Wednesday, February 16, 2011

Score Cards Explained

What are Score Cards?
Score Cards are an experiment! The idea is to provide all of the most relevant financial data for a growth stock in a quick overview and to compute an automatic Score based on this data. Our theory is that stocks with a high score (8 or higher) will outperform, and those with a low score (0 or lower) will underperform.

IMPORTANT: The Score is automatically generated, no human input is involved. The Score Cards incl. Score are designed to be a starting point for your own research, not to replace it. There are many decisive factors for the valuation of a growth stock that can not and are not reflected in the Score Cards. There can be company-specific reasons why a stock with a very high score is traing at a very low price.

Investing in microcaps, sub-$5 stocks, OTC/BB or Pink Sheets stocks, generally small capitalized stocks without significant institutional backing and especially also U.S.-listed China small caps always comes with a high degree of risk! You should NEVER invest in a stock based on the Score Cards alone, and if you get interested in a stock with a high Score you must dig deeper into the story yourself, look out for other sources, read the company's SEC filings and look at metrics as liquidity and ownership.

The Score is automatically generated and should not be seen as a recommendation to buy or sell a security. The ratings (Buy, Hold, Sell) that are posted next to the Score are also automatically generated and should be interpreted according to the metrics that are used for calculating the Score only! Based on those metrics alone the system says the stock is rated "Buy" or "Sell", but there are many other metrics that are not based on financial data which always have to be considered before making an investment decision.

How is the Score Generated? Click for details here.