Clarifying Stock Screens Data

Comment posted to “AAII Stock Screens 2014 Review: Active Strategies Lag,” by Wayne A. Thorp, CFA, in the January 2014 AAII Journal.

Estimate Revision Down 5% or Lowest 30 Down is where money is made in the bear market or a bull market in which valuations are frothy. My question is: What is the lag period from when an analyst revises estimates down to the time it shows up in the screen (or in the SI Pro update over the weekend)? Is it one month or less than that? Can you please clarify?

— Manjunath Sharma, CFA, from California

Charles Rotblut responds:

I can’t speak specifically for Thomson Reuters, which gives us the earnings estimate data, but I can give some insight from when I worked at Zacks Investment Research, which also compiles earnings estimates.

The brokerage firms provide the updated earnings estimate data at the timing of their choice. When I was at Zacks, the turnaround time for processing the data from the brokerage firms was about 24 hours; Thomson Reuters may be slower or faster.

The data from Thomson Reuters is updated weekly in Stock Investor Pro based on the current Thomson Reuters data feed. The earnings estimate screens you see on AAII.com are updated monthly based on month-end data for the previous calendar month.

Pros and Cons of Cash-Secured Puts

Comment posted to “A Comprehensive Approach to Covered Call Writing,” by Alan Ellman, in the January 2014 AAII Journal.

I’d like an article on selling cash-secured puts. It would seem to be simpler to manage than covered calls because there is no stock ownership ball to juggle. Any comments?

—Bill Kirk from Pennsylvania

Alan Ellman responds:

You are correct that selling cash-secured puts does not involve purchase of shares prior to selling the option. However, it is important to understand that the selection of the underlying security related to that put is just as critical as it is for covered call writing.

In addition to this point, we are selling the right to the put holder to sell their shares to us, so we only want to sell puts on securities we otherwise would want to own. If assignment does occur and the shares are “put” to us, we can now sell the stock, keep the stock in a buy-and-hold portfolio or write a call on the stock thereby employing a multi-tiered option selling strategy.

Comparing Advisory Services

Comments posted to “What Exactly Do Online Investment Advisory Services Offer?,” by Jaclyn N. McClellan, in the January 2014 AAII Journal.

Thank you for a nice synopsis of online advisers. Fees in this area are only slightly lower than what in-person advisers will charge with some negotiation.

—Patrick from Kentucky

One feature I seem to be missing: How do the results of their advice stack up? How do they rank against each other? How do they rank against the established person-to-person advisers?

—James Smith from Arizona

Need historical performance data for the services, please.

—Steven Stark from Idaho

Jaclyn McClellan responds:

Performance figures are somewhat difficult to get on the online advisers because it really depends on the advisers’ clients. According to the services, they don’t offer performance history simply because each client’s portfolio is different. Also, some services don’t touch your money at all; they simply make “recommendations,” so performance would depend on whether clients actually followed the advice given.