The Power Gauge Beat the Eggheads at Their Own Game

We've often described the Power Gauge as a "one of a kind" system... That might strike some readers as typical self-promotion. [Chaikin PowerFeed]( The Power Gauge Beat the Eggheads at Their Own Game By Marc Gerstein, director of research, Chaikin Analytics We've often described the Power Gauge as a "one of a kind" system... That might strike some readers as typical self-promotion. But it's much more than that... You see, the Wall Street Journal recently found that most factor-focused investing models don't beat the broad market over the long term. As the publication noted last Thursday... [Chaikin PowerFeed] The Journal concluded that evidence over the past 10 years is "pretty bleak" for factor exchange-traded funds ("ETFs"). And it suggested that ETFs tracking the S&P 500 Index "seem a better bet than exotic factor ETF offerings." Now, the Power Gauge is a factor model. And I'm one of the folks behind the system. So you might expect me to be upset about the Journal's findings. But that's not the case... The factor ETFs in the Journal's research are great examples of how not to build a factor-focused investing model. They're all based on academic and statistical best practices. That's the problem. We can't expect them to succeed with real money. The Power Gauge is different. Chaikin Analytics founder Marc Chaikin built our system based on the best real-world investing sensibilities. And as we love to say, it's one of a kind... Recommended Links: [Tomorrow: $1 Billion Manager Unveils Breakthrough A.I.]( A $1 billion money manager is unveiling a new type of investing that could triple your portfolio, using an A.I. system that can predict where any stock will trade in 21 days, with 82% accuracy. It recently predicted Netflix within 7 cents! By tomorrow, [click here to learn more and claim free access to the system](. [Prepare Now: A Massive Wave of Bankruptcies Is Coming]( In 2009, Joel Litman warned investors about 57 different companies that were about to go bankrupt – 50 collapsed within days. Now Litman is stepping forward with another big bankruptcy warning. If you own a single share of stock – much less a business... a mortgage... or a loan of any kind – this will affect you. [Click here to learn more](. Factors are characteristics that we assume can predict future stock prices. To qualify, the characteristics must be objective. And they must be observable here and now. In short, we want to try to forecast the future with what we can measure and see in the present. In the early 1990s, American economists Eugene Fama and Kenneth French developed a three-factor model for predicting stock returns. Specifically, they focused on... 1. The overall market's performance, 2. Value (measured by price to book value), and 3. Issue size (measured by market cap). Fama and French (and the researchers who followed them) essentially looked at vast amounts of historical data. They hunted for common characteristics between stocks with similar performance. They also constantly battled against charges of "data mining" or "curve fitting." Those two terms refer to the naive matching between factors and stock performance. As the Journal discovered, the failure of most factor methods to account for future growth led to poor results. Here's its scorecard for specific factor ETFs over the past 10 years... [Chaikin PowerFeed] Every one of these factor ETFs failed to beat the S&P 500. Even worse for investors, the Journal found that several of the factor ETFs were more volatile than the index itself. In other words, as a factor model, the Power Gauge is really one of a kind... Over the past 10 years, stocks with "very bullish" rankings outperformed the S&P 500. You can see what I mean in the following table of average three-month returns (annualized)... [Chaikin PowerFeed] The Power Gauge is a holistic model. All 20 individual factors work together to produce a single, actionable rating. That's why we focus on how they all interact in our research. For example, just like human investors, our model can accept that higher valuation ratios will accompany strong growth prospects. Academic factors that stress mathematical purity don't do that. Lacking the data that sees the future, they ignore it. That's wrong. Growth is critical. It's why a lot of people buy stocks instead of less-risky bonds. Of course, we're not psychics. We don't know what will happen in the future. But we work intensely with all sorts of proxies based on technical and expert data. And in the end, the Power Gauge is a proxy for the investment community's future expectations. Other models prefer fancy math. But Marc Chaikin rejected that idea. Instead, he used his five-plus decades of market experience to build the system we love and use today. And as the data shows, the Power Gauge truly is one of a kind. Good investing, Marc Gerstein Market View Major Indexes and Notable Sectors # Hld: Bullish Neutral Bearish Dow 30 +0.40% 6 16 8 S&P 500 +0.52% 101 265 132 Nasdaq +0.55% 36 50 13 Small Caps +1.12% 384 1057 493 Bonds -0.14% Utilities +1.37% 2 6 22 — According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks remain somewhat Bearish. Major indexes are mixed. * * * * Sector Tracker Sector movement over the last 5 days Communication +4.37% Information Technology +3.98% Real Estate +3.90% Discretionary +3.40% Industrials +3.30% Utilities +3.11% Financial +2.87% Health Care +2.87% Materials +2.10% Energy +0.18% Staples -0.65% * * * * Industry Focus Telecom Services 4 17 18 Over the past 6 months, the Telecom subsector (XTL) has underperformed the S&P 500 by -21.06%. Its Power Bar ratio, which measures future potential, is Very Weak, with more Bearish than Bullish stocks. It is currently ranked #19 of 21 subsectors. Indicative Stocks [rating] IRDM Iridium Communicatio [rating] GOGO Gogo Inc. [rating] LBTYK Liberty Global plc * * * * Top Movers Gainers [rating] TFC +6.64% [rating] FSLR +5.40% [rating] ENPH +5.01% [rating] SEDG +4.84% [rating] NEE +4.58% Losers [rating] KLG -5.77% [rating] NFLX -3.27% [rating] AMT -2.14% [rating] GWW -2.07% [rating] TPR -1.92% * * * * Earnings Report Reporting Today Rating Before Open After Close MS, USB No earnings reporting today. Earnings Surprises [rating] PEP PepsiCo, Inc. Q3 $2.09 Beat by $0.13 [rating] NEOG Neogen Corporation Q1 $0.11 Missed by $-0.02 * * * * You have received this e-mail as part of your subscription to PowerFeed. If you no longer want to receive e-mails from PowerFeed, [click here](. You’re receiving this e-mail at {EMAIL}. For questions about your account or to speak with customer service, call [+1 (877) 697-6783 (U.S.)](tel:18776976783), 9 a.m. - 5 p.m. Eastern time or e-mail info@chaikinanalytics.com. 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This work is based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors, and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.