Diary of a Financier

Quant Screens: Core Value (May 2013)

In Trading Desk on Sat 1 Jun 2013 at 13:46

My Core Value screen scored the following names as the highest ranking outputs on 5/24:

  1. Westjet Airlines ($WJA.TO)
  2. American Railcar Industries ($ARII)- watch list
  3. Foot Locker ($FL)- bought 4/30
  4. Genesco Inc ($GCO)- bought 4/30
  5. Cisco Systems ($CSCO)- vetoed

Output_Core Value 2013.05.24

American Railcar Industries ($ARII) is the newcomer on this list, and I’ve already added it to my watch list. As mainly a manufacturer of train cars & components, ARII is in the right place at the right time, given the proliferation of the US energy exploration & production industry, which has turned to railroad transportation for want of other distribution infrastructure. After a fantastic run from <$8 in mid-2009, ARII has corrected 28% off its alltime high this March. With the railroad revolution as a key theme to this thesis, I wanted to look at ARII’s correlation to the Transportation Index ($IYT). As it turns out, correlation has collapsed from a normal range between 0.8-1 down to -0.098 during the aforementioned correction:

ARII v IYT daily (2006-13)- including correlation

ARII v IYT daily (2006-13)- including correlation

In that vein, ARII should comp against industrials, specifically commercial vehicles & trucks, not transports. Here’s a [attractive] comparison of its key valuation ratios against a peer group:

ARII peers

The first name that comes to my mind when I hear commercial trucks is Navistar ($NAV), a name I recently traded while Crazy Carl Icahn went to work on the board. As it turns out, Mr. Icahn is not only a shareholder in ARII (55% ownership stake), but ARII is actually operating as a subsidiary of $IEP since 1/2010.ARII fundamentals (2013.05.31)

Just by surviving the filter of my quant screen, ARII is fundamentally compelling. Technically, I see a daily, short term Head & Shoulders bottom developing its head this week, so I want to wait for a right shoulder formation ($33.7) before building a position for a rally up to and through a neckline ($36.50). That said, I have much more work to do on this name. I have to read some Ks & Qs to get comfortable. Also, I want to get comfortable with the embedded forecasts for railtraffic growth & demand, because I’ve been observing the deceleration of petroleum railtraffic growth from 50% clips over the past 18 months down to the 28% range as recently as last week, as my Top Newsstuffs mentioned.

I’ll be sure to update any trade activity in my reconciliation.


Here’s the performance from the opened positions over this past month; buys all executed 4/30:

$FL -1.64%
$GCO +12.27%
$JOSB +4.25%

Here’s a followup on the last Core Value screen 4/12:

Passive -1.04% (alpha= -4.59)
Active +4.96% (alpha= +1.41)
SPX +3.55%

Output_Core Value 2013.04.12


  1. Started by buying 1/4 sized position; intend to buy more tomorrow…


Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s