Doug suggested to use the following email he recently sent to a member regarding why stocks highlighted in IAS might not get a high rating in the Take Stock tool here on StockCentral, since the question (and similar ones) do come up from time to time:

Take Stock is a mechanical tool for analyzing a stock. As such, it is rigorous and very conservative in its calculations, and relies solely on the numbers without any human input. It doesn’t “know” anything about the economy, or about the overall market, or about a company’s management team, or about the situation in a current industry, or about the factors that affect a company’s profitability – all it knows is what the numbers say. If a one-time event has a negative impact on a company’s performance, all that Take Stock knows is that there has been a recent change that has had a negative effect, and if that negative trend continues, then the stock will likely not perform according to your expectations. To Take Stock, it’s better to be safe than sorry, so it will always err on the side of caution.

Knowing whether an event is an isolated incident or the start of a long-term trend can be difficult to discern, particularly for beginning investors. For those investors, the Take Stock tool can help them from falling into the trap of buying stocks of companies that don’t have consistent, long-term growth; stable profitability; and a share price that provides for an adequate return.

For more experienced investors, the Wizard in the Take Stock program can allow you to override the default judgment items, so that you can decide for yourself if a company is worth considering based on your personal assessment of its circumstances.

On the other hand, the Investor Advisory Service is written by professional, expert stock analysts. It’s their job to know how to interpret the numbers, and also how to evaluate all of the other considerations that go into making an investment decision. They will review recent issues affecting a company and decide if they create a buying opportunity or a warning sign. Our analysts stake their reputations on their stock selections and have a track record of outperforming the overall market that backs up their extensive expertise. They are sometimes more “aggressive” in their selections than beginning investors would be taught, but they are actively tracking all of their selections and so will make sell recommendations as soon as would be required if a particular selection isn’t working out.

For any stocks that come up with an automatic negative rating, you can drill down through the many pages of the Take Stock analyses of each company and learn why Take Stock has a more negative view of the company and recommends that cautious investors proceed with care. Those negative elements are highlighted in red throughout the Quality, Mood, and Price considerations.

Our subscribers use Take Stock in many different ways. Some use it as a tool to conduct a “first look” at a new investing idea; if Take Stock is particularly negative, then they might decide to move on immediately to another idea. Others may use Take Stock to “confirm” their own stock analysis or as a second opinion after they’ve carried out their own stock study, to bring to light issues they might have missed or to provide reinforcement to their conclusions. Very conservative investors can use Take Stock alone as their sole source of stock analysis, only buying companies that are favorably rated by the program.