Since we launched A+ Investor in January, we have continued working to improve it. Not only did we have a massive “wishlist” backlog, but the invaluable feedback we have received from users has also led us to reprioritize and add more items to our to-do list.
From time to time, we want to highlight some of the recent enhancements you may not have noticed. This week, we touch on a few key changes and improvements to A+ Investor:
Recently, we implemented a new methodology for arriving at the A+ Value Grade. The change doubles the number of valuation measurements the Value Grade encompasses from three to six. This allows Value Grades to be assigned to an even broader range of companies.
We continue to use the price-to-book-value (P/B) and the price-to-sales (P/S) ratios, but we are now using the price-to-free-cash-flow (P/FCF) ratio instead of the price-to-cash-flow (P/CF) ratio. Also, three new valuation measures have been added: the price-earnings (P/E) ratio, the ratio of enterprise value to earnings before interest, taxes, depreciation and amortization (EV/EBITDA) and the shareholder yield.
To ensure the validity of the factors used for the revised Value Grade, we backtested the results of the new scoring system across all letter grades (A to F) for the period of 1998 through 2019.
Here are the results:
As we would expect, moving from Value Grades of F to D to C to B to A resulted in better cumulative returns for each higher grade. Even between Value grades of A and B, the higher letter grade outperformed the lower by more than a factor of four.
When we first launched My Portfolio, users were not able to track non-A-class shares for stocks that had multi-class shares. Perhaps the most well-known non-A-class share among AAII members is BRK.B (for Berkshire Hathaway stock). Last week, we rolled out an enhancement to My Portfolio that allows you to enter shares such as BRK.B to My Portfolio to get a more complete picture of your overall investing holdings.
To access the portfolio tracker, click on the My Portfolio button at the top-left of the AAII website:
If you have not yet created any portfolios within My Portfolio, you will receive this message when you arrive at My Portfolio:
Click the Get Started Now button to create your first portfolio.
If you have already set up one or more portfolios with My Portfolio, go to the tool and click on Create next to the portfolio drop-down menu.
When you are creating a new portfolio, you first arrive at this screen:
The first thing to do is name your new portfolio. After that, you can enter all the stock, open-ended mutual fund and exchange-traded fund (ETF) tickers you wish to track.
At the My Screens area of A+ Investor you can now see which stocks that you track in My Portfolio pass any AAII stock screens. You can also track the stocks in the overall universe that pass more than one of AAII’s stock screens.
The My Screens area of A+ Investor is where you have always been able to see the latest passing company results for the AAII stock screens that you have favorited, view A+ Stock Grades for the screening strategies you track and the individual companies currently passing these screens and check the performance of your favorite screens over varying periods.
The table at the My Screens area now has two additional tabs. If you have set up any portfolios using My Portfolio that contain stocks, the My Stocks Passing Any Screens tab will list those stocks in your portfolios that pass any AAII stock screen as of the previous trading day.
The Stocks Passing Multiple Screens tab is not particular to stocks you are following or your favorited screens: It lists all the stocks in the AAII database that pass at least one of the screens tracked by AAII on the Stocks section of AAII.com:
As of April 2, 2020, 895 stocks passed at least one of the screens AAII tracks (not shown) and 226 stocks passed two or more AAII screens (image above). Of these, only three passed five or more screens: PennyMac Financial Services Inc. (PFSI), Align Technology Inc. (ALGN) and NeoPhotonics Corp. (NPTN). You use the drop-down box at the top left of the table to choose the minimum number of screens that stocks must pass to show up in the table.
By default, the listing of the Stocks Passing Multiple Screens tab is ranked from those stocks that pass the most screens to those that pass the fewest. The table also names all of the screens that a given stock passes. Further information on each of the screening strategies can be found by clicking on the screen name in the table or going to the guru and factor screen lists at the Stocks area of AAII.com.
