Vector Vest
VectorVest is a stock screener that analyzes stocks based on a set of criteria determined by its founder Dr. Bart DiLiddo. Vector Vest’s current location is listed as being in Cornelius, North Carolina.
I subscribed to Vector Vest with the goal of finding a system with a different approach than what I was used to, and with hopes that it could provide some new investment outlooks and opportunities. While Vector Vest does provide a different approach to a technical analysis; the system is overly complicated and does not give any real guidance like when to buy, when to sell, etc.First things first, Vector Vest software is complicated and must be downloaded to your computer in order to use the system. If you have a MacBook, or Apple computer you must purchase windows software in order to actually use the software on your computer. So if you were to purchase the lowest level of Vector Vest’s software at $645 on a yearly basis and you were to add an additional $60- $140 for the necessary Microsoft software, you have already made a steep investment just to try the service. It would be much better if Vector Vest’s tools were made available online, without having to download external software to your computer.
The biggest flaw within the system is that Dr.Diliddo says Vector Vest is able to identify “safe stocks” in good markets, and the trouble with this philosophy is that this system does not take any of the stocks fundamentals into account. They also claim that their system “identifies a stock’s long-term price appreciation potential”, but the reality is it is simply not possible to identify “safe” or “long term growth” stocks based solely on a technical analysis. A fundamental analysis is required in order to identify “safe, growth stocks” and Vector Vest does not incorporate a fundamental view into their system. How could one look at the technical analysis of a stock and identify it to be a “safe” or “long term growth” stock, when the technical aspects can change by the minute?
This system uses a color guard or “stop light” like system to advise subscribers of the best time to purchase stocks. For example: If there are three yellow signals, you are advised to use caution when buying stocks. If there are three green signals, you advised to buy. If there are three red signals you are advised not to buy. There are three signals, and if part of the system’s criteria comes in rated lower than the day before, that particular signal becomes yellow. If it is higher than the day before, the signal is green (confusing… I know). During my subscription there were very few “green” days. In fact, while I was a subscriber to the site almost every single day was a “yellow signal”; Vector Vest’s way of telling me to proceed with caution. So if every day you are advised to “proceed with caution” Vector Vest can’t be considered wrong if a stock you bought based on their system tanks, right?
Vector Vest software does have different features or watch lists available that recommend a set amount of stocks based upon their rating scale of buy, sell, or hold. While the majority of the stocks seem to be hold/sell, there are some stocks that are recommended as a buy. The main purpose of the system would be to search stocks you are already interested in, to see Vector Vest’s opinion of that stock. After seeing a particular stock is rated a buy, you are then instructed to assess each stock based on the systems ratings: RV (relative value), RT (relative timing), and VST (master ranking for stocks) to decide if you should buy it. These values range from 0-2; anything over 1 is considered favorable, and anything under 1 is considered unfavorable. You are instructed to sort your stocks by “RT”, or relative timing. While the VST is typically above 1 if a stock is rated a buy, there were countless examples of a stock’s RV or RT being less than one; which would be considered “unfavorable” but are still ranked as a buy (again, confusing… I know). Another huge pitfall of the service based on their recommendations, is that these recommendations can change on a daily basis. It is not uncommon to see a stock go from a “buy” to a “hold” or “sell” within the same week, possibly within the same day! For example: If you were to buy 100 shares of a stock, and it goes from a “buy” to a “sell” rating you would most likely sell for a loss. Well what happens if that same stock is now rated a “buy” again only in a short time period, after you just sold for a loss (you can see how this can get out of hand). There were also numerous examples of the system recommending a stock as a sell and the next day that same stock is now recommended as a hold, which is simply not feasible. You are instructed to also analyze a stock based on the graphs the system produces. The trouble with this aspect is, if you look at a stock that is currently rated a “buy”, you will see that there are multiple time periods within any given week, month, etc. where that stock changed from a “sell” to a “hold” to a “buy”, etc. It is easy to recognize how likely you will end up on the losing end of the stick following their recommendations.
Dr. Diliddo claims that “VectorVest has signaled every major market turn since 1991.” That in itself is a very strong claim, that that is unlikely to hold any true merit. I am sure you have seen the ads claiming huge results, using their exclusive market timing indicators and high rated stocks. It would appear that Vector Vest has built their system on back tested strategies that have worked well in the past or would have worked well in the past, then picks the best results to make very large claims. This is a difficult system to apply, as past performance is certainly not an indicator of future results. Once an old model becomes obsolete, they then modify their data to back test results on a different time period and it starts all over again. The system cherry picks stocks and back tests what did well in a certain period of time. So Vector Vest’s displays the stocks that received a buy rating and gained 500%, but leave out the vast majority that did nothing or were major losers. The obvious problem with using a back tested strategy is that it is difficult to apply to a live market as the market is constantly changing but the strategy does not.
The last thing worth pointing out is the amount of excess products and services Vector Vest attempts to push on its subscribers. Vector Vest offers personal coaching courses for $245 for 3 hours, to teach you how to use the system (which you may actually need, just to understand this system). So if you were to purchase the lowest level of Vector Vest at $645 for a year, and participate in their “personal coaching” you are already in the hole nearly $900 (not to mention if you want to use this software on a MacBook). They also offer courses ranging anywhere from $195- $2,495, which you will be constantly reminded of through their emails. Don’t forget the multiple expensive add-ons such as the “Options Pro” screener for an additional $2,795 a year! Last but not least, by simply agreeing to the Vector Vest subscriber agreement you are also consenting to “receive, and authorize Vector Vest and those it contracts with on its behalf to place and make, telephone solicitations and telemarketing sales calls” (that is an actual excerpt from their agreement). After multiple attempts at trying to cancel my account via email, I was forced to call in because they claim they cannot cancel your account via email request. They say “To ensure accuracy we need to verify your account information prior to terminating your service” and directed me to call in, which was obviously a final attempt to sell me on the service. After speaking with a member of their staff for a moment it is apparent that the employee I spoke with had no experience with investing, or trading stocks. Instead the employee’s focus was more on trying to sell me the subscription, and sell me an expensive training course. I chose to pass.
All in all, Vector Vest’s software is an interesting conversation piece at best, but not very useful as the system is overly complicated, does not produce any real measurable results and is impossible to hold anyone accountable for their recommendations. Dr. Diliddo is obviously a master salesman with great marketing techniques, but is clearly in the business of selling subscriptions without living up to their claims.