/coc

Circle of Competence - A tool for analyzing publicly traded companies.

Primary LanguagePython

Circle of Competence

Circle of Competence (CoC) is a web-scraping tool designed to analyze stock market symbols according to criteria discussed in Benjamin Graham's The Intelligent Investor.

It allows a user to quickly analyze publicly-traded companies, and roughly determine their intrinsic value. As with all investing tools, use it at your own risk.

Running it on your system

First, have Python 3+ installed on your system so you can run python files.

  1. Clone the repository into a directory of your choosing.

  2. Run the main.py file. You'll be prompted to enter one or more stock symbols.

  3. Enter your symbol(s) along with any desired flags.

    • $ bgs -x
    • Note: It takes a few seconds per symbol to scrape/process the required data.

  4. Look at the results printed to the console.

  5. Enter more symbols as desired.

  6. Type 'exit' or 'quit' to close the program.

Running in batch mode

You can also pass a sequence of symbols via the standard in to main program by using the -m batch flag at program start. This will execute a parallelized fetch of the symbol information and writes the results to the coc.xlsx file.

Example: echo "BRK.B" | python3 main.py -m batch

Usable Flags

Interactive Mode Flags

Note that flags can be combined into strings prepended with a dash, so "-dx" would run both "-d" and "-x".

  1. "-d" Debug Mode
    • Debug mode, prints all available fetched data for a symbol.
  2. "-j" JSON Output
    • Generates and prints a JSON string for all the symbols given.
  3. "-s" Silent Mode
    • Silent mode, hides all console output for each symbol. Best when used in combination with JSON generation.
  4. "-x" Excel Update/Creation
    • Appends the symbol to a generated excel file, coc.xlsx. If the symbol already exists in file, then its row is overwritten with fresh data.

The Financial Calculations

Understanding The 7 Criterion

CoC uses a variety of datapoints for appraising a company according to the 7-point system. Most of these values are fundamentals derived from financial statements and balance sheets, such as: Market Capitalization, P/E Ratio, Assets, Liabilities, etc.

Additionally, there are general indicators listed to assist in determining the strength of a company. These include things such as its price relative to its Book Value, or the Payout Ratio of its dividend.

Together, these help illustrate where potential weaknesses in a company may lie. Although CoC can be used to identify long-term strength in a company, it primarily identifies the presence (or absence) of long-term weakness.

What are the 7 Criterion?

Internally, CoC analyzes companies based on the following criteria. An answer of True is associated with relative strength, whereas False is associated with relative weakness.

  1. Does it have cheap assets?
    • Is Market Capitalization < Net Asset Value * 1.5?
    • Note: Net Asset Value = (Assets - Liabilities)
    • Essentially, is the value of all its outstanding shares less than 1.5x the assets leftover after paying all its debts.
  2. Does it have earnings growth of at least 2.9% annually for the last 5 years?
    • This equates to approximately 15% total growth over 5 yrs.
  3. Has it not had an earnings deficit in the last 5 years?
    • Were there any years where it lost money?
  4. Does it have a Current Ratio of at least 2.0?
    • Are the company's underlying assets worth at least twice its short-term debts (those owed in one year)?
  5. Does it have cheap earnings?
    • Is its Price-to-Earnings Ratio <= 15?
      • Essentially, is it priced no greater than 15x its annual earnings.
  6. Does the company have over $700M (USD) in annual sales?
    • This ensures that the company is large and consistently does real business.
  7. Has it not missed or reduced its dividend payments in the last 5 years?
    • This only applies if the company has previously paid a dividend.

Additional Criteria

  1. Analysis
    • A breakdown of which criterion pass/fail and how so. Meant to inform users of a company's risks.
  2. Graham Number
    • The Graham number is a calculation to determine a fair value for a company's shares. Purchasing at or below this value is seen as ideal.
    • It is calculated as the sqrt(22.5 * EPS * BVPS).
      • Sometimes CoC returns a negative value for the Graham number. This means that either the EPS, the BVPS, or both are negative.
      • This indicates a need for manually examining the two values further.
  3. Dividend Yield
    • Relative to the currently traded price, what percentage of profits are payed out annually by the company.
  4. Sector
    • A descriptor of which industry the company does business in.