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July 16, 2022

Two bad days in a row

Two bad days in a row seem to be bad news… at least when rebalanced quarterly, or bi-monthly. Here we also limit it to stocks with a market cap over $1 billion, so that the large number of smaller stocks don’t bias the results.

Backtest Report for Jul 16, 2000 to Jul 16, 2021 for Two Bad Days In a Row

This normal screen rebalances quarterly.…

May 26, 2022

Putting Piotroski to the Test

The Petroski Formula is a nine-point investing formula used to rank stocks. In this article, we put the formula through a variety of tests.
May 21, 2021

Sector Booting using SCTR

Can we boost performance by getting rid of a couple of bad industries? Certainly. Can we do it via the SCTR? Maybe.

The best case: what future prediction can bring

Before we get started, we want to understand what perfect prediction could bring us.

This chart is what would happen, from 2000, if we could magically throw out the bottom 20% of these 11 sectors (usually 3), in terms of future performance next quarter.…

August 23, 2019

What does “S&P-like” mean, anyways?

In a previous article, we compared the S&P 500 index to an EquitiesLab macro, issandplike. Our goal was to analyze the S&P’s value, by comparing the official index’s performance with a collection of similar stocks. But what does “similar” mean in this case?

According to Standard & Poor’s website, an S&P stock must meet the following requirements.…

July 28, 2019

Net Income Verses Free Cash Flow

Show me the money

People look at net income, otherwise known as just earnings, as well as Free Cash Flow to decide whether they like a company. Why? Net income is the “real” income the firm makes, but it has one weakness: it doesn’t actually track money coming into (or out of) the firm.…

May 15, 2019
Does the S&P 500 Cheat?

Does the S&P 500 cheat?

Introduction

The S&P 500 has performed so spectacularly that some find its performance hard to believe. Are the stocks that make up the S&P being cherry-picked to only show the most successful performers? If the contents of this benchmark are not selected organically, its usefulness is suspect. If not selected impartially through a repeatable algorithm, how can these stocks represent a baseline “safe” investment?…

March 26, 2019

Will The Real O’Shaughnessy Please Stand Up?

O’Shaughnessy’s screen focuses on low-cost tickers with small market caps. His reasoning goes that, as small as these companies are, most analysts ignore them. This lack of attention suggests that there quite a few diamonds in the rough within microcap stocks. Is he right?
March 15, 2019
Does Making Money Matter?

Should I Invest In Money Losing Companies?

A common theory is that a company making money will outperform a company that doesn’t. Is that really true? I am here today to test how companies that make negative money or no money do compared against the S&P 500.

The graph to the right shows a screener with companies not making money in green and the S&P 500 in brown.

December 4, 2018
Blockchain is essentially the technological architecture that supports Bitcoin, but it holds far more potential than just that. Many people deem the mastermind behind this term to be Satoshi Nakomoto, the anonymous creator of Bitcoin. However, if you look into the original white paper the words "block" and "chain" are never conjoined but used separately, then later popularized.

Who’s Betting on Blockchain? – the Thousand Year Article

With all the hype surrounding Bitcoin in recent years due to price fluctuations, it’s been hard to ignore. You hear about it on business news, you read about it on your Twitter feed, and then you hear the word “blockchain”.

Blockchain is essentially the technological architecture that supports Bitcoin, but it holds far more potential than just that.

October 23, 2018
The Gordon Growth Model

Financial Valuation: Gordon Growth Model

The Gordon Growth model is an offshoot of the standard dividend discount model. This model is used primarily to calculate the intrinsic value of a firm based on the discounted value of future dividends.

The Equation

At a basic level the Gordon Growth Model is calculated by:

P = D1 / r-g

  • P = The intrinsic price you should pay for the firm
  • D1 = The dividend for the next period
  • R = The current discount rate, for our purposes we will use the CAPM for this
  • G = Is the dividend growth rate


Applying the Gordon Growth Model

So, we know how this is calculated if you are doing this on a sheet of paper, and if you don’t have the data there may be some pieces of information that you need to assume.…