New VectorGrader.com Member Portfolios

In our  continuous effort to make VectorGrader.com more useful, we’ve added the ability for members to save stocks in a portfolio. To add stocks to a portfolio, members can visit the edit portfolio page and enter stocks there, or go to the stock’s page and click on the “Add to Portfolio” button. The top 10 stocks in a portfolio appear at the right hand side of the page along with the stock rating. Because our stock rating system is what premium members pay for, basic members can only add 5 stocks to their portfolio, while premium members can add up to 100.

As with many of our features, we will continue to work on this to make it better and easier to use. If you would like to send us your feedback, feel free to contact us.

Stock Rating Upgrades

We’ve been busy this past week here at VectorGrader.com finishing some improvements to the stock rating system that are now live on VectorGrader.com.

The primary change to our stock rating system is the addition of a component that rates a stock relative to other stocks in the same industry. We added this because a considerable number of indicators such as P/B and P/E work better when the ratio is compared to that of other stocks within the same industry. One reason for this is that each industry’s economics are structurally different. Higher growth rates or margins of some industries could justify a higher P/E or P/B.

Not only does comparing stocks relative to their industry perform better, it also does so with a lower risk of underperformance. This is because the signals from industry comparisons will not leave an investor overweight an underperforming industry with a structurally lower P/E or P/B.

We have also improved our algorithm for comparing indicators to their mean. This has created a more even distribution of stocks across the range of possible ratings and makes a stock’s rating more meaningful.

Coming Soon

We are also working on some tools to help with stock selection that should be complete in a week or two.

Macro Rating – A score for a stock’s specific sector, region, size, quality, and momentum profile, based on relative valuations and momentum of those factors.

New Stock Screens – Some stock screens to dig down into a particular style of investing.

New VectorGrader.com Features

Here at VectorGrader.com, we’ve recently been working on some exciting improvements. While they are not all finished yet, some of them are ready to go live on our website. We’ll be making more changes and adding new features in the near future, so make sure to subscribe to this blog by email on the right side to keep up with the changes.

Stock Ratings List

As members know, we have a page where you can see the ratings for stocks in an index or group. This is where we have made the biggest changes. It is now possible to view stock ratings for stocks in two groups at once or to view the stocks in one group, but without the stocks in a second group. For instance, you can combine the energy group with the materials group to view stock ratings for commodity related companies. Or you can exclude Japan stocks from the Asia stock group to get the stock ratings for Asia ex Japan. As you can see, this adds quite a bit to the usefulness of this page.

We have also added some new groups of stocks. The Dow Jones Industrial Average, Alerian MLP, S&P US REIT, and the Transportation industry can now be used. Of the four new groups, we are making the Dow Jones Industrial Average stock ratings available to basic members in addition to the S&P 100 ratings that have already been available.

Sector and Regional Equity Rotation

While the sector rotation strategy and the regional equity rotation strategy were originally created as strategies for investing in ETFs, I also think they are great as strategies to determine which sector or region to buy stocks in. With that in mind, the sector rotation and regional equity rotation strategies on VectorGrader.com now have links to a list of VG ratings for stocks in the sector or region to make it a little bit quicker to use both strategies together.

Rotation Strategy Component Changes

As I mentioned earlier this week, I was planning to make changes to some rotation strategies. These changes will not alter the past performance of our strategies. I do not replace actual performance with backtests. While I do not altogether avoid backtests, I think they should be used as supplements and not as the real thing.

Market Rotation

The major market rotation strategy is intended to be a strategy for investing in major asset classes. To do this better, I am replacing oil (DBO) with commodities (DBC) and adding real estate (ICF). Commodities are, obviously, a larger asset class than oil alone, so changing this makes this strategy more representative of its purpose.

Likewise, real estate is a large asset class, so it definitely belongs as a part of this strategy. It is now in our major market rotation strategy and our minor market rotation strategy.

Regional Equity Rotation

I am replacing Pacific ex Japan equities (EPP) with Australia (EWA). EPP has some overlap with the Asia component, and I want to reduce that. Australia is the largest country in EPP with a 65% weighting.

Bond rotation

The bond rotation strategy was intended to hold bond classes that are in favor and avoid rising interest rates by including the possibility of cash. However, it is not intended to bet on declining interest rates, so TLT, with a weighted average maturity of over 28 years while the others are below 15, doesn’t really fit. To fix this, I have replaced TLT with IEF, a treasury bond fund with a less interest rate risk.