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Three months ago, I investigated and reviewed a stock rating tool called the Chaikin Power Gauge Stock Rating Widget. At the end of the review, I concluded that even though the widget seemed to be very streamlined and easy to use, I didn’t have enough information at the current time to determine whether or not the Chaikin Widget was effective at predicting the movement of stock prices (in order for it to be used as the sole source of information in executing buying and selling stock actions).
As such, the purpose of today’s post will be to check-in on the performance over the past 3 months of 10 stocks I selected from the Dow Jones Industrial Average and compare that performance to the movement predicted by the Chaikin Widget overall stock potential rating 3 months ago. By doing this, I hope to get a feel for if this rating tool seems to accurately predict price movements of common stocks.
A Quick Review of How the Chaikin Rating Widget Works
Once you enter a stock ticker symbol in to the widget 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 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.
- 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.
3 Month Performance Analysis vs. Chaikin Power Gauge Stock Rating Widget Predictions for 10 Dow Jones Average Stocks
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
When a stock was rated as “neutral,” the stock experienced significant gains (above 20%). When a stock was rated “neutral, trend down,” the stock gained a minimum of 1.55%, with double-digit gains often realized. A similar result from seen with the stocks rated as “bearish.”
Overall, the average % price change for the 10 stocks over the past 3 months was 15.46%. This trumped the % increase of 11.48% of the Vanguard Total Stock Market ETF (VTI) pretty nicely. However, the widget didn’t predict that a single one of the 10 stocks had the potential to go up in the next 3-6 months.
From this analysis of the performance of 10 of the 30 Dow Jones stocks over the past 3 months to the price movements predicted by the Chaikin Stock Rating Widget, we saw that the widget did not accurately predict the performance of any of the 10 stocks, and seemingly could not predict the movement of the overall market either since none of the predictions were directionally correct.
While I realize that a study of 10 Dow Jones stocks is by no means exhaustive (the widget may work better for other stocks in certain sectors, etc), because of these results obtained over 3 months, I would still not be comfortable making buying and selling decisions solely based on the results from the Chaikin Stock Rating Widget. Additionally, the low % of accurately predicted price movements gives me cause for concern.
To me, these results also reinforce why I avoid individual stock selection for the bulk of my retirement assets, using a passive investing strategy of index mutual funds instead. If a model based on 20 factors developed by an expert that has spent years in the industry cannot accurately predict price movements of individual stocks, what would make me think that I could have more success?
Lastly, since the Chaikin Stock Rating is “proven successful at identifying a stock’s potential over the next 3-6 months,” I have placed a reminder on my calendar to check the performance again 3 months down the line. It is possible that the results will be a different story then!
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 that they work?
Share your experiences by commenting below!
***Photo courtesy of http://farm4.static.flickr.com/3487/3897338431_579b5556e6.jpg