Peanut butter and jelly … peanut butter and chocolate … peanut butter and bananas…
These classic combinations have stood the test of time. Each element complements the other to create something greater than the sum of its parts.
In the world of finance, these elements are called factors.
Factors are specific attributes that can influence a stock’s performance. By blending the right factors, investors can enhance their portfolios and achieve superior returns.
Adam O’Dell’s Green Zone Power Ratings is a blend of factors as powerful as the best food combinations — the ultimate investment recipe.
This rating system analyzes thousands of stocks daily to uncover the ultimate investments, those with the highest upside potential while minimizing your risk.
How the Ratings System Works
Ratings are found using a powerful algorithm that evaluates six factors to assign a rating of 0 to 100. Each factor receives its own rating between 0 and 100, and an overall rating takes all factors into account.
Uniquely, the rating assesses the stock and the company. Many investors overlook this important distinction.
Let’s consider Apple (Nasdaq: AAPL) as an example. This company makes iPhones and generates cash from apps, storage, and other hardware products.
But we don’t buy Apple. We buy shares of AAPL.
The company consistently does great things. But the stock has had times when it didn’t beat the market. That’s because the stock price doesn’t necessarily reflect the business.
Sentiment drives stock prices.
Sentiment can make a bad company (like GameStop) into a great stock for short periods. It can also result in a great company being a bad stock that underperforms the market averages despite stellar management and products.
Green Zone Power Ratings include three factors that rate the stock…
3 Technical Factors
- Momentum — Strongly uptrending stocks earn higher momentum ratings. Buying stocks that are already trending higher and at a faster rate than the overall market can increase our odds of success and decrease risk
- Size — Smaller companies earn higher size ratings. Buying smaller companies can provide the extra “juice” that typically comes with them.
- Volatility — Less volatile stocks earn higher volatility ratings. Low-volatility stocks have been proven to generate superior risk-adjusted returns over the long run — with less heartburn.
The other three factors analyze the company’s financial standing and prospects:
3 Fundamental Factors
- Value — Less expensive (aka “cheap”) stocks earn higher value ratings. This factor helps us to find great companies at good prices because the price we pay affects how much we get from future returns. Overpaying for a stock is a costly mistake.
- Quality — High-quality companies earn higher quality ratings. To determine quality, the model considers a company’s returns, profit margins, cash flows, debt ratios, and operational efficiency, among other things.
- Growth — High-growth companies earn higher growth ratings. This factor rewards companies that are growing both revenues and earnings at faster rates than the market and economy.
Research generally shows that any one of these factors outperforms the broad market in the long run. However, the outperformance is usually small, just a few percentage points a year.
While that adds up over time, Green Zone Power Ratings vastly outperforms the broad market.
Testing has shown that stocks with a rating of 80 and above are “Strong Bullish” stocks and have consistently beaten the market by 3-to-1 over the past 23 years.
This performance demonstrates that the combination of factors is more potent than any individual factor or the ultimate investment recipe.
To see the proprietary ratings and full analysis for a company, type in the name or ticker in the search bar on the Power Ratings site right here.
Until next time,
