August 15, 2017

Learning about Green Flags and their score

Green Flags

Now that we’ve gone over red flags, it’s time to look at the other side of the equation and learn about green flags.

In our previous article, we discussed that red flags don’t necessarily mean that an investment is going to lose money. Green Flags are the polar opposite from a red flag, but it still doesn’t guarantee anything. A company could have every green flag raised and still lose money over the time you hold it. However, green flags do indicate that a company is less likely to be a dud and increase your chances of long term success.…

August 10, 2017

Guys, you’re being too selective with your screener

It isn’t uncommon for one of our users to call us up and ask for help. To be honest, there have even been times when I will help a client at their site to get them up and running. In the past two years of working in this industry, I have noticed one major theme among every person(myself included) when it comes to screening for potential investments – we are all far too selective.

What do I mean by that?

Well, when we go in to start building a screen we all have the idea of the “perfect” company. This shrunken world view is just our individual preferences, but it can minimize our potential to make good investments.…

August 5, 2017

Can’t Compare Split Adjusted Prices

If you have been using the Equities Lab system in recent weeks, you may have seen a new error that hadn’t appeared before.

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Stock Server Error:Server Error:Cannot compare split ajusted quantities to constants: greater(Close, 444)

Don’t worry! This error message doesn’t mean that the system is down; it simply tells you that there is a split adjusted value in a place it shouldn’t be.

Have you ever input the following line into a screener?

If you have, you’ll need to change that to the following –

What’s the difference?

  • Close
    • This is the split-adjusted value. When a company undergoes a stock split the value of stock changes, typically by half, and the number of available shares doubles.
August 1, 2017

Marijuana Stocks Rant – Why you should be Cautious

Being the 20 something year olds that they are (myself included), millennials want to invest in something that they feel is groundbreaking and familiar to them within the culture of their age group. Many times, this results in them asking me for advice on marijuana stocks. So, instead of going into it with every single friend, I’ve decided to compile my thoughts on the Marijuana industry here.

To start off, yes, Marijuana made Colorado a lot of money in tax revenue, and it seems that the industry is flourishing in this market place. It actually did so well that other places are making recreational use legal.…

July 25, 2017

Ohlson O-Score

If you’re a short seller, then I’d like to introduce you to the Ohlson O-Score. This is a score created by Dr. James Ohlson of New York University, aimed at predicting the financial distress of a company. The Ohlson O-Score is the result of a nine-factor linear combination of coefficient-weighted accounting ratios that are found from financial disclosure statements that are provided by publicly traded companies. Below is the actual formula for the Ohlson O- Score.






Ohlson O-score formula

Ohlson O-score formula

So, from a first glance it looks very complex, well that’s because it is. For the purpose of understanding what exactly this equation is composed of, let’s break it down piece by piece.…

July 20, 2017

What exactly is a Red Flag?

With the publishing of our Synopsis with red flags article, I thought it was time to discuss what exactly a red flag is and why they should be looked for when identifying and eliminating potential investments.

At its core, a red flag doesn’t mean that the investment is bad. It just means that you are more likely to lose money on the long position than you are to make a profit. There are of course the exceptions, and there are trades you can make a lot of money on no matter the number of red flags, but at that point you are really just throwing darts at a dart board.…

July 16, 2017

Semiconductors, where they’re going and where they’ve been

The semiconductor industry is an important one, in fact, if it weren’t for semiconductors then you wouldn’t even be able to read this. So what exactly is a semiconductor, and why should you care about them? A semiconductor, in a nutshell, is a materials product usually made of silicon, which conducts electricity more than an insulator but less than a pure conductor, such as aluminum or copper. Semiconductors are usually very small complex devices, and the industry is driven by who can become smallest and more complex at the fastest rate. Modern day semiconductors are very small and can be found in just about every electronic device you use from your smartphone to your washing machine.…

July 12, 2017

Industry Rotation – Something you might stay away from

I’ve been seeing a lot of articles recently that are very focused on the idea, that by purchasing the industry or sector that performed best over the past year you are giving you the best chance at making returns. I’m a little skeptical, but just as hopeful to see whether or not this is a potential new avenue to take in my portfolio.

Here is the base screen for what we want to do. This screener takes each sector and finds the total average change of close over the past year – making sure they have a market cap of at least $1 billion.…

July 8, 2017

Stocks That Have Always Gone Down

   When investing, for every fairy tale stock like an Amazon(AMZN) or Nvidia(NVDA), there’s an equally disastrous stock like MoSys(MOSY) or Gevo (GEVO). To avoid getting into stocks like these, it’s important to look at their failures and analyze them to avoid getting into the next potential train wreck of a stock.  Let’s screen for some stocks that have always gone down.




   For this screener we used the equation [always ((change of close over 252 days) < 0 ) within 752 days)] To simplify that equation, it basically means “screen for stocks that have consistently declined every year for 3 years. Only 7 results were shown, so let’s take a look at a couple of these companies’ history and see where it all went wrong for them.…

July 4, 2017

How Effective are Red Flags in Investing

Just how telling are red flags?

The term “red flags” is synonymous with “bad things are going to happen,” and, for investors, they are a sign that you should likely stay away from that investment. However, all this talk of red flags being able to predict that a company is going to do poorly makes you wonder, does it work?

To start, let’s take the red flag score from the “Synopsis with Red Flags” tear sheet which contains 13 different comprehensive red flags. I apologize for the size of the following photo.

Without getting into too much detail, in the event you can’t read the photo clearly, the score looks for the following thirteen items –

  • Bad Accruals
  • Current Accrued Expenses are increasing faster than expenses
  • Two bad days in a row with a 4.5% drop in share price each day
  • Close has decreased over the past 20 days
  • The company has a low Cash Flow score
  • The company has a low Piotroski F-Score
  • Outperformance while EPS 1Y is decreasing
  • Average market cap is in the top ten companies
  • RawClose is less than $2/share.