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What do the colours mean?

Lincoln preferred companies

Stock Doctor often uses colour to help identify different categories for easy and quick reference. Below is a description.

Star Stocks - Lincoln preferred companies

Lincoln preferred companies are those assessed by Lincoln as quality stocks. We believe they are fundamentally superior and should therefore be the first point of focus for an investor looking to build a well-diversified portfolio.

In order to help you even further to determine which stocks are suitable for your investment objective we break the Lincoln preferred companies into three categories:

Star Growth Stocks 

Meeting Golden Rules 1, 2 and 3 from a growth perspective, these stocks suit investors looking to invest in the share market for capital appreciation

Borderline Star Growth Stock

Not quite yet meeting Golden Rules 1, 2 and 3 from a growth perspective, these stocks suit those looking to invest in the share market for capital appreciation but are willing to take on higher risk knowing that these stocks have the potential to become star growth stocks in the near future. 

Star Income Stocks

Meeting Golden Rules 1, 2 and 3 from an income perspective, these stocks suit investors looking to invest in the share market for dividend income

Portfolio Optimiser

The Portfolio Optimiser utilises a traffic light system to help investors identify a stock's position within a portfolio and selected profile.

The status circles reflect the following:

  • Green: The company fits within the profile selected
  • Amber: Though the company does not meet the properties of a stock within the selected profile, it is still a Stock Doctor preferred company
  • Red: The stock does not meet the selected profile nor is it a preferred company. Action is recommended

The status circles make it easy for an investor to determine whether a stock is suitable for the appropriate profile selected and therefore allows them to make quick and informed decisions.

The optimised suggestions are then brought to the investor’s attention allowing him/her to research a manageable selection of companies selected on appropriateness to his/her profile and a potential investment’s alignment to that profile given current holdings.

 

Users can also remove a stock from the Optimiser process so that it does not show it is out of alignment. This may be because the stock holds a tactical/specific role within the portfolio for an investor and therefore they wish to exclude it from the Optimiser process.

By clicking on the lock symbol the stock will not be displayed within the status circles as being out/in alignment. It will be up to the individual investor to ensure the stock continues to meet his/her objectives.

Note: If you choose to lock a company it will not be given an alignment status and no coloured dot will appear against that company in any area of the portfolio manager.

Financial Health Rating

 

Financial Health is our first and most important Golden Rule.

Developed in 1982 by Lincoln founder, academic and former Olympian Dr Merv Lincoln, Lincoln's unique Financial Health model, the L Score, assesses key accounting ratios relating to each company's profitability, cashflow, liabilities and assets.

Financial Health measures a company’s ability to absorb a shock to its operations should something go wrong at an operational or financing level.

Lincoln’s Financial Health methodology, derived from Dr Merv Lincoln’s PhD thesis, used a multivariate approach, whereby a unique set of financial ratios are calculated, combined and weighted to produce an insolvency risk score representing the overall Financial Health of a company.

HEALTH RATING FINANCIAL STANDING

Strong (Blue)
Satisfactory (Green)
Early Warning (Yellow)
Marginal (Brown)
Distress (Red)

If a company has a Strong or Satisfactory financial standing it will be interpreted as having a balance sheet with borrowing capacity to finance growth.

If a company is in the zone of Early Warning it is neither satisfactory nor particularly unhealthy. The company will need to reduce debt or improve cashflows in order to achieve a healthy financial position.

A Marginal financial standing indicates risk above desired levels. Hard decisions are required by management to get the company back into better shape. The decisions required would be detailed. A critical factor here is assessment of the ability of management to reverse the decisions that led to the precarious financial standing.

If the company is in Distress it is exhibiting the financial characteristics of failing companies. It will be difficult for this company to recover and any recovery will generally be slow as it tends to take longer to get out of a difficult situation than it does to get into one.

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