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If you’ve read this blog before or are familiar with the blog carnival I created, The Carnival of Passive Investing, you’re probably aware that I’m not a big fan of being heavily invested in individual stocks.
The reason for this is that in my mind, investing in individual stocks is more of a speculative activity, rather than investing. After all, 70% of actively managed money fails to outperform the market indices. Due to these considerations, most of my retirement funds are invested in passively managed index mutual funds.
However, having said this, I am also very fascinated with the idea of being able to select winning individual stocks (I’m just not convinced enough to place my entire future on it). One of my hobbies is to investigate new stock trading methodologies to see if they are effective over long-term periods. In fact, I often enjoy using small denominations of funds (what I call play money) to invest in individual stocks to see how these methodologies work. An example of one of these investigations I did was a look at Phil Town’s Rule Number 1 stock trading system.
Needless to say, I’m always on the lookout for new and exciting tools that can give stock traders an advantage that will enable them to profit. One of these tools that I’ve been exposed to recently is the Chaikin Power Gauge Stock Rating Widget.
Current State of Stock Ratings by Analysts
Since this widget provides ratings of the common stocks of individual companies, I couldn’t resist briefly ranting about the current state of stock ratings that we all see in the newspapers and financial press…
As you’re probably already aware, this current system of having “analysts” (I love how vague this term is – why don’t they specify who the analyst is or what company they work for?!) rate stocks is laughable at best due to the intense conflicts of interest present in the system. What exactly creates this conflict of interest? Well, as far as I know, the analysts that rate company stocks work for the same big investment banking houses that get paid millions (if not billions) of Dollars by the publicly traded companies receiving the rating for their investment banking work. In other words, the analysts doing the ratings are paid by the same companies they are paid to rank…Crazy, uh? In my opinion, this is the ultimate in conflicting interests!
In fact, I’d venture a guess that the current analyst ratings of individual stocks are about as trustworthy as a politician promising to set up a colony on Mars if he or she is elected President of the United States. End rant..
Using the Chaikin Power Gauge Stock Rating Widget – Features and Widget Outputs
The Chaikin Stock Rating Widget is embedded below (you can use it directly on this webpage, or any webpage where you see it, which is a cool feature!). To try it, enter any stock symbol in the entry box and hit enter.
Once you enter a stock ticker symbol and hit the “enter” button, the following qualitative and quantitative details will be generated automatically for you on the widget.
- The current trading price per share of the common stock (the widget doesn’t do ETFs or mutual funds yet).
- The Chaikin Power Gauge rating – This rating is based on market expert Marc Chaikin’s back-tested 20 factor model, which has been proven successful at identifying a stock’s potential over the next 3-6 months. I personally didn’t yet look in to the details about what 20 factors this widget takes in to consideration.
- Pretty much all you need to know in interpreting the rating is that green is bullish and red is bearish. Makes sense, right?
- Along with the overall Power Gauge rating, the widget displays the bullish or bearish levels of the following company details.
- Financial metrics.
- Earnings performance.
- Price/volume activity.
- Expert opinions.
If after reading the information displayed on widget, you decide that you want more information, you can click “For details on this stock, click here” to request a free 4-page stock report sent instantly via email. When I requested a 4-page detailed report on Southwestern Energy as a test, I was pleasantly surprised at how many details are delivered in the report. Pretty cool stuff for being free!
Effectiveness of Power Gauge Stock Rating Widget
So, if you’re like me, right now, you’re probably thinking, “This widget sounds great and easy to use, Jacob, but whether or not it actually works is what I really need to know!”
In my opinion, this widget could potentially be used in one of two ways.
- First, it could be used in conjunction with your existing stock evaluation methodology as a “check,” a way to get another perspective on a stock before buying or selling it. If you’re going to use the widget in this manner, I think you have all of the tools and knowledge you need; simply research a stock using your current method and then see if this widget concurs.
- Second, it could be potentially used as a sole source of information on a stock in order to decide whether or not to buy/sell. If you’re going to use it this way, the effectiveness of the widget’s ratings become more serious, important, and crucial. Let’s explore this second case a little bit more, shall we?
Unfortunately, since the widget does not provide historical ratings, it’s impossible to perform a back-test using published stock data to determine how accurate the widget is at predicting stock performance. In addition, it’s impossible to predict the future (as you probably already know). Alas, we’ve run in to a dead end.
However, I have a plan to see if we can find out…This should be most interesting!
Listed below is a “mixed bag” of 10 of the 30 Dow Jones Industrial Average companies from different industries. Along with the name of each company, I’ve also listed the current stock price per share, ticker symbol, and the Chaikin Power Gauge Rating from the last week of September, 2011. It’s interesting to note that the widget doesn’t predict that a single one of these stocks will go up in the next 3-6 months.
I’ve placed two reminders on my Outlook calendar – one in 3 months from now and one from 6 months – to check the performance of these stocks since this posting. I’ll plan to update this post with how the performance does or doesn’t match what was predicted below by the widget at that time. Should be very interesting!
3M (MMM) – $74 – Very Bearish
American Express (AXP) – $46.45 – Neutral – Trend Down
Boeing (BA) – $59.51 – Neutral
Coca-Cola (KO) – $67.39 – Bearish
ExxonMobil (XOM) – $69.30 – Neutral – Trend Down
The Home Depot (HD) – $33.72 – Neutral
Merck (MRK) – $31.04 – Neutral – Trend Down
Wal-Mart (WMT) – $50.79 – Neutral – Trend Down
Disney (DIS) – $29.81 – Neutral – Trend Down
Microsoft (MSFT) – $25.06 – Neutral – Trend Down
How about you all? Have you ever used the Chaikin Stock Rating widget or any other similar tool for analyzing stocks? If so, which ones? How well have you found they work?
Share your experiences by commenting below!
Note: This review was sponsored monetarily by Chaikin Power Tools. However, the views and opinions expressed represent my honest evaluation of the product.
***Photo courtesy of http://www.chaikinpowertools.com/