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.…
A recurring name throughout our software and website, the F-score has been continuously tested under many different circumstances and never ceases to amaze me. It may be simplistic, but, when used correctly, can be a very powerful tool for your portfolio.
For this Green Flag we want to look at the two calculations we have in the system for the Piotroski F-Score – Yearly and Trailing 12 Months. If you are unsure of the difference, the yearly score is based on the most recent annual data, while the T12M relies on the four most recent quarters. This slight difference just means that the T12M score is two-quarters ahead of the yearly score data wise.…
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.…
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 –
When it comes to finding green flags, sometimes the simplest idea is the best. In the case of our flag – Revenue Growth and High Asset Turnover – we look for just that. It’s pretty self-explanatory that if a company is bringing in more money and is selling products faster than anyone else, it will likely increase in price long-term.
In this flag, we’ve kept it fairly simple by looking for the following –
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.
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.…
If you have been using the Equities Lab system in recent weeks, you may have seen a new error that hadn’t appeared before.
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?
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 –
Most anytime we analyze a company or build a screen; we use any number of scores that are pre-built in the Equities Lab system. These scores are tried and tested, but they lack that personal touch. I think it’s time we learned how to build our own scores within the software.
To begin creating your score, you need to open up your explorer and click “Formula” under the Create New area. Go ahead and name your formula anything you like, but you’ll want it to be something regular that you can remember.
At its core, a score is a collection of True/False variables.…