Introduction

Investor’s Business Daily (IBD) is a newspaper designed to bring professional-level stock data and research to non-professionals to help them succeed in investing without having to invest full-time. The paper was founded by investor William J. O’Neil and works in conjunction with his CANSLIM investment method (if you’re not familiar with it, see the link to a review at the bottom of this article) that he writes in his book How To Money in shares. O’Neil says that “for decades, professional money managers were the only ones with access to the detailed data that is critical to finding winning stocks.” He created IBD to provide detailed data to all investors small or large, new or experienced.

Main selling points

IBD’s main selling point is that it compiles and categorizes stock market research and data that the lay investor would have to spend an unrealistic amount of time acquiring and might not have access to at all. O’Neil claims that the document will save the reader a significant amount of time and allow them to be successful in investing without being a professional.

IBD does not like to give the reader “stock advice”. Rather, it focuses on educating the reader so that they can use the data provided in the document to make informed decisions about when to buy and when to sell.

Let’s take a look at some of the main features of IBD and see how they compare to other financial documents.

The importance of general market direction

The infamous investor Jesse Livermore said that “all you need to know to make money is to assess the (general) conditions” of the market. He was saying that you can be right about everything with one stock, but if you are in the direction of the general market, and that direction is down, three out of four of your stocks will go down and you will lose a lot of money. Going against the general market is like swimming against the current. In the end you will lose. The smart investor assesses the general conditions (where the current is going) and invests along with them. One of the best aspects of IBD is that it takes advantage of this reality and provides the reader with multiple sources of data to assess general market conditions.

Two of these tools are on the first page. At the top of the first page is the price and volume activity for all the major indices for trading from the previous days. They are highlighted blue for the top and red for the bottom so you can see at a glance where the market moved the previous day. The second thing on the first page is the overview column. This is a synopsis of all the market activity of the previous day and a comment on its relationship to the “big picture” of the market.

IBD also has a great page called “How is the market doing”. It features charts for the major market indices, the NYSE Composite, NASDAQ, S&P 500, and the Dow Jones Industrials. They show price and volume activity for each, as well as relative strength lines, moving average lines, and other market metrics. On a single page it provides a large number of tools to assess the general state of the market.

Not your common stock charts

The second feature that stands out about the IBD is its value tables. Most stock charts show only the previous day’s price and volume changes for stocks and sort them alphabetically. IBD goes much further and provides a series of powerful tools for finding great stocks. First, the tables are sorted by their respective industry sectors, and then the sectors are sorted by their strength. For example, the software sector is currently the best performing and those stocks are listed first. This is a great tool to help you focus on the best performing industries. O’Neil claimed that after conducting extensive research, he discovered that “since 1953, most individual stocks that were actual market leaders were also part of a leading industry group or sector at that time.”

The second great thing about IBD’s stock charts is that they include IBD’s five proprietary ratings called Smart Select Corporate ratings. Here is a description of each.

· Earnings Per Share Rating: Assesses a company’s ability to grow based on its earnings over the past three years, but places additional weight on the most recent quarters. This is a tool designed to allow you to quickly assess the profitability of a company. This utility, as profitability is the driving force behind the long-term stock price movement.

· Relative Price Strength Rating: Measures a stock’s price performance over the past 12 months and compares it to all other publicly traded companies. This is a powerful tool to help you choose the best stocks among a group you are comparing.

Sales + Profit Margin + Return on Equity (SMR) Rating: This rating combines factors into one rating to measure a company’s sales growth and profitability. This helps you determine if a company is growing in its main area of ​​business (as measured by sales).

· Accumulation/Distribution Rating – This rating is based on daily price and volume action and tells you if a stock is being bought a lot (accumulated) or sold a lot (distributed). Accumulation and distribution are key metrics in determining the supply and demand for a stock and this can be used to project future price movements.

· Composite Rating – This is the first column in the stock tables and combines all the ratings to give you one summary rating for a quick review of overall stock performance. This is a good metric for comparing similar or different companies that you want to choose the best one from.

Another notable feature of their stock charts is that they include a percentage change in volume value. This gives the days volume change as a percentage of the 50-day average volume. This figure is useful in determining which stocks are in demand in the market. You can scan the stock charts for stocks that have risen in price with a significant increase in volume to see which shares are piling up.

Stock Check Tool

If you are a subscriber you have access to the online stock query tool. I think this is one of the best features of IBD and it may be worth the subscription price on its own. The Stock Check Tool is a summary of all the criteria of William J. O’Neil’s CANSLIM investment method. It gives you all of Smart Select Corporate’s ratings for the stocks, as well as more data in each of the rating areas. You can go straight from a stock chart to the verification tool and get a quick but comprehensive analysis of your fundamentals. You can also see how you rank against other companies in your industry. In many cases, this is enough information to make a successful purchase. You don’t have to spend hours looking at quarterly and annual stock reports to see if it’s worth it. It is a great time saver. The amount of research that can take someone hours to do can be done in minutes.