THE SCORE
Technical Analysis
This area uses 3 primary areas to score the stock's technical.
Two indicators used are MACD and RSI.
Additionally we evaluate Momentum of the stock. The is done by using 4 indications to build the momentum score. They are Is the stock above or below the 5 day Simple Moving Average (SMA). Is it above or below the 15 SMA. Is the 5 day SMA above or below the 21 day SMA and is the 15 day SMA above or below the 50 day SMA.
These are weighted with momentum carrying more influence on the score.
Inner Circles
Inner Circle Ranking comprised of weighted scoring between insider scores and institution scores.
Insider Score
Proprietary Insider score color are a time regression algorithm based on size of the transactions, roles of transactions and number of transactions. These are then assigned weighted scoring ranges as follows: 0 or greater is green, from 0 to -10 is yellow, greater than -10 is red. The weight is favored on the sell side because generally there is always going to be some selling.
If the selling gets above the company's norm, or if the selling is by directions or C level executives (again above the norm), or if there is cluster selling in a short period, these will weigh more on the scoring and will cause it to go red.
Institutions Score
Institutions scores examine the trend of the overall institution ownership around an asset. In addition, various weighted scores such as: Number of institutions adding positions, Number of institution selling positions, New Institution buyers, and New Institution exiting. These factors are aggregated weighted toward recent activities to derive the scores.
Valuation
The Valuation Score algorithm comprised of proprietary weighted ranking of these factors: PE, PEG, Price/Cash Flow Ratio, Price/Book Ratio, Price/Sales Ratio, Alpha, Beta, R-Square, and Projected Price.
For PE, PEG, Price/Cash Flow Ratio, Price/Book Ratio and Price/Sales Ratio, we look at the result from the past 3 year history. They are evaluated quarter vs quarter, Same quarter this period vs same quarter last period and Trailing TTM year vs year. Each period examined carries with its own weighting. Each Ratio has its own target zone identified as well. In addition, we also look at the range of these from the sector. If the specific stock is outside its sector norms this will influence the score as well.
For Alpha, Beta, and R-Squared, we track the historical data trend to evaluate how this stock has related to the market over time.
- Alpha - This is an indication of how the stock is performing compared to the broad market. An Alpha of 1.0 indicates that it is performing the same as the broad market. Where higher than 1 indicated it is outperforming the market. Less than 1 is underperforming the market. Higher Alpha will carry higher ranking in scoring up to a threshold point.
- Beta - This is a measurement of the volatility of the stock compared to the market. A Beta under 1 means it is less volatile than the broad market, while a number over 1 indicated more volatile than the market.
- R-Squared measures how closely at stock tracks to the broad index. The measurement is between 0 and 1. 1.0 means it exactly follows an index while 0 indicates no collation.
Projected Price
This uses fundamental, PE, growth rates and earning forecast to project a forward price of the stock. Note: Stocks with negative earnings will not have a projected price. The discount rate can be changed to evaluate a higher discount rate on more volatile stocks.
Fundamental Score
There are 20 data points in the score. ( i.e. Sales, assets) These roll up to 5 higher level. (i.e. Growth, Profitability) These roll up to create the single Fundamental Score.
- Growth : Sales, Asset, Equity, Net Income
- Profitability: Profit Margin, Return on Asset, Return on Equity, Return on Investment
- Cashflow: Operational Cashflow, Free Cashflow, Cash Margin, Cash Indicator
- Key Ratios: Current Ratio, Cash Conversion Cycle, Debt/Equity Ratio, Z-Score
- Earning: Actual vs Analysis, Trend, Forecast, Long Term Growth Rate
You can see that structure on the fundamentals page on how they are grouped.
For each of these 20 points we track performance over Quarterly, Annual, and Trailing Twelve Months (TTM).
Each of these 20 data points are an aggregation of the data points that make up that point and each data points have its own weighting criteria. Example: Sales would include the revenue points from the company. These could include: Direct sales revenue, recurring/subscription revenue, interest for financial companies.
The easiest way to look at it is to consider an income statement and a balance sheet and how these can be a one page report, but it can drill way down.
Then weighing for each the data point are assigned to derive the overall score. The weight is different for different Sectors.
