Monday, October 31, 2011

Rabbitt Q-Rank

The Rabbitt Q-Rank is a combination of nine fundamental and technical models, melded together for ranking stocks. The combined score ranges from 99 (highest) to 1 (lowest); that is, a stock with a Q-Rank of 99 has combined qualities better than 99% of the stocks measured. The Q-Rank system, devised by Paul Rabbitt, combines a Technical Sub-Rank (TSR) and an Earnings Sub-Rank (ESR) which offer further insight into the qualities influencing the total Q-Rank.


The Technical Sub-Rank (TSR) combines four models rewarding price leadership, trading status, long-term trend, and sector attractiveness. It makes up 50% of the Rabbitt Q-Rank and is calculated as follows:
The Earnings Sub-rank (ESR) combines value and growth characteristics divided into four categories. It rewards or penalizes companies based on Wall Street consensus earnings revisions, earnings surprises, earnings consistency, earnings growth/acceleration, and reasonable valuations. It makes up 50% of the Rabbitt Q-Rank and is calculated as follows:


When charted, the Rabbitt Q-Rank will display a line representing the 1 - 99 score. Significantly high Q-Rank values suggest that a stock is outperforming the rest of the market, while low scores suggest the opposite.


The Rabbitt Q-Rank can improve timing by delaying purchases or sales that may be just a little too early. Q-Rank stocks ranked above 90 tend to significantly outperform the market; those under 10 tend to significantly under-perform. Investors considering buying a stock with a Q-Rank under 50 should consider delaying purchase unless the stock offers an extremely solid value, new product and/or turnaround story. Investors considering selling a stock with a Q-Rank over 90 should consider holding the stock until its rank declines. The Q-Rank is meant to assist pure fundamental research, not replace it.

Rabbitt Q-Rank and SharpCharts

Using SharpCharts, the Rabbitt Q-Rank can be plotted above or below the price. Rabbitt Q-Rank takes no parameters.