Stock Picker: Russell 2000 Stock for LowCaps (FA)

Overview and Suitability: The robot is an AI-driven trading robot designed for beginners looking to invest in small and micro-cap stocks, specifically within the Russell 2000 and MicroCap universes. The robot operates based on a purely fundamental analysis (FA) approach, focusing on the intrinsic value of companies. It follows a value investing methodology, inspired by Kenneth Fisher's Super Stock strategy. This approach seeks to identify undervalued stocks with solid financials and strong growth potential, making it ideal for those interested in long-term, low-risk investments.

• MicroCap stocks with a market capitalization ranging from $50 million to $300 million.
• Russell 2000 small-cap stocks.

Strategic Features and Technical Basis: The Trend Trader is built on a strategic foundation derived from Kenneth Fisher's "Super Stock" portfolio, which focuses on identifying stocks with high growth potential and undervalued fundamentals. The key metrics used by the robot are as follows:

Fisher’s Super Stock Criteria:

• Price-to-Sales (P/S) Ratio: The robot prioritizes stocks with a P/S ratio of less than 0.75, ensuring the selection of companies where sales are undervalued relative to the stock price. This helps pinpoint stocks that may offer significant growth potential.
• Net Profit Margin: A net profit margin higher than 5% is a requirement, ensuring that the company is not only generating significant revenue but also effectively converting it into profit.
• Debt-to-Equity (D/E) Ratio: The robot prefers companies with a D/E ratio below 0.4, indicating low financial leverage and reducing the risk of instability from excessive debt.

Implementation and Benefits:

• By emphasizing the P/S ratio, the robot identifies companies whose stock prices do not reflect their sales strength, providing a classic value investing opportunity.
• Screening for a high-profit margin and low debt ensures the selection of financially strong companies.
• This strategy provides a balanced approach, combining value investing principles with quality financial metrics to build a robust and diversified portfolio.

The strategy trades stocks in the MicroCap and Russell 2000 segments, making it suitable for investors looking for growth opportunities in smaller companies with potentially higher upside.

Position and Risk Management: To ensure effective risk control and maximize profitability, the Trend Trader employs the following position and risk management techniques:

• Maximum Open Trades: The robot can hold up to 25 open positions simultaneously, ensuring diversification across multiple assets.
• Stop Loss and Take Profit: The strategy applies a fixed stop loss of 20% to limit potential downside and a take profit target of 75%, allowing substantial room for upside gains.

Once the stocks are ranked based on the criteria, the robot selects the highest-scoring stocks for long positions. All trades are executed using market orders within 1-2 hours of market opening, ensuring optimal entry prices in liquid markets.

Trading Dynamics and Specifications:

• Maximum Open Positions: Medium, allowing for diversified exposure while managing concentration risk.
• Robot Volatility: Medium, offering a balanced approach between capturing significant market movements and mitigating sharp declines.
• Universe Diversification Score: Medium High, indicating a moderate array of instruments to hedge against sector-specific downturns and enhance profit opportunities.
• Profit to Dip Ratio (Profit/Drawdown): High, suitable for traders who are able to tolerate and manage greater levels of risk in exchange for potentially higher returns.
• Optimal Market Condition: This robot shows its best performance when market volatility is high, making it particularly adept at navigating turbulent market phases.

Disclaimer:  Disclaimers and Limitations 

Simulated Performance: All simulated performance results are derived solely from real-time calculations using historical data. Algorithms receive minute-by-minute historical prices and other data from Morningstar and generate trades in real time based on these historical inputs, effectively eliminating any hindsight bias. 

Actual Performance: All actual performance results are derived solely from real-time calculations using current data. Algorithms receive minute-by-minute current prices and other data from Morningstar and generate trades in real time based on these current inputs, effectively eliminating any hindsight bias. 

Gross Performance: Gross performance results do not deduct any fees or expenses. These results reflect the total returns generated by the AI Robots without considering the costs associated with accessing the service. 

Net Performance (current performance chart): Net performance results deduct fees to provide a more accurate representation of returns experienced by the user. These deductions can include: Model Fee Deduction: Net performance results may deduct a model fee equivalent to the highest subscription fee charged to the intended audience. Actual Subscription Fees: Net performance results may also deduct the actual subscription fees paid by the user for access to AI Robots.