FundaTechnical Analysis - The way of the future

[Idiode]

Hello again. I have been perusing fundamental screening programs such as Value Gain (+4KAUD), Conscious Investor (subscription) , Share Pricer (+$29USD) and Australian Stock Screener (free).

Do you use a software program to sift out stocks that meet your criteria?

As a newcomer to this forum I have to say thank you for this info Wysiwig.
Regardless of several others views, I have gained heaps of valuable information from this thread.
Now using the Australian Stock Market Scanner as another tool thanks to your input.

 

[rbbrain]

Hi again,

Which Fundamental criteria does everyone prefer? Let's try to keep it simple. We know some of the F/Analysts love the number crunching, and pouring over the statistics, etc. But traders who have little interest in F/A need a quick and easy way to do this.

My preferred three criteria are below. I only want three to keep it simple. No need to over-complicate this.

How do they compare with your own?

And how much do we have to pay to get this information? Either from a broker, or software, or a data service, or whatever?

#1 - ROE > 10% year on year for at least 3 years. - This is a "Performance" measure.
This is a good gauge of the success of a company at making profits.

#2 - D:E < 50% - that is - Debt/Equity ratio (This is a "Risk" metric). For companies to grow, it helps if they can borrow money. The more money they borrow, then potentially the faster they can grow. One of the problems with a fast growing company is to keep up with the expanding needs for cash. Many growing businesses that go bust do so because they can't service the cash flow. But, if a company has taken on too much debt, they might one day get to the point where they have trouble servicing the debt. It seems that a ratio of debt to equity of about 50% is about the tipping point - any more and they run the risk of blowing up down the track (like ABC Learning Centres).

#3 - PE/Growth < 1 - (This is a "Value" metric"). Just looking at PE is simplistic. A company with a high PE might be considered over-price; but if they have future earnings growth potential, then the high PE can be justified. The way to even this out is to divide PE by the one year estimate for earnings growth. This brings the PE back to a more useful number.

How to get these values? What software etc?

Well, I use CommSec, and these values can be used in search criteria to identify the list of stocks - too easy.

Other brokers should have similar tools available to search for stocks.

Software like Lincoln Indicator's Stock Doctor might also be able to scan for these criteria.

how do these compare with everyone else's preferences?

Cheers

 

[Mr J]

"Only" 5% on a spec? The damp slap you just heard was the sound of my sphincter clenching in terror.

My reaction was surprise, but not terror . Are we talking real risk here, i.e. prepared to lose 5% of trading capital, and the same for:

I also know of some people who are very gung-ho and happy to risk a lot more than 30% of their capital on trades that they would not consider speculative

30% is balls to the wall, even if the Kelly Criterion can justify it.

I prefer Technamental, but google shows that to already be in use.

 

[Jack.c]

As a shorter term trader, I am really not too sure how to use fundamentals to help my trading, apart from maybe understanding if a market is likely to take off in 1 direction on a certain day.

But if there is a way i would love to learn how.

 

[Client]

As a shorter term trader, I am really not too sure how to use fundamentals to help my trading, apart from maybe understanding if a market is likely to take off in 1 direction on a certain day.

But if there is a way i would love to learn how.

There are so many fundamentals around that you won't be able to analyse and take to attention all of them. Technical analysis is the only option for a short term trader, IMHO.

 

[Pivotonian]

"Only" 5% on a spec? The damp slap you just heard was the sound of my sphincter clenching in terror.

He's talking about only 5% of total capital allocated to (probably several) spec trades.

Helps to read the post you're quoting. Also sometimes helps to read the earlier posts in a thread - this exact point was dealt with a few posts up.

 

[motorway]

Here are some backtested results of a simple formula screen on US markets

http://info.formulainvesting.com/results/

What is this Magic Formula?

The Magic Formula seeks to identify “good” businesses selling at “bargain” prices. It uses two factors to rank stocks so that you can identify the best businesses selling at bargain prices.

The first factor identifies a good business as one that produces a high return on capital (ROC). Return on capital is calculated by dividing earnings before interest and taxes (EBIT) by the sum of net working capital and net fixed assets.

ROC = EBIT / (Net Working Capital + Net Fixed assets)

The second factor identifies businesses selling at bargain prices by examining earnings yield, which is basically the in inverse of the price earnings ratio (P/E). More specifically, earnings yield is defined as earnings before interest and taxes divided by enterprise value.

EY = EBIT/EV

The Little Book
That BEATS The MARKET
by Joel Greenblatt


In some ways I think a simple scan might be better..
esp If then using Trend Identifying Techniques ...



Motorway

 

[Gunslinger]

...
Now using the Australian Stock Market Scanner as another tool thanks to your input.

Thanks Idiode, now google brought that up for me

Cheers,

JB

 

[Wysiwyg]

Now using the Australian Stock Market Scanner as another tool thanks to your input.

Please note the data is not kept up to date at this resource.