Thursday, October 27, 2016

Stock fundamental ranking and screening with Piotroski F-Score

Piotroski F-Score was introduced by Professor Joseph D. Piotroski in his paper titled "Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers" published in January 2002 while he was teaching as an assistant professor in University of Chicago. He is now teaching in Stanford University Graduate School of Business, and has just promoted from associate professor to professor in 2016.

You can click here to download that interesting 39-pages paper written by Piotroski on his F-Score.

Piotroski backtested his F-Score screening method in his paper and concluded that by investing in the low price-to-book ratio companies filtered by the F-Score, one could have generated a 23% average yearly return from 1976 to 1996.

Today, Piotroski F-Score is used by quite a number of fund managers as well as individual investors in their value investment stock screening process. The F-Score has also been applied in many other academic papers and has so far proven to be effective for stock screening, especially when combined with other fundamental stock screening methods, such as Greenblatt's magic formula, etc.

A backtest by Olivier Dambrine (owner of MFIE Capital which operates the ValueSignals global stock screening website) revealed that a European stock portfolio establised by their Piotroski price-to-book screener is able to achieve an impressive 525% return between June 1999 and August 2011, while at the same period of time the  S&P600 Europe including net dividends has a return of -15%. You can click here to read that article written by Olivier Dambrine on 1 September 2011.

The American Association of Individual Investors (AAII) also revealed in an article titled "2008 AAII Stock Screen Roundup: Piotroski Strategy Defeats the Bear" by Wayne A. Thorp that the F-Score was the only one of their 56 screening methodologies that had positive results in 2008 (up 32.6% on average across 5 stocks, versus -41.7% for all of the AAII strategies over the same period).

Piotroski F-Score is the sum of 9 binary (meaning, either 0 or 1) scores in 3 fundamental categories of the stock, as below:

  • Did the company make a profit during the last 12 months?
  • Did it generate any cash?
  • Was it more profitable compared to the prior year?
  • Did it make more cash than the reported profit?
Leverage, Liquidity and Source of Funds:
  • Did the company increase its relative LT debt compared to the prior year?
  • Did the company improve its ability to pay short-term liabilities  (debt and payables) with its short-term assets (cash, inventory, receivables)?
  • Was the company not required to issue new shares to pay for its future obligations?
Operating Efficiency:
  • Was the company able to improve its margins on sales?
  • Was the company able to improve productivity?
The above 9 criterias are tested by the following financial conditions, comparing the current year with previous year:
  • ROA > 0, EPS > 0
  • Operating cash flow > 0
  • ROA growth
  • Operating cash flow > Net profit
  • (Assets / LT Debt) increased
  • Current Ratio increased
  • Share Outstanding remains
  • Gross Profit Margin increases
  • Asset Turnover increases
An example of stock counter having full F-Score is Forrester Research Inc. (NASDAQ:FORR).

You might want to double check if the counter is consistently scoring high F-Score throughout the years, or has been improving from lower F-Score to higher F-Score across the period. Below is the historical Piotroski F-Score Scorecard of Forrester Research Inc. as presented by ValueSignals website.

The scorecard above shows that the F-Score of the stock counter improved from quarter to quarter, from 5 in 2013 eventually to 9 in mid-2016. It also indicates which out of the 9 criterias had passed or failed the test in each of the quarters.

ValueSignals website provides a very handy and straightforward online service for systematic value investing to perform quantitative stock screening, stock comparison and stock information, currently covering as many as 33,600 stock counters listed in 44 countries around the world.

Beside Piotroski F-Score, ValueSignals website is also able to perform screening (including multifactor cross-screening) of:
  • Greenblatt's Magic Formula
  • O'Shaughnessy Value Composites
  • ERP5
  • Altman's Z-Score
  • Beneish’s M-Score
  • Benjamin Graham's Net Current Asset Value (NCAV) to Market ratio
  • Price index
  • ... and many more
The screening can be performed across all stock counters, or limited to within certain regions,  countries, industries, etc.

As a user of ValueSignals, I recommend this website to all serious value investors and fund managers to boost your stock screening and selection process.

Tuesday, October 11, 2016

Mcdodo 2-in-1 USB type-c and micro USB fast charging data cable

If you bought a latest smartphone that uses USB type-c connector instead of the old style micro USB, you might probably want to search for some 3rd party fast charging and data sync cable for it.

If you still possess other smart mobile devices that use micro USB, a 2-in-1 cable that supports both USB type-c and micro USB will be very nice. If you also have Apple iPhone, perhaps a 3-in-1 cable that supports USB type-c, micro USB and lightning will be even better.

For this reason, I have recently bought some Mcdodo brand 2-in-1 USB cables. They have another 3-in-1 model as well with the Apple lightning connector.

This cable is 1 meter long, and supports fast charging with 2.1A current output. One end of it is normal USB connector, and the other end of it is a micro USB connector. What makes it special is it also comes together with an adapter that tied with it, which can be connected to its micro USB connector to convert it for USB type-c connection.

It also comes with a handy silicon belt that can be used to tie the cable up nicely in an organized manner for easy carriage.

Its cable is insulated with thermoplastic elastomer (TPE) material, which is robust, durable, anti-abrasion, anti-pull, anti-wrap and has high resistance to heat, oil, direct sunlight, flame, water, acid, alkali, alcohol, etc.

Thursday, October 6, 2016

Top 10 database security threats

Databases are among the most valuable assets in the information system as they store valuable and vital data and records of the business. As such, they are also among the most interested place of intrusion for hackers, attempting to gain access to confidential and sensitive information from within.

California based cyber security solution provider Imperva has been consistently publishing the Top 10 Database Security Threats white paper every year.

From year 2013 until 2015, this top 10 database security threats remained as the same listing, with the same ranking, as below:

  • 1. Excessive and Unused Privileges
  • 2. Privilege Abuse
  • 3. Input Injection (SQL Injection)
  • 4. Malware
  • 5. Weak Audit Trail
  • 6. Storage Media Exposure
  • 7. Exploitation of Vulnerabilities and Misconfigured Databases
  • 8. Unmanaged Sensitive Data
  • 9. Denial of Service (DoS)
  • 10. Limited Security Expertise and Education
According to Imperva, the top 9 threats above can be addressed by using an automated Database Auditing and Protection (DAP) platform, which is an approach that improves security, simplifies compliance, and increases operational efficiency. The 10th threat is "human factor" by negligent employee or contractor.

The white paper outlined a multi-layered database security defence strategy encompassing:
  • Discovery and Assessment: to locate where database vulnerabilities and critical data reside.
  • User Rights Management: to identify excessive rights over sensitive data.
  • Monitoring and Blocking: to protect databases from attacks, unauthorized access, and theft of data.
  • Auditing: helps to demonstrate compliance with industry regulations.
  • Data Protection: to ensure data integrity and confidentiality.
  • Non-Technical Security: to instil and reinforce a culture of security awareness and preparedness.
"Failing to safeguard databases that store sensitive data can cripple your operations, result inregulatory violations, and destroy your brand. Understanding the top database threats and implementing the solutions outlined in this paper will enable you to recognize when you’re vulnerable or being attacked, maintain security best practices, and ensure that your most valuable assets are protected." -- Imperva, 2015

You can download the complete white paper to find out more detail of this interesting defence strategy.

Hint: Click on the "Older Posts" link to continue reading, or click here for a listing of all my past 3 months articles.