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TranceAddict Investors Club @ Marketocracy (pg. 40)
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| jerZ07002 |
btw...that fundamental strength spreadsheet is intense. it's a little hard to follow because the references are all over the place.
i have a few comments, in cells B5: D5 you take the ratio of the adjusted score by the highest raw score, what is the point of that? Also, how did you come up with all of your adjustments? Those adjustments seem to be very important for your calculation. |
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| Krypton |
| quote: | Originally posted by jerZ07002
you are absolutely correct, there is no disputing that. i actually contributed to the financials for a few public companies and you wouldn't believe how some companies treat items on the balance sheet and P/L. Sometimes they play tricks and hope the auditors don't catch it.
Accounting rules, which admittedly i don't fully understand, are so complicated and many are not intuitive. Look at the off balance sheet items, that investors had no idea about last year, that are now all being placed on the balance sheets of the investment banks which are causing huge liquidity problems and losses on the P/L. There was no way an investor could know the exact risk with that stuff because it's only now they are being place on the B/S because the banks are acting as backstops, and weren't required by the accounting rules to account for those items.
i only said that because it seems like you really love shipping stocks and loving an industry/companty too much is sometimes a bad thing. many times people don't realize this until it's too late. Many people get burned because they hold on too long because they really love one stock or one industry. All i was suggesting is that you don't do that because to me it sounds like you just love shipping. |
I do have high expectations of the sector, but trust me, if the financial data indicates a decline in value, I have no problem acting accordingly. I follow the numbers. Whatever they tell me, I act on it. |
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| jerZ07002 |
| quote: | Originally posted by Krypton
I do have high expectations of the sector, but trust me, if the financial data indicates a decline in value, I have no problem acting accordingly. I follow the numbers. Whatever they tell me, I act on it. |
then you should have no problem making $$$$. |
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| Krypton |
| quote: | Originally posted by jerZ07002
btw...that fundamental strength spreadsheet is intense. it's a little hard to follow because the references are all over the place.
i have a few comments, in cells B5:D5 you take the ratio of the adjusted score by the highest raw score, what is the point of that? Also, how did you come up with all of your adjustments? Those adjustments seem to be very important for your calculation. |
That algorithm took me about 6 months to develop fully with all the adjustments and scoring balance. You have the finished product!
Cells B5 : D5 are actually the adjusted scores divided by the maximum score possible. This gives you a percentage grade much like that you get in school (0-100%).
I developed the adjustments because I wanted to balance the scores. Few companies ever outperform both their industry and the S&P500 in all 99 catagories looked at in this algorithm. So, instead of using a pure score, I used adjusted scores. The adjustments follow the logic that, if a company outperforms in, for example, 70 out of 99 catagories, that is a very good stock. Well, a pure score would be 70, 71. That's too low for an excellent stock. So with my adjustments, such a stock would be in the 90's, thus an A grade. The more catagories a company outperforms against its peers, the higher the scores, and thus, the higher the fundamental strength.
I worked for a while making those adjustment weights because I don't want scores to be too high or too low. I want them just right. I incorporated a pretty nice weighting system. The more catagories a stock outperformed in, the more extra points were awarded to that stock's grade. BUT, the less a stock outperformed in, past a certain point, I actually take away points! So, good stock's scores are magnified, while bad stocks are minimized. So, if a stock has a fundamental strength of 90 or 95, you know you've got a great stock on your hands. |
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| jerZ07002 |
| quote: | Originally posted by Krypton
That algorithm took me about 6 months to develop fully with all the adjustments and scoring balance. You have the finished product!
Cells B5 : D5 are actually the adjusted scores divided by the maximum score possible. This gives you a percentage grade much like that you get in school (0-100%).
I developed the adjustments because I wanted to balance the scores. Few companies ever outperform both their industry and the S&P500 in all 99 catagories looked at in this algorithm. So, instead of using a pure score, I used adjusted scores. The adjustments follow the logic that, if a company outperforms in, for example, 70 out of 99 catagories, that is a very good stock. Well, a pure score would be 70, 71. That's too low for an excellent stock. So with my adjustments, such a stock would be in the 90's, thus an A grade. The more catagories a company outperforms against its peers, the higher the scores, and thus, the higher the fundamental strength.
I worked for a while making those adjustment weights because I don't want scores to be too high or too low. I want them just right. I incorporated a pretty nice weighting system. The more catagories a stock outperformed in, the more extra points were awarded to that stock's grade. BUT, the less a stock outperformed in, past a certain point, I actually take away points! So, good stock's scores are magnified, while bad stocks are minimized. So, if a stock has a fundamental strength of 90 or 95, you know you've got a great stock on your hands. |
take a look at it again. Cell B5 is taking the ratio of the adjusted score in B4 (which can be as high as 40) and dividing it by 33 (which is the highest raw score). So you can have a number greater than 100% because the highest adjusted score is 40. It's the same with the ratio in the box below it. your percentages will be much lower if it is divided by 40, which would make an accurate ratio of actual adjusted score to highest adjusted score.
EDIT: you do the same thing for every ratio, including the max scores in J19, 27, et al. if you change it to the max adjusted score, the stock that is on the sheet by default will actually fall to a B. |
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| Krypton |
| quote: | Originally posted by jerZ07002
take a look at it again. Cell B5 is taking the ratio of the adjusted score in B4 (which can be as high as 40) and dividing it by 33 (which is the highest raw score). So you can have a number greater than 100% because the highest adjusted score is 40. It's the same with the ratio in the box below it. your percentages will be much lower if it is divided by 40, which would make an accurate ratio of actual adjusted score to highest adjusted score. |
Rarely does a company score higher than 100%. But, if it does, you know you have an exceptional stock. Now, that score you refer to is only one in 8 scores averaged as the CONSENSUS FS. Rarely, if ever, is a stock's CONSENSUS FS above 100. See, I balanced it so that less than .5% of all the more than 1000 companies I've scored ever score above 100%. I think I've found only like 3 stocks with CONSENSUS FS above 100. That's 3 out of more than 1000. This is why it took me around 6 months to finally get the adjustments just right.
Those 3 I found were RIO, PCU, and CSCO, so you might want to take a look at those yourself...;) |
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| Krypton |
| quote: | Originally posted by jerZ07002
EDIT: you do the same thing for every ratio, including the max scores in J19, 27, et al. if you change it to the max adjusted score, the stock that is on the sheet by default will actually fall to a B. |
Yes. No stock ever is 100% perfect. That is why i have adjusted scores, because I want to find those highest outperformers, and so I set the bar not at 100% perfect outperformer in all 99 catagories, but I set the 100% bar a little lower, but if I use the pure scores, then I'll never find any stocks in the 90's, and very very few in the 80's. |
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| Krypton |
Check out this test portfolio. It is the test of the fundamental strength. You can see that the algorithm very much is working.
http://marketocracy.com/cgi-bin/WebObjects/Portfolio.woa/ps/FundPublicPage/source=HcDoBdBcEgMiPlKnMaKiAbDd |
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| jerZ07002 |
| quote: | Originally posted by Krypton
Rarely does a company score higher than 100%. But, if it does, you know you have an exceptional stock. Now, that score you refer to is only one in 8 scores averaged as the CONSENSUS FS. Rarely, if ever, is a stock's CONSENSUS FS above 100. See, I balanced it so that less than .5% of all the more than 1000 companies I've scored ever score above 100%. I think I've found only like 3 stocks with CONSENSUS FS above 100. That's 3 out of more than 1000. This is why it took me around 6 months to finally get the adjustments just right.
Those 3 I found were RIO, PCU, and CSCO, so you might want to take a look at those yourself...;) |
Ok, i see what you are doing. i like it. the only comment i have is that the adjustments in the first box on the top left (in rows 3 - 5) don't seem to provide the most benefit to stocks with the highest raw score 33. Interestingly, when the stock has a raw score of 24 or 28, the difference caused by the adjustment is greater than if the stock has a score of 33. I figured that out by dividing each raw score by 33. THen i divided each adjsuted score by 33. I took the difference between the raw score and the adjusted score. See below (numbers rounded):
Raw (divided by 33)- - - Adjusted (divided by 33) - - - Difference
0 (0) - - - - - - - - - - 0 (0) - - - - - - - - - - - - - 0
1 (.03) - - - - - - - - - 4 (.12) - - - - - - - - - - - - 0.09
4 (.12) - - - - - - - - - 8 (.24) - - - - - - - - - - - - .12
8 (.24) - - - - - - - - - 12 (.36)- - - - - - - - - - - - .12
12 (.36)- - - - - - - - - 18 (.55)- - - - - - - - - - - - .18
16 (.48)- - - - - - - - - 22 (.67)- - - - - - - - - - - - .18
20 (.61)- - - - - - - - - 26 (.79)- - - - - - - - - - - - .18
24 (.73)- - - - - - - - - 32 (.97)- - - - - - - - - - - - .24
28 (.85)- - - - - - - - - 36 (1.09) - - - - - - - - - - - .24
33 (1.00) - - - - - - - - 40 (1.21) - - - - - - - - - - - .21 |
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| jerZ07002 |
impressive man. i like the spreadsheet. you do an excellent job of average out the comparisons against the industry and S&P. |
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| Krypton |
| quote: | Originally posted by jerZ07002
Ok, i see what you are doing. i like it. the only comment i have is that the adjustments in the first box on the top left (in rows 3 - 5) don't seem to benefit the stocks with the highest raw score 33. Interestingly, when the stock has a raw score of 24 or 28, the difference caused by the adjustment is greater than if the stock has a score of 33. I figured that out by dividing each raw score by 33. THen i divided each adjsuted score by 33. I took the difference between the raw score and the adjusted score. See below (numbers rounded):
Raw (divided by 33)- - - Adjusted (divided by 33) - - - Difference
0 (0) - - - - - - - - - - 0 (0) - - - - - - - - - - - - - 0
1 (.03) - - - - - - - - - 4 (.12) - - - - - - - - - - - - 0.09
4 (.12) - - - - - - - - - 8 (.24) - - - - - - - - - - - - .12
8 (.24) - - - - - - - - - 12 (.36)- - - - - - - - - - - - .12
12 (.36)- - - - - - - - - 18 (.55)- - - - - - - - - - - - .18
16 (.48)- - - - - - - - - 22 (.67)- - - - - - - - - - - - .18
20 (.61)- - - - - - - - - 26 (.79)- - - - - - - - - - - - .18
24 (.73)- - - - - - - - - 32 (.97)- - - - - - - - - - - - .24
28 (.85)- - - - - - - - - 36 (1.09) - - - - - - - - - - - .24
33 (1.00) - - - - - - - - 40 (1.21) - - - - - - - - - - - .21 |
Yea, I made it so that naturally high scores did not get ungodly adjusted scores. Check out my weights for stocks which score low. I make it so that low grade company actually lose points!
| quote: | | impressive man. i like the spreadsheet. you do an excellent job of average out the comparisons against the industry and S&P. |
Sure can't complain when it beats the S&P500 by 13%.
The most important thing I have learned is that it is much better to just buy a basket of great stocks, instead of trying nit-pick and choose stocks individually. BUT, to do that, one would need a lot of money so they could actually diversify that way. That, I don't have, but hopefully will one day..!:D |
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| jerZ07002 |
| quote: | Originally posted by Krypton
Yea, I made it so that naturally high scores did not get ungodly adjusted scores. Check out my weights for stocks which score low. I make it so that low grade company actually lose points! |
but don't you think that a company that has the most indicators above the E&P and industry should receive the biggest benefit from the adjusted score? |
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