Five Common Traits of Successful Value Screens

Posted on July 22, 2014 | AAII Journal

Though investing gurus differ in what they look for in a stock, there are five common traits we see across the AAII value-oriented screens.

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Kirkpatrick Bargain

Posted on July 21, 2014 | Stock Screens

A stock screening methodology created by Charles Kirkpatrick that uses the best triggers found in his testing of relative value, relative reported earnings growth and relative price strength.

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Social Media and “Pump and Dump” in the 21st Century

Posted on July 21, 2014 | Computerized Investing

While it is hard to argue with how much technology has made investing easier, there are always two sides to every coin.

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Geopolitical Concerns Spook U.S. Markets

Posted on July 18, 2014 | Stock Superstars Report

The Federal Reserve‘s Monetary Policy Report submitted to Congress this week included concerns about overvaluation in social media and biotech stocks. The report said, “Valuation metrics in some sectors do appear substantially stretched, particularly those for smaller firms in the social media and biotechnology industries, despite a notable downturn in equity prices for such firms early in the year.”

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Where Is the Cash Going?

Posted on July 18, 2014 | Dividend Investing

Ned Davis Research sent out a chart this week breaking down how S&P 500 companies spent their cash for the four quarters ending March 31, 2014. The largest amount was spent on net investments ($690.2 billion). Capital expenditures came in second at a record $666.4 billion. Share repurchases ranked third at $554.1 billion, which Ned Davis Research says is the largest four-quarter amount since the period ending December 31, 2007. Dividends ranked fourth at a record $344.3 billion.

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More Experience Won’t Necessarily Improve Returns

Posted on July 17, 2014 | Investor Update

If you listen to Malcolm Gladwell, you might believe spending 10,000 hours on investing will help you make better portfolio decisions. In his bestselling book, “Outliers” (Little, Brown and Company, 2008), Gladwell cites data from a study linking hours practiced to expertise. Gladwell’s assertion of the number of hours required to gain mastery of a skill is based on a 1993 study of violinists by K. Anders Ericsson and colleagues at Florida State University. The best violinists practiced 10,000 hours, 2,500 more hours than other violinists, according to the Ericsson group.

The Ericsson et al. study is widely cited. If one were to extrapolate its results, a link between the amount of time spent investing and portfolio returns could be drawn. Similar links could be drawn between practice and other activities as well. This is not the case, however. A study recently highlighted by Business Insider argues the amount of practice actually only plays a small role in the mastery of a skill.

In “Deliberate Practice: Is That All It Takes to Become an Expert?,” six researchers analyzed the data from many studies on chess and music. The researchers describe these activities as the “the two most widely studied domains in expertise research.” They found deliberate practice only accounts for 34% of variance in chess performance and 29.9% of variance in music performance.

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AAII Sentiment Survey: Optimism Falls to an 8-Week Low

Posted on July 17, 2014 | AAII Survey

Individual investor optimism about the short-term direction of stock prices fell to an eight-week low in the latest AAII Sentiment Survey. Neutral sentiment rebounded to the upper end of its typical range, while pessimism declined slightly.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 5.3 percentage points to 32.4%. This is an eight-week low. This is also the 16th time in the past 18 weeks that optimism is below its historical average of 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rebounded by 5.5 percentage points to 39.2%. This puts neutral sentiment above its historical average of 30.5% for the 28th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, declined 0.2 percentage points to 28.5%. The decline puts pessimism below its historical average of 30.5% for the 13th straight week and the 36th out of the last 40 weeks.

Neutral sentiment is right at the upper end of its typical range. Readings above 39.4% are considered to be unusually high (more than one standard deviation away from average.) The current 28-week streak of above-30.5% readings for neutral sentiment ties a similar streak from 1993 for the third-longest in the survey’s history. The only longer such streaks were an 82-week stretch between 1987 and 1988, and a 65-week stretch between 1997 and 1998.

Uncertainty about the short-term direction of stock prices, combined with a backdrop of concerns about prevailing valuations, a wait-and-see approach about second-quarter earnings, and, for some individual investors, rising tensions in the Middle East all likely played a role in boosting neutral sentiment and lowering optimism. Some AAII members remain optimistic about sustained economic growth, the market’s upward trend, and the Federal Reserve’s tapering of bond purchases. Others fret about the pace of economic growth, prevailing valuations, events in the Middle East and Ukraine, and frustration with Washington politics.

This week’s AAII Sentiment Survey results:

  • Bullish: 32.4%, down 5.3 percentage points
  • Neutral: 39.2%, up 5.5 percentage points
  • Bearish: 28.5%, down 0.2 percentage points

Historical averages:

  • Bullish: 39.0%
  • Neutral: 30.5%
  • Bearish: 30.5%

The AAII Sentiment Survey has been conducted weekly since July 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat, or fall over the next six months. The survey period runs from Thursday (12:01 a.m.) to Wednesday (11:59 p.m.) The survey and its results are available online at:

Half of Investors Say Market Outlook Is Unchanged by Middle East Turmoil

Posted on July 17, 2014 | AAII Survey

This week’s AAII Sentiment Survey special question asked AAII members what type of impact, if any, the current events in the Middle East are having on their six-month outlook for stock prices. Nearly half of respondents (49%) said the events so far were either not impacting or having a very small impact on their outlook. Slightly more than one out of five respondents (21%) said the events were either causing them to reduce their expectations about how stocks will perform or were a cause for concern. Just 12% said they were more bearish because of the events in the Middle East. Some members noted that their outlooks would change if geopolitical events worsened.

Here is a sampling of the responses:

  • “None. There is always something going on somewhere. I just tune it out.”
  • “I would expect oil and gas prices to go up, creating a slight drag on the economy.”
  • “Currently none, but things can change quickly over there.”
  • “Some concern changing my sentiment on the market from bullish to neutral.”
  • “Major impact due to possibilities of expanded conflicts.”

Sell OF THE WEEK 7/9/2014

Posted on July 16, 2014 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Exxon Mobil (XOM) is his “Sell of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.

Audio url: Sell of the week


Posted on July 15, 2014 | Stock Screens

YTD Return of Top Performers: Rule #1 Investing 54.5% — ADR Screen 38.1%

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