The Stock Selection Guide and some improvements of it
This paper deals with the Stock Selection Guide. The user of the model should state his anticipated yearly growth in earning from the company. The model gives three zones: a buy zone, where the stock is worth buying, a neutral zone and a sell zone. A central concept in the model is the earning-loss ratio defined by \((H-P)/(P-L)\), where \(P\) is a stock price now, \(H\) is an optimistic highest stock price after 5 years, \(L\) is a lowest anticipated price after 5 years. The stock is considered to be worth buying if this ratio exceeds 2. The author proposes two improvements to the model: 1) the determination of what future yearly growth of earnings is required to make a stock worth buying; 2) adaptation of this formula in such a form that the market interest rate is taken into account.
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- An integrated approach for stock evaluation and portfolio optimization
- Stock selection using a hybrid MCDM approach
- Heuristic methods for stock selection and allocation in an index tracking problem
- When Should We be Prepared to Improve a Portfolio by Lacklustre Stocks? — A Note on Log-Optimal Portfolio Selection
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