Hi Kerry, As you have surmised, Price Stability and BETA don't necessarily go hand in hand. A stock or fund with a very LOW BETA rating will usually move concurrent to the market's moves. It might have a high or low Stability rating.
I suspect that your Software definition has a typo in it as the 5-100 rating has been in place for a very long time (over 15 years, I'm certain).
For my own methods, I search for stocks with very low Stability ratings and either very high or very low BETA ratings. Usually counter-cyclical stocks have the low BETA that I enjoy, but then it is a matter of sorting for a low Stability rating as well. I, too, was surprised and delighted by the fact that the two weren't locked at the hip.
I had hoped for a definition for the AIM users as we have had a recent discussion on filtering stocks. One member had discussed and created a measure of "Frequency and Amplitude" of price cycles. I had suggested that V/L's Stability rating might be similar, but couldn't find formulae to verify it.
With AIM, it likes to trade around a core value. The trade range is rather large; +or- 10% or more. So, Amplitude of the cycle is a necessary consideration. Also, since the more frequent the cycle occurs the more opportunities there are for nibbling some profits, Frequency was the other part of the equation that was of interest.
I usually start with a "top down" approach looking a broad economic activity and change and work towards a stock selection. I've successfully used the Stock Price Stability rating in Value Line in this process, but only after I've done all the other work. If it comes down to two companies in the same sector that both meet my other fundamental and technical measures, then I'll use the Stability rating to differentiate between the two and usually choose the stock with the lowest value.
Thanks for taking the time to dig a bit deeper than I was able to at the Library and at the V/L site.
Best regards, Tom |
