Validea: Still Helping You Pick & Analyze Stocks
to check back on Validea (www.validea.com),
the site that helps you to picks stocks by
emulating the strategies of 10 famous gurus such as Joel Greenblatt,
author of the best seller, “Magic Formula Investing,” and Warren
Buffet, who needs no introduction. Besides for the 10 gurus, Validea
also includes its own momentum stock picking strategy and a strategy
developed by Motley Fool (www.fool.com)
for finding fast growing, small-cap stocks.
Validea most useful is that it tracks each portfolio’s returns by year
going back to 2003 as well as annualized returns since each portfolio’s
inception (usually 2003).
check those you’ll see a lot of year-to-year variability in terms of
performance vs. the overall market as gauged by the S&P 500. For
instance, in 2013, 10 of the 12 Validea portfolios generated
double-digit returns and eight of them beat the S&P’s 30% return. By
contrast, last year, only three managed to end the year in positive
territory and only one of those beat the S&P’s 11% number.
Nevertheless, since their 2003 inception, three Validea portfolios have
averaged impressive double-digit annual returns compared to only
7% for the S&P. More on
those three in a minute.
a subscription to see the current portfolios on Validea’s site, but you
can see eight of them, including the six top returners, for free on the
NASDAQ stock exchange site (www.nasdaq.com).
from the NASDAQ home page by selecting Investing and then
Guru Screener in the Investing Tools section. Once there, use the
“Find Stock Based on Guru Interest” section to pick a specific Guru
strategy. Specify “Strong” for interest level to see stocks meeting each
Guru’s full selection requirements, or “Some” for a larger list of
stocks meeting about half of the requirements.
also use the section labeled “Find Good Stocks Based on Guru Interest”
to see stocks that simultaneously have “strong” or “some” interest” from
at least two, and up to five different Guru strategies. However, I’ve
found the best results by specifying “strong interest” from only a
single Guru. Now back to the top three portfolios.
Best Returning Portfolios Since 2003: #3
Kenneth Fisher’s Price/Sales Investor, averaging 11%
annually, produced the
third highest returns since 2003.
Fisher, a money manager and long-time Forbes'
columnist, introduced the concept of using price/sales ratios for
valuing stocks in his best selling book, "Super Stocks." To insure
sufficient trading volumes, I honed down each
portfolio list to stocks with $1 billion minimum market
capitalization, or trading at least 300,000 shares daily.
Using those criterion, Sanderson Farms (SAFM) and Winnebago
Industries (WGO) were the only investible stocks on
Validea’s Momentum Investor, returning 13%, produced the second
best average annual returns.
It looks for stocks with
strong price charts, among other characteristics that
Validea doesn't want to share.
“Strong” interest for that strategy produced only two investible picks:
Amtrust Financial Services (AFSI) and Credit Acceptance Corp. (CACC).
The Value Investing strategy, returning 14%, on average,
annually, produced the highest returns since 2003. It’s based on
conservative, low-risk strategies described in
“Security Analysis,” by Graham and Dodd, first published in 1934.
that screen turned up six investible stocks: National Oilwell Varco
(NOV), Hemerich & Payne (HP), Reliance Steel & Aluminum (RS), Joy Global
(JOY), Universal Corp. (UVV), and Chart Industries (GTLS).
All of the
returns mentioned assumed buying each strategy’s 10 highest-rated stocks
and holding for one year.
Detailed Guru Analysis
After you run a screen, you can click on the name or ticker
symbol of any of the stocks listed to see how it would be scored by any
of the 10 strategies offered on the NASDAQ site. From there, you can
select Detailed Analysis to see a detailed explanation why the stock
passed or failed each of the strategy’s requirements. You’ll learn a lot
by reading these.
In fact, you can see
that information for any stock by entering its ticker symbol in the View
Guru Analysis section.
As always, consider
the stocks turned up by Validea’s screens as research candidates, not a
buy list. The more you know about your stocks, the better your results.