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.
February 14, 2017

52 week high vs. 52 week low

We look at companies who have just reached their 52 week high and for companies who have just reached their 52 week low. Which is better: buy high and sell higher, or buy low sell high?
December 4, 2015

Beating the market … in 2014

The Problem — 2014 and 2015

Have you had the experience of writing a screen, and having it get fantastic performance — except for the last two years?  Like this one.
Zooming out we see outperformance, except in the last two years.  Maddening!


Back to the past

The way we’re going to tackle this is to zoom into a specific period, and see what it seemed to want. We’re going to limit ourselves to January 2014 to January 2015. This is going to tell us what the market wants right now. We can’t just go with this new plan, and throw out our old established recipes, because the market will just switch back, defeating our efforts.…
August 11, 2014

Does P/E matter?

Does PE matter? People say that PE (Price to earnings ratio) is a primary factor when choosing a stock to outperform, but lets put it to the test Mythbuster style...