InvestEd 2015

February Webinar: Options Part 5

Finding Fundamentally Strong Companies, Part 2

Your Windows Function Keys



InvestEd 2015: $20 Savings ends 3.31.15

Richmond VA, June 12-14, 2015

Westin Richmond

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Do you know everything you need to know about profit margins and identifying quality companies? If not, plan to attend Doug Gerlach's session titled "Using Profit Margin Analysis to Identify Company Quality." How about REITs and MLPs? Don Cassidy is your guide to learning how you can have rising income instead of fixed income. In the same area, John Diercks explains all about other high yield vehicles, such as business development corporations.


Would you like your investments to be more green? Attend Bart Womack's sessions on "The Environment, the Economy, and Your Investments." And speaking about "good" investing, do you want to be an angel? Learn about Angel Investing from Fran Waller, a new InvestEd instructor and a member of the Lehigh Valley Angel Investors.


Learn from these and all the InvestEd instructors at InvestEd 2015 in Richmond. Review the InvestEd 2015 website and register to join us on June 12.


Early Bird Registration Rate Ends March 31, 2015

Early bird registration is $389. Registration received after March 31 is $409. A special rate for full-time students is available.


All attendees receive a CD of the handouts, but you must register by March 31, 2015, to receive paper copies of session handouts.


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InvestEd Inc. Free Webinar

Options Part 5

Sunday, February 22, 2015

8:00 PM-9:00 PM ET / 5:00 PM-6:00 PM PT

Instructor: Saul Seinberg

Webinar Registration


This month's webinar deals with finding stocks that are appropriate for option trading. In addition to over-writing, a strategy based on fundamentals and a strategy based on Value Line metrics will be described using appropriate examples. Attendees may review webinar recordings for the previous four parts of the series by logging into InvestEd's Online Education portion of the website.


Register now to attend this InvestEd 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 2

Erica Reisman


Part 1 of this article introduced the investor to the components of the Piotroski F-score. As a review, these nine criteria include: (1) Return on Assets is greater than zero, (2) Cash Flow is greater than zero, (3) Return on Assets is greater than the previous year's Return on Assets, (4) Cash Flow is greater than Income After Taxes, (5) Long Term Debt/Total Assets (current) is less than Long Term Debt/Total Assets one year ago, (6) Current Ratio (current) is greater than Current Ratio one year ago, (7) Shares (current) is less than Shares one year ago, (8) Gross Margin (current) is greater than Gross Margin one year ago, and (9) Sales/Total Assets (current) is greater than Sales/Total Assets one year ago.


In this month's newsletter, Erica discusses the structure, performance, and results of the screener and gives a number of examples in explaining how she has used this screener. In Part 3 of the article, which will appear in the March newsletter, Erica goes deeper into the general screener results and looks at the results from the screener when focusing on the S&P sectors.


About the Screener's Structure

Important for investors to note: rather than screen for stocks against a hard value (Gross Margin > 10%, for example), most of this screener's criteria compare metrics against their values from a year prior. This is advantageous because many metrics have wildly different ranges, depending on the industry or sector of the company. However, by using criteria based on relative values, this screener is able to pull from all corners of the market.


Also note that stocks not passing the above criteria are not necessarily financially unsound. For example, strong companies that are investing in growth may not pass. However, this screener is taking no chances.


Screener Performance 

The logic behind this screener seems reasonable: financially healthy companies perform better. But is this true? To check, I created a backtest screener in Stock Rover, using all the same criteria from Piotroski F-Score system, but using data from five years ago. So, for example, the criterion for Criterion 8 would be Gross Margin from five years ago > Gross Margin from six years ago, rather than current year vs. previous year. I then ran that screener, saved all 87 stocks as a watchlist, and charted the results (including dividends). The image below (Graph 1) shows what I found.


Let's see that again (Graph 2 below), this time with the S&P 500 set as a baseline:


Wow! This must be the reason that the Piotroski F-Score is so famous. While the S&P was up 90.5% in the five year period, the Piotroski almost doubled that at 172.6%. That means it outperformed by 82.1%!


But if we step back a bit, this all makes sense. All of the Piotroski criteria target stocks were increasing their profitability, increasing their efficiency, and reducing their debt. More efficiency means more profit, and more profit means higher earnings, and those earnings are rewarded with a higher stock price. Combine this with improving capital structure, and you have all the workings of a fundamentally strong company. Of course, I always recommend that you do your homework on any stock you find from a screener before investing capital, but this screener certainly will give you a great head start with that homework.


The top performing stock in the backtest was Rockford (ROFO), a micro-cap tech company that produces audio systems, with an outperformance of 1990%. Micro caps are high risk, but (case in point) can bring hefty reward. The second best out-performing stock was Chipotle, a Stock Rover darling from 2012.

While the screener performed overwhelmingly well on the whole, some of those Piotroski-approved financially strong companies weren't able to keep up their price performance. At the bottom of the pack, we see a few stocks that did poorly, with returns ranging from slightly negative to extremely negative. Franklin Wireless (FKWL) had a five-year total return of -2.5%. Education Management (EDMC) came in with a five-year total return of -95.8%. Both of these stocks are micro caps, and in fact most of the stocks that did poorly are micro caps. Of course, some of the stocks that did well also are micro caps. That's micro caps for you! If you are not interested in looking at micro-cap stocks, you always can filter them out of your results. Later in this article, I will explain the process for doing that.


Some notable large cap mentions from the backtest that did well in the past five years are VF (VFC), Visa (V), ConocoPhillips (COP), Roche Holding (RHHBY), and Chevron (CVX). In general, the stocks performed better over a longer period than over a shorter time period.


If you'd like to take a closer look at all of those 87 stocks, they are available to download as a free watchlist from the Stock Rover library, available after logging in at


Screener Results

Now let's look at results when I run this screener on current data. Of the nearly 8,000 stocks on the North American exchanges, 54 stocks pass the screening. However, 14 of them have been public for less than five years. I'm going to kick those ones out because I'd like a longer track record of data, so that gives me 40 stocks. Remember, these 40 stocks all have an F-score of 9, but that's all we know about them.


When I chart these 40 stocks collectively against the S&P 500 over a 5-year period, Graph 3 below shows what that looks like:



Overall, (at the time these graphs were created) these 40 stocks had outperformed the S&P 500 though in the past five years, the graph shows they had been hit harder in the final couple weeks with a downturn in the market. Remember, the screener does not incorporate any price performance or momentum metrics, but instead aims to find fundamentally strong stocks that ultimately will weather this storm and others.


Let's look at the past performance of stocks that have passed the screener. Going from left to right in the table below, the columns I've included are sector, market cap, and P/E Sector Decile. The P/E Sector Decile compares the price to earnings (P/E) of the stock to those in the same sector. Companies that are cheapest in their sector by this valuation score a 1, and those that are the most expensive score a 10. Then we look at the 5-year total return, the 5-year return versus the S&P 500, and the 5-year total return versus sector, followed by those same three return metrics for the 3- and 1-year time periods. I've sorted the results by 5-Year return versus S&P 500 in ascending order (the column header for this metric is highlighted light blue.


Right now, I'm looking only at the overall pattern of red and green to see if anything jumps out, not at the specific stocks. In Chart 1 below, the 5-year metrics are on the left, with the 3-year and then 1-year metrics listed to the right.



From a bird's-eye view, I clearly see that if a stock had red font in the 5-year returns (left side), it was more likely to stay red in the shorter time periods (right-side). Also clear is that some stocks that underperformed the S&P (red font in the second column) still outperformed their sector over a 5-year period (green font in the third column), meaning they could still be strong candidates within their sector, even though that sector isn't doing as well as the S&P. In fact, let's just group them by sector and see if we see a pattern. At this point, I'll focus only on the 5-year return, as the backtest showed us that this is better as a longer-term strategy, so I'll get rid of the 1- and 3-year return metrics.


Next month, Erica looks at the 40 stocks from the general screener, separating them out by sector.


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.




Your Windows Function Keys

Sandy Gallemore


I see 12 F keys along the top of my laptop keyboard. Do I know what they do? Except for one I programmed to go with my Snagit, I did not pay attention to what any of those keys did prior to preparing this article. Of course, I had hit one or two accidentally and messed up what I was working on, but for me, creating problems is not unusual!


So, I poked around the Internet, found a good number of websites with the information I needed about those little keys too far for my fingers to reach comfortably. I learned about the useful functions those F keys will perform, often in conjunction with other keys such as the CTRL key, the ALT key, and/or the Shift key.


F1 Key

The F1 key is a throwback to the olden days of DOS. It brings up a help menu in the program you are using. I'm using Word for this article, so when I hit the F1 key, the image to the right pops up. If I need help with Windows while I'm working in Microsoft Office programs, I simply hit the Windows key plus the F1 key and the Windows help screen pops up. (The Windows key, which shows a Windows icon on it, is located on the bottom row of keys, probably near your ALT or CTRL key.)


F2 Key


The F2 key is used to rename files or folders when you are in Explorer. Simply highlight the file or folder and press the F2 key. It works the same as right clicking on a file or folder title in order to change the item's name. Holding down the CTRL key and the F2 key brings up the print preview window in Microsoft Office programs.


F3 Key


When in Windows Explorer, pressing the F3 key will bring up a small box at the top right of the page that will let you search for files or folders. When in Chrome, Firefox, Internet Explorer (and probably other browsers), pressing the F3 key brings up the Find bar at the top right of the webpage. When a word or phrase or entire page of text is selected or highlighted and the Shift key and F3 keys are held down simultaneously, you are able to toggle among lower case letters, upper case letters, or capitalizing the first letter of each word.


F4 Key


Pressing the F4 key when in Internet Explorer opens the Address bar. This lets you type the address of a webpage. Pressing the ALT key along with the F4 key closes the current program or, if you are not working in a particular program, this combination launches the computer shutdown dialog box. Pressing the CTRL key with the F4 key closes an open window within the current active program. For example, the CTRL+F4 combination in Word lets you close the file on which you are working but remain in Word. The ATL+F4 combination takes you completely out of Word, as well as closes the file or files on which you are working.


F5 Key

The F5 key brings up the Find and Replace window, as shown in the image to the right. In addition, in most browsers it refreshes or reloads the webpage or document window. In PowerPoint, the F5 key begins a slide show.


F6 Key


When used in your browser, the F6 key moves the cursor to or highlights the Address bar. When in a Word document, pressing the F6 key twice I see the image at the right. If I hit a capital P, I see the page layout. If I hit the number 1, I have a new blank Word page. And so forth. As with much of what is the case when using computer programs, several ways exist for performing any function. This to me is a new method. Pressing the CTRL key, the Shift key, and the F6 key simultaneously allows you to move from one open Word document to another.


F7 Key

Pressing the Shift key along with the F7 key brings up the Thesaurus. Simply highlight a word prior to pressing these keys, or type in a term once the Thesaurus is open. The F7 key by itself brings up the Spelling and Grammar checks.


F8 Key


The F8 key is used to launch Windows in the Safe Mode. It is pressed during the boot process and brings up an image similar to the one to the right. As you know, the Safe Mode is a trouble-shooting mode when something seems to have gone awry and the computer needs to start using minimal files and drivers. More information about the Safe Mode of Windows is available from Microsoft.


F9 Key


The F9 key does not seem very useful in Word, although it is useful in other Microsoft programs. In Excel, it alters calculations in the workbook when in Manual calculation mode. In the example to the right, the formula is =A*10. When entering 6 in cell A1 (which previously had 5 in the cell) and pressing the F9 key, the B1 cell updates to the correct 60. In PowerPoint, the Shift key held down with the F9 key toggles the display of the guide lines; ALT+F9 toggles the display of the grid.


F10 Key


The F10 key activates the menu bar in Windows. Using the Shift key with the F10 key brings about the same result as right clicking on a highlighted file. In Windows, this key may be used to close a menu or sub-menu. In Excel it shows the same type of key tips as the F6 key does in Word. In PowerPoint, the F10 key is a toggle key activating the menu bar.


F11 Key

In browser programs, the F11 key may be used to display the full screen. Since it is a toggle key, to get out of full screen, simply hit the F11 key again. In Excel, the F11 key with the Shift key adds a new worksheet. Alone, the F11 key creates a chart of the cell range you select. In Word, if you have hyperlinks in your text, pressing the F11 key causes the cursor to jump to the next hyperlink in the text. The F11 key does not seem to have any functions for PowerPoint.


F12 Key


The F12 key opens the Save As window in Word, Excel, and PowerPoint. Using the CTRL key with the F12 key brings up the option to open a document/file in these same three programs. Using the Shift along with the F12 key saves a document, as does CTRL+S. Using CTRL with Shift and F12 brings up the print option in Word, Excel, and PowerPoint, as does CTRL+P.


In a computer class many years ago, I learned that most everything one does in computer software has at least three ways of performing the function. Some of you may prefer to use these function keys. Whether or not you choose to use them for shortcuts, you may want to know what they do, should you hit one accidentally. For me, the accidental hit came a few days ago when somehow a finger hit the F11 key and all I could see was a full screen with no way out! Now I know what I hit and how to get back to square one.


For more information about using function keys in Word, check out this website.


For more information about using function keys in Excel, check out this website.


For more information about using function keys in PowerPoint, check out this website.

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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