Stock Picker: Undervalued Stock (FA)

Overview and Suitability: The robot is designed to identify undervalued stocks using Fundamental Analysis (FA) principles, specifically rooted in value investing. The robot aims to discover companies whose intrinsic value exceeds their current stock price. By leveraging Kenneth Fisher's renowned investment strategy, this robot is ideal for long-term investors seeking to capitalize on value investing opportunities in a variety of financial assets.

The robot is suitable for investors focused on identifying stocks with strong underlying fundamentals, minimizing risks associated with overvaluation, and emphasizing financial stability.

Strategic Features and Technical Basis

Fisher’s Investment Strategy:
The core of Trend Trader is based on Kenneth Fisher's "Super Stock" investment framework, famously outlined in his book "Super Stocks." Fisher’s approach focuses on identifying companies that exhibit specific financial characteristics, suggesting potential undervaluation and long-term growth.

Key Technical Metrics:

• Price to Sales (P/S) Ratio:
  • Fisher's strategy emphasizes stocks with a P/S ratio below 0.75. The rationale is that sales numbers tend to be more stable and less prone to manipulation than earnings, making the P/S ratio a robust indicator of business strength.
• Net Profit Margin:
  • To ensure profitability, the strategy targets companies with a net profit margin above 5%. This ensures that the business is not only generating sales but also efficiently converting them into profit.
• Debt to Equity (D/E) Ratio:
  • A D/E ratio lower than 0.4 is preferred. This indicates that the company maintains financial stability by avoiding excessive reliance on debt, thereby reducing potential financial risks.

Implementation and Benefits:

By integrating these fundamental criteria, Trend Trader ensures that selected stocks:

• Are potentially undervalued based on their sales performance.
• Exhibit financial health with profitable operations and minimal debt.
• Blend value investing with quality metrics, forming a diverse portfolio with lower financial risk.

The robot works across a large mix of custom Fundamental Universes, offering flexibility in asset selection.

Position and Risk Management

Position Management:

• The maximum number of open trades is limited to 25 to manage risk and ensure portfolio diversification.
• Each position is initiated with a fixed stop loss of 20% to limit downside exposure and a take-profit target of 75% to capture significant upward movements.

Trade Execution:

• After ranking stocks based on the aforementioned fundamental criteria, the robot initiates long positions in those with the highest scores. All trades are executed via market orders within 1-2 hours of market opening, ensuring liquidity and favorable price conditions.

• The analysis and selection process occurs at the beginning of each month, ensuring a disciplined and systematic approach to stock evaluation and trade placement.

By focusing on these structured metrics and employing disciplined risk management, the Trend Trader robot offers investors an opportunity to invest in financially robust companies while minimizing the risks associated with volatile or over-leveraged stocks.

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.