Quantitative Analytics for iPhone Levels the Playing Field For Investors

Retail investors have a better chance than ever of competing with Wall Street’s crème de la crème as a growing number of mobile apps now offer them the same data the top financial institutions use to trade.

Among this new breed of apps is Chaikin Power Tools, a stock market app developed by computer pioneer Marc Chaikin, who once built the first real-time analytics workstation for stock traders and portfolio managers.

[For more on Wall Street’s best apps, look out for WS&T's August digital issue, available for download on 07/26.]

Central to the app is the 'Power Gauge', which leverages a quantitative analytics model to predict whether a stock will outperform or underperform the market in the next six months.

The tool, which is accompanied by real-time news sentiment analysis generated by proprietary linguistics parsing software, identifies trouble spots in a portfolio and points investors to stock which they need to pay more attention to, Chaikin explains.

The quantitative model is based on 20 factors in the following categories: financial metrics, performance, price/volume activity, and expert opinions. The latter includes earnings estimate revisions, short interest, insider activity, analyst opinions and relative strength versus the industry.

“I’ve built this for professional investors for 20 years. What I tried to do here is provide the same kind of institutional quality investment decisions for retail investors,” Chaikin relates.

The model the Power Gauge is based on started with a pool of 200 factors, identifiable as what institutional investors look at, Chaikin explains. “We distilled it down to 20 factors in 4 different categories. But the secret sauce is in the weightings.”

The largest weighting in the model are the five factors in the financial metrics category. These are: price to sales ratio, free cash flow analysis (business analysis), debt to equity ratio, return on equity, and price to book value, Chaikin relates.

“If you look at it, we've distilled it down to a predictive model so an individual doesn’t have to do the analysis someone like Warren Buffett has to do,” Chaikin adds.

The app, which is free, is available on the iPhone, Android and iPad.

Users can trade directly from the app through optionsXpress or tradeMonster. “You can move from actionable information to the ability to trade in under 5 seconds,” Chaikin notes. “The iPhone GUI is so powerful.”

Chaikin recently also launched Chaikin Portfolio Health Check, a personalized, weekly portfolio analysis that costs $9.95 a month and uses similar professional-grade analytics to provide investors with an overview of their stock portfolio.

It shows users which stocks have turned bearish or bullish, as well as earnings surprises, news sentiment analysis, gives specific ideas for swapping out weak stocks and industry groups for strong ones, and a 4-quadrant view of a portfolio which organizes stocks from weakest to strongest.

Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio