“Investors and advisors suffer from information overload,” Marc Chaikin, CEO of Philadelphia-based Chaikin Analytics, told Financial Planning. To help get right to the bottom line, the Chaikin Power Gauge Rating shows whether a stock has a green (for bullish) or a red (bearish) outlook.
“The rating is based on an unbiased 20-factor model,” Chaikin said. “These are the factors that institutional investors look at every day. Our rating shows each stock’s potential for the following six months.”
According to Chaikin, his model is effective in helping investors play defense. “It’s very important to reduce exposure to weaker stocks,” he said. “The Power Gauge can show which stocks are most vulnerable, especially during earnings season.”
Can this so-called “power tool” really help investors cull losers and cling to winners? “We rolled out an iPhone app in early 2011,” Chaikin said, “and later introduced an Android version. In the 18 months since we’ve offered our model to the public, the broad market is up 6ú.5%. Our strongest stocks are up 8% while the stocks we said would be weakest are down 1%.”
This short-term success may or may not indicate Chaikin has a viable scale for weighing stocks. In any case, many financial advisors avoid individual stocks, or use money managers to make trading decisions. That may be true, Chaikin said, but his model still has several potential uses for RIAs and wealth managers.
“We rank 65 industry groups,” Chaikin said. “That can be very valuable for advisors who invest in sector funds, including ETFs. Advisors can see the prospects for health care, say, or retail stocks.” According to Chaikin, some financial groups, such as insurers and major banks, have looked attractive lately, along with groups associated with the building industry. Within the energy area, refiners have been very strong while exploration-and-production companies have been weak.
Advisors who don’t use sector funds also can benefit, Chaikin said, by checking out the individual holdings in diversified mutual funds they’re considering. “In addition,” he asserted, “clients may have their own brokerage accounts where they own individual stocks. If a client wants to talk about Apple or Netflix or some other stock, an advisor can use our products for a reliable quick read. Then the advisor can have a fruitful conversation with the client.”