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Overview.
Analytical Investing provides the information necessary for investors to easily build and maintain a portfolio using our numerical rating system and asset allocation recommendations.
Investment Categories.
Each individual stock is classified by its potential risk and return, and is placed into one of the following five categories:
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Category 1
| Very aggressive investments, with an extremely high potential return, but also a high level of risk.
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Category 2 |
Aggressive investments, with a very high potential return, and a moderate amount of risk.
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Category 3 |
Moderate investments, with a high potential return, and moderate risk.
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Category 4 |
Safe investments, with moderate potential return, and low risk.
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Category 5 |
Very safe investments, with modest potential return, but very little risk.
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Ratings System.
Our ratings sytem provides on overall rating for each company, as well as ratings in each of four categories: value, growth, timing, and safety. All numerical rankings use the same scale, and can be interpreted as follows:
| 80-100 | Strong Buy |
| 60-79 | Buy |
| 40-59 | Hold |
| 20-39 | Sell |
| 0-19 | Strong Sell |
The overall rating is the most important, and is what would normally be used to make buy & sell decisions. The other ratings are there to provide more information about the strengths & weaknesses of each company. The "value" rating is an assessment of a company's current fundamentals, the "growth" rating is an assessment of a company's growth potential, the "safety" rating indicates the likelihood of a company getting into financial difficulty, and the "timing" rating indicates whether or not it is a favorable time to purchase the stock.
Asset Allocation.
The weekly asset allocation recommendations provide guidelines on the percentage of a portfolio that should be dedicated to each investment category. It includes guidelines for conservative, moderate, and aggressive investors. The allocation in your personal portfolio should fit your objectives and personality, and may vary somewhat from the Analytical Investing guidelines.
Building & Maintaining Your Portfolio.
We recommend a portfolio size of 20 to 30 holdings - this will avoid a portfolio with too many holdings (hurts investment performance) or too few holdings (too risky). The "Current Recommendations" section of the weekly report will contain the current week's recommended stocks in each category, while the "Current Holdings" section will report the latest ratings for stocks that are part of our "active portfolio". This information, along with your asset allocation objectives, should be used to determine which stocks should be bought and sold.
Protecting against losses.
We recommend using a 20% stop-loss rule on all investments
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