Charles Rotblut recently spoke at the 2017 AAII Investor Conference. For information on how to subscribe to recordings of the presentations, go to www.aaii.com/conferenceaudio for more details.
Even though I am a value investor, I always look at a stock’s chart before buying.
Don’t get me wrong, among the first things I will look at when I have a stock idea is the price-to-book multiple and the cash flow statement. I would much rather buy a company with positive cash from operations than a stock that is setting new 52-week highs. About 90% of the analysis I conduct is tied to fundamental indicators, industry conditions and trends in earnings estimates.
Yet, I never buy a stock without first looking at a chart. Why? Because, a picture is worth a thousand words. Even something as simple as a stock price that is trending down can be a sign that perhaps I missed something in my initial analysis. (After all, if the stock is such a great buy, then why are other people selling it?) Even more important are large price moves accompanied by big spikes in volume. Such occurrences are often accompanied by news—news that should be understood before the decision to buy a stock is made.
Technical analysis may not be the final determinant in your decision to buy or sell a stock—especially since sometimes current sentiment regarding a stock is wrong—but it can help to improve your analysis. This is why I asked Michael Kahn to write a primer on how to read stock charts. Michael has authored books on the subject and writes the Getting Technical column for Barron’s. His article can be found here.
Following Michael’s article, Wayne Thorp identifies what he considers to be the two best Web sites for stock charts in a new column, CI in the Journal. This column will provide a sample of the great content found in our Computerized Investing newsletter, of which Wayne is the editor.
Also debuting in this issue is Beginning Investor. As the name implies, this column is tailored to new investors and those of you who want to learn the basics of investing.
My idea for this column was based on two primary factors. One was conversations I have had with AAII members about how to start investing. The second is that though there is a large amount of great information on AAII.com and elsewhere, the sheer volume can be daunting. As a result, I thought there was a need for a regular column such as this. (If you have children, grandchildren or friends you think would find this column helpful, send them a copy.)
You may also notice a big focus on social investing in this month’s issue. Meir Statman and Denys Glushkov looked at whether incorporating religious, environmental or political beliefs into a portfolio strategy impacts returns. You can read about their findings here. John Bajkowski identifies several of the stocks most likely to be held by socially responsible funds in this issue’s First Cut. And Cara Scatizzi discusses the various religious mutual funds and exchange-traded funds (ETFs) in Investment Offerings.
One thing both John and Cara learned in writing their articles was that finding socially responsible investments is not as easy as it would seem. For example, brief corporate descriptions do not tell the whole picture. Applied Materials (AMAT) is a good example: The company is known for making semiconductor equipment, but it is found in many alternative energy and environmentally conscious funds because of its involvement in solar panels.
Religious mutual funds and ETFs are not typically segmented in fund screeners. Rather, the easiest way to find them may be to simply use a Web search engine, such as Google, looking for terms like “Christian mutual fund.”
Those of you who utilize stock screens may find Cara’s article on the Piotroski screen interesting. She took a look at this highly restrictive value-oriented strategy to see what would happen if the criteria were loosened. The iterations resulted in more stocks being identified on a regular basis. As far as the impact on the strategy’s performance, you will have to go here to find out.
Wishing you prosperity,
Editor, AAII Journal