What does IBD/O'Neil/Marketsmith mean by Alpha?

[ms33]

What does IBD/O'Neil/Marketsmith mean by Alpha which they define as "how much a stock would have appreciated or depreciated on average on a daily basis over the last year, assuming the S&P 500 remained unchanged during the period"?

I think they've bastardized the concept of alpha which I take to be the residual return to a stock after controlling for beta. Their calculation of alpha as I understand it is simply the daily return of a stock over a one year period. Simple enough. But Marketsmith shows that two stocks can have the same alpha and yet different 12 month price appreciation:

STRL ... .32% alpha ... 166% 1 Yr Price Chg
NVDA . .32% alpha ... 218% 1 Yr Price Chg

 

[TrAndy2022]

What does IBD/O'Neil/Marketsmith mean by Alpha which they define as "how much a stock would have appreciated or depreciated on average on a daily basis over the last year, assuming the S&P 500 remained unchanged during the period"?

I think they've bastardized the concept of alpha which I take to be the residual return to a stock after controlling for beta. Their calculation of alpha as I understand it is simply the daily return of a stock over a one year period. Simple enough. But Marketsmith shows that two stocks can have the same alpha and yet different 12 month price appreciation:

STRL ... .32% alpha ... 166% 1 Yr Price Chg
NVDA . .32% alpha ... 218% 1 Yr Price Chg

Why do you bother about ? IBD does not work. Just look on the ETF "FFTY" that replicates it.

https://www.innovatoretfs.com/etf/?ticker=ffty&ticker=ffty

 

[ms33]

IBD50 doesn't work bcz they have a bunch of clowns making the stock picks. Essentially the front line staff selects their best picks in rotation. Pretty robotic crew.

 

[murray t turtle]

What does IBD/O'Neil/Marketsmith mean by Alpha which they define as "how much a stock would have appreciated or depreciated on average on a daily basis over the last year, assuming the S&P 500 remained unchanged during the period"?

I think they've bastardized the concept of alpha which I take to be the residual return to a stock after controlling for beta. Their calculation of alpha as I understand it is simply the daily return of a stock over a one year period. Simple enough. But Marketsmith shows that two stocks can have the same alpha and yet different 12 month price appreciation:

STRL ... .32% alpha ... 166% 1 Yr Price Chg
NVDA . .32% alpha ... 218% 1 Yr Price Chg

%%
Even the better + best would not hit 100% all the time.
LOL Congrats, you found 2 that did better than 100% in one year.
IBD founding father is no longer with us, but FFTY never did very well[compared to SPY benchmark], eVen when he was LOL
I found a couple more errors in his helpful books, but that'$ another thread

 

[ms33]

The two stocks, STRL and NVDA, currently show an IBD defined alpha of 32 bps /day. They're not stock picks; I chose them bcz their calculated alpha contradicts IBD's own definition of alpha as the average daily return of 1 yr price appreciation. That shop would have benefitted long-term from having a formal Director of Research though that would have been incompatible with Bill O'Neil's stewardship. Favorite explanations: #1 "We show it that way bcz that's how Bill did it." #2 "It's proprietary." There's value in their process but it's disconcerting bcz everyone who works there has their own idea of how to find it.