Figuring out Which Stocks to Stay Away From
With the recent integration with TradeKing finished, it’s time to actually use our free Equities Lab membership to actually analyze our holdings.
As you can see, here are my holdings as of writing this article. Now, a lot of these positions were taken on (randomly!) during our testing phase where we were more worried about the actual functionality of the software than how well our positions were going to perform. So I think it’s time we dive in and adjust our positions (dartboard?) to reflect our personal trading philosophy here at Equities Lab.
The first thing I’m going to do is change the tear sheet, a list of information that our system keeps for each stock for easy access, to our synopsis with red flags. This tear sheet gives us an overview of the key information on the stock as well as gives us warning in the event that there is something going on with the stock that has historically caused companies to underperform.
As you can see, one of my worst positions – Cerulean Pharma, is full of red flags! Actually, each of the deep red positions that you see in my portfolio have enough red flags that I likely should have stayed away from them when I first started adding positions to my account.
On the other hand, my winning positions – such as Willis Lease Finance, have fewer or no red flags.
Does that make these investments any safer? It’s hard to tell as you can’t predict the future, no matter how much historical data you have. The best you can do is identify patterns and hope that the future will continue to follow those patterns as you invest. Nervertheless, it’s better than randomly throwing darts at a dart board.