Liquidity (Qi) = Adjusted Profits / Yearly trading value
Adjusted Profits is a proprietary profit number we calculate.
Yearly trading value is the total yearly traded value of the company, number shares traded multiplied by the share price over the past year.
The ratio tells you how high a company’s yearly traded value per share is compared to its adjusted profits.
More information and back test
You can find more information (including back test information) here: This overlooked ratio, large funds and hedge funds can’t use, gives you higher returns
How to find the most ignored companies
A high value is good
A high value thus means low turnover and thus a larger chance of the company’s shares being mis-priced.
It helps you find companies with large controlling shareholders or a stable base of shareholders where traded value is low and thus less analyst interest because they cannot make money in the trading of the company’s shares.
To find these companies set the slider to 0% to 20%.
A low value means less chance of the company being a diamond in the rough
A low value means high traded value which means more analysts may follow the company giving you a lower chance that the company is mis-priced.
To find these companies set the slider 80% to 100%.
How to use the ratio
Available as a screening ratio: Yes
Available as an output column ratio: No
Liquidity Qi is not available as an output column because its a ratio we developed after a lot of testing. We have seen competitors copy our work so we have left the definition a bit vague and that is also why we don't allow the export of values as one of the columns.
You can however use the filters to find the type of liquidity companies you are looking for.
To find neglected companies we suggest you select the top 10% QI Liquidity companies - set slider from 0% to 10% - and then sort by your favorite valuation or momentum ratio in the columns. You will get about the same companies.
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