Warren Buffett is a pillar of the financial world, and with good reason. He has parlayed his theories on investing and market analysis into a substantial fortune, while others have used his advice to build their own highly successful investment portfolios. Some, too, have crunched Buffett's investment formulas, or something like them, into a suite of computer programs that produce an electronic version of the Buffett genius. Walkrich Investment Advisors, a consulting firm out of Cape Girardeau, Missouri, uses BrainMaker Neural Networks to do just that -- produce an investment tool (WRRAT) based loosely on Buffett's ideas and BrainMaker neural networks in predicting stock prices
How well does WRRAT perform in stock price prediction? From January '95 to January '96, a portfolio made up of WRRAT's 20 most underpriced stocks would have seen an average advance of 32.63%, compared to the S&P's 31.93% gain over the same period. More recently, WRRAT's 20 most underpriced stocks have enjoyed a 44.40% gain from January '96 to February '96, compared to the S&P's 38.65%.
How does WRRAT's forecasting compare to the flesh and blood Buffett? From July '95 to February '96, shares in Berkshire Hathaway, Buffett's holding company, have gained an average of 28%. With WRRAT's 1995 average advance of 32.63%, in financial forecasting Walkrich and BrainMaker can compete with the best.
Walkrich uses a BrainMaker neural network to determine the average premium (discount) the market is currently allocating to particular industries, and then uses that standard in an industry-by-industry neural network analysis designed to determine which stocks are trading below their market value. In that analysis, the neural network will appraise each stock, giving a price estimate (based on price/earnings, price/book and dividend yield) which is adjusted for size, industry, exchange listing and institutional influence. The neural net's per-stock price estimate is then compared to the corresponding industry average, producing a calculated measure of each stock's relative value -- in short, whether the stock is being underpriced or overpriced by the market.
Walkrich Investment Advisors produces a weekly newsletter with a list of the week's most underpriced stocks in each industry, an Industry Popularity Index (average premium allocated to each industry), and a buy, hold, and sell list. Walkrich's proprietary information is also broadcast to institutional investors worldwide over First Call and Bridge Information Systems. For details about their service contact: Walkrich Investment Advisors , 1212 Harmony, Cape Girardeau, MO 63701, (573) 651-9196.