Sunday, November 9, 2008

My Personal Grading System

The attached spreadsheet shows a supplementary grading system for picks that I use. It in no way replaces the grading system developed by the pros at Stock Assault and is presented for educational purposes only.

Use Yahoo Finance key statistics to obtain the following information on an equity: Operating Margin %, Return on Equity %, Price/Book Ratio, Shares Short Ratio to Prior Month (just take the shares short and divide by the prior month's shares short), Debt to Equity Ratio and the %K value of Slow Stochastics (just use your favorite charting program, I use Amibroker or look for my older posts on how to do this).

You'll notice that I assign point values for the grades A to E. I add up the total points and compare to the ranges at the top to get the total grade. For negative margins, earnings or growth just use the values in reverse and subtract the appropriate value.

For example, I was evaluating a stock with a negative quarterly earnings growth of 60%. I divided the 60 by the "A" range value of 19 to get a rounded value of 3 which I multiplied by the point value of 5 to get a negative 15.

This is how I evaluate picks in supplement to those of the software. Just thought I would share it with everyone.

Have a good one,

Attachment: Rogers_Grading_System.xls [View on Google Docs]
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  1. Roger can you post 2 SA picks in your blog today I am thinking of buying SA and would like to see how 2 of their picks do this week, thanks.

  2. Check out ED, and ECL. These are graded "A" picks from the diamond edition this morning 11/11/08

  3. During this current market uncertainty, do you find that Stock Assult picks are any less accurate than in less volatile periods?

  4. Actually, I have noticed that I have to do a little more research during turbulent times, such as looking for a good entry point. I look at the pre-market action and if the Ask is consitently below the previous day close,I find myself waiting for futures to turn positive before I make an entry. But the picks, I believe, are still accurate as long as there are no news pending that might drive them lower. So, in summary, I look at the stock futures, the pre-market action, and study the recent news concerning the equity during volatile runs in the market.