The Value Line Investment Survey is a published analysis of approximately 1,700 companies that are traded on the New York Stock Exchange (NYSE), the Nasdaq and the over-the-counter market. The Value Line Investment Survey uses a timeliness ranking to predict the future performance of stocks.
This ranking is the result of a proprietary calculation that attempts to predict the performance of every stock in the survey against every other stock over the next six to twelve months. According to the company’s website, www.valueline.com, a stock portfolio of number-one-ranked stocks for timeliness beginning in 1965 and, updated at the beginning of each year, would have gained 28,913 percent through the end of December 2008. The Dow Jones Industrial Average gained 1,355 percent in the same period.
The survey itself consists of three parts. The Ratings & Reports section includes a single-page report on each company. The Summary & Index section includes an index of all the stocks in the survey and information to help investors select stocks for their investing goals. The Selection & Opinion section includes forecasts, statistics and model portfolios. Many investors who subscribe to the Value Line Investment Survey keep each week’s survey, storing them in large green or black binders provided by Value Line.
The stocks included in the Value Line Investment Survey are also traded as an index. Known as the Value Line Composite Index, the index is traded on the futures market on the Kansas City Board of Trade. The index is calculated using an arithmetic average. This method consists of adding the percent change of all of the stocks in the index, and then dividing by the number of stocks in the index. This method results in a value that more closely resembles the change in a portfolio that held all of the stocks in equal amounts, compared to the geometric average, which was used by Value Line until 1988.
The Value Line Composite Index is an equal-weighted index, sometimes called an unweighted index. This means that each stock is given equal weight in the index, as opposed to being weighted based on its market capitalization. In contrast, the Standard & Poor’s 500 Index ®, also known as the S&P 500 ®, is a market-value-weighted index, with each stock weighted commensurate with its market value. An equal-weighted index has less chance of having the value of the index dramatically affected by the performance of a single stock.