad stroke definition – a Monte Carlo simulation allows for people to make informed quantitative decisions based on a range of possible outcomes.
What does this mean?
First, we build a model we want to test. In the case below, that model would be the Screener of which we want to plug in different values for the Value Score.…
Tech has been on an absolute tear this year with the whole sector up almost 20% since the beginning of 2017, with an outstanding performance from the FANG stocks. FANG is an acronym used for arguably the most notable tech companies in today’s market which have continuously churned out tremendous returns. The FANG is made up of Facebook(FB), Amazon(AMZN), Netflix(NFLX), and Google which is also known as Alphabet(GOOGL), but for this acronym will remain as Google. So far, 2017 hasn’t offered any promising signs of economic growth as the current administration has failed to hit the ground running, even with a unified GOP government.…
In my years of using Equities Lab as a quantitative investment tool, I have never lost sight of the core values of long term investing. Many of these values are in the teachings of Benjamin Graham and used by an idol of mine, Warren Buffett. Remembering this, no matter how much risk I take on in my portfolio, I always keep a subsection for value investments. Now, his teachings are comprehensive, and there are more value factors than any one person wants to write in each of their strategies; and because of this we have created our own Graham Score which looks for ten different factors based entirely on the teachings of Benjamin Graham.…
High insider ownership is something commonly associated with value investors. The idea behind it is rather simple. If the management owns a large portion of the company, then they are incentivized to perform well – benefiting not only themselves but the shareholders as well. The other side of that coin is that owners may not listen to the advice of people within the company, using their position as majority shareholder to push for things the company wouldn’t do otherwise. Let’s take a look how companies with higher insider ownership have performed compared to companies with low insider ownership.
For this first screener, I screened for companies whose insiders hold a controlling share (>51%) of the company’s stock.…
Debt, a word that consumers and college students know all too well. How do companies view debt and how does it affect their stock price? Let’s find out by taking a look at both high debt companies and low debt companies.We’ll start off with high debt. This Equities Lab stock screener finds companies with a debt to equity ratio ranking them in the top 25% of the market, and total liabilities to assets ranking in the top 25% of the market while outperforming by 2%.
High debt companies have more pressure under them to perform well in order to please their shareholders, while also avoiding drowning in their own debt.…
Institutional ownership is something that is often associated with hedge funds, mutual funds, and pension funds. So what is it exactly? Well, simply put institutional ownership is the ownership stake in a company that is held by large financial organizations. Institutions generally acquire large chunks of a company’s outstanding shares and can apply considerable influence on its management. In this article, we will take a look at the performance of companies with large institutional ownership against the performance of companies with low institutional ownership, and also the performance of a particular hedge fund and their institutional ownership in a company.
Let’s start with the large institutional ownership.…
Shorting in Equities Lab
Before, if you wanted to test out a short strategy, you’d have to run your screen and hope that it loses money. That’s now changed thanks to our new “position_weights” feature where you are able to finally simulate a short strategy more closely and identify if your strategy really does make money.
The first thing you need is a strategy. For the purpose of this article, I’m going to quickly throw together a short strategy. Now, this strategy is a total hack, so I wouldn’t use it, but I wanted to include it in order to give you the full story as we continue throughout this article.…
There was a lot that went down in President Trump’s first 100 days in office, and a lot that didn’t. The market reacted well when Trump was announced the winner of the presidential election and that momentum stayed going until his inauguration. From his inauguration to the end of his first 100 days in office, the S&P 500 produced a 5.5% gain under the new president. While the market continued to climb, the administration struggled to get all the cabinet positions appointed by congress in a timely manner and you could argue that delayed the legislation and economic policies of the new Trump administration.…
I’m not a big technical trader. That being said, a lot of people in the information age are, and because of that we have been sure to include a number of technical indicators within the Equities Lab system. One such indicator, the relative strength index(RSI), is extremely common among technical analysts, and I think it is time to put the RSI indicator to the test.
What is the RSI Indicator?
Developed by J. Welles Wilder, the Relative Strength Index is an oscillator that changes based on the price movements in a company’s share price. It suggests that a company is overbought if the indicator is above 70, and oversold when the indicator is below 30 – meaning that you should buy into a company at any level below 30 and sell/short at any level above 70.…