No. of Recommendations: 31
HIAR: Higher Inventory and Accounts Receivable

In his 2003 book, Practical Speculation, Victor Niederhoffer mentions that increases in inventory and accounts receivable are bad news. To test this, I created a simple short screen that looks for large increases (>40%) in both and then sorts by low volume ratio (on the assumption that low relative volume is usually bad news).

The screen:
Price > 5
Price * Average Monthly Volume 3m/20 > 500
ADR = False
Exchange <> OTC
Industry <> Misc. Financial Services

Inventory Q1 > Inventory Q5 * 1.4
Accounts receivable Q1 > Accounts receivable Q5 * 1.4

Sort low VR = 100 * 10-d Volume/3-mon Volume

The results for a 5-stock monthly can be found in Keelix job 315607. The screen is quite consistent for a short screen. Most short screens do well during bear markets (no surprise) but then blow up in your face in years such as 2003 and 2009. Not so with HIAR, which returned 4% in 2003 and only lost -7% in 2009. This feature makes it a much more useful short screen, as one is not always sure when a bear market has ended.

For the four bear market years of 2000, 2001, 2002 and 2008 the screen had an CAGR of 79%. For the other years since 1997 the CAGR was 7%.

CAGR 24
GSD 43
Ratio 0.56
.
1997 9% 4mon
1998 - 2
1999 76
2000 93
2001 98
2002 120
2003 4
2004 10
2005 - 4
2006 -13
2007 - 8
2008 22
2009 - 7
2010 13
2011 22
2012 8 YTD

DB2
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