Systems for Rating Stocks
Berkshire Hathaway CEO Warren Buffett states, "A public opinion poll is no substitution for thought." This tidbit should be kept in mind when using stock-rating systems. A lot of companies have developed complex, technical methodologies. It does not mean they will be right. Forecasting is risky business. Stock-rating systems should be used in conjunction with a thoughtful means of evaluating individual securities. That said, there are companies offering their stock ratings free on their websites.
Other People Are Reading
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The Street
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The Street is a comprehensive financial website covering Wall Street and Main Street. The website publishes stock analyst and TV stock celebrity Jim Cramer's newsletter. Columns by a number of other stock analysts and financial professionals are also available. The Street rates stocks on a buy, hold or sell classification and provides letter ratings ranging from A+ through F -- for forget about it. The format is user-friendly, includes analyst ratings as well as what they call "community sentiment," information gleaned from their readers.
StockScouter
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MSN Money offers the StockScouter rating system. The method ranks stocks from 1 to 10, with 10 being the highest rating a stock can receive. Each stock gets a letter as well as a number grade. Stocks are evaluated in four categories: fundamentals, ownership, valuation and technical elements. Specifics within each category are rated positive, negative, or neutral. Each category receives a letter grade. A six-month expected return is included in the evaluation.
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Motley Fool CAPS
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The Motley Fool system is based on three criteria. The first one is a determination of either outperform or underperform for the stock. The second factor is the time period covered and the third factor are the ratings of individuals, called players. CAPS ratings are largely based on the 50,000 Fool followers rating stocks. Each stock is given a numerical rating of 1 to 5 stars, 5 being the highest score. Ratings are representative of the stock's chances of outperforming the S&P 500.
Morningstar
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Morningstar scores stocks from 1 to 5 stars. The process involves evaluating a number of criteria. Morningstar reviews company financials. Additional considerations consist of company valuation, fair value estimate of the current stock price, and what is termed the uncertainty rating. This ranges from low, medium, high, very high, to extreme.
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References
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