StockStory Edge is an AI-enabled, human-guided service specifically designed to help individual investors like you beat the market.
AI-enabled research is revolutionizing investing, but so far only large institutions and professional funds have benefitted from it.
That doesn’t seem fair to us. We’ve seen over the years how many small, patient investors have made life-changing money, and we don’t want to leave them behind.
We started StockStory to help you beat the market and give you the same AI-driven edge as hedge funds.
For the first time, our proprietary data sets, cutting-edge AI, and market-beating research are designed specifically for you, the individual investor.
How Do We Approach Investing?
StockStory uses an AI-driven, human guided approach to find and invest in high-quality companies at reasonable prices. Our proprietary models target industry leaders with competitive advantages that remain strong even in down markets. This analytical approach works best with finding companies that you should hold for multiple years, preferably five years or more, while also avoiding struggling stocks poised to underperform.
StockStory Beats The Market
StockStory’s High Quality stocks generated a market-beating return of 175% from September 30, 2019 to September 30, 2024 vs an 94% return for the market (S&P 500).
*Read the report for detailed and technical information about our investment framework and performance methodology
StockStory Edge achieves this outperformance by utilizing AI and quantitative analysis to identify high-quality stocks and opportunities overlooked by the market.
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How Does StockStory Analysis Work?
Our algorithms identify high-quality stocks that will outperform the market over the long term.
O’Reilly Automotive (ORLY)
32,000% return over 30 years
Booking (BKNG)
1,900% return over 15 years
Trade Desk (TTD)
740% return over 5 years
Finding high-quality stocks is extremely hard. To be successful, one must analyze mountains of data while staying on top of constantly evolving market dynamics, competitors, and sentiment. Then, this time-consuming process must be repeated every time new information is available. That’s why it takes a full-time team of experienced hedge fund analysts to cover just a handful of companies.
We want to give everyday investors the same AI-driven and expert analysis at a small fraction of the cost. In better words, we’re bringing the hedge fund to you so you can profit from our timely insights.
What Data Do We Use?
Our algorithms process very large amounts of data multiple times a day. We source our information from companies like Standard & Poor’s, Nasdaq, and NYSE but also have direct access to detailed Wall Street models from most investment banks and brokers. We’ve also developed proprietary internal data sets by parsing company documents, SEC filings, call transcripts, and news articles.
We then decide what data will help us determine the quality of a business - separating signal from noise - and build sector-specific models (for example retailers, semiconductors, and software-as-a-service companies have their own models) by looking at historical values, trajectories of change, and estimates for the future.
How Do We Analyze Data?
Our AI algorithms not only analyze traditional fundamentals like free cash flow but also company-specific KPIs that give deeper insights into a business, often predicting its growth before the numbers trickle down into financial statements. We look at the revenue quality - is it recurring or one-off, is it growing organically or through acquisitions? We also analyze gross margins, operating profitability, and free cash flow generation while scrutinizing whether the company is retaining customers, the speed of its sales cycle, what direction inventory levels are moving, and how its average revenue per user is tracking over time.
We look at the data both from “first principles” and also in comparison to peers and competitors. We know what winners look like because we can rewind the clock to see how they looked many years ago and can use those insights to find stocks exhibiting similar qualities today.
This allows us to establish the quality of the business - and answer the simple yet extremely difficult question: “Is this a good business and a stock market winner”? We can also answer questions like: “Is stock X a better business than stock Y”?
The highest-quality businesses in our coverage get the “High Quality” tag. Companies tagged High Quality by StockStory have, as a group, significantly outperformed the market since 2019, and less than 7% of High Quality stocks have lost value since then.
Lastly, all StockStory models are regularly reviewed and iterated upon by our team of market-beating analysts to guarantee accuracy.
StockStory Rankings:
1. Stock of the Month
Every month, our analyst team led by Anthony Lee will hand-pick one High Quality company as our “Stock Of The Month”. These are rare investment opportunities with explosive upside potential and limited long-term downside risk. We trust them so much that we back every single one with our own money.
For the Stock Of The Month, we complement our AI-driven research with an exhaustive deep dive into the company, going as far as visiting retail store locations and calling customers. Companies with this stamp of approval will always have exceptional business quality.
2. High Quality
High Quality stocks are excellent businesses that are set to outperform the market over the long term. These companies feature some exciting combination of growth, profitability, and free cash flow generation. From 2019 to 2024, our High Quality stocks, as a group, have beaten the market and returned 175% vs 94% for the S&P 500.
3. Investable
Businesses that show some promising signs but are less well-rounded and of lower quality than the “High Quality” companies get the “Investable” tag. We’ve found that these stocks also outperform the market but by a smaller margin than our High Quality stocks. The results are also less homogenous - there are some big winners but also more losers. They are still worth watching though as some will inevitably grow into the High Quality tier.
4. Timely Buy
Stocks we identify as significantly mispriced by the market get a “Timely Buy” tag. Stocks tagged as both High Quality and Timely Buy outperform the market even better than just High Quality stocks. Only Investable and High Quality stocks can get the timely buy tag. See the following section for how we determine if a company is mispriced.
5. Underperform
We are not excited about companies that fall below our quality standards. While there may be some bright spots, these businesses have some deficiency in growth, profitability, cash generation, or the ability to invest capital at attractive returns that make us balk. It doesn’t mean that these stocks won’t make money. It’s just that these don’t fit our investment style of buying and holding solid companies over many years. Beauty is in the eye of the beholder, though, so you may see something in these businesses (a turnaround, for example) that we at StockStory are not willing to underwrite.
How Do We Approach Valuations?
It’s not a surprise that some companies trade at higher valuation multiples than others. The question investors should ask is whether the premium/discount in business quality justifies the premium/discount in price.
We use a quality-adjusted relative value approach. We believe that price is what you pay, and quality is what you get.
For every sector we cover, we pick the most useful valuation method. Sometimes it’s one metric like forward P/E, P/S, or EV/EBITDA, and sometimes it’s a combination of different metrics based on current and historical figures.
Since StockStory can assess the quality of every business in a given sector, we can analyze the mismatch between quality and price, and at times we find there are undervalued opportunities in the market.
The StockStory Investment Framework
There are few basic rules we at StockStory like to follow that align with the way we pick stocks and meaningfully increase the chance of success for any individual investor. Anthony Lee, our Lead Analyst, and his expert team put this framework together based on the experiences from their market-beating Wall St career.
1. Diversified Portfolio of 20 High-Quality Stocks
Diversification is the only free lunch in investing because the more stocks you own, the less likely that the failure of a single company will ruin your overall returns. Based on academic research from top institutions and track records of the best hedge fund managers, we recommend that investors hold roughly 20 stocks at any given time to achieve an optimal level of diversification.
2. Hold for at Least 3 to 5 Years
Our investment recommendations are meant to be held for multi-year periods, ideally 3-5 years at minimum. To outperform the market and truly achieve financial freedom, you must find high-quality companies and have the discipline to hold them. This unlocks the power of compounding returns, which Albert Einstein famously called “the eighth wonder of the world.”
A great example is Home Depot (HD). Over the last four decades, the stock has returned an incredible 27% annually. If you had invested $10,000 in the early 1980s, you would’ve turned your initial investment into over $82 million today. It seems obvious that you should’ve put your stock in a drawer and never touched it. But that’s always easier said than done; Home Depot went through many challenging periods including 1993 when the stock was down 22%, 2000 when the stock was down another 33%, and 2002 when the stock was down a whopping 53%. Many panicked and sold based on short-term price movements rather than taking the time to assess the quality and long-term potential of the business, and many missed out on its legendary 8,200× return.
3. Buy at Reasonable Prices
To be clear: owning high-quality businesses is the key to long-term success in the markets. You can increase your odds of generating true wealth by purchasing at reasonable prices. Yes, there are many ways to win, but these two core principles have made individual investors millions since the U.S. financial markets began.
Whenever we identify an attractively priced AND high-quality stock, we tag it with a “Timely Buy” sticker. Additionally, you can scroll down to the “Is Now The Time?” section in all our research reports to see our detailed thoughts on whether we recommend the stock at the current valuation or not.
We’re Here to Help You
At StockStory, our mission is to help you find the next generation of stock market winners so that you can send your kids to college debt-free, afford high-quality healthcare, move into the house of your dreams, or simply not have to skimp on vacations and once-in-a-lifetime experiences with your loved ones.
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