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Computerized Investing > Fourth Quarter 2011

Building AAII Stock Screens

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by Wayne A. Thorp, CFA

Recently, a member submitted some comments regarding AAII’s CAN SLIM screens, questioning whether they represent the spirit of William O’Neil’s approach. AAII tracks two CAN SLIM screens, one based on the second edition of O’Neil’s “How to Make Money in Stocks” (McGraw-Hill, 1995), and another based on the third edition of the book. All of the stock screens AAII develops are based on our interpretation of an approach, often as it was outlined in a book, article or academic paper. For example, in this issue I finish my two-part discussion of Charles Carlson’s formulas for selecting promising dividend-paying stocks. In developing this and other stock screens, I follow the author’s approach as it is outlined in the source. However, many successful investors do not want to “give away the farm” when writing about their approach, so they are purposefully vague when outlining their search criteria. Therefore, there are times when we must use our investment expertise, and the wisdom of other market gurus, when deciphering what the author is trying to say. Furthermore, the AAII stock screens are developed based on the data available in AAII’s fundamental stock screening database program, Stock Investor Pro. If an approach calls for 10 years of rising earnings, our screen uses seven years, since Stock Investor Pro has seven years of financial statement data. We make every attempt to convey that the stock screens are developed internally by AAII, without consulting with the developer of the underlying approach. AAII develops these stock screens to educate our members on factors to consider when selecting stocks. The hypothetical performance of our stock screens is reported to illustrate what factors work best in differing market conditions. If you are unfamiliar with our stock screens, be sure to visit the Stock Screens area of AAII.com (www.aaii.com/stock-screens).

Portfolio Management Software Comparison

The recent market volatility undoubtedly has many investors reconsidering their investments. While it isn’t a good idea to make knee-jerk investment decisions based on movements in the market, it is prudent to periodically evaluate your investment positions and allocations. This is where portfolio management software can be especially helpful. In this issue’s comparison article, which begins on page 22, Joe Lan discusses his top picks. Be sure to read this article to see not only what these programs offer, but also what to consider when shopping for a system.

Risk Minimization Using Excel: Part 2

Lastly, this issue’s Spreadsheet Corner is the conclusion to my discussion on using Excel to minimize the risk (or maximize the return) of a multi-stock portfolio, which I began in the last issue. It’s a good reminder that you don’t need specialized software to perform useful investment analysis and shows why many computer-savvy investors call Excel the most powerful investment analysis tool available.


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