Equity Rating Scorecard

My view on trading or investing is that it should always be discretionary to large extent. Trading or investing involves significant amount of judgement call. There should not always be one standardised single way of looking at a particular trade or investing idea.

Trading or investing should always be considered from a multi-aspect angle and shall be as dynamic as possible. In this posting, I am trying to develop an equity rating scorecard. The purpose of this scorecard is not to remove the discretion from trading or investing but to nicely link up factors of fundamental, technical, risk management and other critical factors.

It is about placing weightage on what matters when comes to investing or trading. In this scorecard, there is more weightage being anchored towards fundamentals, of which I believe that it is the fundamentals that will drive the long term value of a security. The proposed weightage is as follows: 60% on fundamentals, 30% on technical & risk management and 10% on other critical factors (e.g insider transations, analysts’ target price).

What does the final scoring mean?

This is entirely up to us and it is purely arbitrary. Strictly for illustration, I rank my scoring as follows (seriously, it is purely arbitrary):

4.5 – 5.0                Higher probability to be positive return

4.0 – 4.49              Expected to be positive return

3.5-3.99                Manageable Risk + Possibly Directionless / Breakeven

2.5-3.49                Higher probability of not positive return

<2.5                       Possibly high risk

 

Strictly for illustration – WTK Holdings

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Strictly for illustration – Comfort Gloves (from an earlier posting: see this )

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The effectiveness of the scorecard has not been assessed based on historical financial & market data. Nevertheless, it may be a good starting point in harmonising both Fundamental and Technical analysis. This Equity Rating Scorecard is a dynamic piece of document and shall be continuously refined over time.

 

DISCLAIMER

  • THIS IS A PERSONAL BLOG Of KEN UTAU AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. 
  • ALL ARTICLES CONTAINED IN THIS SITE ARE STRICTLY FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS.
  • IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION.
  • SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS.
  • THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED IN THE ARTICLES

Author: Ken Utau

Data Scientist, Markets Analyst and Food Lover

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