In this review, we look at market timing and analytics software VectorVest. With a rich history dating back to the late 1970s, does the platform stand up today?
What is VectorVest?
VectorVest is a stock market analytics software developed to simplify the decision-making process for individual investors. The software dates back as far as 1978 when Bart DiLiddo, PhD started developing mathematical models to time the stock market, as well as rank stocks. The software aims to give individual investors access to quantitative analytics at a retail price.
Who is Bart DiLiddo?
Bart is the founder of VectorVest. He is a mathematician with a PhD from Case Western University, graduated from MIT, and was formerly a president at Goodrich. VectorVest launched as a weekly issued book of stock rankings in the 1980s and DiLiddo has been developing the system ever since.
VectorVest separates their membership tiers by how up-to-date your data is. Considering that this tool is more targeted at investors and positional traders, I don’t see how intraday or real-time data adds enough value to justify the price jumps. This pricing strategy would be more appropriate for a day trading scanner, however, one can argue that shorter term traders will find value in real-time updates of the market timing tools.
The VectorVest platform is based on a few core indicators. Those are:
- Value: Quantitative measure of a stock’s actual value based on discounted cash flows, earnings, profitability, and future guidance.
- Relative Value: Long term price appreciation potential compared to AAA corporate bonds.
- Relative Safety: Risk indicator. Looks at consistency and predictability of a company’s financials.
- Relative Timing: VectorVest’s proprietary trend identification indicator.
- Direction (direction of move)
- Magnitude (size of move)
- Dynamics (speed of move)
- VST (Value, Safety, and Timing): A weighted average of VectorVest’s Value, Safety, and Timing indicators.
Market Timing Tools
One of the core features of VectorVest is their market timing tools. They claim, that based on their proprietary market indicators, they can send out reliable buy/sell signals. Their headlining tool is the color guard.
The color guard is VectorVest’s main market timing indicator (similar to the Chaiken Analytics “power gauge”). It is expressed as a simple semi-circle graph with a pointer indicating the algorithm’s reading of the current market trend or direction.
The color guard looks at three market indicators to produce it’s reading
- Price movement of VectorVest Composite Index
- Relative Timing
- Buy-to-Sell Ratio: Looks at the health of the overall market
Market Timing Graph
In addition to the Color Guard, VectorVest includes their proprietary indicators as technical analysis studies, allowing traders to develop their own setups based upon them. As you can see, the chart is currently bullish, as all three indicators have recently crossed above the zero line.
The VectorVest scanner is mostly based on their indicators, however, they do have various technical and fundamental indicators included if you’re looking to add specific criteria to your scans, but this would not be my scanner of choice for such a task. if you’re looking to build a watchlist based on broad criteria, this would be my scanner of choice. If you are looking for a powerful intraday scanner, you would likely prefer a scanner like Trade Ideas.
Let’s say, for example, we already have a long portfolio of stocks that we’re happy with and want to start a short portfolio to hedge against market drops. We’re going to stick to a few basic metrics like VectorVest’s VST (Value, Safety, Timing), their buy/sell recommendations, and the relative safety indicator.
We’re going to filter for stocks that have a sell rating issued by VectorVest, a VST level below 0.5 (scale goes from 0 to 2), and a Relative Safety level below 0.5. The reason we include Relative Safety in addition the the VST indicator (which already has a safety filter built in) is because we want to overweight towards stocks that have unstable financials and operations, as those make excellent short candidates.
As you can see we get a list of several stocks with very poor price movement, fundamentals, and stability. We now have a short list that we can research and make trades upon.
VectorVest has a built-in tool for backtesting trading strategies. The tool is quite similar to most retail backtesting packages like those of Money.Net or TradingView, however they do have some of their own unique features that capitalize off of the VectorVest platform.
When developing a new trading system, the backtester asks if you’d like to add any of their proprietary market timing filters. So, instead of choosing stocks from a large watchlist like the S&P 500 or the tech sector, it will only trade stocks that make it through their market timing system. In this example we choose to use the market timing filter, and use their Confirmed Calls system.
From there, it mirrors most other retail backtesting software. You choose a set of criteria from your saved scans list, set stop loss criteria, short selling criteria, and your criteria for when you go to cash.
Here is a sample backtest I did, starting the portfolio in 2009.
Like most similar services, VectorVest has model portfolios based on their indicators and trading principles as an example of what successful implementation of their system looks like.
Known as “Watchdogs,” the VectorVest alert system sends you desktop alerts based on criteria you feed it. Criteria like support/resistance levels, and MACD crossovers are possible with these alerts.
VectorVest’s target demographic is working professionals with lots of savings, and retirement investors. VectorVest caters to self-directed investors, but is slightly more complex than services like Motley Fool and Jim Cramer’s Action Alerts Plus. This market is pandered to by so many newsletters, services, systems, and the like. Most of the offerings don’t add enough value to these investors to justify them straying from index investing.
VectorVest’s value-adds are time and intelligence. Any service can offer you dozens of data points, but most of VectorVest’s target customers have no interest in creating sophisticated systems or trying to analyze a bunch of data. They want a simple way to find good companies, do a bit more research on them, and make sure they don’t buy a falling knife. VectorVest does all of this in a short period of time with their stock picking algorithms.
I’m not saying you should start a hedge fund based on VectorVest’s signals, but to me, it’s probably the best way for the indexing-skeptical casual investor to build a portfolio of fundamentally sound companies that are moving in the right direction.
Self-directed investors who don’t rely on proprietary metrics may prefer a research platform like Stock Rover, Ycharts, or Koyfin.
They are thieves! Heads up if you forget to call on the day of them taking payment after your trial, they won’t give you a refund, even if you never used their service!
See my comment below Cathy….. I sympathise with you!
PLEASE BEWARE of this company. I innocently took a 5 week trial and spent HOURS on the phone with their retention team (I saw on the Net , later, that their retention team is bigger than any other team there!) and wrote loads of long emails.. .. in an effort to cancel the possibility of being ensnared by a full time subscription
They’ve got ALL sort of stories…”Our refund departments have problems right now! I responded by saying they had no problems TAKING my money. BEWARE ANY COMPANY WHO TAKES YOUR CARD DETAILS FOR A TRIAL WITH THE PROMISE THAT YOU WON’T CONTINUE IF YOU CANCEL BEFORE THE TRIAL EXPIRY. They are so bad that it’s almost laughable, and certainly unbelievable
They tried EVERY angle to retain me even going as far as playing the, unbelievable to me, GOD card….trying to stop me cancelling by trying to see if I had a religious weakness…. but I’m from the UK and half of us aren’t into that! The joke is that this guy probably goes to church every Sunday and pretends to do the right thing….SHAMEFUL!!!!
They try EVERY angle!! UNBELIEVABLE; and I don’t know how they get away with it.
They do a disservice to the hard-nosed American business practices by bringing that to a new low.
It’s a DAMN shame as I like the concept very much being an Engineer type myself, like DeDildo. It needs to be rewritten now as, although it must have been great in the nineties, it’s starting to look old hat. It’s also VERY expensive indeed compared with the likes of Trading View or TradeStation/IBKR Global. The ‘add-ons’ are MURDEROUSLY expensive. I think the whole package is aimed at the super wealthy ageing Americans.
GOOD SOFTWARE BUT WITH THE MOST AWFUL COMPANY ‘FOOT IN THE DOOR’ CULTURE…..TRUST ME ON THIS!! I’m 75yrs now but was around 70 at time of trial. I’ve been charting for around thirty years. In general life I have NEVER EVER encountered a company or treatment such as I experienced…. I hardly know what to say…it’s so bad….I wished that I’d recorded the conversations and put them on YouTube…THAT’S what someone needs to do.
I am not going to be a member of any service that doesn’t give me a power to cancel my subscription in my account page with couple of clicks.
I’ve used VectorVest for several years, but am now stopping. It’s because I checked their data against another source (MSN.com), and found that it’s unreliable.
Upon consulting with their support folks, I learned a surprising fact: VectorVest does not report earnings, but only FORECASTS (or “estimates”) of earnings. Even after the quarterly earnings reports come out, they will keep the forecast data in their history, even if it’s wildly inaccurate.
EXAMPLE: Comparing Facebook from July 2019 to June 2020.
VectorVest shows revenue steadily increasing month by month. MSN shows that revenue peaked in December 2019.
VectorVest shows earnings stuttering for the first 3 months, then going steadily upwards from then on. MSN shows that earnings peaked in December and never recovered to the earlier level.
If you are a VectorVest user, even on a trial, you can see this for yourself.
1) Choose any stock, and open a graph for it.
2) Show at least the graph line for earnings.
3) Notice that it gives “earnings” right up until today. But no one will know the true earnings until they are reported, perhaps two or three months from now.
4) Furthermore, notice how the “earnings” line on the graph changes every day, sometimes with big changes up and down. All this is just estimates. A graph of true earnings will have just four data points each year, one for each quarter.
5) For Canadian stocks, I also notice that the dividends graph line often has movements up and down from day to day and week to week. This is pure speculation; it’s not based on actual data.
VectorVest simply is not a trustworthy basis for investment decisions.
I used VectorVest for 6mo, I dont recomend it. Software has too many problems for the price they charge. One month it was down 100% for 2 weeks and when they got it back up, it was having too many problems. They told everyone we were getting a refund and I never got one, plus I got an extra charge and when I asked what was that charge they told me they didnt know and I was going to get a call back. Never got a call or refund. Stay away, this company is greedy and dishonest…