If your time for portfolio management is limited, use the MY FOLIO section of Hedgefolios to rapidly make sure your stocks are moving in the right direction. Similar to a portfolio tracker, MY FOLIO allows you to watch up to 30 stocks that are on your trading radar or in your portfolio. Rather than the time-consuming process of typing the symbols individually in other parts of the site, MY FOLIO puts them all on one page for your convenience.

On the MY FOLIO section, you can add new stocks or ETFs by typing in the symbol or the name. Note that symbols must be exact, but if you only know the beginning few letters of the name, you can type them in and hit add. For example, if you type in “Mic” in the “Name” box and hit add, you will get a list of 10 stocks with names that all begin with the letters “mic.” From that list, all you need to do is click on the one you want, and it will be added.

Building MY FOLIO is easily done throughout the rest of the site during your research. In EVALUATE, MANAGE or PROFILE, the left column of any search result has a box titled “Watch.” Whenever you find a stock that you want to follow, all you need to do is check that “Watch” box, and the next time you visit MY FOLIO, it will be on your list.

Deleting a stock from MY FOLIO is even easier - just click on any ‘’Watch” box that is checked and it will be unchecked and removed from MY FOLIO. If you want to clear all the symbols in MY FOLIO, click on the “Clear” button and it will prompt you to make sure you really want to do that.

Note that MY FOLIO will be cookies-based until membership is required on Hedgefolios, and your list will only be retained on the hardware you are using. If you use Hedgefolios at work and at home, you will need to build MY FOLIO on both of the computers. Sorry for that inconvenience. It will be improved shortly so that no matter where you log in to Hedgefolios, MY FOLIO will reflect your current preferences.

The Hedgefolios fundamental and price data are updated periodically, but not always on the same date. On the top right corner of search results in EVALAUATE and MANAGE you will see “data current as of:” and then a date. Whenever you switch between the Fundamental View and Technical View, these dates will change accordingly. Fundamental data is updated monthly, so you will typically see a date at the beginning of the month, plus or minus a few days. Technical data is updated weekly and I use the open price of the week to document Hedgefolios’ performance. So typically, the Technical View will show “data current as of” the date representing Monday of this week. On weeks when the market is closed on Monday, the data will be current as of Tuesday’s open.

There’s more than one way to sort the data in Hedgefolios. The first step is to search the database using EVALUATE and MANAGE and the second method is to sort the search results.

After each One-Click or Custom search, Hedgefolios provides you with the search results in a sortable list. When you do a search in EVALUATE, the results default to the “Fundamental View” and for MANAGE searches, the results default to the “Technical View.” Fundamental View provides the Hedgefolios definitions for Size, Style, Income, Sector and Industry. Technical View shows the current signal, the signal entry price, the most recently updated price, percentage gain or loss, and the date and weeks since the signal was given. Often times, it is very helpful to toggle between the two views by changing the box located above the upper left corner of the search results.

The other way to sort the search results is to click on the column headings. By clicking on the headers, you can sort the data in alphabetical or numeric order and by clicking on the header again, it will sort in ascending or descending order. While there are many reasons to resort the data, I usually do this once a week to evaluate whether there are similar sectors or industries in the most recent signal changes. I will walk you through this example:
- go to MANAGE
- in the Custom Signal Changes section, select Signal Changes Since 4 Weeks Ago - then search
- then toggle to Fundamental View
- then click on the word “Industry” in the column header

Now the search results are grouped by industry so you can scroll down and see if there is any evidence of sector rotation within Hedgefolios signal changes. You can modify this sorting by changing any criteria in the Custom search section. For example, you might want to limit the search results to Down Signals. As soon as you hit search, the results will change but your most recent resorting preferences will be retained as long as you stay in the same section of Hedgefolios.

Hedgefolios presents up to 100 symbols on each page of search results in groups of 20. If your search generates more than 100 symbols, multiple pages will be generated. You can get to the other pages by selecting the page number (active pages in black and underlined), “Prev” or “Next” at the top and bottom of the search results. Once again, your most recent preferences for page number will be retained regardless of whether you toggle between Fundamental View or Technical View.

Whether you are looking for new investing ideas or trying to figure out what to do with your existing positions, the MANAGE section of Hedgefolios provides several ways to help you actively manage your portfolio.

“One-Click Signal Changes” are a fast way to review all the new signal changes for stocks and ETF’s that occured during the most recent week. If you want to evaluate new long positions, click on the link to “Up Signal Changes This Week” and to consider stocks that you might want to sell, click on the link to “Down Signal Changes This Week.”

For more detailed searches of signal changes, use the “Custom Signal Changes” section. Let’s walk through a few examples(I suggest hitting clear before doing any new search as all criteria are retained from the most recent search):

To find all signal changes for the Hedgefolios stock universe, hit clear - then search.

To find all signal changes for the Hedgefolios ETF universe, change the “Search Type” box to ETFs - then search.

To find signal changes for a type of ETF, change the “Search Type” box to a specific ETF listed in the drop down list - then search.

To find the most current signal for an individual stock, type in the exact symbol in the “Symbol” box - then search.

If you don’t know the symbol, then type in the company name in the “Name” box - then search. Note that you can type in a few letters of the name and the search results will give you all stocks that start with those letters.

To exclude signals of stocks with share prices less than $5 or $10, select the appropriate amount from the “Price” box - then search.

To exclude Down signals, select “Up” in the “Signal” box and vice versa.

If you would like to see signals from the any of the past four weeks, change the “Signal Changes Since” box accordingly. For example, if you want to see signal changes from the last two weeks, then select “Last Week” - then search.

Please practice with the Custom Signal Changes search and use several of the criteria in combination to drill down and create more relevant results. For example, try finding all Up signals for stocks that have occured in the last three weeks with prices above $10. You should get 105 stocks for the the weeks inclusive of 3/6/06, 2/27/06 and 2/21/06.

By coming back each week, I am confident you will find that the MANAGE section of Hedgefolios will be the fastest and easiest way to generate new investing ideas and improve the timing of your active portfolio management.

The first step in using the Hedgefolios database begins with a self-evaluation. Do you know what kind of investor you are? Large Cap? Value? Growth? Aggressive? Conservative? Before you do anything else with Hedgefolios or any other tool for stock research, please get your investment profile figured out by researching the web or talking to your financial planner or broker. Once you know who you are, portfolio management gets less hard (it’s never “easy.”) Each investing style has its benefits and limitations, but primarily, it’s just important to stay true to who you are as an investor. Just ask all the value investors who finally caved in and bought momentum tech stocks in 1999.

Now that your self-evaluation is complete, it’s time to identify stocks that match your investor profile. The EVALUATE section of Hedgefolios allows you to use the 9 most common portfolio styles or customize your search by drilling down with more detailed criteria. Hedgefolios is designed to rapidly exclude stocks that do not fit your investment criteria so that you can focus your decisionmaking on a shortlist that is worthy of your further analysis.

Let’s walk through an example where you want to find Large Cap Value stocks that have a High Yield in the Basic Materials sector. In the left box of EVALUATE, the first One-Click folio is called “Large Cap: Value.” If you click on the words “Large Cap”, the database will give you search results for approximately 405 Large Cap stocks that include both value and growth styles. To narrow the results to Large Cap Value stocks, click on the word “Value” in the first One-Click folio and your search results will be reduced to approximately 231 stocks.

In the right box of EVALUATE called “Custom Folio,” you can narrow your search with additional criteria. Based upon your selections of the One-Click folio, “Large Cap” should be showing in the Size box and “Value” should be showing in the Style box. From the Income box, select “High Yield,” hit search, and you now only have to look at 82 stocks. By selecting Basic Materials from the Sector box, your shortlist of Large Cap Value stocks with a High Yield in the Basic Materials sector should result in 6 stocks. In a few seconds, Hedgefolios found the stocks that met your criteria and now all you have to do is decide which, if any, you want to add to your portfolio. Note that long-only investors would restrict the search results to Up signals while hedgers might want to look at “Any” or “Down” signals.

While this was only one example, hopefully it will guide your use of EVALUATE. Please spend some time practicing the One-Clicks or Customer Folio box with as many permutations of the search criteria as you can. Sometimes its beneficial to retain the search criteria and at other times, it helps to clear all the criteria and start new searches from scratch. Note that your last search results will remain on the screen until you conduct a new search.

Ever since Ben Graham and David Dodd published Security Analysis in 1934 and founded fundamental analysis, stocks have typically been categorized as Value or Growth. I am not ignoring other terms such as Core, Blend, Deep Value, Absolute Value, Relative Value, GARP or Momentum, but those derivations are much more difficult to quantify and mean different things to different investors. So, for the sake of simplicity and clarity, I have always focused on Value and Growth and finding ways to make those two definitions more relevant.

When I set out to build Hedgefolios, I wanted to use terms most advisors and investors were familiar with. However, I also wanted to bring my own perspective to the site and have unique terminology that would create meaningful standards that could be used to build and manage portfolios. The greatest example of this comes in the form of Hedgefolios’ style definitions.

I have always been critical of defining a stock as either Value or Growth without being able to provide an additional (and quantifiable) measure of the degree to which they were one or the other. When you look at the Russell and S&P/Barra Style Indices, you’ll see that stocks have an “either or” definition of Value or Growth. Here’s where my concern comes in - consider two stocks on a spectrum, one called Value and the other Growth. The Value stock has fundamental measures that place it just to the left of the Value vs. Growth threshold (say the 49.99th percentile) and the Growth stock is just to the right of the threshold (say the 50.01st percentile.) While the stocks are relatively the same, they obtain two different definitions and yet, stocks that are much further apart on the spectrum (but on the same side of the threshold) have the same definition. The Hedgefolios methodology for determining each stock’s Style was constructed to address this issue and provide more detailed choices. As a result, Hedgefolios offers Eight Degrees of Separation within the Value/Growth spectrum.

At the far left of the Hedgefolios spectrum and in sequence moving to the right, the definitions are:
High Value, Mid Value, Low Value, Value Blend, Growth Blend, Low Growth, Mid Growth, High Growth.
When you use the Evaluate Section of Hedgefolios to identify stocks that meet your Style criteria, you can focus on the traditional terms of either Value or Growth. If you select Value, you will receive all stocks in the Hedgefolios universe that were High Value, Mid Value, Low Value or Value Blend. If you would like to refine that search and drill down deeper, you can select one of the 4 subcategories of Value and only receive those stocks. The same can be done for Growth Stocks. Furthermore, if you are interested in stocks that show fundamental measures of both Value and Growth, you can select Blend. Within blend, you have 2 subcategories, Value Blend and Growth Blend, as these are stocks that are near the Value / Growth threshold but have a slight bias towards one or the other discipline.

As I have mentioned in the post entitled “It’s Fundamental”, Hedgefolios uses a multivariate and standardized analysis of 6 fundamental measures to create a score for each stock that is then compared to all the other stocks in the universe. These composite fundamental scores are then placed within one of the eight subcategories of percentile ranges along the Value / Growth spectrum.

During the first week of each month, I analyze key fundamental measures of each stock in the Hedgefolios Universe and assign definitions of the general criteria that most investors use to construct their portfolios - Size, Style and Income. While Russell reconstitutes its growth and value indices once a year and S&P/Barra does it twice, Hedgefolios does it monthly to recognize the changes that occur with a stock’s relative size, style and yield during 6 or 12-month periods.

For Size, all stocks are assigned a definition of Large Cap, Mid Cap or Small Cap based upon individual market caps relative to the total market cap for the Hedgefolios Universe. For Income, dividend-paying stocks are divided into thirds and assigned Low Yield, Mid Yield or High Yield definitions. About half the stocks covered by Hedgefolios do not pay dividends and are assigned a definition of No Yield.

Creating Style definitions is a more complex process than the Size and Income methodologies. Rather than relying on 1 or 2 variables to determine whether a stock should be considered Value or Growth, I use 6 fundamental ratios (Price-to-Earnings (Trailing), Price-to-Earnings (Forward), Price-to-Book, Price-to-Sales, Price-to-Cash Flow, and 5-Year Expected Earnings Growth). Employing a multivariate approach is particularly important for the stocks that may not have a ratio that can be calculated given that it is common to have no PE. In those cases, the composite style score is determined by adding each of the 6 variables that does exist and calculating a simple average. To make sure that each variable can be fairly compared to all the other stocks and all the other variables, they are standardized into a numeric value from .0001 to 1.0000.

Signals on Hedgefolios are largely based upon multiple forms of technical analysis with additional factors coming from fundamental valuations, market and sector strength, and corporate news. Due to the number of stocks covered, some people have assumed (incorrectly) that Hedgefolios is a “black box” system that relies entirely on quantifiable mathematical algorithms that spit out UP or DOWN signals. The reality is that I look at each stock each week and make an assessment based upon the technicals AND fundamentals. While most of the analysis is based upon data like charts and ratios, the final decision on each signal comes from my intuition.

Since the Hedgefolios database is updated weekly, I use technical analysis based upon weekly data bars. Between the Friday close and opening of the following trading week, I review each stock chart and typically look at over 4,000 charts, each consisting of 8 primary technical indicators. Once I have evaluated all the stocks, I come back to the ones that are confusing or are suggesting that I should consider changing the prior signal. For this second pass, I use daily technical analysis to try to improve the precision of the timing and confirm or deny that the signal should change that week.

As I mentioned, I use multiple forms of technical analysis - some basic and some that are advanced - such as support/resistance, chart patterns, candlesticks, volume, traditional indicators (Bollinger bands, stochastics, et al), Elliott wave, Fibonacci studies, sentiment indicators, etc. Whenever there is an unexpected move that is contrary to the current signal, I research the news and fundamentals to determine whether the price action is warranted. In my opinion, fundamentals always trump technicals, and it is critical to use both disciplines when evaluating investing decisions. Additionally, I rely heavily upon the bias in the overall market and specific sector so those themes also impact the Hedgefolios signals.

I never understood the ratings that brokerages and independent research firms use even though they provide explanations on their websites. Evaluating equities is tough enough without having to evaluate the ratings themselves. Despite Spitzer’s lawsuit and the 2002 push by the NYSE and NASD to make them easier to understand, equity ratings are still confusing AND plentiful. We have Perform, Market Perform, Sector Perform, Peer Perform and the similar variations with Outperform and Underperform. We have Overweight and Underweight. We have Buy/Strong Buy and similarly (but very rarely) Sell/Strong Sell. We have more generic terms like Add, Hold, Neutral,Maintain, Avoid, Reduce, Accumulate, and Attractive. We have alphabetical ratings like A,B,C,D,F as well as numeric ratings from 1-99 or 1-5 (some with stars, some without.) Well, there are a few more, but you get the idea - there are a lot of terms to evaluate.

Sadly, most people only focus on these one or two word, letter or number ratings and not the 20 pages of excellent research that most analysts put out to justify the rating. I guess it’s human nature, but there is a premium put on soundbites, and in the investment world, these stock ratings are the ultimate soundbite for brokers as well as do-it-yourself investors. However, successful financial advisors and investors know that they should not rely on ratings alone and that each investor’s unique and different profiles dictate what they should “Buy” or “Strongly Buy”.

I am not sure about everyone, but I know what I want and I know what most people ask me about. It’s quite simple really and it’s not ambiguous. It’s “Is the stock likely to go up or down?”

At Hedgefolios, there are no ratings or recommendations and I never suggest that the Hedgefolio signal should be the sole determinant of an investor’s decision. I choose to focus on the basic question of a stock’s likely direction. Since Hedgefolios emphasizes simplicity, speed, and clarity we only have two signals - UP or DOWN. If, based upon my analysis, I think the stock has a higher probability of going up in the foreseeable future, then the signal is UP and the reverse is also true. The moment that the signal is no longer UP it is immediately DOWN.

The market capitalization, also known as market value or market cap, is found by multiplying the share price by the number of shares outstanding. In Hedgefolios terminology, the market capitalization is referred to as “Size” and you have 3 choices to sort the database - LargeCap, MidCap, and SmallCap.

If you search the web for definitions of market cap, you won’t find standard answers or clear dividing lines. For years, LargeCaps were defined as stocks that were worth over $5 Billion, MidCaps were between $1 Billion and $5 Billion and SmallCaps were less than $1 Billion. That might have been relevant in the days of Dow 3,000 but as the market expands and contracts, the definitions have to adapt over time.

Our methodology provides this flexibility by comparing each stock to the total market cap of the Hedgefolios Universe (almost $20 Trillion). Breakpoints are found at 78% and 94% of the cumulative total. By clicking on ANALYZE STOCKS, you will be able to evaluate the ranges of market caps for the current month. For January 2006, LargeCaps were above $9.6 Billion, MidCaps from $1.75 Billion to $9.6 Billion, and SmallCaps were less than $1.75 Billion.

To find stocks of a certain size, just go to EVALUATE and click on the name of the market cap you want within the One-Click Folios or select a market cap from the drop down list box in the Custom Folio section and hit search.