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Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Hello Byculla,
No, backtesting will not be in the new version of Value Stock Selector. Unfortunately the amount of data required to backtest VSS makes it difficult to include this function and still maintain a low price (other analysis programs that include backtesting charge $2,000 to $5,000 per YEAR for this functionality).
However the new version allows you to save your previous analysis results and then scroll through them using the next/previous buttons.
It also allows you to filter on dividend yield (which was requested by users of version 4.0) and includes the company name and industry in the results (another request from v4.0 users).
I've also added a maximum filter to the rating, moat strength and estimated return (apparently some v4.0 users wanted to use VSS to only find bad stocks).
Finally, it includes a watch function that allows you to enter symbols along with minimum and maximum ratings and moat strengths and will alert you if that stock moves outside your selected ranges.
The interface has also been redesigned to use colours so it is easier to interpret results.
Regards,
Mark.
Hi Tom,
I successfully transferred the domain name many weeks ago and started the website refresh then (I thought I'd give it a more updated look although the information would be the same).
Unfortunately I got tied up doing a few other things. So I think it will be a few more weeks before I get the site is up with the new look.
Regards,
Mark.
Value Stock Selector v5.0 needs Beta testers.
If you'd like to beta test the latest version of VSS, please send me an email.
I'm looking for 3 to 5 people who will put it through its paces and test it thoroughly. As usual, Beta testers will receive a free copy when it's released.
There are quite a few enhancements that make v5.0 more powerful than v4.0.
Here are a couple of screen shots.
The main Fundamentals Analysis screen.
The configuration screen.
Let me know if you're interested.
Thanks,
Mark.
mhing@ValueStockSelector.com
I'm in the midst of transferring the aim-users.com domain name from Network Solutions and it is taking more time than usual. They say up to 7 days.
The aim-users site will be back once the transfer completes.
Mark.
Hi Tom,
I hadn't actually thought of that.
Off the top of my head, I think if you held one stock (or a group of highly correlated stocks that you think of as one) and cash, then AIM and Opportunistic Rebalancing (OR) are somewhat related.
However AIM doesn't have a neat way to rebalance between multiple stocks (just between equity and cash).
On the flip side, the OR threshold and tolerance bands are static whereas AIM has a dynamic Portfolio Control. So AIM "rebalances" back to a moving policy benchmark while OR rebalances to a static policy benchmark (with some wiggle room).
I actually think they can complement each other nicely. AIM rebalances individual cash/stock portfolios (the micro level) and OR rebalances multiple AIM-managed portfolios (the macro level).
So AIM takes advantage of an individual stock's volatility and reduces risk at that level while OR takes advantage of uncorrelated AIM-managed portfolios (the holistic view).
And since individual AIM portfolios will usually hold cash, it can make rebalancing easier since it may not be necessary to actually sell individual stocks to rebalance at the Macro level.
On the other hand, Macro rebalancing will require us to interfere with AIM when OR tells us we should rebalance. I don't view this with too much concern because I personally don't have an issue with making non-AIM-directed sales/purchases and manually adjusting the Portfolio Control appropriately if there's a good reason to do so, however I'm sure some AIM purists would not like the idea.
Thanks for bringing this up. I think there could be a few different ways in which AIM and OR could interact. At the end of the day they both seek to control risk and buy low and sell high -- just at different levels.
Mark.
Hi Toof,
I didn't say anything about doubling returns. Perhaps you read the following sentence and thought it was referring to returns...
"The Daryanani study showed that an Opportunistic Rebalancing strategy more than doubled the calendar rebalancing benefits over a wide range of market conditions."
Daryanani stated this in the Executive Summary of his paper.
Regarding tax sheltered accounts, I agree these types of accounts would be best. However not all investors are U.S.-based and there are countries that don't have the long-term/short-term tax rates like the U.S. has.
In addition, Opportunistic Rebalancing can make sense even for U.S.-based investors using taxable accounts.
First, if you've been buying shares over time, some of these shares could have been purchased more than a year back. These are the ones you can sell when you rebalance.
Secondly, Daryanani talks about tax costs under the section, "Costs of Rebalancing" in his paper. So in some situations it makes complete sense to rebalance this way in a taxable account.
The main reason I like this method is because it's based on price rather than dates. And since price is really what creates a portfolio's imbalance, it's logical to use it as the prime determiner on when to trigger a rebalancing event.
Regards,
Mark.
In case you haven't visited the Value Stock Selector site recently (or don't know about it), I've posted an article that explains the Opportunistic Rebalancing strategy.
You can find it here --> http://valuestockselector.com/investment-articles/opportunistic-rebalancing-ultimate-rebalancing-strategy
I also maintain an investment blog at the site here --> http://valuestockselector.com/blog
Regards,
Mark.
Hi Neko,
My apologies for the delayed reply. I haven't been on iHub for a few months now.
I'm still working on the new Pragmatic Investor 3.0 software (which is cloud-based software that runs in any browser and on any device with a modern browser -- such as smartphones and tablets).
However this is not yet available.
The previous version (2.0) is not for sale any longer.
I'll post here once PI 3.0 is released.
Regards,
Mark.
Hi 1step,
VSS will run on any intel-based Mac with an appropriate emulator (e.g. Parallels, VMWare or Oracle). You can also install Windows using Bootcamp and VSS will run.
However since VSS is purely Windows based, it won't run on OS X.
There is a scaled down version of the VSS single stock analyzer here --> http://valuestockselector.com/online/
Regards,
Mark.
Hi 1step,
I recommend waiting. It's not very often in this type of market that excellent stocks with strong moats (i.e. 5 or 6) appear at the price required for the default Margin of Safety.
One change in the latest Service Pack (SP3) of VSS I made was to add an extra filter. So if you are running SP3, you can change the Minimum Rating to 70 (however I recommend you leave the Minimum Moat Strength at 5, the Margin of Safety at 50% and the Worst Case Return at 12%).
I use the 70 minimum rating and I check the "Show when current price greater than Buy Price" box on the Configuration window. This lets me see if the current price is near the maximum buy price.
Regards,
Mark.
Hello Nagpada,
In a way you are in a very good spot. Lichello first came up with AIM back in the 1970s and Tom Veale and some others jumped on the idea and quickly improved on it.
Then there were lots of others who had ideas (some good and some not so good). Over the years, however, the good ideas are still being used and the bad ones fell by the wayside.
I think most of the ideas that are good have already been brought forth and discussed on the main AIM board and on the old Silicon Investor board (I'm sure there are others that could be discussed, but the ones that have the biggest impact are already out there).
This is normal for just about everything. In the early going there's lots of activity and development and then, as the strategy matures, it settles into a stable state.
So you are in a position to take advantage of a very robust system that is being used extensively in the real world and has been tested by quite a few smart people.
Where investing systems are concerned, I think it is better to use one that is mature, open and has been publicly scrutinized and tested rather than one that is in a state of constant modification.
Lichello gave us a pretty good system and others have made it better, but now I think AIM has reached a point of stability that really doesn't need additional tinkering.
Regards,
Mark.
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.
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.
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 support@automaticinvestor.com
Thanks,
Mark.
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.
You can also look here --> http://www.automaticinvestor.com/Tutorials.html
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.
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.
This is a message for Frank H.
Download Automatic Investor here --> http://automaticinvestor.com/ai30setup.exe
Mark.
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.
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.
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.
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.
Hi 1Step,
No, it's still the same version (i.e. v4.0 SP1). I just redesigned the website.
Mark.
Does "Value Friend Selector" find high-quality but undervalued friends with very little competition?
Mark.
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.
New Value Stock Selector website and video here --> http://valuestockselector.com/
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.
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 mhing@automaticinvestor.com and I'll send instructions on how to obtain the AI license.
Mark.
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.
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.
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.
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.
Hi 1step,
1) The asset allocation module uses the Sharpe Ratio to allocate stocks. The Sharpe ratio does not take fundamental strength into account but only concentrates on reward and risk (i.e. price performance and standard deviation).
ABT apparently had the best reward/risk score over the period you used and that's why it was given the largest allocation.
This touches on a fundamental point when investing using VSS. You should FIRST select stocks with strong fundamentals and strong moats, SECOND buy them when they're undervalued and THIRD, allocate those stocks.
That way you're assured that risk-minimization is built-in at each step. First by selecting great companies (which are at less risk of going out of business), second by purchasing stocks with a built-in margin of safety, and third, by diversifying and optimizing your portfolio to further minimize risk and increase returns.
2) VSS v4.0 is the latest version.
I hope I've answered your questions, let me know if you have any others.
Thanks,
Mark.
Hi Neko,
Unfortunately the oft-delayed Pragmatic Investor software is still not ready. To date I have been content to just use it for my personal investing and haven't put in the work required to make it ready for release to the public.
At this point I'm not going to attempt to guess at a new release date but will post a message here as soon as it's available.
Thanks for your interest and my apologies for the continuing delays.
Mark.
2 Days Only: Save 50% on Value Stock Selector 4.0
Until Monday December 20, 2010 (at 11:59 pm PST)
Enjoy Value Stock Selector 4.0 on sale for 50% off!
Now you can get the World's Easiest Investment Software for 50% off any order that you place by Monday, December 20th!
Simply enter Coupon Code Christmas2010 into your shopping cart at http://valuestockselector.com/store/cart/ to receive this special Christmas offer!
You can also apply this offer to the Pragmatic Investor digital book. And, as always, our software comes with a full 30-day guarantee of your satisfaction -- or your money back.
But you must ACT NOW -- this special offer expires on Monday, December 20th, at 11:50pm PST!
Don't miss your chance for significant savings as you get ready to improve your portfolio in the New Year.
Sincerely,
Mark.
P.S. Please share this offer with anyone else you know who might be interested.
2 Days Only: Save 50% on Value Stock Selector 4.0
Until Monday December 20, 2010 (at 11:59 pm PST)
Enjoy Value Stock Selector 4.0 on sale for 50% off!
Now you can get the World's Easiest Investment Software for 50% off any order that you place by Monday, December 20th!
Simply enter Coupon Code Christmas2010 into your shopping cart at http://valuestockselector.com/store/cart/ to receive this special Christmas offer!
You can also apply this offer to the Pragmatic Investor digital book. And, as always, our software comes with a full 30-day guarantee of your satisfaction -- or your money back.
But you must ACT NOW -- this special offer expires on Monday, December 20th, at 11:50pm PST!
Don't miss your chance for significant savings as you get ready to improve your portfolio in the New Year.
Sincerely,
Mark.
P.S. Please share this offer with anyone else you know who might be interested.
Hi 1step,
a) Any correlated group will do, the stocks don't necessarily have to be in the same industry. However you're apt to find stocks in the same industry being more highly correlated. Yes, VSS 4.0 allows you to see correlations.
b) I like to see 0.80 or above as the cutoff for high correlations. However anything above 0.70 can work (but I only use this value if I can't find enough 0.80 or better correlations).
Let me know if you have any other questions.
Thanks,
Mark.
Hi 1step,
I don't know of any studies done on the future price predictions, although it would be an interesting study to do.
I think the best way to use VSS 4.0 is to have a long-term perspective. Find stocks that have high fundamental ratings (i.e. a minimum rating of 78), have strong economic moats (i.e. minimum moat strength of 5) and have their current price less than the indicated maximum buy price.
That will generally return a handful of stocks (for example, I just ran VSS 4.0 and it returned 8 stocks). Once you have this list, I would suggest going through each stock and reading the latest news to see if there are any unusual circumstances, that might negatively or positively affect the stock, that aren't captured in the VSS analyses.
You should also do other due diligence checks that you personally like and then select which stocks you want in your portfolio.
For example, I like to group stocks with high correlations together and then select one stock from that group. The way I select it is by checking its price performance relative to the other stocks in the group over a 6 month period. I choose the stock that has underperformed over the past 6 months.
In the short-term, you can use VSS to confirm a buy decision when the current price is below the maximum buy price. Similiarly you can use VSS to confirm a sell decision when the current price goes above the maximum buy price or the fundamentals rating falls below 78 or moat strength falls below 5.
For a longer-term strategy, you should only consider selling if the estimated target price is reached or the fundamentals deteriorate.
I hope that helps.
Regards,
Mark.
Hi Larry,
I don't think you're doing anything wrong. Don's study used an index. Some ETFs (and stocks) do better with different AI options than others. It really depends on volatility and price movement over the period tested.
My suggestion is to use 5 year time periods going back 20 years and test with the various options over each 5 year period.
For example, start with, say, 1990 and test from Jan. 2, 1990 to Dec. 31, 1994. Repeat from Jan. 2, 1995 to Dec. 31, 1999. Continue until you reach the current date.
Then see which options resulted in the best returns. Sometimes you might not see any definitive patterns, in which case you won't learn anything. In other cases you'll see one option gives much better results. Of course past history doesn't guarantee future success, but if one option has consistently outperformed another in the past, chances are it will also do so in the future.
I hope that helps. Let me know if you have any other questions.
Thanks,
Mark.