VectorVest analyzes, sorts and ranks over 17,600 stocks every day and gives a Buy, Sell, Hold Recommendation on every stock, every day. VectorVest is the only service that does this and I’m grateful for it. When I started investing, I used the VectorVest recommendations as gospel. To this day, I avoid buying stocks that don’t have a Buy recommendation and I always sell any stock(s) that I own when they get a Sell recommendation. It has become second nature for me and has saved me money more times than I can count.
A Buy recommendation means that it’s OK to buy a stock. For a stock to receive a Buy recommendation:
- It must achieve a minimum fundamental data level, as measured by its Relative Value (RV) and Relative Safety (RS).
- The price of the stock must be trending higher, as evidenced by its Relative Timing (RT) being above 1.00.
- The combination of its RV, RS and RT must meet a minimum level of 1.00 as defined by its VST-Vector Value.
- Its Price must be above and pulling away from its Stop price.
A Hold recommendation is assigned when a stock’s price is above its Stop price but is too close to the Stop to justify a Buy.
A Sell recommendation is assigned when a stock’s price falls below its Stop price.
So, as you can see, fundamental analysis is very important to receiving a Buy recommendation because when buying a stock, it’s always a better choice if it’s fundamentally strong. But when you own it, price performance is key. This is why technical analysis plays the most important role in the VectorVest Sell recommendation.
Let’s take a look at our Top 5 VST stocks for the last year to see how well the recommendations work. Access the Stock Viewer (click on Viewers on the main toolbar, then Stock Viewer). Set your date box to yesterday’s close (Thursday, May 6th). Highlight the Top 5 stocks (LPX, LPIH, UFPI, DHI and RCKY), right click on any of the highlighted rows and select View Stock Graph. Set your graph to a 1-yr., End-of-Day, VectorVest Simple Graph. Make sure that the REC box at the bottom left of the graph is selected so that you can see the recommendation along the top of the graph.
WOW! Notice that, if buying on a buy recommendation and selling on a sell, you would have profited handsomely on these 5 stocks.
Brokers and the talking heads on TV seldom, if ever, put a Sell rating on a stock. Instead, they use phrases like, “it has underperformed” or “I still like it, but I sold it because I like X stock more and it is in the same space.” To make matters worse, they advocate buying falling stocks in falling markets, dollar averaging and sometimes even recommend that you NOT buy a stock because it just hit a new high or has gone up xx% already and you should wait for a pullback.
Luckily, I grew up with VectorVest and those ideas are foreign to me. I wouldn’t want to buy a falling stock because I don’t know how far it will fall. And buying a stock when the market is falling, there is hardly anything worse an investor could do. And why wouldn’t I want to buy a stock that is hitting new highs? That means the stock is rising, right?! All of these teachings are ludicrous. It’s nice to know that when investing, all I have to do is use the VectorVest Buy and Sell Recommendations.