Chaikin Power Gauge Stock Rating Widget Review

I’ve recently been trying out the Chaikin Power Gauge Stock Rating Widget, which you can see to the right.  I usually do my stock research through Scottrade or on Yahoo Finance, but I gave this new tool a try.  To try it, enter any stock symbol in the entry box and hit enter.

The premise behind the Chaikin Power Gauge is a back-tested 20 factor model that tries to predict the performance of a stock over the next 3-6 months.  That is an important note: only for the next 3-6 months.  If you are a long term investor, this could be a useful tool for identifying an entry point.  If you are in it for the short term, this could help you identify potential buys.

The Chaikin Power Gauge assigns three overall ratings: Green, Yellow, Red.  Green means very bullish, yellow means neutral, and red means very bearish.  There are also intermediate ratings that are just bullish or bearish.  It also assigns a factor of how the stock may trend in the range.

Along with the overall rating, the Power Gauge Widget assigns ratings to other factors: Financial Metrics, Earnings Performance, Price/Volume Activity, and Expert Opinions.

The power gauge also offers a full report (located on the bottom of the widget), which breaks down the overall rating.   The report also highlights some competitors in the same sector and how they are rated as well.

For my test of the tool, I ran the stock Abbott Laboratories (ABT), a major pharmaceutical company.  The Power Gauge rating for this stock was “Yellow” or “Neutral”.   The stock received high marks for Financial Metrics, Price/Volume Activity, and Expert Opinions, but received a Neutral for Earnings Performance.   It also gave a warning of “Trend Down”.

Here is what my result looked like:

I clicked on the “For Details On This Stock” to get the full report and see how each category breaks down.  The Chaikin Power Gauge Rating gave ABT a Neutral, but said it had attractive financial metrics, average earning performance, very bullish price/volume activity, and very positive expert opinions.

The price and volume activity were very bullish because of the company’s price strength versus the market.

The Chaikin Power Gauge weighs earnings performance highly, and noted that ABT shows worse than expected earnings in recent quarters.  As such, with all the other bullish factors, it still identifies a negative trend on the stock.

For Financial Metrics, the Power Gauge looks at: long-term debt to equity ratio, price to book ratio, return on equity, and price to sales.  These are all good fundamental metrics to look at when judging a stock, and I think the Chaikin Power Gauge is on point with these.

For Earnings Performance, the Power Gauge looks at: 5 years of earnings and P/E ratio.  This should provide a consistent picture of most companies.  However, I wonder how the 5 years of earnings is judged on new companies?

For Price/Volume Activity, the Power Gauge looks at several “Chaikin” propriety measurements.  These look at performance versus the market, money flow, and price trend.  Since these are all specific to Chaikin, it’s hard to tell what specifically they measure.  For long-term investing, however, price and volume activity is usually a minimal component of stock selection.

For Expert Opinions, the Power Gauge looks at: analyst estimates, short interest ratio, insider trading activity, analyst opinions, and price strength versus peer group.

To end the report, the Power Gauge looks at competitors in the peer group and provides a Power Rating for each of these as well.

Positives:

- Provides an in-depth report that highlights a lot of key areas
- I like the metrics that they use in Financial and Earnings performance
- Very easy to use and the report is easy to read
- They also offer an iPhone app and desktop application

Wants:

- I wish I could screen for stocks that were just “Green” or very bullish (you have to select stocks individually currently, or I couldn’t find a way to)

• Update: Screen for stocks that are green – it is on the latest version of the iPhone app; from iPhone app,  search Industry Group by Power Gauge, then sort by stocks w/in the group, sorted by Power Gauge. 
  

- I understand that every trader has their own proprietary methods, but I would like more insight into the Price/Volume activity metrics

• Update: More insight into Price/Volume activity metrics. You can order a research report for that level of detail, which you can do directly from the widget.

-Would love to see some of the backtesting data and how “Very Bullish” stocks performed in the 3-6 month window

• See backtesting data and how “very bullish stocks” performed in the 3-6 month window.  Marc’s 8/11/11 newsletter addresses 5 stocks with bullish Power Gauge ratings in January that he analyzed in August and they were all up, despite a down market.  You can view his newsletter here.

 

Overall, this is a good widget and stock report to look at when deciding to buy a stock.  I found it easy to use, and their report to be very helpful.

 

Disclaimer: Chaikin Power Tools paid The College Investor for time related to this review.  Their product is currently free to use.