Avoiding capital raisings in short term trading

[Gringotts Bank]

I've had a few too many this year where I get caught with the unexpected capital raising, resulting in a sudden decline in share price while the instos get their fill of cheap shares.

Can someone suggest a way of filtering out possible cap raising candidates? I don't want to have to trawl through balance sheets though. I want to know what sort of cash levels would prevent a cap raising in most instances, and how to scan for this in quick manner.

Thanks.

 

[prawn_86]

Depending on the size of the co's you are trading really.

Micro caps tend to raise capital when cash is below 5m
Small caps depends on projects coming up. IE they might have 20m in the bank but need another 10 for a project so decide to raise capital.


I am not sure how you could run a scan for it personally

 

[brty]

I apologise for the harshness of this comment, but....

I don't want to have to trawl through balance sheets though.

...reads to me "I want to make money without doing the work".

 

[captain black]

I am not sure how you could run a scan for it personally

I haven't found a way to filter out stocks with a higher potential for capital raising. I figure that my system backtesting has picked up stocks that have dropped because of capital raisings and that it's included in my system metrics going forward. As long as my system performs within those metrics then issues such as capital raisings are just a part of trading like any adverse company announcements.

 

[McLovin]

Net debt < 3x EBITDA

EBIT > 3x Interest payments

Those are pretty generic banking covenants. If you avoid companies that fall outside that criteria it's unlikely they will need to raise capital.

Obviously if the company's not making money then you just need to look at, and understand, the cash burn.

Then there are acquisitions etc which may bring on cap raisings.

 

[captain black]

Net debt < 3x EBITDA

EBIT > 3x Interest payments

Ok, this has me thinking now. GB, you use Amibroker? It has the ability to import fundamental data and run scans and backtests using that data. I wonder if filtering out companies on fundamental criteria such as McLovin posted would improve a system's performance or whether you'd be filtering out stocks that may outperform? Interesting.

 

[tech/a]

Ok, this has me thinking now. GB, you use Amibroker? It has the ability to import fundamental data and run scans and backtests using that data. I wonder if filtering out companies on fundamental criteria such as McLovin posted would improve a system's performance or whether you'd be filtering out stocks that may outperform? Interesting.

Manual is probably the only way to do it.

But rather than run it on every stock why not do some back and perhaps forward testing by simply running the check on those turned up in the search.
Once you've done it you'll have the info for sometime (before it alters) so you'll eventually have a pool of stock not inside the criteria and results which indicate performance with the fundamental criteria as a further filter.

 

[Trembling Hand]

As long as my system performs within those metrics then issues such as capital raisings are just a part of trading like any adverse company announcements.

Xactly.

 

[captain black]

Manual is probably the only way to do it.

Fundamental data can be imported into Amibroker and used in the same way price and volume data is so it's possible to backtest and walk forward test in the same way as we would technically.

http://www.amibroker.com/guide/h_fundamental.html

I think by cutting out these small cap stocks you'd also hurt overall system performance but it would be interesting to test.

 

[tech/a]

Fundamental data can be imported into Amibroker and used in the same way price and volume data is so it's possible to backtest and walk forward test in the same way as we would technically.

http://www.amibroker.com/guide/h_fundamental.html

I think by cutting out these small cap stocks you'd also hurt overall system performance but it would be interesting to test.

Thanks for the info.
T/H and yourself both have the answer I think but even so would be interested in your results.

 

[Gringotts Bank]

Thanks for the replies everyone. Some good ideas and info.

Most of the stocks I'd trade are small, occasionally medium in size.

I think as a first step I might try to import some free fundamental data from Yahoo (no idea of its accuracy but I can check later), and then see what can be done from there. I'd like to do it automatically if possible, just because I'd prefer to have my list ready to trade within minutes. I might miss my set up if I had to wait while I read through financial reports. Will post if I have any luck.

 

[Gringotts Bank]

Yahoo's fundamental data looks old and patchy.

Found this. Looks promising.

http://www.zignals.com/main/stock_screener/stock_screener.aspx

 

[captain black]

Yahoo's fundamental data looks old and patchy.

heh, yeh, that's no surprise!

I played around with importing dividends and ex-dividend dates into Amibroker a while ago and finding reliable data in a format easy to import was a challenge. I wonder if Google data might be better, that's if it has ASX fundamental data. I'm sure I had a link to a site that had historical fundamental data in ascii format, can't seem to find it though. The site may have shut down and I deleted the link.

The Zignals site looks good but I dont think it has importable data?

 

[Gringotts Bank]

heh, yeh, that's no surprise!

I played around with importing dividends and ex-dividend dates into Amibroker a while ago and finding reliable data in a format easy to import was a challenge. I wonder if Google data might be better, that's if it has ASX fundamental data. I'm sure I had a link to a site that had historical fundamental data in ascii format, can't seem to find it though. The site may have shut down and I deleted the link.

The Zignals site looks good but I dont think it has importable data?

On Zignals, centre/top of screen there's a copy/export icon. Amazing what they have there for free.

 

[captain black]

On Zignals, centre/top of screen there's a copy/export icon. Amazing what they have there for free.

Ah, ok, I just had a look around and it needed me to install Microsoft Silverlight. I'm on a linux laptop so I wont install Silverlight but I'll have a look on the weekend when I jump on one of my laptops with Windows on it.