Richard D. Schwarz, a sell-side equity research analyst for 20 years, couldn't believe how many analysts missed the technology stock crash, and he set out to make sure it didn't happen again.
Mr. Schwarz and software developer Brad Pines, a scientist trained at Massachusetts Institute of Technology, Cambridge, devised a way of analyzing a company's financial information to anticipate changes in stock prices and bond ratings.
"What was lacking was analysis of the down and dirty fundamentals of the balance sheet and what these companies were actually doing vs. what they were saying," explained Bill Dix, senior vice president of sales at Mr. Schwarz's new company, Portfolio Search Inc., Fanwood, N.J.
At the core of the research is an overall strength rating, a percentile position against a "background portfolio" of Russell 3000 firms based on 62 fundamental filter ratios over 12 quarters. A strength rating of 75 for the last quarter of the timeframe, for example, would indicate that company was stronger than 74% of the firms in the background portfolio and allows users to see the strength trend over 12 quarters.