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Ever thought of using a fundamental stop-loss?

Do you hate using a price driven stop-loss system? If you do you are most likely a hard core value investor. Here is a great alternative suggested by a friend and long-term subscriber to the Quant Investing stock screener.

It will help you limit your losses when the underlying business starts going bad.

And best of all it needs little or no research, you can get the indicator emailed to you.

 

Inspired by Warren Buffett

My friend got the idea from an article where Warren Buffett mentioned that he did not care what had happened to a company’s share price as long as operationally the company was still doing well.

Warren got this idea from Philip Fisher that only sold investments for operational reasons.

 

Quantitative fundamental stop loss

So how can you easily find out if a company’s operations are deteriorating without doing a lot of research?

My friend does this by selling an investment if the company’s Piotroski F-Score falls below 5, replacing it with one of the best ideas from his best stock screen.

 

Click here to start using a fundamental stop loss now!

 

Piotroski F-Score summarised

The Piotroski F-Score is calculated with the use of the following 9 ratios:

Profitability

1. Return on assets (ROA)

2. Cash flow return on assets (CFROA)

3. Change in return on assets

4. Quality of earnings (accrual)
Funding

5. Change in gearing or leverage

6. Change in working capital (liquidity)

7. Change in shares in issue

Efficiency

8. Change in gross margin

9. Change in asset turnover

How the Piotroski F-Score is evaluated

Best or high Piotroski F-Score = 8 or 9

Worse or low Piotroski F-Score = 0 or 1

 

Measures the financial health

So you can see, from all the ratios above, the F-Score is an excellent way you can measure the fundamental health of your investments.

You can read more about the Piotroski F-Score (including how it is calculated) here: This academic can help you make better investment decisions – Piotroski F-Score.

To find out just how well the Piotroski F-Score works look at this article: Piotroski F-Score back test

 

How you can find the Piotroski F-Score

In the Quant Investing stock screener the Piotroski F-Score is updated daily so as soon as possible after a company posts results, including quarterly and half year results. This makes it really easy for you to get an up to date Piotroski F-Score value of all the companies in your portfolio.

You simply call up the name of the company and you can immediately see the F-Score of the company.

In the image below I called up the F-Score of Microsoft.

Fund_stoploss_pio_1 

Click image to enlarge

Click here to start using a fundamental stop loss now! 

 

Find only good Piotroski F-Score companies

It is just as easy for you to only get investment ideas of companies with a healthy Piotroski F-Score.

In your favourite screen simply add Piotroski F-Score to your screening criteria and with the slider select only the ideas with a good Piotroski F-Score.

In the image below you will only select companies with a Piotroski F-Score from 6 to 9.

Fund_stoploss_pio_2

 

How to get the F-Score emailed to you

To make it as easy as possible to track the Piotroski F-Scores for the companies you follow we have developed an email function where you can select a portfolio and get the F-Score of the portfolio emailed to you.

You can see exactly how to do this here: How to track your portfolio with automatic updates of closing prices and ratios.

 

PS To get the Piotroski F-Score working in your portfolio right now sign up here

PPS It is so easy to put things off and forget why not sign up right now?

 

Click here to start using a fundamental stop loss now!