InvestEd 2015

January Webinar: Options Part 4

Finding Fundamentally Strong Companies, Part 1

New Year's Resolutions for My Email Life

InvestEd 2015: $20 Savings ends 3.31.15

Richmond VA, June 12-14, 2015

Westin Richmond

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The InvestEd comprehensive curriculum has sessions geared to every level of investing expertise: beginner, intermediate, and advanced. Many sessions are new this year; others are updated topics popular with attendees. Topics include choosing companies to study, stock study analysis, sell decisions, financial report analysis, technical analysis, and much more.


Attendees consistently praise the expertise and teaching skills of InvestEd's nationally renowned instructors and their presentations. In addition, these instructors are available outside of session times to answer your questions, discuss stock study candidates, and personally tutor you.


The highly-rated Newbie Program trains new investors and also serves as a refresher course to build confidence of experienced investors when needed. The Friday Bonus Sessions include techniques that encourage attendees to sharpen their computer skills.


A Sampling of New InvestEd 2015 General Sessions

Do You Really Make Money Investing in Bonds? - John Diercks

Gaming is $erious Business - Daniel Rivera

Technical Analysis for the Fundamental Investor - Erica Reisman

Income Vehicles off the Charts: Understanding REITs and MLPs - Don Cassidy

The Non-SSG - Brian Altschul

The Environment, the Economy, and Your Investments - Bart Womack

An Investment Plan for Busy People - Bob Adams

Screening for Great Stocks - Alex Reisman

Is Angel Investing Right for You? - Fran Waller

Small Cap Clinic - Doug Gerlach


A Sampling of New InvestEd 2015 Friday Bonus Sessions

Cyber Security - Joe Craig

Learning to Use Prezi - Brian Altschul

Basic Hands-On with Google - Daniel Rivera

Organize Your Life with Evernote - Doug Gerlach

Must-Have Android Apps - Daniel Rivera


Discount Registration Rate Ends March 31, 2015

The discount registration fee is $389. Registration received after March 31 is $409. Full-time students with a valid student ID card who are under age 30 and are first time attendees may register for $259.


You must register by March 31, 2015, to receive paper copies of session handouts. All attendees receive a CD of the handouts. Register now and save!


InvestEdInc. Free Webinar

OptionsPart 4

Sunday, January 25, 2015

8:00 PM­9:00 PM ET5:00 PM­6:00 PM PT

Instructor:Saul Seinberg

Webinar Registration

This month, Saul continues the Option series and will discuss limitation of risk in investing with options using collars, inverse ETFs, and basic option spreads and why spreads are popular. Spreads have defined risk. They limit losses in spread-based trades to predefined amounts. The differences between three basic types of spreads will be addressed together with spread setups and characteristics.

Attendees may review webinar recordings for the previous parts of the series by logging into InvestEd's Online Education.

Register now to attend thisInvestEd Inc. free online investor education webinar. Space is limited.

Saul is an InvestEd Inc. advisory director and a conference instructor. A former vice president for education of InvestEd, he teaches at local through national investor education events. With degrees in electrical engineering and law, Saul spent most of his career as a corporate attorney. In addition, he served as an adjunct professor at Albany Law School in New York.




Finding Fundamentally Strong Companies, Part 1

Erica Reisman


Investors always are looking for ways to find strong companies in which to invest. Created in 2000 by accounting Professor Joseph Piotroski, the Piotroski F-Score can help us do that by finding healthy, fundamentally strong companies. Piotroski F-Score looks for companies that are making a profit, showing improving profit margins, and exhibiting strong balance sheets. This investing method uses simple accounting-based variables and includes nine criteria (ratios) in the areas of profitability, capital structure/financial liquidity, and operating efficiency to determine whether or not a stock has solid financials and if those financials continue to get better over time. For each criterion that a stock passes, it is given one point. Screening stocks using the Piotroski system results in a stock having a score between zero and nine points (its "F-Score"). In developing this investment method, Piotroski judged that stocks "passing" would be those that had an F-score of eight or nine points, that were considered financially strong, and that were expected to perform well in the future.

I built a screener that looks for stocks that would have a score of nine – that is, the passing stocks meet all nine criteria.. This screener is available for download at StockRover, either with a Premium membership or free Premium trial of StockRover membership. Initially, Piotroski developed this screener to apply to value stocks in order to separate the value stocks with poor financials from those with strong ones. My screener does not select for any value criteria, but investors are free to add some if they are interested in value stocks. In general, the Piotroski screener may have a slight intrinsic bias for value stocks, since high-growth companies may fail on the Cash Flow and Share Dilution criteria (explained later in the article).

In this article, I'll discuss the theory behind the criteria of the screener, demonstrate how this screener has performed when backtested (spoiler: it performed really well), and show and discuss the stocks that passed the screener when I compiled it a few months ago, as well as patterns in the sectors of the passing stocks.


Below are the nine criteria used in the screener and the rationale for using them. The first four relate to profitability, followed by three related to capital structure, and the last two relate to efficiency.


Criterion 1: Return on Assets is greater than zero.


Return on Assets (ROA) is calculated by dividing Net Income by Total Assets. This is a straightforward test that measures whether or not a company has positive net income (or profits). Financially sound companies should be profitable, so ROA is an important criterion for investors to consider.


Criterion 2: Cash Flow is greater than zero.


Cash Flow is a metric to gauge earnings. Many investors believe it a better calculation to use than Net Income when determining financial soundness of a company. Cash Flow measures how much money is going in or going out of the business. A positive cash flow ensures that the company is generating enough cash from day-to-day operations to continue those daily operations. A firm can have a positive net income, but negative cash flow. This situation is why the criterion is included in addition to, and following, Criterion 1 (ROA > 0).


Criterion 3: Return on Assets is greater than the previous year's Return on Assets.


This equation measures whether or not the firm is improving its profitability. If the company is less profitable this year than it was last year, this could signal that financial troubles are ahead.


Criterion 4: Cash Flow is greater than Income After Taxes.


This equation also measures profitability and is meant to weed out any stocks that may be playing accounting tricks in order make their earnings appear larger than they actually are. Because income has had taxes and depreciation subtracted from it, cash flow generally is larger than income. If cash flow is not greater than income, this may mean that the firm is shifting earnings forward, thus misrepresenting them in the long run.


The above four criteria relate to the profitability of the company. For a company to be a candidate for purchase, it must have the capability to make a profit on a product or a service after deducting the costs and expenses of doing business. If that is not the case, smart investors will not find the company worthy of consideration.

Criterion 5: Long Term Debt/Total Assets (current) is less than Long Term Debt/Total Assets one year ago.


This ratio targets capital structure. Piotroski was looking for companies that were decreasing their debt, increasing their assets, or both. In other words, he was looking for cases where the ratio of long term debt to total assets would be decreasing. Taking on more debt, while not an inherently bad sign, increases the financial risk and may signal that a company is not generating adequate cash flow.

Criterion 6: Current Ratio (current) is greater than Current Ratio one year ago.


The Current Ratio is the current assets divided by current liabilities. It is used to gauge the liquidity of the firm. If a company is liquid, it can pay its debts easily. The higher the ratio is, the more liquid the firm. However, if the ratio is too high, that may signal other issues, such as an inefficient use of capital. Like every accounting ratio, this one does not tell the whole story, but by requiring an improving current ratio, this criterion ensures that passing companies will have an increased ability to meet their financial obligations.


At this point you may have noticed that both Criterion 5 and Criterion 6 deal with assets and liabilities. You may be asking: why are both needed? Essentially, they deal with different timelines of financial security. Criterion 5 (Long Term Debt/Total Assets) looks at a longer timeline, thus dealing with solvency, whereas Criterion 6 (Current Assets/Current Liabilities) uses a shorter timeline, thus dealing with liquidity. A solvent firm has a positive net worth, whereas a liquid firm is able to pay all of its current bills. Both are important for financial health.


A company may be solvent (total assets greater than long-term debt) but still have a liquidity problem, meaning it doesn't have enough cash (or easily sellable assets) on hand to pay its bills. However, because a solvent company has a more manageable debt load, it's better able to borrow against its assets to raise cash in the short term. On the flipside, a company can be insolvent (long term debt greater than assets), but still have enough cash or liquid assets on hand to meet all of its short-term obligations. While this company would be able to carry on with business as usual, it could be headed for financial distress further down the road. Piotroski was looking for companies that had a low degree of financial risk both in the short run and in the long run, which is why both criterions are included.


Criterion 7: Shares (current) is less than Shares one year ago.


This criterion also targets the capital structure. It passes only companies that have not issued any common stock during the past year. In addition to reducing the value of an investment, adding shares outstanding creates share dilution, which may signal that the company is not able to cover its current liabilities, which is another sign of financial distress.


Criterions 4, 5, 6, and 7 deal with a company's capital structure. A healthy capital structure is a sign of a financially sound company worthy of investors' consideration when looking for a stock purchase.


Criterion 8: Gross Margin (current) is greater than Gross Margin one year ago.


Gross Margin (or Gross Profit Margin) is the percentage of revenue that remains after paying the costs of producing the goods sold. By weeding out companies that weren't able to increase their gross margins in the past year, this criterion selects companies that are becoming more efficient and thus are expected to be more profitable.


Criterion 9: Sales/Total Assets (current) is greater than Sales/Total Assets one year ago.


The final criterion in Piotroski's score screens for an increase in Sales/Total Assets, also known as asset turnover. An increasing asset turnover ratio signals that the company is able to generate more sales with its assets. This is a measure of efficiency.


Criterion 8 and Criterion 9 seem similar. Why are both used? Screening for an increasing gross margin ensures that the company is able to keep costs under control, whereas screening for increasing asset turnover ensures that the company is able to grow its sales relative to its assets. Both criteria deal with company efficiency.


Companies that stay efficient and competitive, in addition to meeting the other Piotroski criteria, are ones we might highlight for further research and possible purchase.


In part 2 of this article, which will appear in the February newsletter, Erica discusses the structure and performance of the screener.


Come to InvestEd and visit with the Stock Rover representatives. They will present a session on screening and one on using technical analysis to supplement your fundamental analysis.


Erica is the director of education for Stock Rover, an online investment research platform bringing institutional-grade analytics to individual investors. Though relatively new to the investing world, she has learned fundamentals and a value approach to investing through Stock Rover. Erica graduated from Brown University with a bachelor of science in applied math-economics and, prior to joining Stock Rover 2011, worked at the Federal Reserve Board of Governors in Washington DC performing macroeconomic research. When not working, Erica enjoys cooking, biking, and selling on eBay.




New Year's Resolutions for My Email Life

Sandy Gallemore


January 2015 has arrived, and this means the time is now for some new resolutions! This short article will provide some to-do items related to our email habits. one: clean out the Inbox. Ideally, items arriving in the Inbox should be read, dealt with, and deleted. Perhaps you want to keep the email because of some important information in it. Just create a separate mailbox dealing with that subject and move the email (or your sent email response) to that mailbox. Get it out of the Inbox.


Creating mailboxes and sub-mailboxes if desired is an easy task and can provide you with storage spots. Keeping the Inbox cleaner also may be achieved by creating filters for daily or weekly emails coming from websites where you have signed up to receive alerts, etc. Perhaps you want to read these emails at a given time and not be bothered with seeing them whenever you pull up your incoming email. For example, if you ask Seeking Alpha to send you news about companies you own or are following, you may want a mailbox for Seeking Alpha where you filter anything coming from that website into that box. These side mailboxes are in bold font when messages unread are there, so you always have the option of going to that box and seeing or reading what is there. And your Inbox stays cleaner. two: clean up emails to be forwarded. When forwarding an email, we should first remove prior email addresses and anything in the email not necessary. In addition, we may want to edit the subject, even clearing away those four Fwd. indications. Many people are annoyed by the need to scroll through half a page of extraneous material before reaching the item being forwarded.


Resolution three: change the subject line when replying if that subject no longer applies to the current email. Many times we reply to an email and change the subject of conversation, but forget to change the subject. I do fairly well with resolutions one and two, but often am guilty of forgetting to edit the subject. I usually remember I should have done that shortly after the email has sailed off into cyberspace.


Resolution four: avoid replying to all when not necessary. If someone sends a group email asking for an RSVP to a gathering, for example, replying to everyone is not necessary. That only fills all of our Inboxes. Generally, the only person who needs to know your response is the individual sending the original email. So, we just need to think for a moment and make a reasonable decision about who needs to receive our reply.


Resolution five: think before answering an email (or sending an original email). Sometimes we jot off a note or a reply that either is not worded the way we want or is an incomplete thought. Perhaps we forgot to add a time of day or some other important piece of information. Perhaps we hit the Send button accidentally. One trick that may help with this resolution is to add a delay to our email. For example, in Gmail just go to Settings, scroll to Undo Send, click the Enable Undo Send, and select the number of seconds you want to use to delay your message. I have mine set to 30 seconds, which is the max Google allows. Most of the time, I can catch myself in that length of time.



Resolution six: filter unwanted email to spam (or junk mail) when unsubscribing is not an appropriate option. If you are receiving emails from a legitimate organization or business that you do not want to receive, use the unsubscribe link. However, if you are not sure about whether or not clicking on that li

nk will just result in more email, you may want to filter those emails either to trash or to spam. One guideline we all need to follow: avoid responding to spam. Filtering such emails into spam will keep those emails out of your Inbox.


Resolution seven: check the Trash and Spam mailboxes regularly. You may be surprised to find a completely legitimate email message that has gone to the Spam mailbox or to the Trash mailbox. For me, the Spam mailbox rather than the Trash mailbox seems to be the place I need to check. A daily click on that mailbox lets me check those messages and move any I want to my Inbox. Generally, I just delete all in that mailbox so glancing at new ones is easy. eight: use the BCC option when sending an email to a group. Yes, once in a while I forget to do this, but I know that using that BCC option for sending to a group of people is what I should be doing. Using this option keeps the emails of others private, reduces the overall size of the email, and lets the knowledge of your selection of the people receiving your email remain only with you. So, think before clicking. As the cartoon says: "To BCC or not to BCC. That is the question!"

Speaking personally … I should add a ninth resolution: don't spend so much time on the computer!

Sandy is an InvestEd Inc. director and serves as vice president for education. She is lead editor and prepares the general program brochure for the conference. Sandy has helped form investment clubs, presented introductory investing programs, and taught stock study and mutual fund classes at local, regional, and national events. In her leisure time she participates in a line dance group, plays handbells, bridge, and golf, and enjoys a variety of other activities, including investing. Sandy is professor emeritus of kinesiology, Georgia Southern University.




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