Let’s say you want to do a quick analysis of a stock. Perhaps you’re just looking to give the tires a good kick. Alternatively, you rely on charts and want to make sure the fundamentals are in your favor… or at least not against you. What should you look at?
The following will give an overview of some of the key things I look at. The suggestions are not meant to be a comprehensive guide to everything you should consider. They may also leave you exposed to risks that further research would have identified. They will cover a lot of ground, however, and are certainly better than not conducting any of your own research.
Valuation Ratios: You simply don’t want to overpay for a stock. Lower valuation ratios (price-earnings, price-to-book, price-to-sales, price-to-cash flow, etc.) are better than higher ones. Very high price-earnings and price-to-book ratios can also signal low levels of earnings or book value, respectively. Continue Reading »
AAII Model Portfolio Update
Two exchange-traded funds (ETFs) were replaced in the Model Fund Portfolio. Guggenheim S&P MidCap 400 Pure Value (RFV) and the Guggenheim S&P SmallCap 600 Pure Value (RZV) were removed. Vanguard Mid-Cap Value Index (VOE) and Vanguard Small-Cap Value Index ETF (VBR) were added because of their lower expense ratios and tighter bid/ask spreads.
No changes were made to the Model Shadow Stock Portfolio.
The Shadow Stock Portfolio, which is a real-money portfolio of micro-cap value stocks, rebounded 2.91% in June. The Vanguard Small Cap Index fund (NAESX) gained 2.24% for the month and the DFA U.S. Micro Cap fund (DFSCX) added 3.72% in June.
Since its inception in 1993, the Shadow Stock Portfolio has a compound annual average return of 16.0% versus the Vanguard 500 Index fund’s (VFINX) gain of 9.2% a year on average over the same period. Comparing the performance to a more appropriate benchmark, the DFA U.S. Micro Cap fund (DFSCX) has averaged an annual return of 11.5% over the same period.
The Model Fund Portfolio gained 1.51% in June, compared to a 0.61% increase in the SPDR S&P 500 ETF (SPY). Since its inception in June 2003, the Model Fund Portfolio has a compound annual average return of 8.9%, while the SPDR S&P 500 ETF has an 8.8% average annual return over the same period.
Join AAII and Receive Winning Model Portfolios
Investing the “AAII Way” has always been about distilling current financial theory and academic research into knowledge that our members can act upon. As a member of AAII, you’ll receive monthly updates on the holdings, performance and investment strategies behind our real-world portfolios.
AAII Model Shadow Stock Portfolio: 34.5% one-year annualized return*
Free Guide–New members are rushed a special guide to our model portfolios. This guide acts as an invaluable “cheat sheet” for those who want to quickly build a personal version of their own AAII stock or fund portfolio.
*Results as of 6/30/2017.
More on AAII.com
- Using a Simple Worksheet to Analyze a Stock – This Investor Classroom lesson discusses a downloadable spreadsheet designed to help you assess whether or not a stock is a good bargain.
- 16 Financial Ratios for Analyzing a Company’s Strengths and Weaknesses – These ratios allow you to quickly compare the fiscal strength, profitability and efficiency of two or more companies.
Highlights from this month’s AAII Journal
- Three Value-Investing Benchmarks – Valuation models espoused by John Burr Williams, Robert Shiller and John Bogle that can be used to assess the market’s likelihood of gains.
- Allocating to Manage Risk: A Case Study – A retired couple’s portfolio is adjusted to reduce the damage that turbulent market conditions could have.
AAII Sentiment Survey
Pessimism fell to its second-lowest level of the year. Though optimism rebounded to a 11-week high, it continues to remain below its historical average. More about this week’s results.
This week’s results:
- Bullish: 35.5%, up 7.2 points
- Neutral: 38.7%, down 3.4 points
- Bearish: 25.8%, down 3.8 points
- Bullish: 38.5%
- Neutral: 31.0%
- Bearish: 30.5%
Take the Sentiment Survey.
The Week Ahead
The earnings calendar lists 191 S&P 500 member companies as being scheduled to report. Included in this group are 13 Dow components: 3M Co. (MMM), Caterpillar (CAT), E.I. DuPont de Nemours & Co. (DD), McDonald’s Corp. (MCD) and United Technologies (UTX) on Tuesday; Boeing (BA) and Coca-Cola Co. (KO) on Wednesday; Intel Corp. (INTC) and Verizon Communications (VZ) on Thursday; and Chevron Corp. (CVX), Exxon Mobil Corp. (XOM) and Merck & Co. (MRK) on Friday.
The Federal Open Market Committee will hold a two-day meeting starting on Tuesday. The meeting statement will be released on Wednesday. No rate hike is expected.
The week’s first economic reports will be the July Purchasing Managers’ Index (PMI) and June existing home sales, released on Monday. Tuesday will feature the May Case-Shiller home price index and The Conference Board’s July consumer confidence survey. June new home sales will be released on Wednesday. Thursday will feature June durable goods orders and June international trade. Ending the week, the first estimate of second-quarter GDP and the University of Michigan’s final July consumer sentiment survey will be released on Friday.
Minneapolis president Neel Kashkari, who will speak on Friday, will be the only Federal Reserve official making a public appearance.
The Treasury Department will auction $26 billion of two-year notes on Tuesday, $15 billion of two-year floating rate notes and $34 billion of five-year notes on Wednesday and $28 billion of seven-year notes on Thursday.
Local Chapter Meetings
AAII Local Chapter Meetings offer you a variety of presentations from expert speakers who will give you their view on the world of investing. A bonus of attending a Chapter Meeting near you is the opportunity to meet other AAII members who share your interest and enthusiasm for investing. You can even share the Chapter experience with your family and friends by inviting them to attend Chapter Meetings with you! Upcoming Meetings »