Replies to post #15966 on A.I.M. Users Bulletin Board (AIMUSERS)

[DonCarlson]

Houston,

I think you're not heading quite in the right direction, thinking that a stock beta is going to identify the right stock to AIM. You're headed down the wrong track.

Study the two sites I previously identified for you....identify what they are looking at to identify when the market is in your favor to make money and when it is not. Then, make a list of what they look at to determine what is a good stock/fund to be in.

Best Regards,
Don Carlson in Chicago
[e-mail]

[OldAIMGuy]

Hi Troy, Re: Beta of less than 1.00...........

If you use the BETA of less than 1.00 as a divisor, then it can possibly work for you.

A 0.75 Beta divided into 1.00 gives a 1.33 relative movement, but in the opposite direction.

A 0.50 Beta divided into 1.00 gives a 2.00 relative movement, etc.

I don't have Value Line's actual formulae on how they do their calculations. I'll look in my "Stock Market Logic" book later today and see what they give as a typical method. I do know that some of the quote services use a significantly shorter time frame than 5 years and their BETA values change more often and to rather large extremes at times. Still, it's a measure of the past.

Value Line's Stock Price Stability number doesn't attempt to correlate to the market direction, only to price swings on a percentage basis, I believe.
"Stock's Price Stability—a relative ranking of the standard deviation of weekly percent changes in the price of a stock over the past five years. The ranks go from 100 for the most stable to 5 for the least stable."
So, you could have a negative or positive correlation and a "stability" reading of "5." You would know that the price fluctuates in large amounts, but wouldn't know how it correlates to market moves. On the other hand, if the stability rating is 80, you would know that this stock has very little price range in percent movements.

Generally I like the lowest Stability rating I can find relative to other stocks in the same sector. If I have a choice of two telecomm equipment stocks that both appear good investment potentials, I will choose the one with the lower Stability ranking. Then I let AIM work with that lower stability for fun and profit.

(The Stock Price Stability ranking is at the bottom right hand corner of the Value Line stock page)

Best regards, Tom