As investors, we (should) pay close attention to the stocks we own. Even if you are a “buy and hold investor,” this doesn’t mean you should “set it and forget it.” While stocks will go through natural ups and downs in the long run, there may come a time when the stock no longer meets the core characteristics that led us to buy it in the first place.
This may mean that, for value-oriented investors, a stock has become too expensive. Likewise, for growth or momentum investors, a company’s growth has begun to slow, or the price momentum has started to fizzle out.
For mutual fund and exchange-traded fund (ETF) investors, a change in a current holding may be warranted should certain events occur:
Even if you aren’t an active trader, having a set of possible replacements in your back pocket can be helpful for these situations.
However, the number of investments at our fingertips is enormous. The A+ Investor stock universe contains nearly 6,500 U.S.-listed companies. Additionally, the mutual fund universe numbers more than 24,200, and there are roughly 2,500 ETFs. Doing some preliminary narrowing down of this list makes your life easier if and when it comes time to buy.
This is where a watchlist is useful.
A watchlist is a list of securities that are being monitored for potential trading or investing opportunities.
An investor or trader may create a watchlist of several, dozens or even hundreds of trading instruments—stocks, mutual funds, ETFs, etc.—to make more informed and opportune investment decisions. A watchlist can help an investor track companies and stay abreast of financial or other news that could impact these instruments.
Alternatively, an investor may be interested in purchasing stocks in a particular sector. But if that sector is overvalued, it may offer few stocks that are attractively priced. An investor could create a list of all the stocks in that sector that would track various valuation measures, including multiples like trailing price-earnings (P/E), price-to-sales (P/S) and price-to-book (P/B) ratios, among others. When a company on the list meets a specified valuation criterion, the investor would then know that this stock is a possible candidate for investment.
With My Portfolio, you can create your own watchlists.
A+ Investor was created, in part, to help investors identify investment ideas. The service offers daily passing company lists of AAII’s 60+ stock screens, as well as filtering capabilities to uncover stocks, mutual funds and ETFs that meet your specific criteria.
Let’s say, for example, you are interested in technology sector stocks, but don’t want to overpay for them. Using the A+ Stock Grades Screener, you can isolate stocks in the technology sector that meet specific factor requirements. I created a screen for technology sector stocks that have B or better grades for growth, momentum, earnings estimate revisions and quality, as well as value grades of C or better.
As of June 4, 15 companies out of the universe of roughly 6,500 met these criteria:
With the Stock Evaluator pages for each of the stocks in the A+ Investor universe, you can perform more in-depth analysis of these companies to see if any of them would be a worthwhile addition to your portfolio at some point.
The yellow “+” signs next to tickers on this table and throughout the AAII website allow you to add these securities to a new or existing watchlist or portfolio. For this example, I added the five passing companies with value grades of B or better to a “Tech Watchlist.”
Once you have created a watchlist of stocks, you can go to My Portfolio, load that watchlist and view a variety of data on those tickers:
Just like the holdings you own, a watchlist requires periodic monitoring to make sure the securities you are watching are still worthwhile investments.
The My Screens link on the dashboard of the Screening section at AAII.com is where you can 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, as well as for the individual companies currently passing these screens, and check the performance of favorite screens over varying periods.
You can also add tickers from these passing company lists to a watchlist for further monitoring.
For mutual fund and ETF investors, there are several ways to identify potential candidates.
The ETF Screener and Mutual Fund Screener are tools you can use to narrow down the fund universes. There are also mutual fund and ETF first cut screens—predefined screens that isolate specific kinds of funds or those with certain characteristics.
Sticking with the technology theme, I used the ETF screener to identify technology sector equity ETFs that ranked in the top 50% of their category based on three- five- and 10-year NAV returns and that also ranked in the bottom 50% of their category in terms of expense ratio. From the 82 technology sector equity ETFs in the A+ Investor universe, seven currently meet these criteria.
The A+ ETF Evaluator pages allow me to take a closer look at these ETFs to see if they fit my investment profile.
I then added them to my tech watchlist in case my current technology ETF started to significantly lag in terms of performance over the long term or if its expenses rise.
Note: If you just track a list of tickers, you will not be able to make use of the diversification analysis tools available with My Portfolio. To do so, you need to enter in the number of shares you own in order to calculate the value of individual holdings and the entire portfolio.
Here are some additional resources from A+ Investor to help you identify potential investment ideas and opportunities:
Most of us have a fixed amount of money to invest, so buying new stocks, mutual funds or ETFs comes about because we sell something. With A+ Investor, you have access to a number of tools and resources to evaluate your current holdings. Here are links to articles and resources that show you how you can use A+ Investor to decide whether it is time to move on from an investment and dip into your watchlist:
Over the last few months, I have been working with our developers on an online stock screener that will eventually be part of A+ Investor. This tool will allow A+ subscribers to apply filters to the A+ stock universe on elements of growth, company and stock performance, financial strength, valuation and earnings surprises and revisions.
This initial screener will lay the foundation for a full-function online stock screener to match that of AAII’s software-based Stock Investor Pro tool.
We are going through internal alpha testing now, and I hope to roll this out sometime in July. So stay tuned!
