Category: quant

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quant

Stock picks August

STOCK PICKS FOR AUGUST
The 412 algorithm identifies stocks, and some friends give the thumbs up or down on each.

At the end, you will see the list of stocks used for my personal financial investment.
As of 9/25, the results are here:

Confirmed by others
HSON +0%
seems ok
BBW
seems ok
XELB +15%
seems ok
LXU +44.89%
classic asset play. Nicely positive cashflow (they’re effectively liquidating their capital investment), though they’re accumulating some interest they aren’t paying for now (capitalizing it at high interest rates).

PFSI +8.85%
NXEO

RLGT + 29.79%

DFBG +55.49%
OPY +20.43%

GTN +55.49%
GSM -10.53%
Iffy:

CTG -8.09%
have had significant negative cashflow (customers aren’t paying up, usually a bad sign) recently, otherwise ok

AP -9.4%
Most of their equity is tied up in asbestos insurance receivables, and they are being sued over asbestos. There is a decent chance the lawyers will drive them into bankruptcy (they’ve been unusually successful with asbestos, because so many smokers have been near asbestos at some time in their life).

LCUT -11.48%
Made a major acquisition, now has negative tangible equity and a huge inventory. Sales rose more modestly (from the acquisition). Those intangible assets probably have little value, which would make the company insolvent if properly recognized. Only the latest quarter’s results include the acquisition (especially the interest payments).

VIRC +1.04%
Holds 9 months of inventories; inventories are rising fast while sales are dropping. Their inventory exceeds their equity.
CLRO -6.67%
negative cashflow and lots of inventory with dropping sales, but bankruptcy looks like it is a ways off due to limited debt.

Stay away:

———-
CBK -15.98%
controller just resigned, though that might be because they have a new CFO.
They just had a large inventory increase over the last quarter, and their equity is almost entirely their inventory (which is probably overvalued because they can’t sell it).
They look like they will be delisted soon because their stock price is so low, unless they do a reverse split or something like that.

HBP -9.11%
50% increase in inventories over the last year with much smaller increase (11%) in sales. Highly negative cashflow (which has been ongoing for over a year). Their inventory is twice their equity (so a likely inventory writedown could render them insolvent).
LINC
Current assets < current liabilities and negative cashflow. EXTREME BANKRUPTCY RISK (don’t you have any bankruptcy risk screens?) PANL - Not available from my broker Want a scientifically proven algorithm that finds the best investments?

Categories
math quant

How to measure anything

We can measure anything.

According to Doug Hubbard, author of “How to measure Anything” there are methods and more methods out there for measuring whatever we wish to measure. We take surveys, have a vote, get estimates by experts, or just count.

Does a thing have an effect on you or your company but is difficult to quantify? You can measure its effect with a survey, such as poor employee morale, the effects of losing parking spaces, or the coolness of a CEO.

Does a thing not exist yet but you are working on it? You can ask reliable experts, and even increase their reliability with calibration.

Do you not know what to measure because you want to know what has the greatest effect? You can measure the effects of various things on you as well. How much does the chance of a hurricane effect your house price? There exists tons of tools for just that.

Similarly, in investments, there are measurements for everything. Maybe too many. But whether you find the measurement you are looking for or not, it is out there.

Categories
quant

Value Investing

Value Investments in Pittsburgh!
Value Investments

All the ones researched below did about as well as nasdaq over the last 5 years, the 412 Investment did much better at 21% return!

There are many Value Investment Funds available in the Pittsburgh area.

Over the last 5 years, here is what each made each year on average:

Federated Investors “Federated Strategic Value Dividend Fund (R6)” 8.49%

Wells Fargo Endeavor Select Inst +15.57%

PNC Investments: PNC Blanaced Allocation A PBAAX 6.67% (as of 6/30/2018)

Northwestern Mutual “Investment Growth Stock Portfolio” 14.86% as of December 31, 2017
Fort Pitt Capital Total Return Fund (FPCGX) 5 year 14.94% as of October 31, 2017

Nasdaq Index fund 15% over last 5 years
My system 21% over last 5 years!

Nasdaq (^IXIC) made 15.31% per year over last 5 years – as of 7/1/2018

The market’s performance can be improved upon. If you are looking to do this, you need a financial advisor who is a quant, who is a computer scientist from CMU, who has worked with others from CMU, and who understands the market fundamentals and what can be done to improve it.

Think about a profitable investment you had, maybe you invested in Apple or Coca Cola. What made you pick that? Think about an unprofitable investment you had, what made you pick that?

In working with thousands of stocks, they can be ranked, they can be graded, and buying those at the top of the rankings gets better results than an index fund, both in backtests and in real life investments. It requires us to relax our need to prove ourselves to be the smartest and best prognosticators, and focus on what each stock actually is: an investment that will help the company and
us if we look at it correctly, not just a way to make a quick buck for ourselves. What do most people look for in stocks that misleads them?

Security
Safety
Trustworthiness
Growth

These are correct, but mastering the art of looking for Trustworthy companies is surprisingly easy. Most companies are not full of frauds, their leadership aren’t lying about their results!

To get to a better state in the market, we just need to identify ahead of the market who those bad actors are, and the ones with good numbers who are not them… those are the best investments, the
ones who need investment the most. They have the best value. Like premium clothes on the clearance rack, they need to be bought, but also, they are good quality. They may be lumped with bad quality items, but they are what we most desire, and what needs to be bought to most as well.

Want a scientifically proven algorithm that finds the best investments?

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math quant

Performance, and calculations

As you can see on the “Live results page”, the 412 Investments strategy is doing 21% per year as of August, 2018.

This long term investment strategy was developed using the latest technology circa 2013, neural nets, bayesian evaluation, and evolutionary algorithms. It was trained on data gathered from online XML using a system developed by a google engineer. This system works, and it has improved my own private wealth over the last 5 years.

This working system is my recommendation for anybody willing to take a medium risk and get a maximum return.

Furthermore, it has the property of being helpful to the market, while making more trades than a standard index fund. It is an investment solution based on “value investing”. That means that the undervalued stocks picked are not getting sufficient investments today. This investment strategy helps others do better as we invest in them, a positive sum game.

If you had invested in my system in August 1st, 2013 (when it was not yet available to the public, as it is now), you would have made 21.86% gain per year. Even if you chose a 10% annual performance fee, that would have beat an excellent market. How did the market do?

Nasdaq did awesome over the same period of August 1st, 2013 until today, and made 15.31% if you had invested in a nasdaq index fund. Index funds will likely be the second best investments.

 

 

Bitcoin, of course, did 104% gain per year on average, but it is not really an investment, and it is unlikely you would have known about it beforehand. There is some shady trades going on, and bitcoin is as likely to gain as drop going forward, down over 50% since its high point.

Want a scientifically proven algorithm that finds the best investments?

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financial advisor quant

The simplest way to beat the market

The simplest way scientifically proven to beat the market is value investing on Price over Earnings.

Price Over Earnings, or P/E or just PE. What is it, and does it work, and why does it work?

For every company, profit has been the goal. But what does that mean? Isn’t profit an evil capitalist lie to exploit the workers and keep them poor?

Quite the opposite.

If you are a farmer, profit = food. For millions of years, humans either “profited” by getting more food than they planted in the ground, or they simply died.

Profit is a necessity for civilization, like food and water. It allows us to have this meeting.

How much you profit vs. how much you have to invest is a good rule of thumb for embarking on an enterprise.

When you divide the investment by how much you profit, that is Price (how much you pay) over Earnings (how much you gain).

Companies tend to grow into relatively stable profits and expenses over time, leading to an expectation that we will gain, in the future, about what we did in the past.

Thus, companies publish thousands of numbers. And there are thousands of numbers others calculate from them.

But the P/E is the grand-daddy, the others are merely imitators. If you want to make money, and don’t have the time or energy to read all the literature, just invest in an index fund. They make about 8% a year on average from 1910s until today. That’s better than bonds, or most loans, and far better than inflation.

If you want to beat the market, then invest in low P/E stocks. The average P/E is about 18-25.

If we go back to the farming example, imagine that your farm, after you pay (feed) your people and animals, makes 5 cent profit a year for every $1 dollar invested to buy the farm.

That would be a P/E of 20.  .05/1 = 20

Not bad, and that’s after you haven’t starved to death. Great job, you can now do things like paying taxes and having children with that profit.

Now imagine we have 10 farms we can invest in. They have PE ratios of 100,90,80,70,60,50,40,30,20, and 10. One has a PE of 10. That means the farm is making 10% profit each year, or 10 cents on every dollar.

You guessed it, buy the farm with the best profits and you tend to do better than the average farmer!

Similarly, you want the stocks that make the most money for their shareholders, and that means the lowest PE values.

So, that’s what a good investor will look for.

You need to look out for scams, unfortunately, and there’s no common way to do that. Most scams go on for years before they are caught.

So spread out your investments, and look for companies that get steady good incomes.

If you do that, and invest in the top 5th of all stocks in terms of p/e… you will gain about 12% a year in your investing on average, which will double your money 50% faster.

It still helps to be able to read a balance sheet, however most actively managed funds are too consumed by the 10,000 numbers out there to grasp the simplicity of the P/E, and this has been shown.

If you are investing in stocks on your own, there are two rules to keep in mind: Low PE, and buy the stock in the companies you buy things from, since they will do well in the future.

https://www.jstor.org/stable/4479854https://www.stockscreening101.com/stock-ranking-systems.htmlhttps://quantitativeinvestment.com/performance/https://www.investopedia.com/terms/m/magic-formula-investing.asp#:~:text=Magic%20formula%20investing%20refers%20to%20a%20rules%2Dbased%20investing%20strategy,Beat%20the%20Market%20in%202005.

Want a scientific algo that automatically does this for you to find the best investments?