Quant Sell Ratings 

Since inception, our quant system has carried out roughly 237,000 trades! Such an intensive strategy requires an electronic trading system to manage the portfolio. On any given day, there are almost 1000 combined ‘Strong Sell and Sell’ ratings in the portfolio.

The advantage for investors is the effectiveness of our quant methodology. The principal of the strategy is the same for a single Strong Sell or for all 1000 Strong Sells and Sells. The purpose of exhibiting the performance of all the Sell ratings since inception is to highlight the success of the strategy. As you can see from the chart above, Seeking Alpha’s proven track record is very strong and very long.

Backtesting reveals how well a specific trading strategy would have performed in the past using historical data. The backtest and model is not an investable product as it only reflects the strategy’s historical performance - but it does let you analyze risk and past profits before allocating real capital. Typically, a full stock market cycle is 4-5 years.

The backtesting proves the effectiveness of our ‘Sell’ stock selection trading methodology - as it easily underperforms the S&P 500 Total Return Index almost every single year.

Seeking Alpha’s market performance is based on a backtested hypothetical portfolio of all the daily ‘Strong Sell and Sell’ ratings for 10 years from 31 December 2009 to 4 June 2020. The total compounded annual return for the simulated trades from 4 June 2020 to present.

Simulated trading is the virtual trading of our strategy carried out in real-time after the quant system was created. The quant performance from 5 June 2020 onwards reflects simulated trades for all the daily ‘Sell’ Seeking Alpha recommendations.

The total portfolio performance you see in the chart is based on the combination of the backtested and simulated trades from the end of 2009 to the present day.

The trading strategy consists of being fully invested in Seeking Alpha's ‘Strong Sell and Sell’ ratings with equal weighting, daily rebalancing, and no transaction costs. Any stock where the rating drops i.e. from ‘Strong Sell and Sell’ to ‘Buy’, gets sold at the market open. A computer runs this model daily without human intervention.

As calculated by S&P Global, our market performance is the compounded average return calculated daily to determine the annual return. The returns include paid dividends and are based on daily closing prices.

However, please note that past performance is not a guarantee of future results.

Seeking Alpha’s ‘Strong Sell and Sell’ ratings are compared to the S&P 500 Total Return Index. The below portfolio statistics reflect the period from 31 December 2009 to 31 December 2021.

Seeking Alpha's trading algorithm is derived from our Quant Ratings and Factor Grades.

Over 100 metrics for each stock are scored against the other stocks in its sector. We roll up these metrics into five key ‘Factor Grades’. The Value, Growth and Profitability factors are used to identify mis-priced securities, while the Momentum and EPS Revisions factors identify timeliness.

You can use Factor Grades to get an instant measure of whether a stock is strong or weak on any of these key investing metrics vs. the sector - and use the Quant Ratings to see which stocks perform best overall.

Our Quant Ratings are an objective evaluation of each stock based on a weighted analysis of the five Factor Grades. Each stock is then assigned a Quant Rating (from ‘Strong Buy’, ‘Buy’, ‘Hold’ and ‘’Sell’ and ‘Strong Sell’). Factors with the greatest predictability carry higher weights.

The Quant Ratings are updated once a day, before the market opens. The trading performance is also updated once a day.

The Quant Ratings and Factor Grades appear on the stock screeners, the individual symbol pages, and on the financial pages. They are only available for Premium subscribers- but you can also try them for free with our 7 day free trial.

To see the ratings on the symbol pages, (1) ensure you are logged in to the desktop website as a paying subscriber or in free trial, (2) enter the stock symbol in the search box at the top of the page, (3) hit Return, (4) when you land on the symbol page, you'll see the Quant Rating in the right-hand column in the Ratings Summary box, above the Seeking Alpha Author Rating and Sell-Side Rating.

While a correction can affect all stocks, it often hits some harder than others. Stocks that have had strong long-term performance, stocks that are very liquid, smaller-cap stocks, high-growth stocks in volatile sectors, like tech or industrials or consumer discretionary, tend to have the largest declines in a market correction. Often, it appears that companies with the strongest fundamentals get hit the hardest in a market correction.

This holds true for many stocks with a Seeking Alpha ‘Strong Sell and Sell’ rating. These stocks possess strong growth characteristics, have demonstrated long periods of outperformance, and overall are stocks with very strong fundamentals. During corrections it is common for investors to take profits in their winners and raise cash or re-allocate to defensive sectors such as consumer staples or utilities.

Market corrections are driven by fear, emotion, and sentiment – not fundamentals. The good news is that corrections do not last forever and investors always return to investing in stocks with strong fundamentals. In fact, equity markets rebound every time and when they do rebound stocks with the strongest fundamentals can rebound the quickest.

Seeking Alpha’s strategy and performance is shown in the chart above. The chart demonstrates that during corrections, such as the recent correction fueled by Covid-19, the performance of Seeking Alpha ‘Strong Sell and Sell’ recommendations is impacted negatively.

Conversely, when the markets rebound, stocks with ‘Strong Sell and Sell’ recommendations tend to rebound as well. Stocks with strong fundamentals become the coveted investment when fear, emotion, and sentimental investing are driven out of the consciousness of investors.

No! They are suitable for both long-term and short term investors. Even deep value investors are aware that securities can remain mis-priced for long periods of time without a catalyst.

The overall Quant Rating attempts to identify mis-pricing and timeliness in a single rating, and that’s actionable for both long-term and short-term investors.

In 2018, Seeking Alpha acquired CressCap Investment Research, a platform providing next-gen quant analytics. Founder and CEO Steven Cress joined Seeking Alpha as Head of Quant Strategies. Steve has over 30 years of experience in equity research, quantitative strategies and risk management. He founded quant hedge fund Cress Capital Management after running a quant trading desk at Morgan Stanley.

Survivorship Bias: This is when a stock has been delisted or acquired and is not included in the backtest results. As of May 3, 2020, we have eliminated to the best of our ability the survivorship bias from the end of 2009 to present by adding all stocks that were delisted or acquired to the backtest through data from S&P Global.

Restatement Bias: This is when a company restates its historical financials. We have eliminated to the best of our ability all of the restatement bias from backtesting through S&P Global data.

Split Bias: This is when a company has had a historical stock split. We have adjusted to the best of our ability stock splits from 5 June 2010 - to date using S&P Global data.

Look Ahead Bias: This is when a company reports its financials at a point that was after or not available at the end of the quarter. We have eliminated the Look Ahead Bias to the best of our ability with S&P Global data.

Portfolio Reconciliation: Audit of portfolio performance and portfolio attribution to ensure the data reflected is as accurate as possible. Monthly audits are conducted on backtest and simulated trades.

Seeking Alpha data is sourced from S&P CapIQ and Compustat. The backtesting tool is ClariFi, which is also owned by S&P CapIQ. Both of these entities are fully owned by S&P Global.

To dive deeper into our quant methodology, check out this article featuring more commonly asked questions: Quant Ranking and Factor Grades FAQ.

It’s also worth watching this video with the creator of the Seeking Alpha quant system on the best ways to use the Quant Rankings and Factor Grades: An Interview With The Founder Of The Seeking Alpha Quant Rating System (Video).