• OPTV (3.42) – 3rd day at 9
• NOIZ (15.30) – newly minted 9, was 8 yesterday
• LSCP (30.80) – newly minted 9, was 8 yesterday
• KKD (7.55) – 2nd day at 9
• JCOM (28.51) – 2nd day at 9
• ILE (3.20) – 4th day at 9
• IDCC (25.71) – back at 9 after a 1 day haitus (it was 8 )
• ENZ (12.70) – back at 9 after a 2 day haitus (it was 8 )

It’s become too cumbersome to report individually on stock performance here, so I uploaded my spreadsheet that I was working on (the first draft got accidentally deleted, so I’m posting this in part to make sure I can retrieve it just in case!). See the Excel file attached for a detailed performance review of the stocks that have appeared on the PowerRatings site with a PR of 9. They have been performing extremely bad all week!

Power Ratings Worksheet

Stocks with a PR of 9 on 7/13:

• OPTV (3.39) – 2nd day at 9
• KKD (7.68) – newly minted 9, was 8 yesterday
• JCOM (29.79) – newly minted 9, was 8 yesterday
• ILE (3.33) – 3rd day at 9
• ASPV (23.61) – 4th day at 9

Let’s see how we would have done if we purchased Wednesday’s 9′s at the opening today (S&P was down 1.09%):

• OPTV – down -7.63%
• NTG – up 5.38%
• ILE – down -0.30%
• IDCC – down -2.05%
• ASPV – down -2.54%

Average 1 day performance: down -1.43%
Let’s see how we would have done so far if we purchased any of Tuesday’s 9’s at Tuesday’s open:

• NTG – up 3.83% (was down -1.47% yesterday)
• ILE – down -2.63% (was down -2.34% yesterday)
• ASPV – down -6.20% (was down 3.75% yesterday)
• IDCC – up 3.28% (was up 5.45% yesterday)
• FSII – up 2.10% (was up 3.07% yesterday)
• ENZ – down -1.42% (was up 1.92% yesterday)
• DXPE – unchanged (was up 1.53% yesterday)
• COGO – up 9.61% (was up 3.13% yesterday)

Average 2 day performance: up 1.07% overall

Let’s see how we would have done if we purchased Monday’s 9′s at Monday’s open:

• FMD – down -0.27% (was down -0.21% yesterday)
• COGO – up 1.59% (was down -4.40% yesterday)
• ASPV – down -17.11% (was down -14.95% yesterday)

Average 3 day performance: -5.26% overall

COGO and NTG have been downgraded to a PR of 5 and 6 respectively, which I guess is the PR equivalent of a “hold” since these aren’t indicating that they’ll out perform the S&P 500 now.

Stocks with a PR of 9 on 7/12:

• OPTV (3.97) – newly minted 9, was 8 yesterday
• NTG (37.53) – 2nd day at 9
• ILE (3.34) – 2nd day at 9
• IDCC (27.30) – 2nd day at 9
• ASPV (23.61) – 3rd day at 9

Let’s see how we would have done if we purchased any of yesterday’s 9′s:

• NTG – down -1.47%
• ILE – down -2.34%
• ASPV – down 3.75%
• IDCC – up 5.45%
• FSII – up 3.07%
• ENZ – up 1.92%
• DXPE – up 1.53%
• COGO – up 3.13%

Assuming that we purchased equal amounts of yesterday’s 9s, our overall return would be 1.88% minus commissions and bid/ask slippage. The S&P 500 was up 0.41% today, making stocks with a PR of 9 today yield better than 4.5 to 1 over the S&P 500.
An interesting note: the 3 stocks that performed the best (IDCC, FSII and ENZ) all went from a PR of 7 to a PR of 9 on Monday (FSII was a 4 on Friday, representing a huge jump in a few days). All the others either were an 8 over the weekend (ILE and DXPE) or remained a 9 (COGO and ASPV). Based on today’s results, it’s possible that what’s more important is not just whether the stock is a 9 today or not, but whether it advanced quickly to a 9 or just drifted there. I’ll continue to monitor this hypothesis for the remainder of this week.
To contrast the results for this basket of Monday’s stocks with a PR of 9, here’s how Friday’s stocks with a PR of 9 have performed since Monday’s open (the earliest you could have begun trading these stocks):

• FMD – down -0.21%
• COGO – down -4.40%
• ASPV – down -14.95%

The average loss for these 3 stocks, assuming you purchased them in equal amounts, would be -6.52% in 2 days. Ouch! Granted, ASPV would probably have hit a stop loss on the first day, so the loss would probably be a little less in practical terms.
To further comment on FMD, which dropped from a 9 yesterday to an 8 today: it’s down 0.06% today on another tightly traded day. What an interesting stock to watch these past few days as it’s trading range has tightened–you can tell some institutional holders just dumped this one and few interested parties seem to be left to pick over the bones. I love this quote from Jim Cramer and MadMoney on 6/30 about FMD (read this and go look at the chart for a healthy laugh):

“Jim Cramer: I believe First Marblehead is going higher over the next year. The shorts have been consistently wrong on this student outsourcing play, which has defied the bear camp consistently by putting up strong numbers quarter after quarter. In addition, they are resigning all their major customers to new contracts.”

Finally, stocks with a PR of 1 are:

• AD
• GGXY
• KMG
• SBIT

Here’s stocks with a PR of 1 today: AD, GGXY, LSCP, SBIT

Note that COGO (down 5.72% yesterday) and ASPV (down 5.00% yesterday) were rated 9′s yesterday, so these are worth watching since they’ve been 9′s for 2 subsequent days.

FMD had a PR of 9 on 7/7, 7/10 and currently has a PR of 8 today 7/11. Just check out it’s 5 day chart to see just how bland it’s been…although it could be argued that it’s just a coiled spring. Quicksilver, do you see a chart pattern in FMD?

There were no stocks with a PowerRating of 10.

Stocks with a PowerRating of 9:

FMD – current price of 47.65

COGO – current price of 10.49

ASPV – current price of 25.82

Several stocks with a PowerRating of 8 showed up as well, but there were too many to comfortably list here and after going through all the S&P 500 data, I’m not in the mood to type all those out.

For reference, here’s what TradingMarkets website says about the PowerRatings stocks: From 1995-2005, stocks rated 7 have outperformed the S&P 500 by a better than 4-1 margin over a five-day period. Stocks rated 8 have outperformed the S&P 500 by a better than 8-1 margin; stocks rated 9 have outperformed the S&P 500 by a 13-1 margin, and those stocks that have achieved a 10 PowerRating have outperformed the S&P 500 by a 16.9-1 margin.

Stocks with a PowerRating of 1 (meaning that from 1995-2005, stocks with this rating underperformed the S&P 500 by a factor of 4 over the next 5 days):

MDTH – current price of 21.36

RSAS – current price of 27.28

WGR – current price of 60.01

As with the 8′s, there were multiple stocks with a PowerRating of 2.

They have a section on the site that shows stocks that scored 9′s or 10′s in the past 2 days and you can view their charts. Only one was listed: AXR. AXR had a PR of 9 on 7/6, a PR of 8 on 7/7, and it’s currently marked with a PR of 6 for Monday (7/10). Assuming you had this data on the evening of 7/5 (the new PR ratings come out at 7:00 pm EST, so you would have been able to setup a trade for AXR that was set to buy at the opening of 7/6), you would have bought AXR most likely at 50.5 on at 9:30 am on 7/6. At the close of 7/7, AXR was at 53.27 a 5.5% 2-day profit, minus commissions, assuming you sold right at the close. Since the PR rating has fallen to 6, I’m interested to see if you should cash in and take your 5.5% profit immediately or hold on for another 3 days.

Another interesting part of the site is their list of stocks with the largest change in their PR either up or down. CLRK just changed from a 2 yesterday to a 6 today. LBIX, ENS, FSII, and SERO each just changed from a 4 yesterday to a 7 today.

There’s plenty to discuss and I’m looking forward to an interesting week looking at PowerRatings. If PowerRatings can quickly provide a small list of interesting stocks that have a high probability to move in an expected direction quickly, it’s worth $50/month without a doubt. Here’s a list of the followup items I’d like to focus on regarding PowerRatings:

1. Finding Optimal Trading Strategies using PowerRatings. The current assumption is to just look for 9′s or 10′s and trade them as long as they remain above 7. An alternate assumption is to just look for 9′s or 10′s and trade them for 5 days and take profit sometime on the 5th trading day.
2. Finding Optimal Money Management Strategies using PowerRatings. I’m assuming that these volatile stocks likely will need somewhat wide stop-loss orders on the order of 5% or 8% per trade. With a stop-loss of 5%, can an overall profit be made or will too many trades be stopped out before fruition? How many times does a 9 or 10 bust (draw down 10% or more) within a 5 day period?
3. What option is best for trading multiple 9s and 10s? On any given trading day there could be 3 or more stocks with 9s or 10s. Let’s assume that you had $50,000 allocated to trade PowerRating stocks. On Monday, 3 stocks with 9′s show up, so you would invest $3,333 in each of these stocks. On Tues, 2 new stocks show up, one 9 and one 10–I’m assuming that you would invest $5,000 in each of these stocks. And so on throughout the week evenly dividing your $50,000 amongst these stocks. If there were no 9′s or 10′s one day, consider looking at the 1′s and shorting those with the $10,000 allocated for that trading day. The basic idea would be to not trade any more than 1/5th of the total investment amount on any given trading day.
4. How long do stocks stay as 9s or 10s? If a stock can remain a 9 or 10 for more than one day in a row, do stocks that have been 9s for two or more days out perform stocks that are classified as 9s or 10s for only one day? Is it better to purchase a stock on the second day it’s been a 9 or 10? Or is it better to purchase all stocks on their first day as a 9 or 10, but double the position if they remain a 9 or 10 on the second day?

PowerRating of 1 –> none

PowerRating of 2 –> 1 stock

PowerRating of 3 –> 6 stocks

PowerRating of 4 –> 112 stocks

PowerRating of 5 –> 211 stocks

PowerRating of 6 –> 153 stocks

PowerRating of 7 –> 10 stocks

PowerRating of 8 or above -> None

Since TradingMarkets doesn’t seem to recommend buying any stocks other than 9′s or 10′s or shorting any stocks that aren’t 1′s, this is a pretty unactionable list.

Overall, I ended up with about 135 stocks to run through the PowerRatings system to see what kind of scores these stocks had, looking for 8′s, 9′s and 10′s to test for good long positions and looking for 1′s for a good short position. Of these, I got the following results:

PowerRating of 1 –> none

PowerRating of 2 –> 4 stocks

PowerRating of 3 –> 41 stocks

PowerRating of 4 –> 54 stocks

PowerRating of 5 –> 31 stocks

PowerRating of 6 –> 5 stocks

PowerRating above 7 –> none

These numbers are especially poor when you take into account that these stocks came from some stock screens that were supposedly filtering for stocks well positioned to grow as being the best-of-breed value (high PEG ratio) or growth (high 1, 2, and 3-5 EPS growth) stocks or have just been given a brokerage upgrade (within past week).

I will gladly share my spreadsheet with you upon request. I’ll try to find time this week to run through the screens again and see how the results go. I’ll also look at other screening tools and see what kind of results I can get.

The PowerRating system is less useful if it doesn’t give strong indicators, and that’s just what I’m seeing here–nothing really leaning strong towards buy or sell. But then again, thinking about the big picture that we’re seeing in the market, maybe PowerRating is doing what it’s supposed to: it’s showing that the market doesn’t have any really clear signs right now. If I were depending solely on PowerRatings, I’d be sitting out of the market earning money market interest levels on my funds just waiting for a buying opportunity to arise.