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Computerized Investing > First Quarter 2009

Messages: What Members Are Asking On-Line

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by CI Staff

On-Line Discount Broker Survey

Why do you focus only on trading (cost and efficiency) aspects of one’s relationship with an on-line broker in the survey? With very few exceptions, the cost of a trade is irrelevant as a percentage of invested dollars and return on investment. Also, while I have run into exceptions, the efficiency and effectiveness of the trade is also not an issue. What is an issue is the kind of services and support tools—stock screener, research reports, etc.—available for free. I use them to pick the stock I want to buy. If you don’t pick the right stock to buy, who cares how efficient the trade was or how much it cost.

—J.H. via Web Inquiry

CI Editor's Response: The AAII On-Line Discount Broker Survey (in the Investor Surveys area of AAII.com) collects the opinions of our members via an on-line questionnaire in an attempt to measure some of the qualitative aspects used to select a broker. It is geared toward investors who have performed their own research and are merely looking for cost-effective brokers with whom to place their trades. While we have expanded Computerized Investing’s annual comparison of on-line discount brokers (see the January/February 2009 issue) to cover some of the types of research that brokers provide to their clients, it is typically more effective, both on a cost and quality basis, to separate the research side of managing one’s portfolio from the execution side. You can often pay high(er) brokerage and account fees to obtain research tools, and sometimes better tools are available for free or at a lower cost through dedicated investment Web sites. AAII’s annual “Guide to the Top Investment Web Sites” lists the best sources for on-line data and research; it was recently updated and can be accessed in the AAII Guides area of AAII.com.

Glossary of Technical Analysis Terms

Where can I find basic definitions of commonly used technical indicators?

—F.C. via Web inquiry

CI Editor's Response: StockCharts.com, one of my favorite charting Web sites, has a free Chart School that provides in-depth discussions of popular charting techniques and most of the technical indicators used today. The Web address is: http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators.

Magic Formula Investing On-Line Exclusive

After reading Cara Scatizzi’s article on Greenblatt’s Magic Formula Investing [August 2009 CI On-Line Exclusive], I have a question. If I understand correctly, tangible book value was defined in Cara’s article as being net working capital. However, on page 138 of Greenblatt’s book, tangible book value is defined as net working capital plus net fixed assets. What is the reason for the deviation in the article from the original calculation?

—P.D.M. via Leave a Comment

CI Editor's Response: Upon receiving this comment, we found we had erroneously left out net fixed assets from our tangible book value calculation. We corrected our calculations, and then revised our backtesting results. The On-Line Exclusive Magic Formula article has been corrected (found at the Computerized Investing home page at www.computerizedinvesting.com) and the data for the Magic Formula screen in the AAII Stock Screens area of AAII.com has also been updated. We apologize for any confusion this error may have caused and thank you for bringing this to our attention.

Data Sources for Buffett Valuation Spreadsheet

I am very interested in the article from the Third Quarter 2009 issue of Computerized Investing on “Valuing Stocks the Warren Buffett Way.” On page 17 under “Data Sources,” it states that the SmartMoney Web site provides 10 years of financial statement data for free. However, I cannot find the data there. Can you help me?

—J.S. via E-mail

CI Editor's Response: The Shadow Stock portfolio review schedule attempts to coincide with the quarterly earnings release schedule of most publicly traded firms, which have quarters ending in December, March, June, and September. This is because the purchase rules require positive earnings for the latest fiscal quarter and trailing 12 months.

When you go to the SmartMoney Web site (www.smartmoney.com), you first type in the ticker of the stock for which you want the data at the top right of the page, and then click on the Search button. This will take you to the stock’s Overview page. On the gray toolbar below the quote—at about the middle of the page—click on the Financials link. By default, this will take you to the Quarterly Income statements for the stock. However, if you select Yearly Income Statement from the Choose Option drop-down menu and click the “go” arrow, it will take you to the Income Statement page as shown in the figure below. The latest five years of annual financial statement data are shown on this page. However, by clicking on the Previous 5 Years link, you will see the other five years of data the site offers.


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