A Faster Run for Your Money

STANDING STILL IS ONE OF THE BEST ways to go backward when it comes to reaching your financial goals. Here are a couple of recent updates from investment-software firms—as well as a cautionary tale or two about student loans—that should help speed you in the right direction in life’s monetary marathon.

SAGEWORKS’ PROFITCENTS (http://www.profitcentspublic.com) recently added some new analysis to its financial-reporting interpretation tool, which we previously recommended for the serious fundamental investor (The Electronic Investor, May 22, 2006). The Sageworks reporting engine runs Securities and Exchange Commission filings through a series of analyses, and then explains the resulting huge piles of data in a straightforward way, aided by a series of charts and graphs.

The new analysis, which seeks to get at a public company’s intrinsic value, is a nice complement to ProfitCents’ existing reports that focus on liquidity, profits, borrowing and assets. The latest addition includes a price-to-valuation analysis based on discounted cash flows, a trailing 12-month price/earnings ratio, and a dividend yield. Related graphs illustrate price-to-value for the company versus the industry average, as well as the P/E ratio versus the industry average. For companies that pay dividends, a graph compares the company’s dividend yield with the Standard & Poor’s 500 average.

For $199 a year, a user can run an unlimited number of reports by entering the ticker symbol of the company she wants to analyze. Both the “Analyst” (more sophisticated) and the “Basic” reports let the user choose from three temporal comparisons: fiscal year to fiscal year, current quarter to year-ago quarter, or current quarter to previous quarter. The patented ProfitCents artificial intelligence engine reviews the financial statements and evaluates the firm’s performance over time.

What do the results look like? The new valuation section generated the following text when analyzing General Electric, comparing fiscal 2006 and 2005: “This company may merit some attention from value investors, although the results are somewhat conflicting. The company’s valuation comes up short of justifying its market price, but it compares well with similar firms. Basically, the company’s projected cash flows make this company look like a solid value compared to competing firms.”

I enjoy perusing the reports generated by the “Analyst” level of ProfitCents, but find the information created in the “Basic” view to be a little too simplistic. The Basic reports award one (lowest) to five stars in the five operational areas covered by the program (Value, Liquidity, Profits, Borrowing and Assets) while Analyst provides more depth, and rates these five areas from one lowest to 100.

In a future version, I’d like to see the opening user interface spiffed up to allow an investor to set up a portfolio of companies and possibly create e-mail triggers that would be activated when a prespecified company files an SEC report that might affect its rating. It would also be helpful if ProfitCents would allow a user to compare two companies, side-by-side.

My last nitpicking complaint: The site requires the user to agree to the terms and conditions every time a report is generated. There’s got to be a way to agree to those terms just once each session, so that the user isn’t repeatedly tripped up.

eSIGNAL RECENTLY ANNOUNCED an intriguing new product called QuoteTrader (http://www.quote.com/quotetrader) that should quicken your analytical step while letting you enter trades. It links to a number of online-brokerage accounts (including those kept at optionsXpress, Interactive Brokers, TD Ameritrade and MB Trading), and allows you to enter transactions on all of them from one screen, provided the brokerage has partnered up with eSignal.

QuoteTrader is mostly free—some brokerages (TD Ameritrade and Interactive Brokers) also throw in the charting add-on for no charge, but for those that don’t (such as optionsXpress), you can pay the added fee to use it. Since all of the market data are provided by your brokerage, you don’t generate a lot of one-off fees. Adding on the LiveCharts charting applications rings up a $9.95 monthly charge—however, you can also opt for higher-end QCharts for $95 a month.

There are a few steps to get set up, so if you decide to check this out, give yourself an hour or so. First, you have to sign up for an eSignal account and download the software. Then you must link the program to all your brokerage accounts and test your connections.

I like the depth-of-book display, which shows you open orders. You can also define profit targets for a position, and automatically close it once the target is reached. QuoteTrader lets you check on forex, futures and options, as well as stocks. It’s a fun toy, especially for the data junkie. Setting it up isn’t a picnic, but it’s tolerable.

STUDENT-LOAN FEEDBACK: Quite a few readers responded favorably to my column on saving and investing to pay college tuition rather than taking out a loan. One writer helpfully pointed out that an option I’d mentioned was eliminated in 2006 (see below for excerpt from this week’s Mailbag).

A reader, who is penning a book on how college grads can land that first post-diploma paycheck, wrote to tell me a series of tragic stories of student loans gone bad. Among them: A college grad who’d lived with his parents for nearly a decade while employed as a limo driver to earn money to pay off his loans. Even so, he estimated that it would take another two years to wipe the ledger clean.

I was also alerted to a University of Washington Alumni Association survey of its membership on how they’d financed college (http://www.washington.edu/alumni/survey/200612results/loans.html). Although the group neglected to ask specifically about loans, quite a few alumni responded that borrowing had hurt the quality of their post-grad life. One noted: “I was blissfully ignorant of the material sacrifices I would have to make in the future when signing my name to the forms during my educational years. Add credit-card debt accumulated while finding a job post-graduation. If I had it to do over again, I would have worked during college and tried to pay at least half of my educational expenses and planned ahead for post-graduation empty pockets.”

Another reader congratulated me on getting my daughter through college debt-free, and passed on his experience investing on behalf of his granddaughter, who is in sixth grade. Three years ago, he started a Custodial/DRIP [dividend-reinvestment-plan] portfolio of three stocks, and reports that now the account is large enough to purchase a medium-sized car—six years before matriculation. He concludes by saying, “Stock appreciation, dividend compounding, and voluntary investments combined with the child’s scholastic accomplishments will assure a good education and lucrative life after graduation—debt-free!”

That’s the essence of a successful financial marathon.

Excerpt from 9/10/2007 Mailbag, in response to my 8/27 column on student loans:

Loophole Plugged

To the Editor:

Regarding the Aug. 27 Electronic Investor column on student loans, the gifting strategies Theresa W. Carey employed for her daughter’s college payment plan aren’t still valid. Prior to enactment of the Pension Protection Act of 2006, parents could make a gift of appreciated securities to a minor over age 13, and have the minor sell them at his lower tax bracket to pay for college. The 2006 act changed the kiddie-tax age to 18 in 2006, and then 2007 legislation changed it to age 23 for full-time students. Unearned income in a given year above $1,700 for a full-time student, up to age 24, is taxed at the parents’ typically higher rate, making this strategy a non-starter for most college-bound families.

Joseph Casey
College Planner LLC
Walnut Creek, Calif.

Posted by on 09/15 at 06:24 AM






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