There have been a lot of changes to the stock screener lately and we introduced quite a few new measures in the scorecard. Our objective is now more than ever to provide a stock screener which is plug-and-play for everyone. Instead of adding in measures willy-nilly every once in a while, we only add new measures if they have strong academic research behind them and add real value to the model. We want to keep our tool sharp and focused and avoid it becoming bloated with measures with no or only minor predictive value.
For most of these measures, it's really important to keep in mind in which situations they are effective or not. Did you know for instance that the Piotroski F-Score should only be used on stocks that are in distress or have a low P/B value? One of the underlying signals for instance compares increased long term debt to the prior year but for a strong prosperous company taking on more debt can be a good thing.And did you know that the Altman Z-Score - as we currently support it - should only be used on manufacturing companies? The weights used in this score were defined in 1968 and based on a set of manufacturing companies. Professor Altman has developed the Z' and Z'' models since then to support other industries but we don't support this yet. (We hope that we will soon though) Finally, did you know that abnormally high total assets growth is actually a bad thing, and tends to be followed by a period of underperformance?
We think a great tool comes with great documentation so we decided to upgrade our glossary. For each of the measures we added a clear introduction and where we got the idea from. If there's a paper supporting it, we try to summarize the findings so you don't have to read the entire document. Finally, if you drill down by clicking on the title in the glossary, we take you to a page with easy links to other parts of the site that discuss the subject. This could be references to our latest paper, template screens, stock screener and scorecard manuals or our blog. Click here to go to the glossary.
Finally, for certain popular metrics like the Piotroski F-Score, we integrated the documentation right into the scorecard. It's like reading Joseph Piotroski's paper - in less academic language - with the stock you selected as an example. Click here for more details on the Piotroski F-Scorecard.
We think the upgraded documentation will be of great value for our members but also for anyone interested in the subject of quantitative investing or value investing. Or in fact, anyone looking for a way to beat the markets on a consistent basis. We get a lot of good feedback from members who have been able to achieve superior returns since they started using our stock screener. We hope the documentation will get more investors interested in this new way of investing and hopefully it will reverse their fortunes too!