The Y-Rating

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Importance: High

Historical Predictive Power: Moderate

How it relates to returns: See individual components - Value Score, Fundamental Score, and Valuation from Historical Multiples.

What it is: A single summary score that takes into account our 3 key indicators: Value Score, Fundamental Score, and Valuation from Historical Multiples.

How to use it: In a glance, it will give you a sense of the safety and return possibility of the stock.

Watch out for: It will often miss stocks with a huge potential for gains because big gains are correlated with high risk. Also, it sometimes misses the decline of industries which were profitable for long periods of time.

Detailed Calculation: Once we have the Value Score, the Fundamental Score and the Valuation from Historical Multiples, we calculate the final score.

To receive an overall “Attractive” rating, a stock must:

  • Receive a Value Score of 9 or 10
  • Receive a Fundamental Score of 7 or higher
  • Have a Historical Value greater than its current price

To receive an overall “Avoid” rating, a stock only needs to have “Weak” fundamentals - a Fundamental Score of 4 or lower.

We rate all other companies “Neutral,” since based on our testing we do not have strong quantitatively-backed reason to believe that they will underperform or outperform the market significantly as part of a portfolio.

Now you have an understanding of the key pro metrics. You can use them to evaluate any company.

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