Adherence to Rules Helps Model Shadow Stock Portfolio’s Performance
Posted on November 22, 2012 | AAII Journal
Following a consistent, well-defined approach has helped the portfolio achieve an average return of 16.1% over the past 20 years. Plus, see the latest buys and sells.
Earnings Estimates and Stock Prices
Posted on November 20, 2012 | AAII Journal
Expectations play a key role in determining if a stock’s price “gains” or “loses” when actual earnings are reported.
The Top Financial Apps
Posted on November 19, 2012 | AAII Journal
These are some of the best financial apps for iOS and Android devices currently.
New Edge Stocks
Posted on November 13, 2012 | AAII Journal
Christina Wise of Investor’s Business Daily reveals which company traits make a story stock an attractive investment in her September 2012 AAII Journal article “The ‘New’ Edge: Characteristics of Winning Stocks.” These are the fundamental traits that past winning stocks possessed in bull market after bull market, decade after decade. This issue’s First Cut applies the key fundamentals highlighted in the article using AAII’s stock screening and fundamental database, Stock Investor Pro.
The starting universe of 5,564 stocks for this issue’s First Cut consisted of exchange-listed companies. The First Cut first looked for companies with positive current earnings per share that have been able to increase annual earnings at a 25% or higher rate for each of the last three years. Only 168 stocks met that stringent test. The First Cut then required that earnings per share for the most recent quarter be at least 25% higher than same quarter last year. We also looked for companies that have had an accelerating rate of quarter-over-quarter earnings growth. As a confirmation of the strength of earnings per share growth, the First Cut looked for quarter-over-quarter sales growth of at least 25%. Only 12 stocks possessed both strong historical year-over-year annual earnings growth and recent strong and accelerating quarterly growth.
To seek out companies with sustainable and improving profitability, the First Cut followed Wise’s fundamental test that firms have a return on equity of at least 17% and a net profit margin is better than the company’s average margin over the last three years. Since profit margins vary by industry, the First Cut also required that the company’s profit margin be higher than the industry norm. This type of filter helps to highlight companies that have a competitive advantage over their peers.
Only 10 stocks passed all of the fundamental factors exhibited by typical market winners and they made the First Cut. The table ranks these stocks by the price change over the last 52 weeks to highlight recent stock market success.
The Top ETFs Over Three Years: Real Estate Dominates
Posted on November 5, 2012 | AAII Journal
Five real estate funds led all ETFs in terms of three-year returns. Dividend-focused ETFs led many equity fund categories.
The November 2012 issue of the AAII Journal is now available on-line
Posted on November 2, 2012 | AAII Journal
AAII’s Best of the Net: 2012 Guide to the Top Investment Websites, 16th Edition – This annual guide highlights the best online resources for financial information and investment data.
Charles Dow’s Theory Still Valid for the 21st Century
Posted on October 24, 2012 | AAII Journal
Dow Theory relies on both the Dow Jones industrial average and the Dow Jones transportation average to determine whether a true market trend exists.
Websites for Exchange-Traded Funds
Posted on October 17, 2012 | AAII Journal
Where to find data as well as prospectuses and other reports on ETFs.
The Balance Sheet: Assets, Debts and Equity
Posted on October 11, 2012 | AAII Journal
The balance sheet provides a snapshot of a company’s assets and liabilities at a certain point in time and gives insight into a company’s financial strength.
Model Mutual Fund and ETF Portfolios: Value and Small Stocks Impact Returns
Posted on October 8, 2012 | AAII Journal
Once again, the past quarter saw the market change direction dramatically. This time, happily, the change was strongly to the upside.
As can be seen in Tables 1 and 3 on pages 30 and 31, both the Model Mutual Fund Portfolio and the Model ETF Portfolio outperformed their benchmarks year-to-date as of January 31, 2012.
However, the turn to the upside was not strong enough to overcome the weak third quarter of last year. Both model portfolios underperformed for 2011, as shown in Tables 2 and 4.
Figures 1 and 2 give a graphical representation of the portfolios’ performances compared to their benchmarks.
The underperformance of both portfolios is largely due to the inferior short-term performance of value stocks and small-cap stocks. Since small-cap and value stocks have always proved superior in the long run, they are emphasized in the model portfolios. As a result, the model portfolios pay a price during the occasional periods when small caps and value stocks underperform. With the recent turnaround in the market, smaller-cap and value stocks have led the way up, and we expect to see that continue.