Defund the Value Police

Here’s a blog on value that might interest you, and more particularly, an explanation of the relationship between value and growth. If you aren’t doing both, then you’re doing neither.

https://actiquant.com/2020/09/14/defund-the-value-police-unless-or-until-they-get-it-right/

Thank you Marc. Good article!

From the article:

I wonder if—without giving away any proprietary methods—you could expand on how you look at the “wisdom of the crowds.”

Momentum? Other technical factors? Consensus estimates? Other data? Maybe none of the above?

And are you always looking for when the crowds are right (and following the crowd’s wisdom) or sometimes investing when you think the crowds might have it wrong?

Probably this next question does get into proprietary methods. But if not (or speaking generally), how does Chaikin Analytics weigh the factors you discuss in the paper? Are they linear rank weightings, like with the P123 ranking system, or do you use a different method?

Thank you in advance for any additional information you can share

Best,

-Jim

All of the above, and it could be anything else anyone comes up with. We don’t have a monopoly on the exact factors. The key is to play detective. What factors are telling you about stock behavior consistent with a market belief to the effect that . . . .

This is an interesting question. The contrarian game is irresistibly wonderful to play, especially when one is new to investing. So naturally, when I started, at a time when my hair had no grey and when my knees were a helluva lot better than they are now, I had not doubt that the market was populated by an ignorant herd (it helped that there were lots of gurus happy to stoke my ego) and that I was a superior genius. But the longer I’ve been in tis business, the more I see how Mr. Market, although not always right, is damn smart and entitled to a presumption of innocence. (And it does make sense – back when all the gurus decided the market was dumb, information was scarce and expensive, so anyone who actually looked at objective info had a bona fide edge. Today, though, that sort of approach is as exciting as black-and-white TV and rotary dial phones.

So we are trend followers (when we use oscillating indicators, it’s mainly to look for oversold/overbought condition and identify traing points).

This doesn’t make anything easy. There is no actual person named Mr. Market announcing “This is what I believe.” So it takes a lot to determine what we should look at to measure the crowd’s wisdom, detect when the crowd is losing conviction and considering changing its views, etc.

Yeah, that’s proprietary.

Thank you Marc. -Jim

Good article!

Thank you Marc. Very interesting post where statistics meet common sense.

Marc,

I hope this is thought of as just good information (or as a shameless promotion for your service if you prefer).

But you can actually download the factors that Chaikin Analytics uses from their site: https://www.chaikinanalytics.com/wp-content/uploads/2019/05/eBOOK__20Most-Important-Factors-CA.pdf

This link works for me but I have already given them my email address. You may have to find this on the site.

And I have gotten a personal email message from Mark Chaikin;-)

Anyway good stuff, IMHO.

Has anyone ever done factor analysis?

Or noticed that Marc Gerstein and perhaps Marc Chaikin (based on the download) like to group factor into nodes (latent factors)? Anyone who has done factor analysis or principle component analysis knows this can reduce overfitting.

However, Chaikin Analytics use a proprietary method and they may (or may not) have the equivalent of a node. So it may be a bit of a stretch to speculate that Chaikin Analytics benefits from this.

Intentionally or not there is a lot of good statistics (the common sense is a given) going on behind the scenes with Marc’s methods.

Really good stuff.

Edit: Not too shabby of a five bucket (not necessarily an equal number of stocks in each bucket here) rank performance test (below).

Question. If I subscribe to this service can I get an ordering of stocks (best to worse)? and can I get all of the “very bullish” stocks downloaded to be put in as an InList into P123? Or do I only get a readout of each single stock that I enter? That is not clear from the site.

Best,

Jim


Hey Jim,

So you got into our marketing database. Cool :slight_smile:

Some of the factors are straightforward, others have non obvious wrinkles. We’re not giving away IP. The nodes are not high quant. The model was created on p123. So they are just plain vanilla p123 rank nodes.

You would not be able to get back lists of companies or anything like that. It’s display only, as per the scope of our license with SP, and our choice to not serve power-user quants. We don’t see the profit opportunity in going there (people into that can go to, well . . . p123 of course). There are users on our platform we think of as power users, but they are a completely different type from those who would be called power users on p123. Ours are not into statistics and modeling; even our power users prefer to use our model and devote their efforts to individual stock analysis, to choose which favorably ranked stocks (or etfs) they prefer. If you wind up getting a mailing for a webinar (which may well happen now that we have your email), check it out and see how the other half lives!

P.S. Shameless? promotion. No such thing. The shame is in not promoting. I feel that way now and I felt that way at p123. Doesn’t mean I’m a genius in doing it, which is ok since Chaikin has others who deal with sales and marketing.

Marc,

Thank you.

I was looking last night at some of the information about entry signals. Seem like there are several on the site. I would be interested in more information about that if it is an interesting topic of discussion for you.

Obviously there are many, many ways to use the site. But one could wait for an entry signal then see what the Power Gauge rating is (buying a stock with a signal and high Power Gauge rating)? Then sell when there is a sell signal or a worsening of the Power Gauge rating? Again just one possible way it seems.

What types of things are used as a signal? Chaikin Money Flow is probably one I assume?

Best,

Jim

Under the hood, the signals are, simply, screens (with rank>X as one of the rules). They’re technical but function exactly the way I’ve talked here about the relationship between signals and ranking systems.

We’re at stage 1 of what will be a significant effort to bring pre-set screens more to the forefront (the bulk of our users are not terribly interested in screening on their own) and the signals are likely to become part of that.

At present, information on the signals is sitting on my blog at https://actiquant.com/chaikin-buy-sell-signals/ and I just posted a performance review at https://actiquant.com/evaluating-the-chaikin-analytics-buy-signals/

I did that as an accompaniment to a blog dealing with this sort of thing; it’s on my blog site, but you can also see it on the Chaikin Analytics blog at https://www.chaikinanalytics.com/value-for-a-growth-obsessed-world-six-infrastructure-plays/ (Over there, you can get more of a sense of how we approach stocks . . . I’m more the R&D guy; Dan Russo (a tech analysis expert) is our Chief Market Strategist with Pete Carmasino also posting often. I’m more of a opnce-per-week unless I get snowed under with other things.

Marc,

Nice! Thank you.

Jim

Marc,

Can you please tell us what data provider you use at Chaikin Analytics?

Thank you in advance.

Best,

Jim