Ranking systems on Portfolio123 are, at their core, quite simple: They put every stock in the universe in order. While seemingly simple, this is perhaps the most powerful feature on the site. The major difference that you'll find with our system is that it looks at every data point simultaneously, not sequentially.
If you take the top 25 by one measure and the top 10 by another sequentially, you risk missing the opportunity that might be in the 26th company. Maybe it's the top choice by the second measure. It's already gone, so you'll never know.
Instead, Portfolio123 ranks everything at the same time using only what's important to you with the weight that you've assigned to find the top choice according to your criteria.
The Ranking Tool
Take a look at this partial ranking system:
While a ranking system may look complicated, it's fundamentally simple. The numbers are weights. The weights are applied at each level, indented from the left. The four more-colorful lines on the right are the complete contents of the Stock Rank folder, which is 50% of My Ranking System. You can vary the weights at each level based on what is more important to you. If the cash-to-debt ratio is more important to you than the quick ratio, then you can just change the former to 30 and the later to 20. If you think that the Stock Rank is more important than the other folders, you can increase its weighting without touching what's in the folder. And you can use Portfolio123's industry-best backtests to see which would be better.
But note also the icons just to the left of those last four lines. The bracketed pictures show whether you're ranking against the whole universe, the stock's sector or the stock's industry. And the arrows show which direction you're ranking. This is configurable by the user. If you don't think that Quick Ratio should be ranking low to high, just swap the direction.
What does it all boil down to? A single percentile rank:
You can use that ranking to choose the top 10 of a given universe (as here, where it's choosing the top third of the Dow 30), or you can use it as a criteria in a screen or portfolio. Perhaps you only want the top 10%, or the bottom 5%.
Pre-Built Ranking Systems
Even if you don't want to build your own ranking systems, we have more than 40 ranking systems that have already been built for you to use immediately. They have focuses on growth or income or momentum, and they even include emulations of famous investors like Warren Buffett or Joel Greenblatt. You can either use them straight as they are or you can modify them for your own purposes.
To become better at ranking, we recommend the following resources:
- Our easy to follow, step by step tutorials. You can find them here.
- For more in depth discussion check out our A-Z guide written by our guru Marc Gerstein.
- Check out some of the books in our Recommended Books article.