RE: Rankings (was: POSS (was: [CANSLIM] where is everybody?))

From: "Katherine Malm" <kmalm@earthlink.net>
Subject: RE: Rankings (was: POSS (was: [CANSLIM] where is everybody?))
Date: Sun, 9 Feb 2003 08:53:32 -0600
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Hi All,

I have run comparisons between IBD/DGO's and QP2's EPS Rankings and found
overall inconsistencies, so I don't see them as particularly
interchangeable. In general, the QP2 ranking seems to be more sensitive to
recent quarters than does the IBD/DGO ranking. However, I haven't used the
EPS rankings in ages, as they are a summary indicator of the raw fundamental
data which is readily available these days. I think in an age where
fundamental data was hard to get your hands on, this ranking was useful. But
the days of waiting for the 10K's and annual reports to arrive by mail or
trudging to the library to read the ValueLine, or waiting (or paying) for
S&P Reports from your broker are long gone. WON clearly lays out the
fundamental requirements necessary if a stock is to be considered CANSLIM
material, so if one has their hands on that, they have the necessary info to
evaluate the stock.

I agree with you Tom that consistency of source is key, especially if the
measure could potentially create notable inconsistency in rankings. I've
looked at the methodology of both IBD/DGO and QP2 and the RSRank methodology
itself is relatively consistent. The differences arise in their treatment of
stocks with less than 1 quarter's data and in the universe of stocks that
they use for rank ordering. In this case, either one is sufficient for
drawing your eye to strength in the same way, though there are often
significant differences in rank when there is not a full year's trading
history. That aside, I view the rankings as interchangeable, as long as one
uses one source or the other vs. a mix of the two.

I don't agree, Roger, that an RSRank system that is "flat" is going to tell
you the same thing. In other words, if the ranking system is derived by
simply taking the difference in the price over a 52wk period and then
ranking the stocks 99-1, the results will be wildly different and in
general, inconsistent with the studies upon which the CANSLIM methodology is
based. IBD/DGO (and QP2) use a weighted measure with 40% of the weight
placed on the most recent quarter's change in price. That means that the
Ranking methodology is very sensitive to more recent action in a stock. If
the stock has been generally rising over the last year but has started to
crater in the latest quarter, it is punished and placed lower in the
rankings. Conversely, if the stock has done so-so over the last year, but
has come on strong in the latest quarter, then it will rise significantly in
the rankings. In my view, this sensitivity is a key factor in getting your
eye on the right group of stocks. Once that is done, the direction of
200dMA, the direction of the comparative RS Line and the % off the 52wk high
take over as a means of describing the general action of the stock over the
last year. The RSLine, the 50dMA and other miscellaneous technical
indicators of choice such as Patrick mentioned along with the Price/Volume
action then describe the current condition of the stock.

Just this weekend, I finished and posted a new tutorial on the differences
between the RSRank and the RSLine and is accessible without a subscription
to our site. Go to www.cwhcharts.com and choose the "Forums" menu on the
left. Select the "Tutorials" forum and you'll see it listed as "RS Rank vs
Comparative RS Line."

Katherine

- -----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]On Behalf Of Tom Worley
Sent: Saturday, February 08, 2003 10:06 PM
To: canslim@lists.xmission.com
Subject: Re: POSS (was: [CANSLIM] where is everybody?)


I never expect different systems to produce exactly the same results, unless
the method of calculation is known and copied. But what I would be careful
about is where one system produces an 87 ranking and another produces a 65.
That's a big difference. I think the real key is to find a data source you
like and are comfortable with, then stick with it once you are satisfied
that you get accurate info. If you get part of the data one place, and more
from another, you may end up confused. Or if you keep changing which site
you use, you will have conflicting info.

- ----- Original Message -----
From: "Patrick Wahl" <pjwahl@attbi.com>
To: <canslim@lists.xmission.com>
Sent: Saturday, February 08, 2003 9:10 PM
Subject: RE: POSS (was: [CANSLIM] where is everybody?)


I think others here have a different opinion on this matter, but to me
things
don't have to match exactly.  I have used Quotes Plus, and found their
EPS and RS rankings fine, although they are not the same as IBD.  The
underlying idea to these ratings is to find the stocks that are growing
earnings at a good rate and whose stock price is performing well.  Then a
buy decision is made based on a few other factors, such as chart pattern.
I think these alternate ratings allow one to home in the usual growth stocks
just as well as the IBD services.

On 8 Feb 2003 at 20:41, Roger Tawa wrote:

> How important is it for the rank to match ibd's definitions exactly?
Isn't
> anyone's calculation of a rank as relevant as another's?  there are quite
a few
> websites that say they calculate these values.  how important is it that
msn's
> calculations "are not weighted as they are at IBD/DGO, so don't give quite
the
> same info"?



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