The Significance of Changes in Our Valuentum Buying Index (VBI) Ratings
publication date: Jan 28, 2013
author/source: Valuentum Analysts
Astronics (ATRO) has been a darling of a stock for our Best Ideas portfolio, despite hitting a very rough patch recently. Our Valuentum Buying Index (VBI) ratings have helped us maximize profits in the company, informing us to add the firm in June 2011 to our Best Ideas portfolio in the low-mid $20s (VBI rating of 10) and then to potentially take some profits when the firm registered a VBI rating of 6 in late 2011/early 2012 in the mid-$30s, which we did (selling 30% and then another 50% of our position).
We view VBI ratings of 9 and 10 as actionable for us on the long side and VBI ratings of 1 or 2 as actionable for us on the short (put-option) side. However, we only pick the best of the best from these respective groups to include in our Best Ideas portfolio (and once an idea is added to the portfolio, we typically expect the idea to work out within a 6 to 18 month time horizon). We may tactically trade around (add or trim to) positions in our Best Ideas portfolio that subsequently score in the "big middle" (3 through 8) depending on a variety of factors, including diversification, macroeconomic, or technical considerations.
The case of Astronics illustrates how no stock is ever a perpetual buy for us and the significance of changes in the Valuentum Buying Index (VBI) rating. A simple buy-and-hold strategy would have left investors at a loss, instead of reaping the significant gains registered by Astronics in our Best Ideas portfolio. The path of Astronics is shown below.