DISCLOSURE: THIS POST MAY CONTAIN AFFILIATE LINKS,MEANING That I GET A COMMISSION IF YOU DECIDE TO MAKE A PURCHASE THROUGH MY LINKS, AT NO COST TO YOU. PLEASE READ FULL DISCLOSURE HERE
If you are an investor, you have probably heard of “The American Association of Individual Investors” or AAII.
So, what is really AAII?
Also, what can you get out of your AAII membership and its premium services such as A+ Investor?
Is AAII really useful in helping you make better investment decisions and get better returns on your investment?
Are there any better alternatives that can help you invest better?
In this review, I am sharing with you everything after trying AAII membership, so you can make a more informed decision.
AAII Stock Screener
One of the most useful tools you get from your AAII membership and A+ Investor is its stock screener.
AAII stock screener not only helps you save A LOT of time in your stock research, but its pre-developed stock screens also give you good investment ideas based on popular stock strategies.
There are a few types of stock screeners available:
- Stock Grade Screen
- Guru Screens
- ETF Screener
- Mutual Fund Screener
So, how do these stock screeners work?
And how do you use them to find good stock ideas?
Stock Grade Screen
This Stock Grade Screen is exclusive to A+ Investor subscribers.
With the Stock Grades Screener, you can find stocks with specific letter grades across the quant factors of value, growth, momentum, earnings estimate revisions, and quality.
There are roughly 6,100 stocks being tracked and rated every day.
For each stock, a grade of A-F is assigned for each of the five quant factors with “A” being the best and “F” being the worst.
Stock Grade is a stock-grading system based on percentile rankings of multiple key metrics within five investment factors: Value, Growth, Momentum, EPS revisions, and Quality.
For example, for the “Value” factor, some of the key metrics will be price-to-book, price-to-sales, and price-to-earnings.
If you are not familiar with value investing, the basics of value investing is that cheaply priced stocks tend to outperform more expensive stocks in the long term.
So, how do you tell whether the stocks are overvalued or undervalued, or fairly valued?
Generally, you use price multiples such as the stock price as a multiple of company earnings, price as a multiple of book value, and other such ratios to help you gauge if the stock is fairly valued.
Now, let’s get back to how the “Value” Grade is calculated for each stock.
Once you have all these key metrics of “Value” (e.g. P/B ratio, P/E ratio, etc), then these will be compared against the same metrics of other stocks in the same sector.
Then, a score in terms of percentile ranking will be calculated for each of these key metrics.
To get the overall score for the factor “Value”, the scores of all these key metrics are taken into account.
Then, a “Grade” will be assigned based on this system:
- Grade “A” : 0-20 Deep Value
- Grade “B” : 21 – 40 Value
- Grade “C” : 41 – 60 Average
- Grade “D” : 61-80 Expensive
- Grade “E” : 81-100 Ultra Expensive
Now, let’s take a look at the factor grade “Value” of Apple Inc.
As you can see from the table above, Apple Inc. has a Value Score of 70, which is considered to be Expensive.
Now, what you do is to put the stock on your Watch List and patiently wait for the Value Grade to change to at least “C” or better.
So, how do you use Stock Grade Screen to find good investment ideas?
For each Quant Factor (i.e. Value, Growth, Momentum, Quality, etc), there are sliders that you can use to limit the grade for that particular factor.
Also, you can screen the stocks by Sector or Industry.
Let’s say that you want to find value growth stocks with both Value Grade and Growth Grade no worse than “B”.
To further reduce the list of potential stocks, you might want to add in another filter of Momentum and Revisions Grade no worse than “C” and Quality Grade no worse than “B”.
From the screenshot below, you can see that there are about 126 stocks that have met my criteria.
If you think that’s still too many stocks to go through, then you might want to just show stocks with “Value” Grade no worse than “A”.
Once you have a list of stock ideas, then you can use Stock Evaluator to take a deeper look at any individual stock.
Stock Evaluator is everything you need to analyze the fundamentals of a listed company.
Below is a screenshot of Apple Inc. inside Stock Evaluator.
Not only do you get a quick overview of Apple Inc.’s fundamentals, you can also take a deep dive into the other tabs such as the Grades, Charts, News & Events, Valuation, Growth, Ratios, Analysts (analyst ratings), Earnings (consensus estimate data), Financials (detailed quarterly and annual financial statement data) and Insiders (insider buy and sell activity) tabs.
If you want to follow a specific stock strategy that is based on the investment philosophies of investing “gurus” such as Warren Buffett, Benjamin Graham, Peter Lynch, and William O’Neil, here’s the good news.
AAII has developed 42 different stock selection strategies.
Below is just a screenshot of the performance of the stock strategies that are sorted by annual price gain.
So, how have these 42 so-called “Guru Screens” performed over the years?
- 35 of them (i.e. 83.3%) have beaten the S&P 500 respectively since its inception
- 4 of them (i.e. 9.5%) have achieved similar returns to the S&P 500 since its inception
- 3 of them (i.e. 7.2%) have underperformed the S&P 500 since its inception
One of the best performing “Guru Screens” is William O’Neil’s CAN SLIM screen.
The blue line, green line, and yellow line represent three slightly different versions of William O’Neil’s CAN SLIM stock picking strategy.
The red line is the performance of the S&P 500.
So, you can see that William O’Neil’s CAN SLIM screens have beaten the market by a large margin every single year since 2000.
Now, what is William O’Neil’s CAN SLIM stock picking strategy?
How does it really work?
To understand the criteria that William O’Neil uses to pick the best high-growth stocks, you first need to know that he merges both fundamental analysis and technical analysis.
To him, fundamental analysis is important for identifying good companies while technical analysis is used to find the right timing to buy those stocks.
So, he came up with 7 common characteristics shared by the best growth stocks before they soared.
These characteristics form the foundation of the CAN SLIM system.
So, what does CAN SLIM stand for?
- C: Current quarterly earnings per share (EPS) increases (e.g. quarterly EPS growth of at least 20%)
- A: Annual earnings increases over the last five years (e.g. annual EPS growth of at least 20% over the last three to five years)
- N: New products, management, or new events/information that push the company’s stock to new highs.
- S: Scarce supply coupled with a strong appetite for a stock creates excess demand
- L: Leader stocks are preferred within the same industry (i.e. relative strength rankings (RSI) of 80% or 90% with a chart base pattern.)
- I: Pick stocks that have institutional sponsorship by a few institutions with recent above-average performance
- M: Market direction by reviewing market averages daily (i.e. high growth stocks tend to outperform the market in a bull market)
If you are looking for high-growth stocks to invest in, William O’Neil’s CAN SLIM screen is a good place to start.
But, here’s the downside of using this screen.
The performance illustrated in the graph is achieved by buying in equal dollar amounts ALL the stocks that have passed the screen at the start of the month and selling and re-balancing the stocks that have not passed the screen at the end of the month.
So, that means you have to actively manage your portfolio at least twice every month.
On top of that, there might be only very few stocks passing the criteria.
When this happens, are you willing to invest a lot of money in just two or three stocks?
Ideally, you should have at least 1o to 15 stocks in your portfolio to diversify your risks.
So, what you can do instead is you could follow the top 5 Guru Screens and divide your money into five different portfolios that track different investment strategies.
Alternatively, you can also use Stock Rover to screen for good stocks.
Personally, I use it to find investment ideas as well as monitor my stocks because it has the most comprehensive financial and fundamental data on all US and Canada stocks.
On top of that, it has a lot of great pre-defined stock screeners based on some of the greatest investors’ investment strategies.
Try Out Stock Rover Risk-Free For 14 Days Now (No Credit Card Required)
AAII Shadow Stock Portfolio
The AAII Model Shadow Stock Portfolio was created to show AAII members how to invest in promising micro-cap stocks because research has shown that micro-cap value stocks tend to outperform the market in the long term.
Micro-cap stocks are stocks with a market capitalization between approximately $50 million and $300 million.
On the other hand, large-cap stocks are stocks with a market capitalization of over 10 billion.
By the way, AAII manages this real-money stock portfolio by simply reviewing holdings on a quarterly basis.
So, how has the AAII model shadow stock portfolio been performing?
|3-Year Risk-Adjusted Return
|Shadow Stock Portfolio
|Vanguard 500 Idx (VFINX)
As you can see from the table above, micro-cap stocks outperformed the large-cap stocks in the long term (20-year period), but the volatility (i.e. risk measured by standard deviation) of micro-cap stocks is much greater than large-cap stocks.
So, the key to investing in micro-cap stocks is to diversify and NOT put all your money in just a few stocks.
AAII Membership & Premium Services Cost
So, how much does AAII Membership cost?
- Basic AAII Membership: $29/year
- 4 Year AAII Membership: $99
- Life-time AAII Membership: $390
- 12 Issues of the AAII Journal
- Free AAII Model Stock Portfolio
- Access to AAII.com
- Top Mutual Funds Guide
- Yearly Tax Planning Guide
- Access to Local Chapter Meetings (over 50 nationwide)
- 60 Online Stock Screening Strategies
- And much more!
Apart from the membership, AAII also provides a few premium services such as A+ Investor, Stock Investor Pro and Dividend Investing, VMQ Stocks, and Stock Superstar Report.
A+ Investor is essentially a suite of investment tools that include the following:
- Quant and Factor Stock Screens updated daily for over 30,000 stocks, funds, and ETFs
- 40+ Guru Screen updated daily
- Stock Evaluator (i.e. financials, fair value, grades, charts, news, events, etc)
- Portfolio tracking and analysis
- Diversification analyzer and insights
- Mutual Fund and ETF evaluators
- Interactive asset allocation views of your portfolio
AAII A+ Investor is very useful to help you research and analyze the stock market as well as manage your stock portfolio.
For $149/year, it’s $12.50/month which is quite affordable.
As for AAII’s other premium services, personally, I think they are not really necessary because you can use the Stock Grade Screens and Factor Screens inside your A+ Investor to find good dividend stocks and value momentum stocks yourself.
How does AAII compare to Stock Rover in terms of pricing?
Stock Rover has the following pricing plans:
- Essentials at $7.99/month (or $6.67/month if billed annually)
- Premium at $17.99/month (or $15.00/month if billed annually)
- Premium Plus at $27.99/month (or $23.33/month if billed annually)
Stock Rover Premium is comparable with AAII A+ Investor.
With Stock Rover Premium, you get almost everything that AAII A+ has to offer plus more much.
For example, it gives you a lot more fundamental and financial metrics as well as stock ratings, scores(growth, value, etc), and valuations to help you with your research and analysis.
On top of that, it puts everything in an easy-to-manage interactive table for you to compare with other stocks.
That’s also the reason why I am using Stock Rover for my own stock research.
Try Stock Rover Out Risk-Free For 14 Days Now (No Credit Card Required)