superior returns
One question the investors to achieve superior returns over the long term.
One option, which can save time and inject much-needed focus and discipline is to use stock screening and data mining tools as part of their armory.
The reason there is so much interest in the shares of screening is that, if carried out intelligently, evidence suggests that one of the safest way to consistently "beating the market'.
For example, Warren Buffett, the most successful investor in the world's best known for its distinctive, disciplined and systematic approach to investing, which is based on thinking about the two "giants" - Benjamin Graham and Philip. Fisher. As Buffett says, 'If it is good business, stock eventually follows'.
UK investment guru Jim Slater, author of "The Zulu Principle 'and famous for the" low PEG access "to picking growth stocks like a very disciplined. He believes that "almost every intelligent system works," and likes to combine several criteria in order to beat the market.
His favorite criterion is a low PEG (price-earnings growth factor), which is based on future earnings ratios. Basically, it is used to identify stocks that are on a low multiple of earnings relative to their earnings forecast growth rates.
To illustrate, the company forecast earnings per share (EPS) growth of 20% more (price-earnings ratio) of 10 to an attractive PEG of 0.5 (10 divided by 20). On the other hand, the company forecast EPS growth of 10% to more than 20 to unattractive PEG of 2 (20 divided by 10 ).
At first glance, that the latter would look much less attractive in terms of its valuation.
Stock screening, for example, allows you to focus on those companies with a PEG of less than or equal to 0.5, ie only those that appear to be humble in price relative to their earnings forecast growth rates. Clearly, as the stock then requires further investigation.
It also makes good sense to build a "safety net" around the main criterion. For example, other criteria may include looking for stocks at relatively low multiples, with cash flow per share in more than EPS (ie, to avoid creative accounting) and positive relative strength (ie, positive share price and quality relative to the market as a whole).
back-testing
Buffett's approach was successful and was consistently significantly superior in the long run as evidenced by his investment vehicle Berkshire Hathaway in the past 40 plus years, and an independent back-testing.
For example, back-testing conducted analysts Standard & Poor (S & P) using the screen version of Buffett stocks and found that between 1995 and January 2003 to get back to 207% compared with 77.7 % for the S & P 500
Jim Slater's Zulu Principle of the approach is also a 'back-tested. "The results were published by a stock broker Merrion in Dublin, Ireland.
Between 1994 and 2004, Merrion found that more than nine and a half years 'Zulu Principle' portfolio could have delivered compound annual returns of 24.5% (excluding costs), compared with only 4.4% compound per year UK FTSE All Share index.
Merrion One of the main conclusions was that this quantitative, disciplined and systematic approach to remove a lot of subjectivity and emotion from investment decisions, such as the urge to jump on the latest bandwagon, emotions that investors are often the hardest to control.
As Warren Buffett puts "what is necessary for successful investing is a sound investment framework for decision making and ability to maintain their feelings of corrosion within the'.
in combination with other qualitative research, intelligent disciplined approach to stock picking should be able to systematically stack the odds in your favor and lead to success in the long run.
How can I make a stock check?
Clearly, therefore, the evidence for the use of stock screening is compelling. So, what are the best tools available and how much they cost?
easy starting point is to type in key words such as "stock screening" and "data mining tools" as part of a keyword search in Google and other web-based search engines. This will provide information on free and paid for data mining and stock screening tools available to private investors. It is worth also checking in financial publications as Barron and I would recommend that you also check with your stock broker and financial adviser first before making a final decision and taking out a subscription to the stock screening.
Personally, I pay about $ 25 a month for the UK, focused on market leading stock screening tool that I find completely necessary.
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