October 26, 2017

Investment Green Flags – Decreasing Shares Outstanding

Share Buyback Programs

A company purchasing back its shares tends to increase the stock price for a couple of reasons. First, it shows that the firm and its employees are confident in the direction the company is heading, and second, it cuts down on the shares available for investors to purchase purchasing the price up through basic supply and demand.

Below, we’ve outlined one of our green flag indicators “Decreasing Shares Outstanding” which can be found within our Green Flags Score.

Like all green flags, we want to keep this to be as simple as possible. We are building a piece of a larger score, not an entire screener.…

September 28, 2017

Investment Red Flags – Close < 2

Sharing a lot of characteristics with the “Ultra Low Market Cap” red flag, looking for companies with a close of less than 2 gives you a number of companies whose market cap ranges from Micro to Small. These companies tend to have extremely poor fundamentals and also have a high probability of causing negative returns in your portfolio.

For this flag, we collect all companies who have a close of less than two at the time of screening. Now, a lot of marketers sell you the idea that you can make your fortune on these low priced stocks and in some cases that are true.…

September 21, 2017

Investment Red Flags – Micro-Cap Companies

Every time I get on the internet to try and find something new to learn about the markets I’m inundated with advertisements selling classes. These classes all seem to follow the same theme – they teach you how to become “rich” on penny and microcap stocks. Some people even get lucky and make some money doing it, but the vast majority is simply throwing money into a pit. Now let me explain why, and also why we have included microcap stocks in our red flags score.

Keeping with our other flags, we have kept it as simple as possible here by only having one line that simply states the following –

  • Companies whose average market cap over the past year is less than $100 million.
September 7, 2017

Investment Red Flags – Bad Beneish Score

How negatively does a bad Beneish score affect your portfolio?

 

With all of the recent articles regarding red and green flags, I realized I should begin writing articles on the flags within the score. One such flag, the bad Beneish score, is a key component of the red flags score.

The line item, “Bad Beneish Score” within the red flags score is calculated by using the above editor.

  • The Beneish M Score over the trailing 12 months (The most recent calculation) must be greater than 0.
  • The Beneish M Score over this past year (Two quarters behind the T12M calculation) must also be greater than 0.
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.…

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 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.
April 25, 2017

Stock Analysis – Creating a Tear Sheet

Creating a Tear Sheet from Start to Finish

A little over a year ago we released an article that outlined the process that one has to go through to create a tear sheet within the Equities Lab system. Upon looking back on it, I realized that the article didn’t really make the process seem very user friendly, so I’m going to go ahead and illustrate how to build a tear sheet step by step.

  1. Create a new formula
    1. Go into the editor and create a new formula. Name it whatever you like – in our case we are building momentum with red and green flags.
January 26, 2017

Which Stocks you Should Stay Away From

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.…
December 23, 2016

“Cut the Cord Movement” Affecting Cable Companies?

Is the Cut the Cord Movement affecting big Cable Companies?

The Cut the Cord movement has come about with the advent of the internet. As people are finding new means of entertainment, and new mediums to get the entertainment they received through cable, they have begun to cancel their expensive cable subscriptions. In 2000 there were a total of 68.5 million active cable subscriptions. However, by 2013 that number dropped to 54.4 million. That resulted in, assuming that the average cable subscription costs $50/month, a $8.46 billion dollar loss for the cable industry. So how does this massive loss affect the companies providing these cable services?…