Monday, April 11, 2011

Fundamental Analysis For Short Term Trade?

Yes, it's doable. I just completed a stock ranking system that is based on pure fundamental indicators such as valuation, growth, financial condition, etc., yet it is good for short term trade. I created a portfolio that contains the top 20 stocks returned by the ranking system, and rebalance it every week. As show in the chart below, the performance is good. Annualized return is 18.35% vs. merely 2.56% of S&P 500.

The stock universe used here is
  1. Market cap is at least 250M. So we only trade small cap and above.
  2. Accumulated one year dollar volume is at least its market cap. So liquidity is good.
I wouldn't reveal the formula, but I can provide some information on its ingredients and their weights in the ranking system:
  • valuation, 2/7
  • growth, 2/7
  • return on capital, 1/7
  • financial condition, 2/7
It's very late now. I'll post more on this later.

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