The Ideal Stock Filter is the “holy grail” of investing. It (as I see it) will sift through hundreds of stocks, assessing financial ratios, market share, executive profiles, literally hundreds of financial and non-finacial factors. it will then deliver the optimujm portfolio, with which one can make money consistently!
My question is: after evealuating thousands of computer models, I now set out to use my “Ideal Filter”-will my success disturb the market? Will others leap on my bandwagon and dilute the efficiency of my model? Or will the market begin to re-configure itself, such that my model will no longer work? Or, will there be a “negative feedback” effect 9that is, my model will become less usefulover time, as myseccess drives down stock prices of the stocks I invest in)?
Help me out on thisone!
Well you seemed to have taken care of a lot of the “controllable” risk, technicals, and fundamentals. There are other variables in the market, many of them defy models. Things like the world political climate, and all the other “uncontrollable” risk factors. The weight of the variables that affect the stock market seems to change continuously. There are times though where the “uncontrollable” or “external” risks seem to remain constant (or close enough to constant) where a good model that evaluates “controllable” risk will be somewhat consistently successful. But when those ever changing “uncontrolable” factors decide to change, the models get crushed.
Most models I have seen for stock technicals pretty much suck, they usually say “strong buy” when a stock has had a big run already. The only way to get a handle on the big picture is listen to the talking heads on TV about world affairs. But it sure seems like taking a contrarian point of view is successful more times than not.
I think ralph124c is referring to a hypothetical filter/methodology. I’m going to assume that this magic filter is also able to minimize the uncontrollable risk of your investments.
Over time the market would eventually catch up to you. How long that takes is the question. If you keep the filter to yourself, then the market won’t catch up until you’re so wealthy that people start paying attention to what investments you’re making, and the prices of what you’re buying increase to a point where the rate of return decreases.
I’d love to help you out but first I have to see what we’re working with.
Send me a copy of the stock filter and I’ll give you my informed opinion.
So if i go on late-night TV and offer to sell my Filter for $199.00, it is not going to work any more?
geez, i thought i found the ticket to riches!
I’ll ask you the same question I ask random stock brokers who call me with great stock tips.
If it’s such a great opportunity, why are you trying to make me rich? Invest your own money and laugh all the way to your off shore account.
Mine don’t even bother to call. They just fax.
how the hell I got my fax number on that list, I’ll never know.
The principle is called arbitrage. Basically, if there was a way t consistantly make money and lots of people found out, then the price of the stocks picked using that method would rise until the advantage disappears.
Value Line has served me well over the years, almost always making me money. It’s not cheap, but your library probably has a subscription that you can look at for free. You choose your own criteria, and with their analysis, make your own choices. They don’t call or fax with hot tips. On paper, it’s about 6 in. thick, one page for each of the 1700 stocks they track. The Windows version is easier to wrangle.
Peruse it in the library, and use it to pick a handful of stocks for a year, on paper only. Keep track of your imaginary portfolio, and see if they made you money.
Here’s a basic framework, within their system:
Timeliness= 1
Safety <= 3
Industry Group <= 15 (more, if there are some throwouts in the top 15)
3-5yr. est. growth >=80%
You may want touchstones like P/E ratios and amount of debt.
Being the leader in an industry group is a good thing.
I’m not a jittery investor. I stay in until VL says it drops to 3 timeliness.