The use of a specific company as an example in this document in no way represents an opinion regarding the value of that company as a stock investment.
Anyone interested in investing for long term growth should be familiar with the tools and techniques of National Association of Investors Corporation, in particular the Stock Selection Guide. Windows users have several software packages available that reduce the effort and improve the accuracy of the data manipulation portions of the SSG, freeing the investor to concentrate on analysis and conclusions. While not an integrated package, similar goals can be met using freely available tools on UNIX, and specifically on Linux. This is probably not the first (or last) effort at using a spreadsheet to assist with the SSG, but it does leverage the capabilities of UNIX to tie the different applications together.
The tools used by this package to create a Stock Selection Guide include:
Xspread/sc are used to mimic the data entry and analysis portions of the SSG, and portions of the spreadsheet are processed by gnuplot to produce a chart similar to the visual analysis portion of the SSG. As would be expected, many of the calculations commonly left as "an exercise for the student" are performed by the software tools.
Because these tools are a by-product of gathering stock information from websites, the discussion will be based on using the web as the primary source of information. Because most web sites provide less than ten years of historical data (for free anyway), the tools are initially configured to handle as little as five years.
These are a few images of the output from these programs:
The primary application you must directly interface with is the spreadsheet: xspread. Online documentation is available, but for the purposes of this exercise, arrow keys, the mouse and a few simple commands should suffice:
The other 'tool' that I use is the internet. I get my data from these sources:
A significant limitation of using the internet for stock analysis is that data are usually limited to five years. Additionally, the data available may not be same as available from more traditional sources. For Example, the EBIT provided by WSRN tables is not the same as Pre-Tax Net presented on NAIC greensheets. Caution must be excercised when combining or comparing data from different sources.
In addition to the applications, this system include template files:
These templates are used to create the specific files needed for each individual stock.
The user interface to this system is via the command line using the make program. Companies being analyzed are referenced via their stock symbols followed by a target tag. For Example: make MSFT.new creates a new spreadsheet for Microsoft.
The makefile tags of interest are:
To get started you will need an open xterm window in the directory where the tools reside and you need a web browser tuned at www.wsrn.com (for now).
Step 1 : in the xterm enter make MSFT.update. This starts xspread in a new window. You will hear a beep as xspread make some calculations--it is safe to ignore this. You will notice that several fields are already filled, but for another company. These are placeholders and will be changed shortly.
Step 2 : navigate to the WSRN Company Links page and click on the QuickSource: Description & Stats link on this page. You will enter data (described in detail below) from the tables on this page and once complete use the browser back button to return to the previous page. The next link is the WSRN QuickSource: Fundamentals, Ratios & Earnings page from which additional data are obtained. Next access the MoneyCentral at Microsoft site to obtain the stock price data. At this point you should save and close the spreadsheet.
Step 3 : at this point you should review the data to check on accuracy and to assist in forming your assessments of management and risk. In the xterm window enter make MSFT.view. This opens a ghostview containing the current spreadsheet report and chart.
Step 4 : make the entries in the SSG requiring judgment (on your part). This is the last part of the SSG.
Step 5 : enter make MSFT.print to print the completed Stock Selection Guide for Microsoft.
The following sections cover the data entry in detail.
The following sections describe the process of data entry in general, with links to images showing the sources and results for a specific company. Remember, the use of a specific company in this or other examples in no way represents an opinion regarding the value of that company as a stock investment.
No matter what the stock analysis technique, we can never avoid that fact that it ultimately comes down to judgment.
After data acquisition and entry, completion of the Stock Selection Guide requires your estimates of the company's future prospects, your assessment of the overall business climate and how it affects this company, and ultimately your overall judgment. Sorry.
The spreadsheet has several areas supporting the judgment calls inherent in the SSG:
Based on the belief that the SSG is a time-tested technique that works, the goal of this system is to implement an SSG as faithfully as possible using the tools available to perform laborious calculations and reduce the time necessary to reach an analysis phase. There are some differences between the output produced and the NAIC SSG, most of which are format differences, but some of which are are intentional content differences.
The SSG chart is presented in landscape mode as opposed to portrait mode in the traditional SSG. If you are accustomed to portrait graphs, the 15% slope appears much lower than before. Price, Sales and EPS are plotted as expected, but rather than have a series of growth lines at the bottom right, a 15% growth line is shown tangential to the Last full year of data for each plot. Looking back in time, an actual plot that drops below the 15% line indicates that historical growth is greater than 15%. Conversely, historical plots falling above the growth line indicate less than 15% growth. The future side is the reverse, with greater than 15% growth above the line and lower growth below the line.
Data traditionally shown on the graph of the SSG are shown on page 1 of the spreadsheet. This page also shows the actual data used to render the graph.
The second page of the spreadsheet displays the data normally shown on the top half of the second page of a traditional SSG.
The third page of the spreadsheet displays the data normally shown on the bottom half of the second page of a traditional SSG.
