I am using Lincoln Indicators Stock Doctor. I started subscribing in November 2010. I'm new to stock investing so I can't really give a perspective on how well it has served me yet. I was googling one day looking for "fundamental analysis" and came across something by Alan Hull and he mentioned Stock Doctor in on his website and that is how I found it.
It has to be appreciated for what it is. It is not a buy/sell recommendation service. It applies a mainly statistical analytical process to company financial data to rate a company's health (strong, satisfactory, early warning, marginal, distressed). It then also identifies "star stocks" that meet certain criteria, ROA, EPSG, and so on and which are deemed (constantly healthy). For those companies that are "star stocks" Lincoln analysts provide an ongoing valuation and in-depth analysis with is reviewed in a timely manner in response to announcements and developments.
The software provides detailed financial info on all ASX stocks including broker consensus forecasts. This data comes from Reuters Thompson and Morningstar I believe. It has a decent charting tool and the ability to create detailed and complex filters for both technical analysis of share price and fundamental analysis of company finances. The most simple filter to run is an "undervalued star stock" filter. This will produce a report of those star stocks that are trading at a discount to the Lincoln valuation. I then run this list through a technical filter which applies the Alan Hull ActVest system which in a nutshell gives me financially healthy stocks potentially trading at a discount to true value that are in a sustained share price up-trend.
While "market sentiment" is listed as one of the Lincoln nine rules of investing, Stock Doctor doesn't provide any analysis if timing. It will identify stocks trading below Lincoln valuation and below broker consensus valuation. It does provide very functional charting application and technical filters to help you decide on buy/sell timing but provides no system for deciding. Buy and sell timing is up to you and Lincoln make no suggestions. It is not an advisory nor a financial planning service.
One criticism you will hear of Stock Doctor is that it doesn't alert you early enough to emerging opportunities. For example, MCE, a stellar performer and a company with solid fundamentals and great prospects only became a Star Stock this reporting season. By definition, it could not have been a star stock prior to this because one of the star stock criteria is EPS growth over 8% for at least 18 months, and MCE only listed mid 2010. So, by definition, stocks are not going to be identified as star stocks until they have been emergent and growing strongly over the medium term. So, for the conservative active investor, stock doctor identifies those companies with the strongest fundamentals (lowest risk of suffering financial hardship in a downturn, going broke) that are achieving solid sustained growth.
Another criticism of Stock Doctor that users have been providing feedback on in their investor network has been the churn rate of Star stocks in and out. Especially this reporting season. Some stocks have come in too late in their growth cycle and their subsequent performance disappoints. One bad reporting season and a star stock is out.
There has also been a lot of discussion recently on the investor network about the number of mining and mining related stocks have come in as star stocks this reporting season. Just some examples are OZL, MGX and FMG. This raises all sorts of questions that investors should already be addressing in their investment strategy anyway; where in the price cycle is iron ore, copper, etc; what are their long term outlooks; volatility of prices and profits and share price risk.
I would imagine that most conservative active investors such as myself hold a certain proportion of stocks that are not currently stock doctor stocks but are blue-chips, a certain proportion of stock doctor stocks (low fundamental risk high growth stocks) and a possibly certain proportion of more speculative plays.
In any case, even if you ignore the Lincoln "star stock" methodology, Stock Doctor excels as a information source for fundamental and technical analysis of ASX listed stocks. it provides detailed financial information for companies beyond what you can get for free on the web. Things such as PEG (PE to Earnings Growth ratio), ex dividend dates, links to all company ASX announcements. Furthermore, all the data is available to run through the filters.
Another part of the service is access to the Lincoln analysts. As a subscriber you can telephone and talk directly with the relevant analyst for a company or sector. I've telephoned and spoken with the analysts several times and this has been invaluable in making decisions. Lincoln constantly publish analysis for subscribers on their investor network too. This includes a daily stock market chat with subscribers, weekly stock market reviews, general economic commentary. From time to time analysts will also publish commentary on non-star stocks which they identify as potential out-performers. In the recent past these have included Legend and Silver Chef.
In terms of customer support Lincoln are very responsive. They hold regular coaching seminars including webinars. Their technical support is very responsive and their analysts are always available on the other end of the phone to subscribers.
My objectives in subscribing to stock doctor can be summed up as:
- Fundamental analysis of the financial health a company and the intrinsic value of its shares.
- Identify companies with solid growth/outperform potential both within and importantly outside of the S&P 200.
- Outperform alternative investment options without taking on excessive risk.
I'll come back in a year's time and update my findings on how Stock Doctor has actually my stock investments perform.
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As I started thinking about a reply, the first thing I realised was just how much the company and the service has developed in the past couple of years. I've just renewed again so am now into my third year of subscription.
Over the past couple of years Lincoln have tweaked their metrics a couple of times here and there. They seem to be in the background running things through their models and they back-test any changes they make to their financial health model. So they have slightly different financial health models which they apply to banks, miners, small caps and everything else.
They now have a "borderline star stock", which it took them a while to giggle around with to get the concept right, but these are stocks which don't meet the criteria to become star stocks just now, but which the analysts forecast will do so in future. Usually, these are companies which haven't attained EPS growth of 8% or higher but which are forecast to do so in future periods.
The "star stock" model basically aims to find those companies with strong balance sheets (low risk of failure) with strong growth profiles and strong growth potential. It is mainly geared towards finding medium term strong growth prospects. The analysts for the company will then provide a fairly conservative valuation for the company. This year especially, many stocks have overshot their Lincoln valuations and we are now starting to see some come back - such as BRG (which they de-stared as a start stock yesterday - won't meet their EPS growth requirements). It is also interesting to see some star stocks like MND which have over the past couple of years traded very close to their Lincoln valuation but both have risen fairly much lock-step each half year as it has reported and as Lincoln has increased its valuation.
On occasion there have been star stocks which have come in because they meet the metrics but for which the analyst has given prescient analysis about the inherent risks in the company that don't show through in the fundamental analysis. An example was MGX, which became a star stock but the analyst was never a fan of the management and said so in his analysis.
The mining price boom saw a lot of miners become star stocks and drop out not long after. I think this was a problem for Lincoln as the valuations they put on a lot of these companies were revised down heavily as prices fell.
Due to the rise of SMSF and the age of their clients and the flight to yield, Lincoln have now introduced preferred income stocks. These are stocks which pass Lincoln's model of financial health but which might not meet their growth metrics but instead they feel pay good sustainable yields. These include the big four banks, TLS, TGA and others.
Lincoln now also analyses and provides valuations for all the ASX20 companies as well.
A while ago they launched an online version of Stock Doctor. It has all the basic fundamental analysis for each company as well as all the basic metrics (including thompson reuters consensus forecasts), a very basic chart and all the analyst commentary. The PC version of Stock Doctor continues to have much more in depth data including historical data. The charting program in the PC version is quite good - it has almost everything you would want (no P&F charting though). I use the charting program a lot, and one thing I like about it is that there is a side panel with a summary of the fundamental data of the company being charted so you can get a good snap-shot of both the technicals and fundamentals on one screen.
There are some very rich filtering tools in the PC application. There is a fundamental filter which screens stocks based on fundamental data. There is also a technical filter which applies technical rules and you can even edit your own formulas to run in the technical filters (advanced pointy head stuff). I have been playing around with a momentum filter I have developed of late. I run a fundamental filter to give me just the stocks with a strong or satisfactory financial health rating and then run them through the technical filter to try and identify stocks with upward momentum that have reached a good entry point. Very experimental.
Another good thing about the fundamental filter is that you can create custom reports and run your own portfolio through them to come up with a spreadsheet full of fundamental data for your own portfolio or watchlists. I've just recently created one that provides me with a good overview of my income portfolio which I export to excel and which helps me forecast income.
The portfolio manager is adequate for my needs and I use it extensively to keep track of my trades and portfolios. I export the data to spreadsheet to give to the accountant for the SMSF.
Lincoln do aim to move everything into the cloud eventually and to run all the software through web services.
In launching the web based version of stock doctor, Lincoln were able to segment different membership levels. There is a basic subscription which provides access to the online data only. I have the platinum membership which allows me to call and speak with the analysts which I do from time to time. It can be very handy to clarify an analyst's thinking on a specific stock and stocks within a sector.
Most of my portfolio are Lincoln star stocks. borderline star stocks or income preferred stocks. These are the stocks that the analysts know inside out and keep on top and provide valuations and regular updates for so it makes sense to make use of their footwork.
I have stocks which are not Lincoln preferred stocks but which I like for income, or am looking for a shorter term trade in. I do, however, generally stick to stocks that have a strong or satisfactory financial health rating. Examples of income stocks in my portfolio that Lincoln do not cover are GZL, BYL, DWS.
Finally, Lincoln make a point of saying that they do not provide any technical analysis or advice on timing entry and exit. Yet, unless you are prepared to hold for the long term and switch the market off, this has been the challenge of this sideways trending secular bear market with a commodity price boom thrown in. Stocks like WEB, REA, IIN, TPM, FLT and even CCL have been Lincoln star stocks for the past few years and for a long time there they languished well below their Lincoln valuations until they took off over the past few months. So the old adage that the market can be wrong longer than you can remain solvent still applies even to Lincoln's pick of the best.
On the flip side, during the 'Taking Stock' weekly vodcasts leading up to reporting season, Lincoln has been reminding its shareholders that a lot of stocks have run up hard and well past their Lincoln valuations and that a bit of prudent profit taking going into reporting season might soften the blow of any market disappointments and free up some cash for further opportunities. This has been good advice.
Premium members also get to attend a monthly "CEO insights" webinar with CEO Elio d'Amato. I generally listen to the recording after the event. Elio seems very in tune with where his clientele are at - conservative risk takers looking to out perform the market through prudent active investing - and has been pretty good at giving macro-level analysis of events impacting on the market and where the market is going. During every webinar, Elio goes over changes and updates to Lincoln's stock universe and provides a good catch-up overview of the stocks under their analysis.
If you were to use Lincoln's stock doctor as a crude tool to just find stocks at high discounts to their Lincoln valuations and invested in them with a scatter-gun approach, you might not do so well. Yet, Lincoln maintain that by simply investing with equal weighting in all their star stocks (entering when they become a star stock and exiting when/if they become "de-starred") you will out-perform the market - which is not far from how the Lincoln share fund operates. I think, better yet, is to use the Lincoln data for fundamental analysis of companies' financial health and earnings outlooks but time entry and exit based on a broader analysis of market sentiment, share-price momentum and macro-risks.
The short answer to your question is that I still subscribe and I find it a valuable service. The price for subscription is quite reasonable for anyone managing a modest size SMSF or a decent size personal portfolio. I hope that helps.
While I have no experience with it personally, I've heard it's quite good but also rather expensive.
You could try asking Aceyducey (back in Somersoft, as I haven't seen him post here for some time) as I think he has it.
Thanks for the info re Stock Doctor, very comprehensive summary.
One thing you didn't mention though, was the cost.
From memory it is somewhere between $1500 and $2000 per year, depending on whether you subscribed at the regular or discounted price.
Is that still the case ?
I subscribed for $1,595 for 15 months (one year plus a promo bonus of 3 months), but I see on the website the subscription is now $1,895 for one year. They have a national road show of "user group meetings" every year and I went to one last October and they had the special then. You can subscribe to a 30 day demo for $50.
I have had StockDoctor with my SMSF for about six years, I didn't renew last year as I found that using my own trading system on the ASX300 seemed to suit me better while I have the time to actively monitor my holdings with a charting approach.
An interesting area that often amuses me is when I hear or see the fundamentalist investors talk about the likes of WOW and TLS etc, most of them have never heard of the really fundamentally sound stocks that StockDoctor identifies such as MND etc. but that's another story.
If you are running your own SMSF etc with a fundamental investment approach then StockDoctor is an essential piece of software imo.
Many thanks tinhat for your comprehensive update on Stock Doctor. It is most helpful.
I have subscribed to the Stock Doctor Essentials free trial for 2 weeks and will give consideration to the Gold or Platinum service based on your description of the support.
Cheers and thank you for your detailed reply
For me personally, a solid performing stock that doesn't have strong growth projections needs to be yielding at least 6% before franking credits for me to consider it. MNDs earnings growth outlook for 2014 is looking the softest it has been for years and margin compression in the industry still is a risk, so I would probably have an entry target price of somewhere close to $21 which gets it closer to 7% yield.
Thank you, tinhat. Sorry, I was overlooking the copyright obligations. The info is appreciated. This is one I regret selling some while ago. The guidance last week doesn't make it attractive right now and the Stock Doctor comment bears this out.
I have been impressed by your posts.
Do you have any further update observations over the last two years since your last post?
Would you consider Stock Doctor is a worthwhile investment for someone who has two quite large portfolios (several million $'s, one of them an SMSF) but who is primarily set and forget using a broker, with blue chip stock and trading only say 6-10 times a year?
Rather than the general method of ruling in stocks to buy, it does the opposite and actually keeps you out of those with less than average fundamental support.
I know bugger all about fundamentals, I let StockDoctor keep me away from the risky investment stocks by applying their filter to reduce the market to (currently) 456 stocks that are what they refer to as Strong and Satisfactory.
I then apply technical analysis (usually weekly charts) to those 456 stocks and so far have achieved very acceptable returns without stress or difficulty.
I have included a pic extract as an example of a basic summary analysis page of one of their stocks that my SMSF has been in and out a few times since around 2010.
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Thank you Boggo for that helpful response.
The program has superb graphics and seems to be very sophisticated. I have also viewed the videos on the Stock Doctor website.
I have a couple of questions
- I have essentially a blue chip portfolio and for someone who is not planning to do much trading, I guess its value would then be mainly in monitoring the portfolio for potential problem areas. As the cost is say $1600 pa, I am wondering if this is a worthwhile investment in that type of situation.
- I noticed in tinhat's post that he referred to Thompson Reuters Consensus forecasts. Have you found these helpful?
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