Advanced Automatic Investor

[aptus]

Hi Tom,

I'm not aware of any such reviews but when I first started Automatic Investor I had wanted to build in some sort of stock selection algorithm. Unfortunately finding the data (and the algorithm) was difficult back then.

A few years later, however, I was able to build a fundamentals analyzer into AI using some data available at Yahoo! Finance. I know quite a few AI users used it to select stocks and then manage them using AIM, but I don't know if any of them did formal backtests.

I then started to read quite a bit about Benjamin Graham and Warren Buffett and came to the conclusion that selecting fundamentally strong stocks with wide moats was what was required for AIM (mostly because of AIM's long-term outlook and its algorithm that bought more when prices fell -- it seemed clear to me that it was detrimental to buy more shares of bad stocks when prices dipped but was favorable to buy more shares of excellent stocks on price declines).

And what I was reading about Buffett and Graham made me realize they had already come up with an algorithm to find the excellent stocks -- and so Value Stock Selector was born.

Shortly afterwards I made the decision to use Buffett's methods for most of VSS with a bit of Graham (and a couple of others) on the side.

Putting it all together is basically what you've alluded to. Construct portfolios of strong stocks with wide moats. Only purchase shares when they are undervalued and then let AIM manage them.

You would sell if the fundamentals (or moat strength) decreased below a certain level, otherwise you would buy and sell according to AIM's recommendations. The VSS estimated sell price would not be used because AIM would take care of the sales.

In addition, for a long time I've placed a high importance on diversification, allocation and rebalancing.

AI has a built-in allocation function and I had presented on diversification at the AIM 2001 conference and wrote an article titled, Using Modern Portfolio Theory with Automatic Investor.

VSS also has an allocation function (based on the Sharpe ratio) so the only thing left was rebalancing. In the Pragmatic Investor book I described some rebalancing techniques and also described a form of extreme rebalancing I call the Value Trading Algorithm.

Lately I've been working on including Opportunistic Rebalancing into my new Pragmatic Investor software project.

To summarize, I see starting with great stocks that are selling for less than they're worth (i.e. Graham's margin of safety), diversifying based on low correlations, allocating based on reward/risk (i.e. the Sharpe Ratio), using AIM to manage risk at the micro-level and rebalancing at the macro-level using an Opportunistic Rebalancing strategy.

It sounds simple enough, but it has literally taken years to get to this point.

Regards,
Mark.

[OldAIMGuy]

Re: Integration of AutomaticInvestor with Value Stock Selector.....

Mark,

Have you or any customers done any "white paper" type reviews of portfolios constructed using Value Stock Selector and then managed using AIM AutomaticInvestor software?

I guess one wouldn't use the sell targets generated by the Value Stock Selector screener but would, instead, let the AIM engine do the risk management.

Comments?

Best regards,

[OldAIMGuy]

Hi N,

Some of us are still here. Like many hobbies, some fade in importance or priority after a while.

In my case, my "hobby" of investing I wanted to treat as a business. Therefore the business plan of Lichello's AIM became the basic structure and strategy of it. Once treated as a business, investing becomes less emotional and more consistent. The AIM engine is excellent for that low emotion and highly consistent goal.

Just as Day Traders tire of having to wear a catheter and not having a life other than staring at a monitor, some AIM users lose their enthusiasm. The ideas shared here and elsewhere about the AIM engine carried it from the "Senior Thesis" level to the "Post Doctorate" level. I'm sure there are other things that can be done/added/improved, but the incremental gains may be smaller than what has already occurred.

The AIM engine still doesn't address things like fundamental and technical analysis, portfolio design and structure, "core and satellite" ideas and market risk monitoring. Those things can and should be used in concert with the AIM business plan. Mark has complemented the AIM concept with several other products that reach into and help these other areas.

Best regards,

[nagpada]

I have been going through the postings at this board from post number 1. At one time there was some lively discussions and suggestions to modify AIM, peoples ongoing experiences with AIM and AI. It all seems to have come to a comparative grinding hault. Whatever happened to those inventive group ?

[nagpada]

Mark, The problem with screen shorts is that they are static and thus display only one error code at a time. I am getting way too many errors ( they may all point to the same source ) to keep doing that. There was a time in the past when I would not have heard of you or your software, progress ( internet ) made this both possiable and cheap. No more snail mail now tweets and video mail ?? I do not know the technicalities involved, I don't build cars just drive them.

Wish this site would progress to video attachments. Would make for a more enlightening and absorbing discussions. I was reading AI section from it's beginning. Seems many of the original thinkers and contributers have faded away.

[aptus]

Screen shots work well if the size of the image is relatively small. You should be able to attach those to emails (or post them here -- see the "Image" button to the left of the editor where you create your posts).

I've never had anyone send me videos as attachments to show problems before. If you want to use videos, I would suggest posting them to YouTube and sending a link. In most cases, however, screen shots serve to demonstrate the problem.

Regards,
Mark.

[nagpada]

But actually sending videos as attachments may or may not work.

I have used video attachments with emails before with no problems, some even sent to the Ukraine.

I hope this site had an eazy way of attaching a screen shot at the very least.

[aptus]

If you want to send a video you can put the video up on YouTube and then send a link to the YouTube video. But actually sending videos as attachments may or may not work.

Usually problems aren't caused by bad downloads but something else. Try posting the videos to YouTube and send the links to [e-mail]

Thanks,
Mark.

[nagpada]

Aptus, yes I did sent video's ( 3 ) that showed the problems thst I was encountering. I have used this technique before and if worked fine. Much better than writing pages. It's a new thing with the advent of you tube.

With the amount of problems that I am having trying to use it, could it be a bad download ?

[aptus]

Hello Nagpada,

The user's guide is very comprehensive and contains detailed explanations of every AI function. Did you have a chance to read through it?

Did you send any emails to support? Attaching videos probably doesn't work well because they tend to be too big or captured as SPAM.

If you'd like, I can extend your trial period for another 10 days and you can download the software again.

Mark.

[nagpada]

Futhermore 3 video's does hardly suffice to explain the innumerable possabilities of AI. My 10 day trial period is up and I haven't yet been able to get it to work. Don't know if it was a bad download or what. I sent video's with the problems occuring to support but haven't heard anything back. A complete and detailed series of videos posted on you tube would both provide a great service and boost sales. Maybe a long time and appreciative user might accept this assignment.

[nagpada]

Mark, Video 2 & 3 play. Video 1 does not do anything and thus I am unable to view it's content.

[aptus]

You can also look here --> http://www.automaticinvestor.com/Tutorials.html

[aptus]

Hello Nagpada,

There is a detailed user's guide that goes over all of Automatic Investor's functions and explains how each function works.

You can access the user's guide by double-clicking on the file called AIHelp30sp7.pdf

You can also click the HELP button in AI to access the user's guide.

Regards,
Mark.

[OldAIMGuy]

Hi N, You may want to ask over on the regular AIM board as there have been a number of users there.

Best regards,

[nagpada]

Any AAI user, Are there any videos that teach one step by step how to use this software and all it's capabilities. I have just downloaded the trial version and am lost. Thanks.

[nagpada]

Hi Mark,
1.Can AAI work of minute data.

2.Search for stocks at or near their 52 wk highs/lows.

3. How about LEAP information.

Thanks.

[aptus]

Hello Jack,

On a Windows 7 machine, after you install AI, you need to search for all aidb.mdb files on your computer and then copy your current data file to each place you find one. The actual aidb.mdb file will probably be in a sub-folder under the c:\users folder.

Windows 7 puts the data file in a separate folder from the program file (which is a change from how Windows XP operates).

After you've done that, register online and you should be set.

Let me know if you run into any issues.

Thanks,
Mark.

[lifo]

Hello Mark,

I am in the process of moving AI to a newer laptop computer and installed AI 3.0 SP7. After installation, it asked me to register the software, which I did. I then loaded one of my 'aidb' data files.

The program opens up, but it doesn't work, i.e. none of the accounts can be accessed. When I click on Portfolios, nothing happens.

Do you have any suggestions?

Thanks,
Jack

[aptus]

This is a message for Frank H.

Download Automatic Investor here --> http://automaticinvestor.com/ai30setup.exe

Mark.

[1step]

Hi Tom, Mark

You can save this site also by making it an EBook perhaps publishing on Kindle-Amazon, and using the proceeds if you decide to sell it to help finance your grand child's education. Books are as cheap as 99 cents or even less. If you have reservation over charging any money. You also can revise the book as new ideas prove deserving of consideration

It would be available to all. Would do a good thing as education is very exspensive and the kids come out with large debts.

Just a suggestion

1-Step

[OldAIMGuy]

Hi Mark, RE: AIM site...........

It was interesting to go back through the various pages and review what I'd written so long ago. Even though my current position with SignalPoint has us using primarily ETFs and CEFs, we do get requests from clients on occasion relative to individual stocks. I still review individual companies in much the same way as I proposed in those pages, too.

While we've all seen big changes in the way the markets move over time and the influences of the "block trade" aspects of ETFs and supercomputer arbitrage, essentially all of the fundamentals haven't changed. There appears to be a great divide between those who invest for the very long term and those who show up just for one dance and then are gone. The mentality and strategy of the two sides are about as extreme as they could possibly be.

The added short term volatility that has entered the markets doesn't preclude long term prospects. For those using AIM or another method of capturing volatility the shorter term volatility offers occasional better capture opportunities. Still, month-over-month changes aren't that different from years past. I do notice on my histograms the occasional odd trade that is well away from a 26 Week average price, only to see the price/share return to near where it was afterward. The "flash crash" of 2010 was an example of that. Many of my GTC Limit orders tripped that day well away from what had been the going price the day before.

So, while looking over those pages, I decided that while not much has changed about the only thing I've done is add consistency and minor refinement to the efforts I put forth for our clients. I think they appreciate our non-emotional adjustments to their portfolios.

Best regards, Tom

[aptus]

Thanks Tom for all the work you've done over the years creating and putting that information on your site. When I first wrote Automatic Investor, I used your site (along with the Lichello book) as the requirements document for designing AI.

I'll be working to get everything transferred and running on my server in the next few weeks, so when the current hosting goes offline there will be no interruptions to the aim-users.com site.

Mark.

[OldAIMGuy]

Re: www.aim-users.com Web Site...........................

Mark Hing of AutomaticInvestors.com has been kind enough to offer space at his web site for continuation of the aim-users.com web site. We've started the work of moving all the pages to his site, transferring the domain name and getting the redirect to work.

For the user, it shouldn't make any difference after the "move" is made. The web adderess should work as before, search engines should still find it, etc.

Thanks Mark!

Best regards,
Tom

[1step]

Hi Mark

Ran VSS to see if the market has changed. Nothing new same three stocks.

I reduced the percent to 70 . Two stocks came up msft and Ko. Both blue chips Ko i believe Coke and msft is microsoft.

Both would be good for consideration in a value account.

1step

[aptus]

Hi 1Step,

No, VSS doesn't use Beta when calculating scores or moat strengths.

I actually like to use highly volatile (but fundamentally solid) stocks with the Value Trading Algorithm as described in the Pragmatic Investor book. I try to stay away from low beta stocks.

Mark.

[1step]

Hi Mark

Ran vss only three stocks came up STRA, ESI, DLB

Wall Street Journal today sunday Had an article on Low Beta stocks outperforming the SP 500 in general.

Dose VSS use that in any way in allocating scores to picking stocks.


!step



.

[aptus]

Hi 1step,

I noticed VSS is now recommending 4 stocks (as of earlier this week). However VSS filters on fundamentals AND price so there may not be much correlation with a graph based solely on price.

In addition, VSS calculates intrinsic value and then builds in a margin of safety, so, the higher stock prices rise, the less chance VSS will recommend more stocks as being undervalued.

If 70% of prices are in the first quartile, then it makes sense that fewer stocks will be considered undervalued and thus VSS will return fewer recommendations.

Regards,
Mark.

[1step]

Hi mark

Just an observation . N.Y. times List s&p 100 as a graph. Each stock is compared to its 52 week high and low range.yesterday monday 27 new highs. over 70 % were in the upper quartile (top 25% of the hi-low range).Vss is still picking 2 stocks.



1step

[aptus]

Hello 1step,

I was actually surprised by this myself as I’ve never seen only 2 stocks returned in over 6 years of using VSS.

I think some companies have had their ratings go down (probably because they did worse during the past year or two due to the economic problems) and others have had their prices rise very quickly over the past year.

These two things appear to have combined to reduce the number of great, undervalued stocks.

Mark.

[1step]

hi Mark

just an observation Ran VSS 4. only 2 stocks came up . Does this mean the market is overbought.I just don't know? I do this irregularly but I believe this the lowest i've seen it.

I've been exploring pp by posting and reading. Your vss 4. doesnt allocate etfs and mutual funds unfortunately.

1step

[OldAIMGuy]

.....and the friendship pays dividends.....

[OldAIMGuy]

........ and room for growth......

[aptus]

Hi 1Step,

No, it's still the same version (i.e. v4.0 SP1). I just redesigned the website.

Mark.

[1step]

Hi Mark

Is this a new version. What new features does it have?

1step

[aptus]

Does "Value Friend Selector" find high-quality but undervalued friends with very little competition?

Mark.

[OldAIMGuy]

Hi Mark,

I'm glad I found you with my Value Friend Selector!

TV

[aptus]

I tend to read the news online every day, and a particular story just caught my attention and I wasn't surprised to hear Warren Buffett, who is visiting India, telling investors, at a news conference in New Delhi, he recommends they focus on fundamentals and be patient.

In fact that's what he's been doing for more than 5 decades and this strategy has made him one of the world's wealthiest people with a net worth of over $50 Billion.

And, as you might be aware, the Value Stock Selector software ( http://ValueStockSelector.com ) is based on Buffett's strategies... but I'm not posting today to get you to buy my Value Stock Selector software (although I think it could be very profitable for you if you did)...

Rather I'm posting to invite you to join the Value Stock Selector affiliate program. If you know anyone who could benefit from a solid, easy-to-use value investing system, you can help them start investing correctly and pocket a 50% commission for yourself by pointing them to the Value Stock Selector.

Sign up for a free Value Stock Selector affiliate account here --> http://valuestockselector.com/wp-content/plugins/wp-affiliate-platform/affiliates/index.php and get started today.

There's currently a promotion on VSS until April 1, 2011 for $197 (so your affiliate commission would be $98.50 for each sale) however the regular price is $297 (so your normal affiliate commission would be $148.50 for each sale).

It's a win-win-win situation. The person who purchases VSS wins by getting top-notch investing software, you get some extra cash and I get a new customer.

Sign up here --> http://valuestockselector.com/wp-content/plugins/wp-affiliate-platform/affiliates/index.php and get started today.

If you have any questions, feel free to let me know.

Mark.

[aptus]

New Value Stock Selector website and video here --> http://valuestockselector.com/

[aptus]

Hi AIMster,

The only other software I have for sale right now is Value Stock Selector, but it's not included in the charitable offer.

Don't you have a copy already?

Mark.

[AIMster]

Thanks, Mark.

Since I pragmatically took advantage of the AI offer last time, would you consider extending it to other software offerings?

I know, I push, [grin]

AIMster

[aptus]

Hi AIMster,

Thanks for the reminder. I've been so busy I didn't even think of that this time. But yes, that is a good idea and I will extend the same offer until March 31, 2011.

For people who donate at least $297 U.S. to the Red Cross to help the Japanese situation, I will give them a free AI 3.0 license.

The donation must be made between March 19, 2011 and March 31, 2011 (inclusive).

The license is a full license with all the benefits as if purchasing the software directly.

Just send a copy of the donation receipt to [e-mail] and I'll send instructions on how to obtain the AI license.

Mark.

[AIMster]

Mark,

A few years back for the Indonesian Tsunami you offered a nice deal on the software - a license for a corresponding donation to the Red Cross equal (or greater) to the software cost to the Red Cross. Are you inclined to do a repeat for the Japanese and their nuclear situation?

Thanks for your consideration.

AIMster

[aptus]

Hi TF,

That's what the Value Stock Selector software does. It combs through the 9400+ stocks trading on major U.S. exchanges and finds the highly rated ones --> http://ValueStockSelector.com

Mark.

[Toofuzzy]

Hi Aptus

That is really cool. If I could only figure out what to do with the info. Would be neat to rate a list of all stocks in order instead of hunting for the ones with high ratings one at a time.

Toofuzzy

[aptus]

Just put up a new online stock research tool here --> http://gflat.com/

I'm still working on the News portion, but it's well enough along to use now.

Mark.

[aptus]

Hi Larry,

Yes, that's exactly what Yahoo! is doing (see the excerpt in my last post from Yahoo!'s help). They say the price is the closing price from the last trading day of the week or month.

Personally I don't find that useful and would rather calculate the prices using daily data. It's more accurate.

Regards,
Mark.

[OLD NO.7]

Mark

Yahoo for monthly is pulling the last day of the month not the first day of the month so that is why they were different. I didn't check but for weekly data they are probably pulling the last day of the week.

Larry G

[OLD NO.7]

Mark

I guess my question is really for Yahoo because if daily data is data from the first day of the month and monthly data should be from lthe first day of the month then they should be the same unless they are pulling the last day of the month for monthly data. Just thought of that and I will check.

AI certainly saves time doing historical studies!

Thanks

Larry G

[aptus]

Hi Larry,

AI uses the adjusted close in its calculations.

The way AI works when you ask it for monthly data is to use the start date you selected and retrieve the daily data. Then it jumps ahead one month, retrieves the daily data on that day and repeats the process until the end date is reached.

So AI is actually always using daily data, but ignoring the data items between months. That's why you see 75.60 as the price for 9/3/2002.

The daily data are the most accurate and that's why AI uses them.

Here's a description of the differences from Yahoo's help page...

• Daily Historical Quotes provide you with the daily open, high, low, close, and volume for each trading day in the chosen date range.

• Weekly Historical Quotes retrieve the open trade from the first trading day for the week, the high and low price quotes of the week, and the closing price on the last trading day of the week. The weekly volume is the average daily volume for all trading days in the reported week.

• Monthly Historical Quotes report the open trade from the first trading day of the month, the high and low price quotes for the month, and the closing price on the last trading day of the month. The monthly volume is the average daily volume for all trading days in the reported month.

Let me know if you have any other questions.

Thanks,
Mark.