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Jrinne
Re: FactSet beta site v1.0, NOW LIVE

I use (CurFYEPSMean - CurFYEPS4WkAgo) /abs(CurFYEPS4WkAgo) too.

There is nothing wrong with using the formula. It just doesn't represent growth in the majority of applications. You are most likely flagging companies operating around the knee of the sales/earnings curve, which is not a bad thing if you are looking for companies with growing sales that are likely turning the corner on profitability. If you ignore the logic behind it (i.e. earnings growth) and "go with what works" then you might have some success with it.

Steve

Steve,

I just want to say I agree with you. Furthermore, in support of what you say, I have developed a recent appreciation for growth factors.

But my appreciation for these factors does not matter. Those who have complained about value factors not working should logically be looking at other factors (including growth). I hope you will expand on your knowledge of growth factors.

A shorter statement of my agreement: I consider what I have written to be a sentiment factor but if it works I do not care about the name. I am good with whatever anyone wants to call it.

Best,

Jim

From time to time you will encounter Luddites, who are beyond redemption.
--de Prado, Marcos López on the topic of machine learning for financial applications

Jul 12, 2020 9:56:10 AM       
Edit 2 times, last edit by Jrinne at Jul 12, 2020 10:09:33 AM
yuvaltaylor
Re: FactSet beta site v1.0, NOW LIVE

Yuval,

Thank you for your comments. I use (CurFYEPSMean - CurFYEPS4WkAgo) /abs(CurFYEPS4WkAgo) too.

I have also used something similar to CurFYEPSMean - CurFYEPS4WkAgo) /Max(0.02, Abs(CurFYEPS4WkAgo)). I think it is a good idea. I have found it does not seem to make much difference in sims so I do not use the Max in the denominator out of pure laziness.

I just have a questions about programing with FactSet. Mainly about the defaults, I guess. Do period and weekAgo both need to be specified? If not, which gets defaulted for sure.

Or on a practical level, I just want to be sure that the analogous equation to the above using NTM would be: (ConsEstMean(#EPSNTM,0)-ConsEstMean(#EPSNTM,0,4))/abs(ConsEstMean(#EPSNTM,0,4).

Basically, I want to be sure that this last equation is doing what I think it should and that I am not missing something. Any error correction appreciated.

I guess I am unsure because the equation works but does not seem to be quite as good as using some combination of (CurFYEPSMean - CurFYEPS4WkAgo) /abs(CurFYEPS4WkAgo) and (CurNextFYEPSMean - CurNextFYEPS4WkAgo) /abs(CurNesxtFYEPS4WkAgo) in a node.

Intuitively I would have thought (ConsEstMean(#EPSNTM,0)-ConsEstMean(#EPSNTM,0,4))/abs(ConsEstMean(#EPSNTM,0,4) would have worked better than the combination in the previous paragraph.

Maybe I am doing something wrong.

And if you know, how is #EPSNTM calculated? I assume it is a function of FY and nextFY as analyst do not generally make a prediction of the next 12 months that I have ever seen. It would be easy to weight FY and NextFY based on the number of months left in the fiscal year, however. Is it just a weighted combination of the two?

Thank you.

Jim

Yes, you're using ConsEstMean correctly.
NTM is calculated by adding the next four quarters' estimates. CurFY is calculated by adding the estimates and actuals for the four quarters in the current fiscal year.

Yuval Taylor
Product Manager, Portfolio123
invest(igations)
Any opinions or recommendations in this message are not opinions or recommendations of Portfolio123 Securities LLC.

Jul 12, 2020 10:03:07 AM       
Jrinne
Re: FactSet beta site v1.0, NOW LIVE

Yuval, Thank you. -Jim

From time to time you will encounter Luddites, who are beyond redemption.
--de Prado, Marcos López on the topic of machine learning for financial applications

Jul 12, 2020 10:08:37 AM       
InspectorSector
Re: FactSet beta site v1.0, NOW LIVE

But my appreciation for these factors does not matter. Those who have complained about value factors not working should logically be looking at other factors (including growth). I hope you will expand on your knowledge of growth factors.

OK - I'll throw you guys a bone because you are putting up with my ranting :-)

I don't find the earnings growth formula or earnings estimate growth, as the case may be, very satisfying because it isn't doing what I would want it to do. Instead, I use a formula that I call operating leverage although the name is probably not correct. My understanding is that it is impossible to calculate the operating leverage.

The formula is (Lower is better):
ZScore("$STD_OpInc/$STD_Rev")

The custom formulas are:
$STD_OpInc LoopStdDev("OpInc(CTR,TTM)",12)
$STD_Rev LoopStdDev("Sales(CTR,TTM)",12)

This formula puts you at the knee of the operating curve income versus sales. But more importantly, the income is normalized by sales. This overcomes one of the big problems with the growth formula where change of EPS from 0 to 0.1 can either be extremely meaningful or have little value depending on the size of the company.

When you combine low "operating leverage" with sales growth, you will see some great results. So I have to qualify that. I don't chase value stocks and I don't know how it will perform with value stocks. I have a custom universe of digital transformation stocks, essentially S/W stocks with strong growth characteristics.

This stuff is my bread-and-butter so I don't want to reveal any more. Contact me privately with any questions.

Thank you!
Steve
Steve

Jul 12, 2020 10:56:08 AM       
InspectorSector
Re: FactSet beta site v1.0, NOW LIVE

For what its worth, I developed a four-factor ranking system back in November with the following factors:
- 3-year sales growth
- Operating Leverage (as described above)
- smoothness of sales growth
- Weighted quarterly sales surprises

Attached is the most recent 6 months which are out-of-sample for the PRussell3000 and my digital transformation stock universe.

Attachment RS_Test.gif (58016 bytes) (Download count: 92)


Jul 12, 2020 12:01:23 PM       
Edit 1 times, last edit by InspectorSector at Jul 12, 2020 12:02:24 PM
judgetrade
Re: FactSet beta site v1.0, NOW LIVE

hey thank you for all the great feedback, will try out all suggestions!
Best Regards
Andreas

Jul 16, 2020 3:34:02 AM       
judgetrade
Re: FactSet beta site v1.0, NOW LIVE

@inspectorsector

how did you form your universe of digital transformation stocks, discreationary? How many stocks?

Best Regards
Andreas

Jul 16, 2020 3:48:40 AM       
judgetrade
Re: FactSet beta site v1.0, NOW LIVE

@ Dan: For example -100/10 would be 100/10=10 --> that might be a great stock! It just might have just turned around and the price might not reflect that -->
I am with Jim here, it might not capture a growth, but it can be a good sentiment factor, especially on small caps.

I tried:

(CurFYEPSMean - CurFYEPS4WkAgo) /Max(0.02, Abs(CurFYEPS4WkAgo))
(NextFYEPSMean - NextFYEPS4WkAgo) / Max(0.02, Abs(NextFYEPS4WkAgo))

and I tried
(CurFYEPSMean - CurFYEPS4WkAgo) / Abs(CurFYEPS4WkAgo)
(NextFYEPSMean - NextFYEPS4WkAgo) / Abs(NextFYEPS4WkAgo)

they give (much!) less performance then

Abs(CurFYEPSMean) / Abs (CurFYEPS4WkAgo)
Abs (NextFYEPSMean) / Abs(CurFYEPS4WkAgo)

Both above factors in one node and a rank weight of 12.5%.

at least with my ranking systems (which has some heavy quality and momentum components) and a filter on small caps on the buy rules

Jul 16, 2020 4:10:32 AM       
Edit 1 times, last edit by judgetrade at Jul 16, 2020 4:14:50 AM
judgetrade
Re: FactSet beta site v1.0, NOW LIVE

@Steve

The formula is (Lower is better):
ZScore("$STD_OpInc/$STD_Rev")

The custom formulas are:
$STD_OpInc LoopStdDev("OpInc(CTR,TTM)",12)
$STD_Rev LoopStdDev("Sales(CTR,TTM)",12)

Where do I put the custom formulas, so the ranking formula ZScore("$STD_OpInc/$STD_Rev") works?

Thank you very much!!!
Best Regards
Andreas

Jul 16, 2020 4:13:35 AM       
InspectorSector
Re: FactSet beta site v1.0, NOW LIVE

Judgetrade - I have a custom universe of approximately 170 stocks. I started with the constituents of the SKYY ETF then added more stocks from there. I've been researching these stocks for about a year. They are mostly high-growth s/w stocks.

You define the custom formulas in the P123 custom formula module.

It looks like cloud-computing is starting to have a meltdown :-)

Jul 16, 2020 5:56:50 AM       
Edit 1 times, last edit by InspectorSector at Jul 16, 2020 5:59:19 AM
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