Given a data base Industry Associated Data (like
MyFin2
available for
download)
of companies whose parameters vary widely. How can one determine the
*best* companies of these ? Any mediocre business student
can tell you one would like the most growth at the least `cost` as is
demonstrated in this table:

4 Value Parameters | 2 Growth Parameters | |||||
---|---|---|---|---|---|---|

P/E | ROE | Debt/Equity | Price/Book | Rev Qtr/Yr Ago | EPS Qtr/Yr Ago | Rank |

low | high | low | low | high | high | low |

The Rank is
derived from the other parameters, and represents a statistical ordering
measure for finding the `best` (statistically optomized?) companies. Sql
provides many methods of
targeting those companies we like best. Suppose we wish to eliminate companies
where ROE is negative (or as Jack Welch might say less than the T-bill rate).
Debt/Equity < 1 might be another tempting *filter*. Who wants
to pay for a company that has more debt than peers ? or is priced higher.
However in real life the * rules * can get much more complicated. With
healthcare companies for example negative ROE is often the norm. In
grocery stores Debt/Equity > 2 is common (ge is over 4).

Perhaps the easiest way to use Sql is to create a subquery driven by a
table (which could be the
results of another query). The Query can eliminate companies whose values
are *below* those in the
table marked
**low** in our table above. Conversely we will keep companies whose
values are *above* those in the
table marked
**high** in the figure 1 above. To see this idea
Graphically the red bars are
marked high in the above table while green is low.

The point of this is one can build this subQuery according to many different styles. For example one could ignore growth, and look at value, or conversely. One could use Means, Quartiles, Medians, or almost any statistical aggregation measure in the subquery as well.

George Elgin | Questions or Comments |