Portfolio123 Review

I’ve had the opportunity to try out Portfolio123 for the past couple of months.  Portfolio123 is a backtesting engine and trading system creator.  It is populated with historical data from Reuters, one of my favorite data sources for stock fundamentals.  Given my interest in backtesting Joel Greenblatt’s Magic Formula, I have really enjoyed this tool.

Portfolio123 has six main features. The first main feature I tried was the Ranking system creator.  You can develop very complex stock rating systems using a vast array of variables.  You can create complex equations that even are able to utilize conditional expressions such as if-then statement, And, Or, Max, Min, and several other functions.  This is the first time I’ve found a ranking system that can do that.  In addition, you can create several ranking factors and determine how they are weighted in determining the overall rank.

The next major feature is the Screening tool.  You can create a list of rules to filter down the universe of stocks that you wish to analyze and then you can apply a ranking system to the resulting stocks.  The screening tool allows you to backtest the performance of a screen and also determine the current top ranked stocks that the screen will select.

Screens can be taken one step further using the simulation tool.  The simulation tool lets you establish a starting capital amount, benchmarks, commissions, slippage, rebalance frequency, and position size.  Then you select a ranking system, buy rules, sell rules, and finally the start and end dates for the simulation.  Simulations can be tested as far back as March 31, 2001.  I wish the data went back a few more years, but at this point Portfolio123 can’t go back any further.  After you run the simulation, you get several screens worth of statistics, transactions, and performance numbers.

You can then use a simulation as a starting point to creating a portfolio.  The portfolio tool can help you select stocks to trade and track your trading performance over time. I still haven’t fully utilized this feature.

Another feature labeled, Stock, allows you to type in a stock symbol and review its historical ranking over time using one of the custom ranking systems that you have developed.  The Stock feature can also be used to get a profile of the stock and a list of fundamental ratios.

The final feature is the Portfolio123 Community.  The Portfolio123 community is actively involved in creating and sharing trading systems.  I asked a few questions on the message board and I received good answers fairly quickly from other members.  This is a big plus with a complicated and powerful tool like Portfolio123.  Even after several weeks of using Portfolio123 I realize that there are probably additional powerful features that I have not even discovered yet.  The community message board and publicly shared user created ranking and portfolio systems have help me identify some of not so obvious features that I might not have discovered on my own.

Portfolio123 is a powerful stock screening and backtesting tool that can be very helpful in testing out theories or even creating mechanical investing systems.  I avoid purely mechanical systems, but I find backtesting useful to test out some theories I may come up with.

I’ll be using Portfolio123 over the next couple of days to emulate the Magic Formula Investing picks and backtesting the formula.  If you are interested in getting involved with my backtest, you might want to consider signing up for a 30-day free trial.  I’ll need all the help I can get in fully using this tool to test out the Magic Formula. Tomorrow I plan to share with you my attempt to create a Magic Formula ranking system using Portfolio123.