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How to Pick Your Very Own MrMarket Like Stock Picks
version .1, addition marked in text
Stock picking is easy, when you are MrMarket. And because MrMarket has made no secret of his method, it is also easy when you are you. To show everyone how easy it really is, I defined some screens and developed a spreadsheet. Now you can do it too.
When I defined the screens, I had to improvise, because MrMarket uses IBD info, and this was not available to me. So the results of this will not be true MrMarket picks.
In fact, the results of the procedure are untested, and my description is not meant as investment advice. I mean to illustrate a stock picking method, no more.
You'll find a report of a Paper Portfolio (not a Real Money
Portfolio!) using these picks in this topic.
When you try this procedure out, and run into problems, post them to the General discussion board. I'll see what I can do. And perhaps somebody else is able to help.
So How Does It Work?
You'll find the original description of MrMarket's method in the first topic of this board, and on his homepage
Broadly speaking there are two steps:
In my setup, you need to be able to run the screens with your browser, and to massage the data with a spreadheet program. More precisely:
For the screens you will need Microsoft Internet Explorer and a MSN Passport. IE (still) comes with Windows, and a Passport is easy to get on a MSN site (www.msn.com, www.hotmail.com, etc.).
Perhaps you will also need to download some extra software: a free ActiveX component for the Moneycentral screener.
The spreadsheet program I use is Microsoft Excel 2000.
1. Gathering a collection of stocks
When you are all set, you go to next post in this topic. There you will find all screens, but 1, 7, and 8 are only approximations of what MrMarket is doing. Click on a link (Shift+Click in IE opens the target in a new window; recommended!) and the screen is run.
In case you get a completely different window, or a blank HTML screening page instead of a nice ActiveX page, review what is necessary to run the screens a bit earlier. BTW, that window may contain an upgrade link: take it.
When the screen is run, you copy the results to a spreadsheet. You could use Mimic.xlt, an Excel 2000 template. Open it first, then return to the screener, and choose Export > Results to Excel. You will find it referenced in the same post as the links.
If this doesn't work (you see strange values in cells, with quote marks), choose Edit > Copy Results to Clipboard instead. Then return to Excel, press Ctrl+N to get a new, empty sheet and Ctrl+V to paste the results you copied.
The results show a varying number of columns, but always too many. Remove the columns you don't need. You need the first, Ticker, column, and the last four columns. To remove the columns you click on the header of the leftmost column you want to remove and shift+click on the rightmost column you want to remove. Then right-click and choose Remove.
Now you copy the results to the Mimic spreadsheet. Click on the first ticker and shift+click on the last cell in the 'Rev Growth...' column. Press Ctrl+C to copy the data. Now go back to the Mimic spreadsheet and click in the first free cell under Ticker. Press Ctrl+V. You have now copied
the results of the first screen to the spreadsheet. Repeat the procedure for all other screens. Of course, the Mimic spreadsheet will already be open. When you have copied the relevant columns from the screen results, you are ready for the narrowing down.
2. Narrowing down to one stock
We split this procedure in two parts:
2a. Narrowing down to ten stocks
When you look at all the stocks you have gathered, you will see a mess. Double tickers all over the place. Don't worry, it will come out in the wash.
For the narrowing down we use the formulas in the columns labeled xxx1, etc. At this moment, most of the columns show ####'s. That is because there are too many formulas. We are going to remove what is not necessary.
Click on the first cell in the xxx1 column that has ###'s. It is on the first row past the data you pasted. Then press Ctrl+Shift+End to extend the selection to the last cell with a formula (and ###'s). Press Delete. Press Ctrl+Home. That looks better.
Now it is time to sort the data. We are going to sort on column K. Click on the header of the first column (A), to select the whole column. Then shift+click on the header of column K. Now choose Data > Sort and select Sort on > Column K. Also select the option that says that the list contains a row of field names. When you do that, you will see that the first row becomes unselected. Click on OK to sort the list.
What have we done up to now? The first two columns with formulas calculate two ratios: Price over Price/Earnings and Price over Projected Price/Earnings. The third column with formulas adds the rankings of the stock in the PriceAppreciation column and in the two ratio columns. The
fourth formula column ranks the added rankings.
Column xxx5 now ranks the Revenue Growth for the first twenty stocks, ignoring double tickers. Column !!!!! finally ranks those rankings, and now you have the list sorted on Revenue Growth. You want the stocks ranked 1
through 10 in this column.
Now it is time for the final step: the R-squared analysis, step 2b.
2b. R-squaring to get one stock
The important stocks for the R-squared analysis are the stocks ranked 1 through 10 in column !!!!!. For the R-squared analysis we need historical prices, going back one year.
As the last link, under the link for the screens, you will find the link to Yahoo historical prices. It opens for SPY, because it has to open somewhere.
First correct the Start date to one year before the end date. Sounds obvious, isn't it? Then replace SPY by one of the tickers with rank 1-10 in column !!!!!. Click Get data.
When the page is refreshed, go to the end of the page. There you will see a link Download Spreadsheet Format. You could open that link in a new window, for instance by shift+clicking it, but this doesn't work always. Safer is right-clicking on the link and choosing Save target as. Never mind the name. Open the file saved (usually named table.csv) in Excel and select all prices in the column Close. Press Ctrl+C to copy them. Go to the second sheet of the Mimic spreadsheet. (Click on the tab R-squared to get there.) Click on the first cell of Column B and press Ctrl+V. Cell A1 now typically shows a value of about 250. As long as it is over 200, things are OK. If the value is about 60 or less, you forgot to change the Start Date for the historical prices.
Now the r-squared value of the prices is in C1. Copy cell C1, go back to the first sheet and paste the value after the !!!!-rank for the ticker you are analyzing. Paste with Edit > Paste Special > Values! You don't want to paste the formula! Repeat for the other tickers ranked 1-10.
added:
Before you do the next stock, clear column B on the sheet R-squared. (Click on the column header for B and press delete.) Then close the sheet you downloaded from Yahoo. After that, query Yahoo for the next
stock, etcetera.
end addition
Now, which of the copied R-squared values is highest? Which Ticker wins? But finding a high R-squared is not enough, you also need to do some Due Diligence on the stock. If you like the stock, that is the winning ticker.
If you want to invest in it, well, it is your money!
Remember, this whole procedure was for illustration purposes. How this method works, is illustrated in the Mimicking MrMarket thread. And as in all investment exercises, past performance is no guarantee for future
results.
But it was fun working this out.
Regards,
Karel
version .1, addition marked in text
Stock picking is easy, when you are MrMarket. And because MrMarket has made no secret of his method, it is also easy when you are you. To show everyone how easy it really is, I defined some screens and developed a spreadsheet. Now you can do it too.
When I defined the screens, I had to improvise, because MrMarket uses IBD info, and this was not available to me. So the results of this will not be true MrMarket picks.
In fact, the results of the procedure are untested, and my description is not meant as investment advice. I mean to illustrate a stock picking method, no more.
You'll find a report of a Paper Portfolio (not a Real Money
Portfolio!) using these picks in this topic.
When you try this procedure out, and run into problems, post them to the General discussion board. I'll see what I can do. And perhaps somebody else is able to help.
So How Does It Work?
You'll find the original description of MrMarket's method in the first topic of this board, and on his homepage
Broadly speaking there are two steps:
- Gathering a collection of stocks, the Long List.
- Narrowing down to one stock.
In my setup, you need to be able to run the screens with your browser, and to massage the data with a spreadheet program. More precisely:
For the screens you will need Microsoft Internet Explorer and a MSN Passport. IE (still) comes with Windows, and a Passport is easy to get on a MSN site (www.msn.com, www.hotmail.com, etc.).
Perhaps you will also need to download some extra software: a free ActiveX component for the Moneycentral screener.
The spreadsheet program I use is Microsoft Excel 2000.
1. Gathering a collection of stocks
When you are all set, you go to next post in this topic. There you will find all screens, but 1, 7, and 8 are only approximations of what MrMarket is doing. Click on a link (Shift+Click in IE opens the target in a new window; recommended!) and the screen is run.
In case you get a completely different window, or a blank HTML screening page instead of a nice ActiveX page, review what is necessary to run the screens a bit earlier. BTW, that window may contain an upgrade link: take it.
When the screen is run, you copy the results to a spreadsheet. You could use Mimic.xlt, an Excel 2000 template. Open it first, then return to the screener, and choose Export > Results to Excel. You will find it referenced in the same post as the links.
If this doesn't work (you see strange values in cells, with quote marks), choose Edit > Copy Results to Clipboard instead. Then return to Excel, press Ctrl+N to get a new, empty sheet and Ctrl+V to paste the results you copied.
The results show a varying number of columns, but always too many. Remove the columns you don't need. You need the first, Ticker, column, and the last four columns. To remove the columns you click on the header of the leftmost column you want to remove and shift+click on the rightmost column you want to remove. Then right-click and choose Remove.
Now you copy the results to the Mimic spreadsheet. Click on the first ticker and shift+click on the last cell in the 'Rev Growth...' column. Press Ctrl+C to copy the data. Now go back to the Mimic spreadsheet and click in the first free cell under Ticker. Press Ctrl+V. You have now copied
the results of the first screen to the spreadsheet. Repeat the procedure for all other screens. Of course, the Mimic spreadsheet will already be open. When you have copied the relevant columns from the screen results, you are ready for the narrowing down.
2. Narrowing down to one stock
We split this procedure in two parts:
2a. Narrowing down to ten stocks
When you look at all the stocks you have gathered, you will see a mess. Double tickers all over the place. Don't worry, it will come out in the wash.
For the narrowing down we use the formulas in the columns labeled xxx1, etc. At this moment, most of the columns show ####'s. That is because there are too many formulas. We are going to remove what is not necessary.
Click on the first cell in the xxx1 column that has ###'s. It is on the first row past the data you pasted. Then press Ctrl+Shift+End to extend the selection to the last cell with a formula (and ###'s). Press Delete. Press Ctrl+Home. That looks better.
Now it is time to sort the data. We are going to sort on column K. Click on the header of the first column (A), to select the whole column. Then shift+click on the header of column K. Now choose Data > Sort and select Sort on > Column K. Also select the option that says that the list contains a row of field names. When you do that, you will see that the first row becomes unselected. Click on OK to sort the list.
What have we done up to now? The first two columns with formulas calculate two ratios: Price over Price/Earnings and Price over Projected Price/Earnings. The third column with formulas adds the rankings of the stock in the PriceAppreciation column and in the two ratio columns. The
fourth formula column ranks the added rankings.
Column xxx5 now ranks the Revenue Growth for the first twenty stocks, ignoring double tickers. Column !!!!! finally ranks those rankings, and now you have the list sorted on Revenue Growth. You want the stocks ranked 1
through 10 in this column.
Now it is time for the final step: the R-squared analysis, step 2b.
2b. R-squaring to get one stock
The important stocks for the R-squared analysis are the stocks ranked 1 through 10 in column !!!!!. For the R-squared analysis we need historical prices, going back one year.
As the last link, under the link for the screens, you will find the link to Yahoo historical prices. It opens for SPY, because it has to open somewhere.
First correct the Start date to one year before the end date. Sounds obvious, isn't it? Then replace SPY by one of the tickers with rank 1-10 in column !!!!!. Click Get data.
When the page is refreshed, go to the end of the page. There you will see a link Download Spreadsheet Format. You could open that link in a new window, for instance by shift+clicking it, but this doesn't work always. Safer is right-clicking on the link and choosing Save target as. Never mind the name. Open the file saved (usually named table.csv) in Excel and select all prices in the column Close. Press Ctrl+C to copy them. Go to the second sheet of the Mimic spreadsheet. (Click on the tab R-squared to get there.) Click on the first cell of Column B and press Ctrl+V. Cell A1 now typically shows a value of about 250. As long as it is over 200, things are OK. If the value is about 60 or less, you forgot to change the Start Date for the historical prices.
Now the r-squared value of the prices is in C1. Copy cell C1, go back to the first sheet and paste the value after the !!!!-rank for the ticker you are analyzing. Paste with Edit > Paste Special > Values! You don't want to paste the formula! Repeat for the other tickers ranked 1-10.
added:
Before you do the next stock, clear column B on the sheet R-squared. (Click on the column header for B and press delete.) Then close the sheet you downloaded from Yahoo. After that, query Yahoo for the next
stock, etcetera.
end addition
Now, which of the copied R-squared values is highest? Which Ticker wins? But finding a high R-squared is not enough, you also need to do some Due Diligence on the stock. If you like the stock, that is the winning ticker.
If you want to invest in it, well, it is your money!
Remember, this whole procedure was for illustration purposes. How this method works, is illustrated in the Mimicking MrMarket thread. And as in all investment exercises, past performance is no guarantee for future
results.
But it was fun working this out.
Regards,
Karel
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