MarketGrader.com is a stock research company that uses technology extensively in the analysis of public companies’ financial statements and presents the results to investors in a user-friendly format. Our goal is to simplify the research process in order to help investors achieve their financial goals. We focus on understanding the financial health of every company we cover and in finding those that are consistently creating economic value and lasting shareholder value. This means that regardless of a company’s business, whether building widgets, providing a service or exchanging goods, we believe that at the end of the day its performance can be graded on the basis of its financial success. While we understand well that all companies are different, particularly across different industries and sectors, ultimately they all serve (or should) the same purpose: maximizing returns for their shareholders. The purpose of our research is to grade their ability to achieve this goal.
The method by which we analyze all companies we cover is quantitative, which means that it is an objective, numbers-driven process that relies on factual reported data to calculate specific indicators and grade them. As you find out more about our research you will discover that by quantitative we do not mean complex or convoluted, adjectives usually assigned to the term. Quantitative means we analyze numbers—thousands of them—in order to simplify our clients’ decision-making process.
Our research is fundamental, which is the term used in our industry to describe the analysis of a company’s financial statements. Company fundamentals are simply sales, expenses, cash flow, income and all other labels used to describe a company’s financial results. While our system provides our clients with much more than just company fundamentals including technical analysis tools, sentiment indicators that measure the supply and demand for a company’s shares, and trend information, for example, the core of our research and our grades is a company’s financial reports. Essentially we believe that what matters most in the analysis of public companies is understanding how successful every company is at what it does.
Our clients are primarily individual investors and financial advisers who understand that the most successful investors are those who regularly do their homework and follow a disciplined methodology. However, given the size of our financial markets today, the explosion of online sources of data and the ongoing business and earnings- reporting cycle, this is a daunting task. Serious investors would also agree that the best way to understand a company’s true financial performance is to read its annual and quarterly reports. Yet they also know that this is an impossible task across hundreds or thousands of companies even for the most seasoned analyst. This is where MarketGrader.com comes in.
Our quantitative research system was designed to automatically collect and analyze all companies’ financial statements and keep score of their financial performance and produce a clear, synthesized analysis of how every company is doing and, more importantly, what it means for its stock. Our reports explain in straightforward terms if a company is growing, whether it is doing so profitably, whether it is being run efficiently and whether the price of its shares offer good value to investors.
For financial advisers the task of tracking and understanding the stock market is even more challenging as they typically need to follow several clients’ portfolios, give them advice and be on the lookout for new ideas their clients can profit from. This leaves them with little time for research, which is where MarketGrader.com is most helpful. To a financial adviser MarketGrader.com, in essence, means time spent elsewhere.
1.Objectivity As described before, our research is based entirely on computer-based quantitative analysis. This means that not a single one of our grades, ratings or company reports is calculated, written or based on the opinion of an analyst or any other person. Our research is 100% facts-based and objective. This isn’t because we have anything against analysts or their work. Quite the opposite, we think MarketGrader.com’s research is most useful when combined with insightful qualitative analysis such as is done by a research analyst, a journalist or a reporter.
2.Interpretation Our focus has always been to serve individual investors and financial advisers—what many call retail investors—rather than institutional investors. We think that while individual investors today have plenty of sources of information (perhaps even too many,) there has been a shortage of inexpensive analysis of that information. In a world where you can follow the tick-by-tick performance of just about any stock anywhere and get access to even the most insignificant piece of information, the question is not ‘where to find it’ but rather ‘what does it mean?’
3.Transparency Our research is transparent and independent. Our business model is simple: provide research to individual investors and financial advisers and get paid for it. We have no ties to any financial institution that would compromise the independence of our ratings. These are based, as described before, simply in the numbers reported by the companies we cover. We aim to make our reports as transparent as possible, explaining how we arrive at every grade and rating. Throughout our web site we also strive to show how all our past ratings have performed for every single company under coverage as well as how each one of our indexes has done across multiple time periods and since their inception. We do not claim our research to be infallible and we are constantly working on improving our system’s ability to analyze company numbers in a way we can help our clients understand their business better. We put particular emphasis on ways to program our system to differentiate across industries and sectors and adapt our fundamental analysis across different business models. As such, suggestions and ideas are welcome and we always look forward to hearing from our clients.
MarketGrader was founded in the fall of 1999 in Miami, Florida, with the goal of making sense of the flood of financial information that the Internet had, in a few short years, suddenly made available to millions of investors. As online brokers, financial portals and day trading web sites proliferated, it had become clear that intelligent analysis of stocks was still reserved for institutional investors and that individuals were left to their own devices. Not coincidentally the proliferation of financial data paralleled the stock market’s breathtaking rise in the late 1990’s, which was in no small part fueled by individual investors’ fear of missing the party. The ensuing euphoria got the better part of caution and, for the most part, the research community failed to alert investors to the perils of speculative buying. Our point here is not to retell an episode of history that is too well known by now to all but to explain the backdrop in which MarketGrader was born.
Unfortunately our development process took much longer (and a lot more money) than originally anticipated and our first research system, available at MarketGrader.com, didn’t launch until May 2003. Our flagship index, the MarketGrader 40, was launched simultaneously with the new site and we have now been publishing it daily to this date. That same year, the Global Analyst Research Settlement was announced, under which ten (eventually 12) of the largest investment banks in the country agreed to provide independent third party research to their clients beginning in July 2004. MarketGrader was selected, among other research firms, as an independent research provider by UBS, Credit Suisse and Lehman Brothers. Our research was available to clients of these firms for the duration of the settlement, which expired in July of 2009.
In January 2006 the first ever investment product based on one of our indexes was launched by London & Capital, a U.K. based investment manager, and Barclays Capital. The product, a structured note, was listed in Dublin, Ireland, and achieved a return of 36.5% in its first year compared to 13.6% for the S&P 500 index. Also in January 2006 Barron’s re-launched its web site, Barrons.com, as a separate subscription service from WSJ.com, its sister publication, and included our research as a new feature available to its subscribers under the StockGrader name. This relationship quickly became one of our web site’s main sources of referrals and the StockGrader service on Barrons.com continues to run successfully to this day. Our relationship with Barron’s was expanded in 2007 when, on the cover of the September 3rd issue of the magazine the Barron’s 400 was first introduced to Barron’s readers. Based on MarketGrader’s research methodology the new index was the result of collaboration between MarketGrader, Barron’s and Dow Jones Indexes. Please visit our Barron’s 400 section for more information about it or click here to read the story.
In 2007 we also expanded our own index family with the January launch of the MG 100, MG 200, MG Small Cap, MG Mid Cap and MG Large Cap indexes. Please visit our indexes section for more information on them. ETFs on these six indexes were subsequently launched by SPA ETF in London (September 2007), New York (October 2007) and Milan (January 2008). Unfortunately these long-only funds (which means they buy stocks and hold them regardless of market conditions, although they were rebalanced regularly) were launched around the same time the global financial crisis was beginning to take hold, throwing equity markets around the world into a prolonged slump. The headwinds proved too strong for the fledgling products, which failed to gain significant traction in an adverse environment and SPA ETF decided to shut them down in March of 2009. The indexes continue to be published and fully supported by MarketGrader and we hope to see them as the basis of new investment products in the future. For licensing opportunities please contact Carlos Diez at email@example.com or (305) 529 8551
We capped a busy 2007 with the launch of our eight sector indexes in December, even though we never published them on our web site until 2009. Now all information on these indexes is available to our subscribers in our Sector Indexes section.
By the time we were wrapping up the development and back test of our sector indexes we had begun work on our new web site, which we had been planning for a good while. Since the launch of the original MarketGrader.com in 2003 we had redesigned our web site a couple of times, both of them mostly consisting mostly of a facelift of the user interface and the addition of a few new features and pages. On the other hand, the latest iteration of MarketGrader.com has been based on a complete rebuilding of our site from the ground up, significantly improving (we hope) the way our research is delivered to our clients and the way they interact with it and profit from it. Based in large part on feedback we have received from our clients in the last six years we re-thought the web site’s architecture and we expanded its scope significantly. For a complete breakdown of its most important, and hopefully popular, new features please click here.
Next: Research Process